Glenda Biggers was the sole shareholder and corporate secretary and Alton Biggers was the president of Clark
Question:
Glenda Biggers was the sole shareholder and corporate secretary and Alton Biggers was the president of Clark Warehouses. In January 1993, Clark Warehouses executed a note to the Small Business Administration for \($70,800.\) The note was signed by both Glenda and Alton in their capacities as president and secretary of the corporation. Glenda and Alton also signed a Small Business Administration Guaranty as guarantors of the note. The Guaranty provided, in pertinent part: “The Undersigned hereby grants to Lender full power, in its uncontrolled discretion and without notice to the undersigned, … to modify or otherwise change any terms of all or any part of the Liabilities or the rate of interest thereon (but not to increase the principal amount of the note of the Debtor to Lender).” In September 1993, Glenda and Alton executed a Modification of Promissory Note that changed the principal amount of the loan to \($130,800\) and increased the monthly payment and term of the loan. The Modification stated, “It is further understood and agreed that all other terms, conditions, and covenants of the aforesaid Note, not otherwise modified hereby, shall be and remain the same.” Glenda and Alton Biggers signed the Modification twice: once in their corporate capacity (secretary or president) and once as “Borrower.” However, Glenda and Alton never signed the guarantors’ consent to the terms of the Modification. Clark Warehouses filed for Chapter 7 bankruptcy in 1997. In 2000, the SBA sold the note and guaranties to Loan Participant Partners, Ltd., which contracted with Beal Bank to service the loan. Beal Bank sued Glenda and Alton Biggers to collect on the note. The trial court entered a judgment awarding the Bank \($87,861.81\) (principal and interest) and \($7,500\) in attorney’s fees but refused the Bank’s request for additional amounts reflecting the increase in the principal amount of the loan pursuant to the Modification. The Bank appealed. Is the Bank entitled to recover the additional principal? Why or why not?
Step by Step Answer:
Dynamic Business Law
ISBN: 9781260733976
6th Edition
Authors: Nancy Kubasek, M. Neil Browne, Daniel Herron, Lucien Dhooge, Linda Barkacs