Opinion
No. 58107
Opinion Filed: February 27, 2001
APPEAL FROM THE CIRCUIT COURT OF BOONE COUNTY THE HONORABLE CLIFFORD EUGENE HAMILTON, JR., JUDGE.
Thomas M. Harrison Columbia, Missouri for appellant[s]
John A. Ruth Jefferson City, Missouri for respondent[s]
Before Breckenridge, P.J., Ulrich and Howard, JJ.
Boone National Savings and Loan Association, F.A. (Boone National), sued Laura J. Crouch for breach of a guaranty contract Ms. Crouch had signed guaranteeing the debts of her husband, John A. Crouch, M.D. In her answer, Ms. Crouch asserted affirmative defenses and a counterclaim. One of her affirmative defenses and her counterclaim alleged that Boone National had violated the Equal Credit Opportunity Act (ECOA) by requiring her to sign the guaranty. Boone National moved for summary judgment on Ms. Crouch's affirmative defense and counterclaim based upon the alleged ECOA violation, and on its breach of contract claim to collect on the guaranty. The court granted Boone National's motions. On appeal, Ms. Crouch argues the trial court erred in entering summary judgment in favor of Boone National on her affirmative defense and counterclaim because it is permissible to assert an ECOA violation as an affirmative defense, and her counterclaim was not barred by the ECOA's two-year statute of limitations. Ms. Crouch also argues that the trial court erred in granting summary judgment in favor of Boone National on her affirmative defenses of equitable estoppel and waiver, and on its breach of contract claim because there were genuine issues of material fact on Boone National's claim that precluded summary judgment. This court finds that Ms. Crouch's affirmative defense and counterclaim based upon Boone National's alleged ECOA violation fail as a matter of law. Moreover, Ms. Crouch's affirmative defenses of equitable estoppel and waiver fail as a matter of law, and there were no genuine issues of material fact on Boone National's claim for breach of the guaranty. The judgment in favor of Boone National is affirmed. On the court's own motion, the case is transferred to the Missouri Supreme Court, pursuant to Rule 83.02, because of the importance of the questions involving Ms. Crouch's ECOA affirmative defense and counterclaim.
Factual and Procedural Background
When reviewing summary judgments, this court reviews the record, and any reasonable inferences from the record, "in the light most favorable to the party against whom judgment was entered." ITT Commercial Finance v. Mid-Am. Marine , 854 S.W.2d 371, 376 (Mo.banc 1993). Thus, this court will review the record in the light most favorable to Ms. Crouch. On January 13, 1992, Boone National made an unsecured loan of $193,235.20 to Ms. Crouch's husband, Dr. Crouch, individually, and his business partner, Dr. Jerry D. Kennett, individually. Dr. Crouch and Dr. Kennett had formed a limited partnership, and they used the proceeds of the loan to purchase an option to acquire land in San Bernadino County, California. Ms. Crouch had no interest in the limited partnership.
The day after Boone National made the loan, the bank's president and chief executive officer, F.H. Kruse, Jr., sent a letter to Dr. Crouch notifying him that the bank had used $68,235.20 of the loan proceeds to pay off another loan, and that the remaining $125,000.00 of the loan proceeds had been wired per Dr. Crouch's instructions to a bank in California showing Dr. Crouch and Dr. Kennett as the remitters. Also in the letter, Mr. Kruse notified Dr. Crouch that he was enclosing "the correct guaranty form for Mrs. Crouch to sign." Mr. Kruse apologized for having initially given Dr. Crouch the wrong personal guaranty form for Ms. Crouch.
The guaranty agreement provided that Ms. Crouch would absolutely and unconditionally guarantee payment of all debt incurred at that time or in the future by Dr. Crouch. Dr. Crouch did not discuss the terms of Ms. Crouch's guaranty with anyone at Boone National, and he did not read the guaranty before asking Ms. Crouch to sign it. Ms. Crouch did not know what she was signing, and she also did not read the guaranty before she signed it. Ms. Crouch had not participated in the loan negotiation process, and in fact, had never had any conversations with anyone at Boone National.
At the time Ms. Crouch signed the guaranty, Ms. Crouch was employed part-time as a registered nurse. Her adjusted gross income in 1991 was $16,069.00. Dr. Crouch was employed as a partner in a group of cardiovascular surgeons in Columbia, Missouri. His adjusted gross income in 1991 was $502,849.00.
Dr. Crouch and Dr. Kennett paid off the 1992 loan on or about July 6, 1994. In late 1994, Ms. Crouch became aware of Dr. Crouch's outstanding loans he had incurred at other financial institutions for the purpose of purchasing investments. At that time, Ms. Crouch informed Dr. Crouch that he had no authority to obligate her on any future loans for investment purchases in which she had no direct interest or in which she had not participated in the decision to make such purchases.
On January 12, 1995, Boone National made a loan to Dr. Crouch, individually, in the amount of $275,000.00. The loan was secured by Dr. Crouch's life insurance policy in which Ms. Crouch had a beneficial, but no ownership, interest. Ms. Crouch was not aware that Dr. Crouch had incurred this loan. Dr. Crouch used the proceeds of the loan to acquire stock in a health care company in Atlanta, Georgia, that was acquiring primary care practices. When Dr. Crouch applied for this loan, Mr. Kruse asked him whether Ms. Crouch would co-sign the note. Dr. Crouch told him she would not. Dr. Crouch recalled having no discussions with Mr. Kruse at that time regarding whether Ms. Crouch would guarantee the loan. Mr. Kruse did not tell Dr. Crouch that the continuing guaranty Ms. Crouch signed in 1992 could cause her to be liable on this loan. Dr. Crouch believed that Ms. Crouch's guaranty was no longer effective after he paid off the 1992 loan. A consumer/business loan worksheet prepared by Boone National did not list Ms. Crouch's personal guaranty as security for the loan.
When Dr. Crouch's 1995 loan became due on January 12, 1996, Dr. Crouch arranged to have the due date extended to January 12, 1997. On January 12, 1997, Dr. Crouch failed to pay the principal and accrued interest on the note. Between January and April, 1997, Dr. Crouch attempted to negotiate a repayment plan with several of his creditors, including Boone National. During the negotiations, Boone National did not mention the existence of Ms. Crouch's personal guaranty. Ultimately, the creditors rejected Dr. Crouch's proposed plan, and the creditors filed an involuntary Chapter 11 bankruptcy proceeding against him. Boone National did not list Ms. Crouch's personal guaranty as security for its claim in the bankruptcy proceeding.
Boone National did not make any demand upon Ms. Crouch for payment of Dr. Crouch's 1995 loan. Instead, Boone National filed a petition for breach of contract against Ms. Crouch on December 4, 1997, alleging that Ms. Crouch breached the guaranty by failing to pay Boone National the unpaid principal and accrued interest Dr. Crouch owed on the 1995 loan. Boone National asked the court to order Ms. Crouch to pay unpaid principal in the amount of $274,000.00, plus accrued interest at a rate of nine percent per annum. Boone National also requested attorney's fees and court costs, which it alleged were collectible under the terms of the guaranty.
In her amended answer to Boone National's petition, Ms. Crouch raised several affirmative defenses. The affirmative defenses she asserted were: (1) the guaranty was unenforceable for lack of consideration; (2) Boone National was equitably estopped from enforcing the guaranty; (3) Boone National waived any rights it had to collect on the guaranty; (4) the guaranty is a contract of adhesion and is unconscionable and unenforceable; (5) Boone National violated Missouri's Truth-In-Lending Act by not disclosing the existence of the guaranty to Dr. Crouch at the time it made the 1995 loan; (6) Boone National's calculation of damages was incorrect; and (7) Boone National was equitably estopped from enforcing the guaranty because it violated the ECOA when it required Ms. Crouch to execute the guaranty in 1992. Because of Boone National's alleged ECOA violation, Ms. Crouch asserted she was entitled to have any damages amount awarded Boone National reduced pursuant to the equitable doctrine of recoupment, and that she was entitled to recover her attorney's fees and costs.
Ms. Crouch filed an answer, a first amended answer, and a second amended answer. The trial court granted summary judgment on Ms. Crouch's affirmative defenses and counterclaim based upon Boone National's alleged ECOA violation prior to Ms. Crouch's filing her second amended answer. In her second amended answer, Ms. Crouch again included her affirmative defenses and counterclaim based upon the alleged ECOA violations. At Boone National's request, however, the court struck those affirmative defenses and counterclaim. Thus, this court will set out the affirmative defenses and counterclaim based upon the ECOA as they appear in Ms. Crouch's first amended answer. Because the trial court did not strike Ms. Crouch's other affirmative defenses raised in her second amended answer, this court will set out all other affirmative defenses as they appear in Ms. Crouch's second amended answer.
In addition to these affirmative defenses, Ms. Crouch's amended answer also included a counterclaim. In her counterclaim, Ms. Crouch alleged that Boone National violated the ECOA by requiring her to guarantee both the 1992 and the 1995 loans. As a result of Boone National's alleged ECOA violation, Ms. Crouch asserted that she was entitled to equitable recoupment of any damages awarded to Boone National, attorney's fees and court costs, and punitive damages in an amount not greater than $10,000.00.
Boone National moved for summary judgment on Ms. Crouch's affirmative defense and counterclaim based upon the alleged ECOA violation. In its motion, Boone National argued that Ms. Crouch was prohibited from asserting an alleged ECOA violation as an affirmative defense. As for Ms. Crouch's counterclaim, Boone National argued that it was barred by the ECOA's two-year statute of limitations. Ms. Crouch also moved for summary judgment on the issue of whether, as a matter of law, she was entitled to equitable relief upon a showing that Boone National violated the ECOA. On December 12, 1998, the trial court granted Boone National's summary judgment motion and denied Ms. Crouch's summary judgment motion.
Boone National then moved for summary judgment on its claim for breach of contract. In its motion, Boone National argued that there were no genuine issues of material fact on each of the elements necessary for it to recover on the guaranty, and that Ms. Crouch's affirmative defenses of lack of consideration, equitable estoppel, waiver, unconscionability, the violation of Missouri's Truth-In-Lending Act, and the miscalculation of damages failed as a matter of law. On December 8, 1999, the trial court granted Boone National summary judgment on its claim. The court awarded Boone National damages in the amount of $259,877.74 as unpaid principal on the 1995 loan, accrued interest through December 6, 1999, in the amount of $71,206.58, accrued interest from and after December 7, 1999, at the contract rate of nine percent per annum, and $26,000.00 in attorney's fees. Ms. Crouch filed this appeal.
On August 30, 1999, Boone National received $14,122.26 as a creditor in Dr. Crouch's bankruptcy proceedings and applied that amount to the $274,000.00 unpaid principal balance under the note.
Standard of Review
This court reviews an appeal from a trial court's entry of summary judgment de novo. ITT , 854 S.W.2d at 376 . "The criteria on appeal for testing the propriety of summary judgment are no different from those which should be employed by the trial court to determine the propriety of sustaining the motion initially." Id . Here, Boone National was the movant. To be entitled to summary judgment on its claim against the non-movant, the movant must establish that there is no genuine dispute as to every material fact necessary to support the claim and a right to judgment as a matter of law. Id. at 381. Once the movant has made a prima facie showing, the non-movant may not rely upon "mere allegations or denials of his pleading," but must respond by affidavits, or as otherwise provided in Rule 74.04, and provide the court with specific facts demonstrating a genuine issue for trial. Id . Conclusory allegations are insufficient to defeat a motion for summary judgment. McDowell v. Waldron , 920 S.W.2d 555, 561 (Mo.App. 1996). Additionally, when the non-movant has raised several affirmative defenses to the claim, the movant must show that each affirmative defense fails as a matter of law, by establishing that any one of the elements necessary to support the defense is missing. ITT , 854 S.W.2d at 381 .
To be entitled to summary judgment on Ms. Crouch's counterclaim, Boone National, as the defending party on that claim, must establish any one of the following:
(1) facts that negate any one of the claimant's elements facts, (2) that the non-movant, after an adequate period of discovery, has not been able to produce, and will not be able to produce, evidence sufficient to allow the trier of fact to find the existence of any one of the claimant's elements, or (3) that there is no genuine dispute as to the existence of each of the facts necessary to support the movant's properly-pleaded affirmative defense.
Id .
Boone National Entitled to Summary Judgment on Affirmative Defense and Counterclaim Based Upon Alleged ECOA Violation.
In her first point, Ms. Crouch alleges that the trial court erred in granting summary judgment in favor of Boone National on her affirmative defense and counterclaim based upon Boone National's alleged violation of the ECOA, 15 U.S.C. § 1691 et seq. In her affirmative defense, Ms. Crouch claimed that Boone National was equitably estopped from enforcing the guaranty because it violated the ECOA when it required her to execute the guaranty in 1992 and guarantee both the 1992 and the 1995 loans, since Dr. Crouch was independently creditworthy for the amounts of those loans. She argued that because of the ECOA violation, she was entitled to recoupment of any damages the court might award Boone National on its breach of the guaranty claim, plus attorney's fees and costs. In her counterclaim, Ms. Crouch asserted that Boone National violated the ECOA when it required her to guaranty both the 1992 and 1995 loans, and that she was entitled to recoupment of any damages awarded Boone National, plus punitive damages not to exceed $10,000.00, and attorney's fees and costs. In its motion for summary judgment, Boone National argued that an ECOA violation could not be asserted as an affirmative defense, and that Ms. Crouch's counterclaim for recoupment was barred by the ECOA's statute of limitations. The court granted Boone National's motion for summary judgment on Ms. Crouch's ECOA affirmative defense and counterclaim in a docket entry order.
The ECOA prohibits a creditor from discriminating against applicants on the basis of marital status with respect to any aspect of a credit transaction. 15 U.S.C. § 1691(a)(1) (1998). Regulation B, the regulation promulgated pursuant to the ECOA, further mandates that a creditor cannot require the signature of the applicant's spouse if the applicant independently qualifies under the creditor's standards of creditworthiness. 12 C.F.R. § 202.7(d)(1) (2000). Any creditor who violates the ECOA is subject to civil liability for actual damages, punitive damages in an amount not to exceed $10,000.00, and attorney's fees and costs. 15 U.S.C. § 1691e(a),(b),(d) (1998). The applicant must bring an action under the ECOA within two years from the date of the violation. 15 U.S.C. § 1691e(f) (1998).
The ECOA also contains a provision allowing a court of competent jurisdiction to grant equitable and declaratory relief as necessary. 15 U.S.C. § 1691e(c) (1998). In Hammons v. Ehney , 924 S.W.2d 843, 852 (Mo.banc 1996), the Supreme Court recognized that "[m]any cases have utilized this provision as authority for allowing a debtor to assert violations of the ECOA as a counterclaim for recoupment or as an affirmative defense to collection actions, even after the running of the two year statute of limitations." The Court then cited nine cases from other jurisdictions that allowed a guarantor or co-signer of a note to assert the ECOA violation as a counterclaim or an affirmative defense against the lender or a party standing in the lender's shoes. Id . The nine cases cited by the Court were: Silverman v. Eastrich Multiple Investor Fund, L.P. , 51 F.3d 28, 32 (3rd Cir. 1995) (allowing ECOA violation to be raised as an affirmative defense after expiration of the statute of limitations); Sony Electronics, Inc. v. S.G. Putnam , 906 F. Supp. 228, 229 (D.N.J. 1995) (allowing ECOA violation to be raised in a defensive claim for recoupment after expiration of statute of limitations); F.D.I.C. v. Medmark , 897 F. Supp. 511, 514 (D.Kan. 1995) (allowing ECOA violation to be used defensively after expiration of statute of limitations); Resolution Trust Corp. v. Schonacher , 844 F. Supp. 689, 696 (D.Kan. 1994) (holding that ECOA violation could only be asserted as a counterclaim, and not a defense, but noting that two-year statute of limitations for bringing an ECOA claim had expired); Integra Bank/Pittsburgh v. Freeman , 839 F. Supp. 326, 330 (E.D.Pa. 1993) (holding that after the statute of limitations has expired, the only damages claim a permissibly-bound party could assert under the ECOA was a claim for recoupment); Riggs Nat. Bank of Washington, D.C. v. Linch , 829 F. Supp. 163, 169 (E.D.Va. 1993), aff'd 36 F.3d 370 (4th Cir. 1994) (holding that a counterclaim, but not an affirmative defense, could be based upon an ECOA violation); CMF Virginia Land, L.P. v. Brinson , 806 F. Supp. 90, 93 (E.D.Va. 1992) (holding that ECOA claim was properly asserted as a compulsory counterclaim for recoupment and not an affirmative defense); Eure v. Jefferson Nat. Bank , 248 Va. 245, 448 S.E.2d 417, 421 (1994) (holding that statute of limitations did not bar defensive use of ECOA violation to avoid liability on guaranty): Marine American State Bank of Bloomington, Ill. v. Lincoln , 433 N.W.2d 709, 712 (Iowa 1988) (holding that statute of limitations did not bar claim for recoupment based on ECOA violation).
Unlike the guarantors in those nine cases, however, the guarantor in Hammons was attempting to assert the alleged ECOA violation against her co-guarantors, and not the actual lender. Id . Thus, the Court in Hammons determined that since the guarantor's co-guarantors were not creditors under the ECOA, "any claims for recoupment or other defenses cannot be asserted directly against them by [the guarantor]." Id .
Furthermore, the Court in Hammons found that even if the lender had violated the ECOA, the guarantor could not use the ECOA violation to void the guaranty. Id . The Court in Hammons agreed with "[t]he vast majority of cases considering relief available for violation of the ECOA [that] have held that there is no authority in the statutory language for the proposition that a violation of the ECOA renders an instrument void." Id . The Court agreed with the reasoning of those cases that "where such drastic relief is not expressly stated in the statute, it will not be implied." Id .
The cases cited by the Court for this proposition were: F.D.I.C. v. 32 Edwardsville, Inc. , 873 F. Supp. 1474, 1480 (D.Kan. 1995); Resolution Trust Corp. , 844 F. Supp. at 696; Riggs , 829 F. Supp. at 169; CMF Virginia Land , 806 F. Supp. at 95; Diamond v. Union Bank Trust of Bartlesville , 776 F. Supp. 542, 544 (N.D. Okla. 1991); United States v. Joseph Hirsch Sportswear Co., Inc. , 1989 WL 20604 (E.D.N.Y. 1989), aff'd without op. , 923 F.2d 842 (2nd Cir. 1990).
Both Ms. Crouch and Boone National rely on Hammons to support their positions. Ms. Crouch argues that Hammons stands for the proposition that, so long as the guarantor is not attempting to render the guaranty void, the guarantor may assert a counterclaim for recoupment or an affirmative defense based upon an alleged ECOA violation at any time after the lender attempts to enforce the guaranty. Boone National, on the other hand, argues that by finding that the guarantor could not assert an ECOA violation to render the guaranty void, the Court in Hammons was rejecting the defensive use of an alleged ECOA violation.
The reasoning behind the cases cited in Hammons for the principle that "there is no authority in the statutory language for the proposition that a violation of the ECOA renders an instrument void" is that the ECOA provides remedies for alleged violations, i.e., a federal civil action for actual damages, punitive damages, attorney's fees, and equitable and declaratory relief as necessary, and the language of the ECOA cannot be read to imply that an alleged ECOA violation can be asserted as an affirmative defense to negate the guarantor's liability in an action to collect on the guaranty. See 32 Edwardsville , 873 F. Supp. at 1480 (concluding that the guarantor "cannot assert a violation of the ECOA as an affirmative defense"); Resolution Trust Corp. , 844 F. Supp. at 695-96 (concurring with cases that held that an ECOA violation may be asserted as a counterclaim, but not as an affirmative defense to invalidate the guarantor's obligation on the guaranty); Riggs , 829 F. Supp. at 169 (holding that the ECOA sets forth a specific remedy, i.e., a federal civil action for damages, for alleged violations, and therefore, "the ECOA cannot be asserted as an affirmative defense" to invalidate the debt); CMF Virginia Land , 806 F. Supp. at 95 (finding that the ECOA "sets forth the contemplated remedy under the statute," and "[n]owhere does it afford relief by way of an affirmative defense" to avoid basic liability on the debt); Diamond , 776 F. Supp. at 544 (finding that "there is no authority, in statutory or case law, for the proposition that a violation of the ECOA renders an instrument void."); Joseph Hirsch Sportswear , 1989 WL 20604 (stating that the ECOA provides only for the remedy of a federal civil action, and thus it "appears that the [guarantors] may be entitled to employ the ECOA only to assert a counterclaim, not a defense.").
Ms. Crouch argues that her affirmative defense seeking recoupment is not an attempt to void her underlying obligation on the guaranty. The court in 32 Edwardsville , 873 F. Supp. at 1480 , a case cited with approval by Hammons , stated that "[a]lthough [the guarantor] describes her affirmative defense as recoupment, in reality she is attempting to use the alleged ECOA violation as a basis for negating or denying her potential liability on the guaranty." Recoupment is a method of reducing or satisfying a plaintiff's claim. Schroeder v. Prince Charles, Inc. , 427 S.W.2d 414, 419 (Mo. 1968). Here, Ms. Crouch asserted that her affirmative defense based upon the alleged ECOA violation entitled her to have any award of damages to Boone National reduced in the amount of that damage award. The practical effect of such an award would be to negate or deny Ms. Crouch's potential liability on the guaranty, rendering the guaranty effectively void. As the Court in Hammons stated, "where such drastic relief is not expressly stated in the statute, it will not be implied." Hammons , 924 S.W.2d at 852 .
Moreover, from the Court's statement in Hammons that "[w]hile [the guarantor] might have pursued legal and equitable remedies against the Bank pursuant to the ECOA, her guaranty was not rendered void," it appears that the Court was approving the guarantor's using the ECOA affirmatively, and not defensively. See id . While it seems the growing trend among courts in other jurisdictions is to allow defendants to assert ECOA claims as affirmative defenses, see Andrea Michele Farley, The Spousal Defense — A Ploy to Escape Payment or Simple Application of the Equal Credit Opportunity Act?, 49 Vanderbilt Law Review 1287, 1300-05 (1996), this court feels compelled to follow the apparent direction of the Supreme Court in Hammons . Therefore, Ms. Crouch's affirmative defense for recoupment based upon Boone National's alleged ECOA violation fails as a matter of law. The trial court properly granted Boone National's motion for summary judgment on the defense.
Ms. Crouch argues that this court's opinion in Stewart Title Guar. Co. v. WKC Restaurants Venture Co. , 961 S.W.2d 874, 885 (Mo.App. 1998) endorses the use of an alleged ECOA violation as a basis for an affirmative defense for recoupment. To the extent that Stewart Title can be read to endorse the defensive use of an alleged ECOA violation, it is inconsistent with the direction of Hammons , and should not be followed.
Having found that Ms. Crouch could not assert an affirmative defense for recoupment based upon Boone National's alleged ECOA violation, this court turns now to Ms. Crouch's counterclaim for recoupment, attorney's fees and costs, and punitive damages. Like her affirmative defense for recoupment, Ms. Crouch claims that the ECOA permits her counterclaim for recoupment under 15 U.S.C. § 1691e(c), which provides that any court of competent jurisdiction "may grant such equitable and declaratory relief as is necessary to enforce the requirements imposed under this subchapter." Whether it is called an affirmative defense or a counterclaim, however, Ms. Crouch's claim for recoupment is an attempt to use the ECOA violation defensively to negate her obligation on the guaranty. See Schroeder , 427 S.W.2d at 419 (stating that "recoupment is a purely defensive matter growing out of the transaction constituting plaintiff's cause of action"). Thus, her counterclaim for recoupment, like her affirmative defense for recoupment, is not permissible. See Hammons , 924 S.W.2d at 852.
Ms. Crouch also includes in her counterclaim a request for attorney's fees and costs pursuant to 15 U.S.C. § 1691e(d) (1998), and punitive damages under 15 U.S.C. § 1691e(b) (1998). These provisions are subject to the two-year statute of limitations contained in 15 U.S.C. § 1691e(f) (1998). 15 U.S.C. § 1691e(f) (1998) provides that " [a]ny action under this section" is governed by the two-year statute of limitations. (Emphasis added.) The statute of limitations starts running from the date the guaranty is executed. See Diamond , 776 F. Supp. at 544 . Here, the two-year statute of limitations began to run when Ms. Crouch executed the guaranty in January, 1992. Any affirmative claim for relief Ms. Crouch had, whether it was legal or equitable, expired in 1994. Thus, Ms. Crouch's counterclaim based upon Boone National's alleged ECOA violation, filed in May of 1998, fails as a matter of law. The trial court properly granted Boone National's motion for summary judgment on Ms. Crouch's counterclaim.
Boone National Entitled to Summary Judgment on Its Claim and on Affirmative Defenses of Equitable Estoppel and Waiver
In her second point, Ms. Crouch claims that the trial court erred in granting Boone National's motion for summary judgment on its breach of the guaranty contract claim. To recover on the guaranty, Boone National needed to establish that (1) Ms. Crouch executed the guaranty; (2) that Ms. Crouch unconditionally delivered the guaranty to Boone National; (3) that Boone National thereafter extended credit to Dr. Crouch in reliance on the guaranty; and (4) that Dr. Crouch owed Boone National a sum of money that the guaranty purports to cover. ITT , 854 S.W.2d at 381 . Ms. Crouch argues that genuine issues of material fact remain on the issue of whether Boone National relied on the guaranty in making the 1995 loan to Dr. Crouch. She also argues that genuine issues of material fact remain on her affirmative defenses of equitable estoppel and waiver.
This court will first address Ms. Crouch's claim that genuine issues of material fact remain regarding whether Boone National relied on her guaranty when approving Dr. Crouch's 1995 loan. "A creditor may not enforce a guaranty unless it relied on it when deciding to extend credit." Hammons , 924 S.W.2d at 850 . The issue of whether a creditor relied on a guaranty in extending credit is essentially a question of whether the extension of credit was in consideration for the execution of the guaranty. Boatmen's First Nat'l. v. Roofco Systems , 852 S.W.2d 402, 404 (Mo.App. 1993). Like all other contracts, contracts of guaranty must be supported by consideration. Coleman v. Villa Capri Restaurant , 712 S.W.2d 65, 66 (Mo.App. 1986).
In this case, the guaranty itself recites consideration. The guaranty begins as follows:
For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and to induce you, at your option, to make loans or engage in any other transactions with borrower from time to time, I absolutely and unconditionally guarantee the full payment of the following debts when due (whether at maturity or upon acceleration:
I absolutely and unconditionally guarantee to you the payment and performance of each and every debt, of every type and description, that the borrower may now or at any time in the future owe you.
* * *
"A recitation of the consideration on which an agreement is based is prima facie evidence that sufficient consideration existed." Hammons , 924 S.W.2d at 850 . Further evidence that Boone National relied on Ms. Crouch's guaranty is the affidavit of Mr. Kruse, the president and chief executive officer of Boone National, in which he stated that the bank relied upon Ms. Crouch's personal guaranty in making the 1995 loan. Indeed, Mr. Kruse's memo to the credit file, which contains the signature of the director of Boone National's loan committee indicating official approval of the 1995 loan, specifically references Ms. Crouch's personal guaranty. This evidence was sufficient to make a prima facie showing pursuant to Rule 74.04(c) that there were no genuine issues of material fact on the issue of whether Boone National relied on the guaranty in executing the 1995 loan, and that Boone National was entitled to judgment as a matter of law on that issue.
Once Boone National made this prima facie showing, the burden was on Ms. Crouch "to show — by affidavit, depositions, answers to interrogatories, or admissions on file — that one or more" of Boone National's material facts were genuinely disputed. ITT , 854 S.W.2d at 381 . In her response to Boone National's motion for summary judgment, Ms. Crouch contended that genuine issues of material fact remained on the issue of reliance because a consumer/business loan worksheet prepared by Mr. Kruse regarding the 1995 loan did not reference Ms. Crouch's personal guaranty. Ms. Crouch did not explain how Mr. Kruse's failure to list her personal guaranty on the consumer/business loan worksheet raised a genuine dispute as to whether Boone National relied on the guaranty in making the loan. Although this court is to afford Ms. Crouch, as the non-movant, the benefit of all reasonable inferences from the evidence, the fact that Ms. Crouch's continuing personal guaranty was not listed on a consumer/business loan worksheet as security for the loan fails to establish a plausible, but contradictory, version of Boone National's assertion that it relied on Ms. Crouch's guaranty in making the 1995 loan. ITT , 854 S.W.2d at 382 .
Additionally, Ms. Crouch stated in her response to Boone National's motion for summary judgment that she was "prepared to present testimony at trial, as well as demonstrable evidence in the form of [Boone National]'s own lending polices and loan documents, to show that [Boone National] did not rely" on Ms. Crouch's guaranty. Such bare allegations are insufficient to defeat a motion for summary judgment. Id. at 381. Rather, a non-movant must set forth specific facts establishing a genuine issue for trial. Id . Ms. Crouch has failed to do so on the issue of whether Boone National relied on her guaranty in making the 1995 loan to Dr. Crouch.
Ms. Crouch next argues that the trial court erred in granting summary judgment in favor of Boone National on its claim for breach of the guaranty contract because genuine issues of material fact remain on her affirmative defenses of equitable estoppel and waiver. To be entitled to summary judgment where the non-movant has asserted an affirmative defense, the movant must establish that the affirmative defense fails as a matter of law "by establishing that any one of the facts necessary to support the defense is absent." Id . In Grannemann v. Columbia Ins. Group , 931 S.W.2d 502, 506 (Mo.App. 1996), this court discussed the elements of equitable estoppel:
Equitable estoppel applies when: 1) an admission, statement, or act (including silence or inaction) is inconsistent with the claim that is later asserted and sued upon; 2) an action is taken by the second party on the faith of the admission, statement, or act; and 3) an injury occurs to the second party, if the first party is permitted to contradict or repudiate his admission, statement, or act.
In her second amended answer, Ms. Crouch claimed that Boone National's silence on the issue of her personal guaranty during Dr. Crouch's discussions with Mr. Kruse during Dr. Crouch's application for the 1995 loan was inconsistent with its later claim to collect the 1995 loan amount from her under the personal guaranty. Specifically, Ms. Crouch argued that Dr. Crouch expressly told Mr. Kruse that Ms. Crouch would not co-sign the promissory note or be liable for the debt, and that Mr. Kruse did not communicate to Dr. Crouch "in any manner" that Boone National intended to rely on any type of guaranty by Ms. Crouch in making the loan. Ms. Crouch claimed that Dr. Crouch relied upon Mr. Kruse's silence on the issue of her guaranty to mean that her guaranty was terminated. Without having relied on Mr. Kruse's alleged acts indicating that Ms. Crouch's guaranty was terminated, Ms. Crouch claimed that Dr. Crouch would not have obtained the 1995 loan from Boone National. Thus, because Dr. Crouch relied, to Ms. Crouch's detriment, on Mr. Kruse's acts indicating that Ms. Crouch's guaranty was terminated, Ms. Crouch argued that Boone National should be equitably estopped from now trying to enforce the guaranty to collect the 1995 loan amount from her.
The guaranty that Ms. Crouch signed in 1992 was a continuing one, as it applied to all present and future debt that Dr. Crouch might owe Boone National. A continuing guaranty remains in effect until the guarantor terminates it. Lemay Bank and Trust Co. v. Harper , 810 S.W.2d 690, 693 (Mo.App. 1991). Here, the guaranty provided that it would remain binding on Ms. Crouch, "whether or not there are any debts outstanding," until Boone National actually received written notice of Ms. Crouch's revocation or written notice of her death or incompetence. Thus, even if this court were to accept as true Ms. Crouch's inference that Mr. Kruse's alleged silence on the issue of her guaranty indicated that Boone National was terminating her guaranty, such termination would not have effectively revoked her obligation under the guaranty. Farmland Industries, Inc. v. Bittner , 920 S.W.2d 581, 583 (Mo.App. 1996).
"[O]ne cannot set up another's act or conduct as the ground of an estoppel when he knew or had the same means of knowledge as the other to the truth." Id . Here, Ms. Crouch and Boone National had the same means of knowledge to the truth, which was that her obligation under the guaranty was a continuing one, and Ms. Crouch had to revoke her guaranty agreement in writing in order for her obligation under the guaranty to be terminated. See id . Ms. Crouch claims, however, that she was unaware that her guaranty continued to apply to all of Dr. Crouch's future loans even after the 1992 loan was paid off because neither she nor Dr. Crouch ever read the guaranty agreement. "Missouri has long recognized that a person signing an agreement has a duty to read it." Id. at 584. Moreover, without a showing of fraud, "a party who is capable of reading and understanding a contract is charged with the knowledge of that which he or she signs." Id .
The undisputed evidence was that Ms. Crouch was capable of reading and understanding the guaranty, which included the statement that it applied to all present and future debts Dr. Crouch might owe Boone National, and that the only way the guaranty could be terminated was if Ms. Crouch provided actual written notice of her revocation to Boone National. Ms. Crouch cannot claim equitable estoppel when her lack of knowledge of the continuing nature of the guaranty and the proper way of terminating the guaranty was due to her failure to read the guaranty before signing it. Id . Therefore, Ms. Crouch's affirmative defense of equitable estoppel fails as a matter of law.
Finally, Ms. Crouch claims that there were genuine issues of material fact precluding summary judgment on her affirmative defense of waiver. "[W]aiver is the intentional relinquishment of a known right which may be implied from a party's conduct." Grannemann , 931 S.W.2d at 505-06 . To imply such a relinquishment, "the conduct must clearly and unequivocally show a purpose to relinquish the right." Id. at 506. In her second amended answer, Ms. Crouch argued that Boone National waived whatever rights it may have had under the guaranty because Mr. Kruse "expressly warranted and represented" to Dr. Crouch that it was extending credit solely to Dr. Crouch without the necessity of Ms. Crouch guaranteeing or co-signing the loan.
There is no evidence in the record to support such an assertion. Mr. Kruse testified in his deposition that he specifically remembered telling Dr. Crouch during their discussions regarding the 1995 loan that since Ms. Crouch was not going to co-sign the note, Ms. Crouch would still remain liable on the loan under her guaranty. Dr. Crouch, on the other hand, testified in his deposition that he recalled having no discussions with Mr. Kruse about Ms. Crouch's continuing liability on the guaranty when he applied for the 1995 loan. Neither Mr. Kruse's nor Dr. Crouch's version of the discussions surrounding the making of the 1995 loan support Ms. Crouch's contention that Mr. Kruse "expressly warranted and represented" to Dr. Crouch that Ms. Crouch would not have to guaranty the 1995 loan.
Recognizing that Dr. Crouch's deposition testimony was that he had no discussions with Mr. Kruse regarding Ms. Crouch's guaranteeing the 1995 loan, Ms. Crouch attempts to argue on appeal that Mr. Kruse's silence on the issue of Ms. Crouch's guaranty constituted a waiver of Boone National's right to collect on the guaranty. As this court has already discussed, however, Ms. Crouch's guaranty guaranteed payment of all of Dr. Crouch's present and future loans with Boone National from the time she signed it in 1992 until such time as she gave her written notice revoking the guaranty. Because she had not revoked her guaranty, the guaranty remained in effect and applied to the 1995 loan, regardless of whether Mr. Kruse and Dr. Crouch discussed it. In light of this fact, Mr. Kruse's alleged silence on the issue of Ms. Crouch's guaranty cannot be interpreted as demonstrating a clear and unequivocal purpose to relinquish Boone National's right to collect on the guaranty. Thus, Ms. Crouch's affirmative defense of waiver fails as a matter of law.
The trial court properly concluded that Ms. Crouch's affirmative defenses of equitable estoppel and waiver fail as a matter of law, and that there were no genuine issues of material fact on Boone National's claim to recover on the guaranty. Because we feel compelled to follow the apparent direction of the Supreme Court in Hammons on the issue of whether an alleged ECOA violation can be asserted defensively, this court also finds that Ms. Crouch's affirmative defense and counterclaim for recoupment based upon Boone National's alleged ECOA violation fail as a matter of law. However, since the Supreme Court in Hammons was not confronted with precise issue presented here, and because of the importance of the question involved, we order the cause transferred to the Missouri Supreme Court pursuant to Rule 83.02.
All concur.