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Webster Capital Finance, Inc v. Newby

United States District Court, Tenth Circuit

August 2, 2013

DANIEL NEWBY, et. al., Defendant.



In this action, Plaintiff Webster Capital Finance, Inc. f/k/a Center Capital Corporation (“Webster Capital”) seeks to enforce personal loan guaranties against Defendants Daniel Newby and Thomacine Newby. This case comes before the Court on Plaintiff’s Motion for Summary Judgment (Doc. 48). For the reasons stated below, the Court grants Webster Capital’s motion.

I. Factual and Procedural Background[1]

Webster Capital is a Connecticut corporation that provides financing to various business ventures. Defendants Daniel Newby and Thomacine Newby are residents of Kansas City, Missouri, who operate Ottawa Bus Service, Inc. (“Ottawa Bus”), a Kansas corporation. On February 19, 2002, Webster Capital and Ottawa Bus entered into Master Loan and Security Agreement No. 31505 (the “Master Loan Agreement”), which provided the terms under which Webster Capital would extend credit and financing to Ottawa Bus. Section 6 of the Master Loan Agreement provides nine disjunctive paragraphs describing various events of default, including:

(i) The failure to pay any installment(s) due hereunder or under one or more of the Schedules on the due date therefor;
(ii) The breach of any term covenant, warranty or representation contained in this Agreement which is required to be performed or observed by Borrower and which failure is nor cured to Lender’s reasonable satisfaction within the (10) days after the giving of notice by Lender to Borrower of such failure;
(iv) With respect to the Borrower, the Equipment or a substantial part of Borrower’s assets: . . . (B) a petition in Bankruptcy or under any similar law is filed.[2]

This section also provides that “[u]pon the occurrence of an Event of Default, the Obligations under any or all Schedules may, at the option of Lender and without demand, notice, or legal process of any kind, be accelerated, and shall immediately become due and payable.”[3]

To secure payment under the Master Loan Agreement and the various loan schedules, Defendants each executed a Continuing Guaranty on February 26, 2002 (the “Continuing Guaranties”).[4] In these documents, Defendants personally guaranteed Ottawa Bus’s “prompt payment of all indebtedness, including, but not limited to, principal, accrued interest, costs, late charges, out of pocket expenses, and attorneys’ fees”[5] due under the Master Loan Agreement or any related obligations. Defendants’ guaranties gave rise to “an absolute and unlimited guaranty of payment and performance, not a guaranty of collection, and Guarantor agrees to pay and/or reimburse [Webster Capital] for any attorney’s fees and out of pocket costs incurred in connection with the collection on or enforcement of this Guaranty.”[6]

Pursuant to the Master Loan Agreement, Ottawa Bus entered into at least six loan schedules, whereby Webster Capital financed the purchase of equipment and took a purchase money security interest in the collateral. Each of these loan schedules required Ottawa Bus to pay the indebtedness in monthly installments. In July, August, and September of 2010, Ottawa Bus failed to pay monthly installments as required by the Master Loan Agreement and the loan schedules. On September 2, 2010, Webster Capital sent Defendants a Notice of Default, which provided:

The Borrowers and/or Guarantors are currently in default by reason of their failure to pay the monthly installments due July 1, 2010 through September 1, 2010 and accrued late fees as provided for in the Agreement. Accordingly, [Webster Capital] is accelerating the indebtedness pursuant to the terms of the Agreement. [Webster Capital] hereby demands payment of such accelerated balance, together with any and all applicable sales tax and late fees due from the Borrowers and/or Guarantors.[7]

Defendants allege that after receiving the Notice of Default, they paid the installments due for July, August, and September or 2010.

On November 22, 2010, Ottawa Bus filed a voluntary petition for bankruptcy relief under Chapter 11. Webster Capital filed this action on May 15, 2012, asserting that Defendants improperly refused to honor their Continuing ...

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