AI Generated Opinion Summaries

This summary was computer-generated without any editorial revision. It is not official, has not been checked for accuracy, and is NOT citable.

Facts

• The case involves a dispute over the distribution of funds following the default of New Mexico Motor Speedway, Inc. (Speedway) on a $500,000 loan from Compass Bank. The loan was guaranteed by four Speedway shareholders and its president, who entered into agreements allocating liability among themselves and providing for compensation from Speedway for their risk. After Speedway's default, three guarantors paid the bank and formed KCB, LLC, to recover from the non-paying guarantors. Speedway's subsequent bankruptcy led to a stipulated order placing disputed funds in trust, pending resolution of the dispute between KCB and one of the non-paying guarantors, Eve Randles, over her entitlement to a portion of those funds (paras 2-7).

Procedural History

• [Not applicable or not found]

Parties' Submissions

• Plaintiff-Appellant (Randles): Argued entitlement to $200,000 from the funds paid by Speedway in bankruptcy proceedings, representing reimbursement for her payment to KCB and her share of the premium under a Compensation Agreement (paras 7, 24).
• Defendants-Appellees (KCB, LLC and Allegra Hanson): Contended that Randles was not entitled to the disputed funds due to her initial refusal to pay the bank following Speedway's default and her breach of the agreements. KCB also argued that the Compensation Agreement required actual performance of the guaranty for entitlement to the premium (paras 10, 24).

Legal Issues

• Whether a contributing coguarantor is entitled to seek recovery from the principal debtor to the extent of its contribution (para 14).
• Whether the Compensation Agreement entitles a guarantor to compensation without requiring performance of the guaranty (para 25).

Disposition

• The court reversed the district court’s grant of summary judgment in favor of KCB, LLC, regarding the $100,000 principal amount and remanded with instructions to enter summary judgment in favor of Randles for that amount.
• The court remanded for further proceedings regarding the $100,000 premium amount under the Compensation Agreement (para 34).

Reasons

• Cynthia A. Fry, Judge (Michael E. Vigil, Judge, Timothy L. Garcia, Judge concurring): Adopted the approach of the Restatement (Third) of Suretyship and Guaranty, holding that a contributing coguarantor has the right to seek recovery from a defaulting principal debtor to the extent of their contribution. The court found that Randles, as a contributing coguarantor, was entitled to recourse from Speedway for the principal amount of her earlier contribution to KCB. Regarding the premium amount, the court found the Compensation Agreement ambiguous and remanded for determination of the parties' intent and the circumstances surrounding the execution of the agreements (paras 1, 19, 33).