Stewart Title Guaranty Co. v. WKC Restaurants Venture Co.Stewart Title Guaranty Co. v. WKC Restaurants Venture Co.
Allen J. Block, David M. Block, co-trustee of David M. Block Trust, Jay Friedman, James E. Grier, William Logan, Hal M. Dan-zig, and C. Maxwell Logan
1
appeal the trial court’s order entering partial summary judgment in favor of Stewart Title Guaranty Company (Stewart Title) on Stewart Title’s action to enforce a guaranty. The guaran
On appeal from an order granting summary judgment, this court reviews the record in the light most favorable to the party against whom judgment was entered.
ITT Commercial Finance v. Mid-Am. Marine,
On September 29, 1986, WKC executed a promissory note in the principal amount of $720,000 in favor of Home Savings Association of Kansas City, F.A, to refinance an earlier loan from Home Savings in the same amount. The collateral for the loan was a deed of trust on WKC’s Wendy’s restaurant located at 31st and Main in Kansas City, Missouri, a collateral assignment of leases and rents affecting the property, and a security agreement affecting the property. There was also a guaranty, dated that same day, executed by Leon Karosen аnd his wife, Mary Karosen, James H. Block and his wife, Rae Alene Block, Allen J. Block and his wife, Gloria Block, David M. Block, co-trustee of David M. Block Trust, Jay Friedman, James E. Grier and his wife, Virginia Grier, William Logan and his wife, Judith R. Logan, Hal M. Danzig and his wife, Carolyn Danzig, C. Maxwell Logan and his wife, Heidi E. Logan, guaranteeing the payment of “all principal, interest, and all other charges due” under the promissory note. Each of the guarantors agreed to be liable under the guaranty in an amount equal to, but not exceeding, a portion of the $720,000 equal to 133% of the guarantor’s interest in the WKC Restaurants Venture Company partnership. Stewart Title was the title insurance company on the refinancing transaction, and it issued a lender’s title policy to Home Savings in the amount of $720,000. The title policy showed Home Savings as the first mortgage holder on the property. The loan transaction closed on November 26,1986.
In 1992, Home Sayings became insolvent. The Resolution Trust Corporation (RTC), as receiver of Homе Savings, assigned the WKC note to Chemical Bank, N.A. WKC made monthly payments on the promissory note from November of 1986 up to and including April of 1993. However, on July 9,1993, the trustee for industrial revenue bonds issued on a parcel of land that included the collateral for the loan foreclosed on the property. The Wendy’s restaurant was sold at a foreclosure sale to Security Bank of Kansas City, as trustee for the Land Clearance for Redevelopment Authority of Kansas City, Missouri Revenue Bonds. Home Savings did not hold a first mortgage as Stewart Title had erroneously represented in the lender’s
In October of 1994, Stewart Title, as the note holder, filed a petition against WKC, WRVC, Restaurant Land Partnership, and all of the partners in those partnerships, as makers of the note, seeking payment of the balance due on the note, plus interest, late charges, attorney’s fees, and court costs. The remaining ten counts were against the guarantors of the note, and sought each guarantor’s portion, pursuant to the formula in the guaranty, of the balance due under the note, plus interest, late charges, Stewart Title’s attorney’s fees, and costs. In their answer filed in May of 1995, the guarantors asserted the following five affirmative defenses: (1) Stewart Title’s petition failed to state a claim upon which relief could be granted; (2) Stewart Title failed to mitigate its damages; (3) if the guarantors were liable, their liability was released and discharged because Stewart Title failed to pursue persons or entities that were or may have been jointly and severally liable; (4) the guaranty was void because it was made in violation of the Equal Credit Opportunity Act; and (5) Stewart Title was barred from recovering against the guarantors because the makers of the note have no personal liability, and the obligations of any guarantors cannot exceed the obligations of the makers.
Stewart Title moved for partial summary judgment against the guarantors for their respective portions of the unpaid principal balance of the note, interest, late fees, and attorney’s fees. The guarantors then filed a motion for leave to file an amended answer. The proposed amended answer added two affirmative defenses, namely, that the guarantors were entitled to set-off because they relied on Stewart Title’s negligent misrepresentation that the mortgage they were guaranteeing was a first mortgage, and that the guarantors were entitled to a set-off because they were accommodation parties, and Stewart Title was not a holder in due course. The guarantors also moved for summary judgment, based upon their contention that there was a material alteration of the underlying contract that, as a matter of law, discharged them from their obligation under the guaranty. The guarantors’ defenses were based on the premise that the guarantors did not know the priority of liens on the Wendy’s property the guarantors owned through their partnerships, and that they relied on Stewart Title’s misstatement that the Home Savings mortgage was a first lien.
On July 8, 1996, the trial court entered an order overruling the guarantors’ motion for leave to file an amended answer and the guarantors’ motion for summary judgment. The trial court sustained Stewart Title’s motion for partial summary judgment, and ordered the guarantors to pay their respective portions of liability on the note based upon the formula in the guaranty. 2 The court declined to order the guarantors to pay attorney’s fees and costs in addition to their liability on the note, finding that Stewart Title’s recovery against the guarantors was limited by the guaranty and did not include expenses of enforcement, costs and attorney’s fees. Stewart Title did not appeal this ruling. In its order for partial summary judgment, the court found that there was no just reason for delay; thus, the partial summary judgment is a final and appealable order. See Rule 74.01(b).
Review of summary judgment is conducted in the same manner as review of a court-tried case, and the judgment will be sustained if any theory supports it.
AG Processing v. South St. Joseph Sewer,
The first step in deciding whether the grant of summary judgment was proper in this case is to determine whether Stewart Title established the material facts necessary to recover on the guaranty. To recover on the guaranty, Stewart Title must prove (1) that the guarantors executed the guaranty; (2) that the guarantors unconditionally delivered the guaranty to Home Savings, the original creditor; (3) that Home Savings thereafter extended credit to WKC in reliance on the guaranty; and (4) that WKC owes the creditor, who is now Stewart Title, a sum of money which the guaranty purports to cover. Id. at 382.
In their answer, the guarantors specifically admitted executing the guaranty. Stewart Title attached a copy of the guaranty to the petition. The copy of the guaranty contains the signatures of the guarantors. There is no dispute on the issue of whether the guarantors executed the guaranty.
On the element of whether the guarantors unconditionally delivered the guaranty to Home Savings, the guarantors argue that the transaction was conditioned upon the mortgage to Home Savings being a first mortgage. They presented affidavits signed by William Logan, David M. Block, co-trustee of the David M. Block Trust, and C. Maxwell Logan, stating that they, and all of the other guarantors to the loan transaction, signed the guaranty with the understanding that the security interest WKC was granting to Home Savings was a first mortgage. They also stated in the affidavits that all of the guarantors understood that under the guaranty agreement, the guarantors would be subro-gated to the interests of Home Savings, should they be required to perform on the guaranty.
However, the guaranty itself explicitly recites, “Each of the persons who has signed this Guaranty has unconditionally delivered it to the Lender_” There are other provisions in the guaranty expressing the unconditional nature of the guaranty, including the following:
The Obligations are irrevocable, absolute, present, continuing, unconditional, joint, and several (subject to the limitations set forth herein), and shall not be to any extent or in any way discharged, impaired, or otherwise affected except upon payment and performance in full of all Obligations, regardless of any circumstance whatsoever which might otherwise constitute a legal or equitable discharge or defense of the undersigned.
* ⅜ *
This Guaranty is in no way conditioned or contingent on Lender attempting to collect from Maker, or Lender attempting to perfect or to enforce any rights Lender has in any security for the Note or this Guaranty, or on any other condition or contingency whatsoever.
⅜ * *
The undersigned hereby waive the right to require Lender to proceed against Maker or any other person or to pursue any other remedy, [and] waive the right to have the property of Maker or any other person first applied to the discharge of the indebtedness guaranteed hereby.... Additionally, the guaranty contains the following integration clauses:
This Guaranty constitutes the entire agreement, and supersedes all prior agreements and understandings, both written and oral, between the undersigned and Lender with respect to the subject matter hereof.
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This writing is intended by the parties as a final expression of this Guaranty and also is intended as a complete and exclusive statement of the terms of the agreement. No course of prior dealing between the parties, no usage of trade, and no parol or extrinsic evidence of any nature shall be used to supplement or modify any term hereof, nor are there any conditions to the full effectiveness of this Guaranty.
“The rules of construction applicable to a guaranty are the same as applied to other contracts.”
Royal Banks of Missouri v. Fridkin,
Here, the guaranty specifically states that the guarantors’ promise to pay the debt is unconditional. The guaranty does not state that it is conditioned upon Home Savings’ lien on the property being a first mortgage. In fact, the guaranty allows the holder of the note to “grant forbearances, renewals, and extensions of the time for paymеnt of the Note, and may expressly or impliedly agree to any change, substitution, withdrawal, decrease, increase, or other alteration of any collateral or property directly or indirectly securing the Note....” The guarantors’ claim that the guaranty was conditioned upon Home Savings’ lien being a first mortgage is in direct conflict with the unambiguous writing they signed which granted Home Savings the right to freely dispose of the collateral. The writing governs, and there is no genuine issue of material fact that the guarantors unconditionally delivered the guaranty to Home Savings.
The next element Stewart Title had to show to recover on the guaranty was that Home Savings relied on the guaranty in extending credit to WKC. The guaranty recites that it was executed on September 29, 1986. However, the guarantors dispute that the guaranty was actually signed by all of the guarantors on this date. The guarantors presented to the trial court the interrogatory answers of William Logan, C. Maxwell Logan, Heidi E. Logan, and Judith R. Logan, in which they all stated that they did not know, or could not recall, when they signed the guaranty. They also presented affidavits from these four guarantors containing the following statement:
That the guaranty in question ... was not signed by all of the guarantors contemporaneously with the closing of the loan. Specifically, the signatures of at least William Logan, Judith R. Logan, C. Maxwell Logan and Heidi Logan were not placed on the guaranty until after the closing. All of these signatures were made at the Olathe State Bank in the presence of Thomas J. Davies after the closing on the loan. Home Savings did not state upon which guaranties, if any, it was relying in extending the credit.
Additionally, the guarantors offered excerpts from the depositions of Whitney B. Wheeler and Gary L. Froistad. Mr. Wheeler was the asset manager of J.E. Robert Company Inc, which was the special loan servicer for Chemical Bank. Mr. Froistad was the Division Claims Counsel for Stewart Title. Mr. Wheeler and Mr. Froistad said thаt they did not know when the guarantors executed the guaranty. Thus, the guarantors contend that because four guarantors did not sign the guaranty until after the loan was closed on November 26, 1986, the guaranty was not executed contemporaneously with the promissory note, and that creates a genuine issue of material fact as to whether Home Savings
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 execution of the guaranty.
Boatmen’s First Nat. v. Roofco Systems,
In this case, the guaranty itself recites consideration. The guaranty begins as follows:
FOR VALUE RECEIVED, each of the undersigned unconditionally, irrevocably, jointly, and severally guarantees the due and punctual payment of all principal, interest, and all other charges due under that certain Promissory Note dated September 29, 1986, in the face amount of Seven Hundred Twenty Thousand Dollars ($720,000.00) executed by WKC RESTAURANTS VENTURE COMPANY, a Missouri general partnership (“Maker”), payable to HOME SAVINGS ASSOCIATION OF KANSAS CITY, F.A....
The recitation “for value received” is prima facie evidence of sufficient consideration to support a guaranty.
Gover v. Empire Bank,
Moreover, even if four of the guarantors did not sign the guaranty until after the loan was closed, the guaranty would still be valid and enforceable. “Missouri courts enforce guaranties executed after a loan is made, as long as it is part of the underlying loan transaction.”
Hammons v. Ehney,
The guarantors cite two cases,
Bethany Trust Co. v. Harker,
In
Tri-State Lumber,
a lender sold a preexisting note to a new holder.
The last element of an action on a guaranty that Stewаrt Title needed to prove was that the debtor, WKC, owed Stewart Title a sum of money that the guaranty purported to cover. Stewart Title attached a copy of the promissory note to the petition. The promissory note showed that WKC promised to pay Home Savings $720,000, with interest on the unpaid principal balance from the date of disbursement. The guaranty guaranteed that in the event of a default under the note, the guarantors would pay to Home Savings or its successors or assigns, “all principal, interest, and all other charges due under that certain Promissory Note dated September 29, 1986, in the face amount of Seven Hundred Twenty Thousand Dollars ($720,000.00).” Each guarantor’s share of liability under the guaranty was based upon his partnership share in WKC, as set forth in the following excerpt from the guaranty:
Notwithstanding anything to the contrary contained herein, the liability under this Guaranty of each guarantor, together with his spouse, if any, shall always be equal to, and shall not exceed, a portion of the initial face amount of the Note equal to 133% of such guarantors interest in Maker at the time of execution of this Guaranty. For example, a ten percent (10%) partner in Maker (whether direct or indirect) at the time of execution of this Guaranty will guarantee 13.33% of all indebtedness evidenced by the initial face amount of the Note, and said guarantee will remain in full force and effect notwithstanding any principal reduction on the Note.
Beside each guarantor’s signature was his percentage of interest in the WKC partnership.
Regarding the current unpaid balance, Mr. Wheeler affied that WKC made regular installment payments of principal and interest up to and including April 1, 1993. From April 2, 1993, until September 19, 1994, neither WKC nor anyone else made payments on the note. The unpaid principal balance on the note was $699,848.14, on September 19, 1994, and so long as the unpaid principal balance remained that amount, interest would cоntinue to accrue at $203.15 per day.
The guarantors contend that a genuine issue of fact exists as to whether Stewart Title’s calculation of the unpaid principal balance is correct. They argue that neither Mr. Froistad nor Mr. Wdieeler knew the date of initial disbursal of funds, nor whether Home Savings, the Resolution Trust Corporation, or G.E. Capital Asset Management used the correct date in calculating the amount of each loan payment to assign to principal and interest. The guarantors also point out that neither Mr. Wftieeler nor Mr. Froistad knew whether any rents had been collected by any of the holders of the note, pursuant to the assignment of rents that was executed in 1986. The guarantors allege that they would be entitled to a set-off in the amount of any rents collected.
The guarantors offered no affirmative evidence that the figures Stewart Title provided the court regarding the unpaid principal balance were inaccurate, nor did
Having found that Stewart. Title established that there was no genuine dispute as to the four elements of its claim, this court now turns to the guarantors’ affirmative defenses raised in their answer. To be entitled to summary judgment on the guarantors’ affirmative defenses, Stewart Title must show beyond any genuine dispute the nonexistence of a fact essential to the affirmative defense, or that the defense is legally insufficient.
ITT,
Pursuant to Rule 84.13(a), this court need not address the trial court’s rejection of the guarantors’ alleged affirmative defenses of failure to mitigate and failure to pursue parties or entities that were or may have been jointly and severally hable because the guarantors did not appeal the trial court’s rejection of these asserted defenses.
3
The remaining alleged affirmative defenses fail for several reasons. First, guarantors hsted these defenses as conclusory statements, and did not plead any specific facts to support each defense. Rule 55.08 mandates that “a pleading setting forth an affirmative defense
shall
contain a plain statement of the facts showing that the pleader is entitled to the defense.”
Curnutt v. Scott Melvin Transport, Inc.,
Even if the guarantors had properly pled the defenses, the defenses would not have succeeded. With regard to the affirmative defense of failure to state a claim, Stewart Title’s petition sufficiently stated facts entitling it to recover on the guaranty. The petition alleged that the guarantors executed the guaranty. The guaranty, which was incorporated by reference into the petition, stated that the guarantors unconditionally delivered the guaranty to Home Savings, that the guaranty was supported by consideration, and that the guaranty covered the repayment of the $720,000 note WKC executed, gave to Home Savings, and which was in default.
Likewise, the guarantors’ affirmative defense which Home Savings based on the ECOA also lacks merit. The guarantors claim that Home Savings violated the ECOA by requiring their wives to sign the guaranty, without first having made a determination of whether the guarantors would have independently qualified under Home Savings’ standards of creditworthiness. They argue that the violation renders the guaranty void, and that they are entitled to recoupment.
This affirmative defense would be available, if at all, only to guarantors Allen J. Block, James E. Grier, William Logan, Hal
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) (1994). 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) (1997). The ECOA defines the term “applicant” as “any person who applies to a creditor directly for an extension, renewal, or continuation of credit, or applies to a creditor indirectly by use of an existing credit plan for an amount exceeding a previously established credit limit.” 15 U.S.C. § 1691a(b) (1994). In conjunction with the ECOA definition, Regulation B defines an applicant as “any person who requests or who has received an extension of credit from a creditor, and includes any person who is or may become contractually liable regarding an extension of credit. For purposes of § 202.7(d), the term includes guarantors, sureties, endorsers and similar parties.” 12 C.F.R. 202.2(e) (1997).
Any creditor who violates the ECOA is subject to civil liability for actual damages, punitive damages
not
to exceed $10,000, and attorney fees and costs. 15 U.S.C. § 1691e(a),(b),(d) (1994). The applicant must bring an action under the ECOA within two years from the date of the violation. 15 U.S.C. § 1691e(f) (1994). However, 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) (1994). Aggrieved applicants have used this provision in several cases to assert the ECOA violation as a counterclaim or an affirmative defense for recoupment after the two year statute of limitations has run.
Hammons,
In this case, the guarantors have asked thе court to void the guaranty. Aggrieved applicants cannot use the ECOA to void the guaranty. Id. The “vast majority of cases considering relief available for violation of the ECOA have held that there is no authority for the proposition that a violation of the ECOA renders an instrument void.” Id. The Missouri Supreme Court held that the statute does not contain the remedy of voiding the guaranty; “where such drastic relief is not expressly stated in the statute, it will not be implied.” Id.
The guarantors have also requested relief in the form of recoupment. They claim that the remedies provided by 15 U.S.C. § 1691e(b) and (d) (1994), including actual and punitive damages, attorney fees and costs, are available to them in a recoupment action. The guarantors misunderstand the nature of recoupment. Recoupment allows a defendant to mitigate or extinguish plaintiffs damages, but “ ‘permits of no affirmative judgment for the defendant.’ ”
Crewse v. Shelter Mut. Ins. Co.,
[T]he set of claims cognizable by way of recoupment is a limited one that excludes many of the “actual damages” available under 15 U.S.C. § 1691e — such as humiliation, embarrassment, mental anguish and injury to credit and reputation — which are not defenses to liability on the underlying contract. Similarly, any claim defendant might make for attorney’s fees under 15 U.S.C. § 1691e(d) lacks sufficient nexus■with the underlying contract to be asserted by way of recoupment.
Id. (footnote deleted). With regard to actual damages, the guarantors failed to plead any injury that they have suffered as a result of the alleged ECOA violation, and the record does not indicate that they have suffered an injury that they can assert as a defense to their contractual obligation under the guaranty. Id. The guarantors’ affirmative defense for recoupment fails as a matter of law.
The guarantors’ last pleaded affirmative defense is that Stewart Title is barred from recovering against them because the obligations of guarantors cannot exceed the obligations of makers, and since the makers have no personal liability, the guarantors have no personal liability. The promissory note contains the following non-recourse clause:
This Note shall be binding upon Borrower, its partners, all partners of such partners, and all makers, guarantors, sureties, and endorsers and their successors, heirs, personal representatives, and assigns; provided, however, that the liability of Borrower, its partners, and all partners in such partners shall be limited to all of the property that constitutes security for the payment of this Note and all of the obligations of Borrower in the documents described herein and as is provided in that certain Guaranty executed contemporaneously herewith.
The guarantors аrgue that this clause not only makes WKC’s liability on the note non-recourse, but it makes the guarantors’ liability non-recourse as well, because the guarantors were all partners in the two partnerships that comprised WKC. If the individual partners in WKC had simply taken out the loan in the partnership name, without signing the guaranty, this clause would have applied to limit-their liability to their interest in the collateral. The partners would have been only partners in the partnerships that comprise WKC, the borrower. However, the guaranty the partners executed in their individual capacities was a separate obligation to perform the partnership contract. Under the Uniform Partnership Law, “[a]ny partner may enter into a separate obligation to perform a partnership contract.” § 358.150.1, RSMo Supp.1997.
4
By executing the guaranty as individuals, and the promissory note as partners of WKC, the partners incurred liability in two “separate and distinct capacities.” 59A Am.Jur.2d
Partnership
§ 645 (1987). Thus, although they were partners in WKC, and as partners, they were liable on the note as the borrower, they obligated themselves as individuals — a separate and distinct capacity — on the guaranty.
See Metro North State Bank v. Gaskin,
The guarantors’ reliance on
Mobil Oil Corp. v. Days,
Holding the guarantors personally liable on the guaranty does not impermis-sibly expand the guarantors’ liability beyond their specific engagement, as the guarantors contend. The guarantors agreed in the guaranty that if WKC defaulted, the creditor could proceed directly against them, -without first proceeding against WKC or anyone else, “or foreclosing on, selling, or otherwise dis
This argument fails for several reasons. The guaranty wаs not conditioned upon the loan being a first mortgage. In reference to the commitment letter, the guaranty recites only that the guarantors guaranteed that WKC would comply with all conditions required to be complied with by WKC in the commitment letter, not that the holder of the note had to comply with any conditions contained in the letter in order to enforce the guaranty. Additionally, nothing occurred after the execution of the guaranty that materially altered the contract of guaranty or impaired the collateral. From the time of its inception, the Home Savings mortgage was junior to the bond holders’ lien on the property. The bond holders’ foreclosure was an exercise of their senior interest in the property, an interest which preexisted both the Home Savings mortgage and the guaranty. In any event, the following excerpt from the guaranty gives the holder of the note unlimited reign over the collateral without affecting the guarantors’ liability:
Any holder of the Note may grant for-bearances, renewals, and extensions of the time for payment of the Note, and may expressly or impliedly agree to any change, substitution, withdrawal, decrease, increase, or other alteration of any collateral or property directly or indirectly securing the Note, or may agree to execute any amendment or other modifications to the Note or the Listed Documents, and any holder of the Note may otherwise deal with Maker, any successor in interest of Maker, or the owner of any collateral or property directly or indirectly securing the Note, or with any endorser as it may elect, without in any way affecting or releasing the Obligations.
This language expressly waives any alleged expectation of the guarantors that the collateral would still be available to them to obtain by subrogation if they had to perform on the guaranty.
The guarantors’ last point on appeal is that the trial court erred in denying their motion for leave to amend their answer to include the following two affirmative defenses: (1) that the guarantors are entitled to a set-off because they relied on the negligent misrepresentation of Stewart Title regarding the first mortgage, and (2) that the guarantors are entitled to a set-off because they are accommodation parties, and Stewart Title is not a holder in due course.
Rule 55.33(a) provides that a pleading may be amended once before a responsive pleading has been served, or, if no responsive pleading is permitted, at any time within 30 days after it is served. “Otherwise, the pleading may be amended only by leave of court or by written consent of the adverse party; and leave shall be freely given when justice so requires.” Rule 55.33(a). The trial court has discretion whether to deny a party’s request for leave to amend a pleading, and the appellate court will not disturb
Neither of the proposed affirmative defenses possess merit. In both proposed defenses, the guarantors assert a right to a set-off. However, the guarantors specifically waived the right to a set-off in the guaranty in the following excerpt from the guaranty: “Any amount payable by the undersigned hereunder shall not be subject to any claim of the undersigned or others, whether by way of counterclaim, set-off, reduction,' or otherwise.” A guarantor can waive the right to set-off in the guaranty. 38A C.J.S. Guaranty § 104 (1996).
Further, the guarantors’ claim of negligent misrepresentation would not have succeeded, as it is missing several key elements of the defense. To prevail on a claim of negligent misrepresentation, a claimant must establish the following:
(1) the defendant supplied information in the course of its business or because of some other pecuniary interest; (2) due to the defendant’s failure to exercise reasonable care or competence in obtaining or communicating this information, the information was false; (3) the defendant intentionally provided the information for the guidance of a limited group of persons in a particular business transaction; (4) the plaintiff justifiably relied on the information; and (5) as a result of the plaintiffs reliance on the statement, the plaintiff suffered a pecuniary loss.
Mark Twain Kansas City v. Jackson,
The fact that Stewart Title did not assume a direct obligation to WKC in the lender’s policy also shows that the guarantors’ reb-anee on the representation was not justified. Further, the guarantors’ actual reliance on the representation in guaranteeing the loan is questionable, considering that the guaranty was not conditioned on the note being a first mortgage, and in fact the guaranty gave the holder of the note the power to release collateral without affecting the obligations of the guarantors. The guarantors did not have a reasonable expectation that the property would still be serving as the collateral for the loan if the guarantors were called upon to honor the guaranty. It was the agreed-upon terms of the guaranty, and not the guarantors’ unjustifiable rebanee on Stewart Title’s erroneous representation, that caused the guarantors’ alleged peсuniary loss. The guarantors’ affirmative defense of negbgent misrepresentation would not have been successful; therefore, the court properly denied the guarantors’ motion for leave to amend its answer to include this defense.
The guarantors assert the right of set-off for impairment of the value of collateral claim under § 400.3-605, RSMo 1994. This statute became effective in 1992. Section 400.3-605(e) discharges an accommodation party from an obligation to pay an instrument to the extent that a person entitled to enforce the instrument impairs the value of the interest in the collateral securing the instrument. However, like § 400.3-606, RSMo 1986, § 400.3-605 allows a party to waive discharge. Section 400.3 — 605(i)(ii) provides that a party is not discharged if “the instrument or a separate agreement of the party provides for waiver of discharge under this section either specifically or by general language indicating that parties waive defenses based on suretyship or impairment of collateral.” Regardless of which statute is applied to the facts of this case, § 400.3-606, RSMo 1986, or § 400.3-605, RSMo 1994, the guaranty clearly waives discharge based on impairment of collateral.
Because neither of the proposed affirmative defenses would have been successful, this court finds no error in the trial court’s decision to deny the guarantors leave to amend their answer to include the affirmative defenses. There are no genuine issues of material fact remaining regarding whether Stewart Title is entitled to recover on the guaranty, and the guarantors’ pleaded and proposed affirmative defenses were legally insufficient. Stewart Title established a right to judgment as a matter of law. The judgments of the trial court granting Stewart Title partial summary judgment on its claim аgainst the guarantors, and denying the guarantors’ motion for leave to file an amended answer, are affirmed.
All concur.
Notes
. For simplicity’s sake, this court will refer to the appellants as “the guarantors.”
. Stewart Title sought, and the trial court entered, partial summary judgment against Allen J. Block, David M. Block, co-trustee of David M. Block Trust, Jay Friedman, James E. Grier, William Logan, Hal M. Danzig, and C. Maxwell Logan only. Stewart Title did not seek partial summary judgment against Leon Karosen (now deceased), Mary Karosen, James H. Block (now deceased), Rae Alene Block, Gloria Block, Virginia Grier, Judith R. Logan, Carolyn Danzig, and Heidi E. Logan.
. The guarantors also did not brief their asserted defense of failure to state a claim upon which relief can be granted. However, the failure to state a claim is an issue of subject matter jurisdiction which questions the trial court’s authority "to enter any judgment for the plaintiff."
Adkisson v. Director of Revenue,
. Although § 358.150 was revised in 1995, 1996, and 1997, the quoted language has remained constant since the 1986 version.