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Nature of Suit Code: 220
Nature of Suit: Foreclosure
Cause of Action: 

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UNITED STATES COURT OF APPEALS 

TENTH CIRCUIT 

RICHARD H. MONTGOMERY, ) 

) 

Plaintiff-Appellee, ) 

) 

Unit!silia ~ .l} Tenth circuit pJ)e&Js 

AUG O 6 1990 

ROBERT L. HOECKER 

Clerk 

v. ) No. 89-6204 

) 

RIVER OAKS ESTATES, INC., an ) 

Oklahoma corporation, and ) 

LEROY WHEELER, ) 

) 

Defendants-Appellants. ) 

(D.C. No. CIV-87-2043-R) 

( W. D. Okla. ) 

ORDER AND JUDGMENT * 

Before LOGAN, SEYMOUR, and TACHA, Circuit Judges. 

After examining the briefs and appellate record, this panel 

has determined unanimously that oral argument would not materially 

assist the determination of this appeal. See Fed. R. App. P. 

34(a); 10th Cir. R. 34.1.9. The case is therefore ordered 

submitted without oral argument. 

This appeal is from an order of the district court 

foreclosing a mortgage and granting judgment to plaintiff-appellee 

Montgomery on a note and on money paid for the benefit of the 

corporate defendant-appellant River Oaks Estates. The district 

court also awarded attorneys' fees to Montgomery. Appellants 

* This order and judgment has no precedential value and shall 

not be cited, or used by any court within the Tenth Circuit, 

except for purposes of establishing the doctrines of the law of 

the case, res judicata, or collateral estoppel. 10th Cir. R. 

36.3. 

Appellate Case: 89-6204 Document: 010110039622 Date Filed: 08/06/1990 Page: 1 
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Wheeler and River Oaks Estates allege on appeal that the district 

court erred in holding that the note and mortgage sued upon were a 

loan rather than a capital contribution to River Oaks Estates and 

that Montgomery is entitled to recover the amount of the 

contribution made to the River Oaks Estates to avoid foreclosure 

of a prior mortgage. Appellants further allege that the district 

court improperly calculated the amount of the liability of River 

Oaks Estates and that Montgomery violated an alleged fiduciary 

duty to appellants. We affirm. 

This appeal grew out of a series of transactions related to 

the efforts of defendant-appellant Wheeler and plaintiff-appellee 

Montgomery to finance the construction and operation of a nursing 

home facility in Norman, Oklahoma. Wheeler and Montgomery each 

owned 50% of the stock of River Oaks Estates, Inc. The 

construction of the nursing home was funded by a first mortgage of 

3.3 million dollars in bond authority. Initially Montgomery's 

management corporation, Americare, managed the nursing home 

pursuant to previous agreements between Wheeler and Montgomery. 

On July 1, 1986, the nursing home was leased to another management 

company. At that same time it was learned that there were 

substantial cost overruns and other expenses due and owed by the 

corporation. In conjunction with the lease negotiations with the 

management company and to avoid foreclosure on the first mortgage, 

Montgomery executed a note with appellants under which Montgomery 

agreed to fund cost overruns and lease deficiencies and to loan 

$220,000 to River Oaks Estates. Wheeler executed a personal 

guaranty for one-half of the $220,000 note. The note was secured 

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Appellate Case: 89-6204 Document: 010110039622 Date Filed: 08/06/1990 Page: 2 
by a second mortgage on the nursing home. The management 

corporation which leased the nursing home facility went bankrupt 

in June of 1987. By its terms, the $220,000 note was immediately 

due and payable when the lease with the management corporation 

terminated because of the bankruptcy. After the bankruptcy and 

default of the $220,000 note, Montgomery made advances to the 

nursing home in order to avoid foreclosure on the first mortgage 

and the possibility of a tax foreclosure. Montgomery in this suit 

seeks repayment on the note, foreclosure of the mortgage and 

reimbursement with interest for the amounts advanced to River Oaks 

Estates in order to protect his second mortgage from foreclosure 

on the first mortgage by a third party. 

The district court found that the transaction between the 

parties was a loan and not a capital contribution to River Oaks 

Estates, the corporate appellant. This finding is clearly 

supported by the testimony of the parties and by the nature of the 

transaction. We cannot say that the district court was clearly 

erroneous in this finding and therefore in its finding the note in 

default. Nor can we say the district court erred in awarding to 

Montgomery the amount of the loan with interest to be paid in 

equal portions by Wheeler and River Oaks Estates. The record 

contains no support for application of the principles of economic 

duress to this loan transaction and the district court did not err 

in refusing to do so. 

The district court further found that the cash advances 

Montgomery made to the corporation were either money paid and 

received or unjust enrichment to Wheeler and River Oaks Estates, 

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Appellate Case: 89-6204 Document: 010110039622 Date Filed: 08/06/1990 Page: 3 
and that such advances were not fair without some corresponding 

obligations on appellants. The district court, therefore, awarded 

$414,781.13, the amount of the cash advances without interest, to 

Montgomery to reimburse him for the advances. The district 

court's finding of unfairness is supported in the record and is a 

proper exercise of its equitable powers. The district court did 

not err in awarding judgment in favor of Montgomery for the amount 

of the advances to the corporation. We further find no error in 

the calculation of the liability of the River Oaks Estates under 

the circumstances here where Wheeler made no contribution at all. 

The record contains no evidence of bad faith on Montgomery's part. 

The order of the district court is AFFIRMED. The mandate shall 

issue forthwith. 

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ENTERED FOR THE COURT 

Deanell Reece Tacha 

Circuit Judge 

Appellate Case: 89-6204 Document: 010110039622 Date Filed: 08/06/1990 Page: 4