The opinion of the court was delivered by: NEWCOMER
The parties to this action have filed cross-motions for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure. The material facts, although not in stipulated form, are established beyond reasonable controversy by affidavits, depositions and the pleadings themselves.
The relevant facts are as follows:
It became evident in January of 1970 that Trans-Michigan Airlines (hereinafter referred to as "Airline"), a commuter airline of which the defendant James Biever was and is a stockholder, needed additional funds in order to operate. However, because of its poor financial condition the Airline was unable to borrow money itself.
As a result, in January, 1970, L. Joseph Crafton, President of the Airline, and several others formed TMA Fund, Inc., a Michigan corporation. TMA Fund, Inc., the plaintiff herein, was formed for the purpose of borrowing money and channeling such monies into the Airline. Defendant James Biever, Joseph Crafton and several others subscribed for stock in TMA Fund, Inc., and James Biever subsequently became the Fund's Vice-President as well as a Director.
On January 19, 1970, plaintiff and Trans-Michigan entered into a loan agreement whereby TMA Fund, Inc. would lend the Airline $400,000 dollars and use its best efforts to obtain an additional $400,000 dollars. The Airlines, in return, gave the plaintiff a long-term note and warrants.
Thereafter, the plaintiff secured credit up to $500,000 dollars from Ann Arbor Bank, but only $375,000 dollars was ever borrowed. In return for the loan from Ann Arbor Bank, the plaintiff Fund by its President Joseph Crafton, signed a note on January 20, 1970, which note was due and payable to the bank on July 20, 1970. Because the plaintiff had no substance of its own, Mr. & Mrs. Crafton, Mr. & Mrs. Biever, Mr. Gerald Buhrman, and Mr. & Mrs. Cedric Fricke signed documents as joint and several guarantors of the bank loan.
On July 20, 1970, the Ann Arbor Bank renewed the Fund's note for $375,000 dollars but because the Airline was now in a Chapter XI proceeding, the bank began to press for payment of the principal. As a result, Joseph Crafton paid the bank $170,698.54 dollars, thus reducing the principal of the note to $204,301.46.
The July 20 note from the Fund to the bank was renewed in the principal amount of $204,301.46 on October 19, 1970 and again on December 4, 1970. As a result of this latter renewal, the due date for payment of principal was pushed back to February 5, 1971.
On October 26, 1970, defendant James Biever wrote to Joseph Crafton, President of TMA Fund, Inc. in order to resign as an officer and director of the Fund. He also sent a letter to the Airline, resigning as a director of that corporation.
At this point Biever had no more money to invest in these enterprises. Crafton, however, contended that while each guarantor of the Fund's note to the bank was a joint and several guarantor, the guarantors had agreed among themselves that they would be primarily liable for certain portions of the original $375,000 dollar loan: Crafton for $200,000 or 8/15; Biever for $100,000 or 4/15; Buhrman for $50,000 or 2/15; and Fricke for $25,000 or 1/15. This agreement was entered into according to Crafton prior to January 20, 1970, but it was not reduced to writing. Mrs. Biever was not a party to this arrangement.
Because of Biever's inability to pay any additional sums, Crafton decided to fly to Philadelphia to talk with Mr. & Mrs. Biever, the defendants herein. Crafton wanted to discuss Biever's "obligations and to resolve his situation relative to the other guarantors to the bank". Crafton made the trip some time in March and talked with the defendants one evening in their home. Crafton explained to them that he, i.e. the Fund, had obtained a commitment from a group of upstate Michigan businessmen who had agreed to put equity money into the Airlines and that if only the Bievers would rejoin the enterprise by signing the several documents he would present to them related to the TMA Fund, he would be able to consummate the proposal. Funds to be supplied by these businessmen, Crafton told them, would not simply "bridge the problems that the Airline was having" but would "give it enough money to expand and become so profitable that it could very easily pay off the obligations that it had to the TMA Fund". Crafton also told them he "had raised money to go into new routes". He also said he had raised $100,000 in the summer of 1970 and was in the process of raising $200,000 more. According to Crafton, this additional sum was raised by May or June, 1971. However, despite his admitted representations to the Bievers in March, 1971 that he had raised money between July, 1970 and April, 1971 for new airline routes, he conceded at his deposition in this case that during this period "neither Mr. Biever nor I had been successful in finding hope for investors" to obtain any financing for Trans-Michigan Airlines. It was not until April or May, 1971 that he was ". . . able to find some individuals who would provide the temporary financing to keep Trans-Michigan in operation for a period of time and then that financing was provided through Mid-American Airlines . . ."
In addition, on March 19, 1971, a few days after the meeting in the Biever home in Philadelphia, Crafton sent the Bievers for their signatures the Agreement and Notes to TMA Fund, which are the subject of this lawsuit. Again, due solely to Crafton's promises about the commitment of the upstate Michigan businessmen to Trans-Michigan Airlines, James and Pamela Biever signed these documents on March 30, 1971. It is undisputed that they did not sign the documents as a result of any inducement or quid pro quo from TMA Fund, the other signatory. The Agreement states:
"WHEREAS, The TMA Fund, Inc. owes the Ann Arbor Bank $204,301.46 evidenced by a Note due and payable on February 5, 1971;
WHEREAS, The TMA Fund has, through its duly authorized officers, executed an installment note, a copy of which is attached hereto, in the amount due;
WHEREAS, Messrs. Buhrman, Crafton, Fricke, and Biever, and their Spouses, are joint and several ...