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Dunkirk Trust Co. v. Schmitt

May 1, 1963

DUNKIRK TRUST COMPANY, APPELLANT,
v.
NICHOLAS L. SCHMITT, TRUSTEE OF THE ESTATES OF AUBREY C. BALDWIN AND HENRIETTA D. BALDWIN, APPELLEE.



Author: Hays

Before MOORE, FRIENDLY and HAYS, Circuit Judges.

HAYS, Circuit Judge.

Dunkirk Trust Company (hereinafter "the bank") appeals from so much of an order of the United States District Court for the Western District of New York as affirmed an order of the referee in bankruptcy denying appellant's claim as a secured creditor (11 U.S.C. ยง 1 (28)) of the estates of Aubrey C. Baldwin and Henrietta D. Baldwin, bankrupts. We affirm the determination of the district court.

The bank's claim to be a secured creditor of the bankrupts is based upon the following:

Aubrey C. Baldwin was president and a principal stockholder of Baldwin Motors, Inc. which is also a bankrupt.*fn1 At the time of its bankruptcy Baldwin Motors was indebted to the bank in the amount of $27,807.09 on a number of notes and on two checks returned because of insufficient funds. These obligations were all incurred in 1961.

In 1956 the Baldwins gave the bank a mortgage to secure a loan of $20,000 for the erection of a residence. This mortgage contained the following clause:

"This mortgage and accompanying bond shall also be considered as collateral and continuing security for any and all present and future indebtedness, including renewals and substitutions thereof, on the part of said mortgagors to Dunkirk Trust Company, not to exceed at any one time the amount of the above indebtedness".

By the time of their bankruptcy the Baldwins had repaid $12,800 of the mortgage loan, leaving an unpaid balance of $7,200. This remaining balance, concededly a secured claim against the bankrupts, was paid to the bank when the residence on which the mortgage was given was sold by the referee in bankruptcy.

In 1959 Baldwin Motors, Inc. was indebted to the bank on certain notes and mortgages. On April 10, 1959, the corporation paid its mortgage indebtedness in full and part of the indebtedness on its notes. Obligations represented by notes totalling $7,255.27 remained unpaid. On the same date Mr. and Mrs. Baldwin executed the following instrument:

"GUARANTY OF PAYMENT OF NOTES AND RENEWALS THEREOF

"Know all men that whereas DUNKIRK TRUST COMPANY of the City of Dunkirk, New York, at our special instance and request, has agreed to extend credit to BALDWIN MOTORS, INC., a domestic corporation having its principal office in the City of Dunkirk, Chautauqua County, New York,

"NOW THEREFORE WE AUBREY C. BALDWIN and HENRIETTA D. BALDWIN both of Fredonia, New York, in consideration of ONE DOLLAR to us in hand paid, the receipt of which is hereby acknowledged, hereby covenant and agree with the said DUNKIRK TRUST COMPANY, its sucessors and assigns, to guaranty, and we hereby do guaranty the full and prompt payment of all of said obligations of said BALDWIN MOTORS, INC. to said DUNKIRK TRUST COMPANY as maker, endorser or otherwise and of any and all renewals thereof or of any of them or substitutions therefor when the same shall become due and payable, until all of the said obligations with interest thereon and any and all renewals thereof, are fully paid and discharged.

"IN WITNESS WHEREOF, we have hereunto set our hands and seals in the City of Dunkirk, New York ...


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