Case 08-02077 Doc 40 Filed 02/13/09 Entered 02/13/09 17:26:58 Desc Main

Document Page 1 of 6

Gary E. Jubber A1758

Douglas J. Payne A4113
Clint R. Hansen A12108
FABIAN & CLENDENIN,
a Professional Corporation
215 South State Street, Suite 1200
Salt Lake City, Utah 84111-2323
Telephone: (801) 531-8900
Fax: (801) 596-2814
gjubber@fabianlaw.com
dpayne@fabianlaw.com
chansen@fabianlaw.com

Attorneys for Gary E. Jubber, Chapter 7 Trustee

IN THE UNITED STATES BANKRUPTCY COURT

FOR THE DISTRICT OF UTAH, CENTRAL DIVISION
)
In re: ) Bankruptcy No. 08-20308
)
BEDROCK MARKETING, LLC ) (Chapter 7)
)
)
GARY E. JUBBER, Chapter 7 ) Honorable William T. Thurman
Bankruptcy Trustee of Bedrock Marketing, )
LLC, and Chapter 7 Bankruptcy Trustee of )
Enlightened Management, LLC, ) REPLY MEMORANDUM IN SUPPORT
Plaintiff, ) OF MOTION TO STRIKE
v. )
)
WESTON WADE SLEATER, an ) Adversary No. 08-02077
individual, )
)
Defendant.

Gary E. Jubber (“Trustee” or “Plaintiff”), Chapter 7 trustee of the bankruptcy estate of

Bedrock Marketing, LLC (“Bedrock”), and Chapter 7 trustee of the bankruptcy estate of

Enlightened Management, LLC (“Enlightened”), hereby submits this Reply Memorandum in

Support of his Motion to Strike:

 Case 08-02077 Doc 40 Filed 02/13/09 Entered 02/13/09 17:26:58 Desc Main
Document Page 2 of 6

ARGUMENT

I. Statements Made by Rex Wheeler Are Not Admissible Against the Trustee Under
Fed. R. Evid. 801(d)(2).

Paragraphs 3, 7, 8, 9, and 16 of the Sleater Declarations refer to statements allegedly

made by Rex Wheeler (“Wheeler”), who was formerly the owner and manager of Bedrock and

Enlightened. Prepetition statements made by an officer or agent of a debtor are not admissible

against the debtor’s bankruptcy trustee under Rule 801(d)(2 of the Federal Rules of Evidence.

See, Hon. B. Russell, BANKRUPTCY EVIDENCE MANUAL §801:16 (2008-2009 Ed.). In Calhoun v.

Baylor, 646 F.2d 1158, 1162-63 (6th Cir. 1981), the Sixth Circuit held that Rule 802(d)(2) did not

allow a defendant in an adversary proceeding brought by a bankruptcy trustee as a successor in

interest to the debtor to introduce prepetition statements by the debtor’s officers or agents. Id. at

1162. “Rule 801(d)(2) does not include statements by predecessors in interest among the types

of statements the rule makes admissible. As one commentator has pointed out, the rule ‘rejects

privity as a ground of admissibility by making no provision for it.’” Id. at 1162-1163, quoting 4

WEINSTEIN’S EVIDENCE 801-165 (1979). Thus, regardless of Wheeler’s status as an agent of

Bedrock or Enlightened, his out-of-court statements are not admissible against the Trustee.

II. Parol Evidence Is Not Admissible Because the Notes Are Not Facially Ambiguous.

Sleater argues that the Notes are facially ambiguous because Sleater is named as both the

maker and guarantor and those terms are mutually exclusive. Sleater cites Bohart v. Universal

Metals & Machinery, 523 S.W.2d 279 (Tex.Civ.App. 1975). However, that decision was

expressly overruled by the Texas Supreme Court on the very point for which Sleater advances it

as authority. Universal Metals & Machinery v. Bohart, 539 S.W.2d 874, 876-877 (Tex. 1976).

The Texas Supreme Court reversed the lower court’s finding that the terms are mutually

2
 Case 08-02077 Doc 40 Filed 02/13/09 Entered 02/13/09 17:26:58 Desc Main
Document Page 3 of 6

exclusive, implicitly found the instrument to be unambiguous, and held the individual signers to

be personally liable. Id. at 876-877 & 879.

None of the other cases cited by Sleater support his argument that a facial ambiguity is

created or that parol evidence may be considered whenever an individual is both a maker and

guarantor. For example, the language Sleater quotes from Material Partnerships, Inc., v.

Ventura, 1021 S.W.3d 252 (Tex. App. 2003) is dictum from a concurring opinion and is not the

holding of the court. See, id. at 263. In fact, the majority opinion in Material Partnerships held

that the guaranty agreement in question was “not ambiguous.” Id. at 261. In the present case,

Sleater is attempting to use extrinsic evidence to vary the terms of the Notes, which are valid,

integrated, and unambiguous instruments. “The parol evidence rule . . . bars the use of extrinsic

evidence to vary or add to the terms of [an instrument that is] valid, integrated and

unambiguous.” See, Tangren Family Trust v. Tangren, 182 P.3d 326, 332 (Utah 2008).

III. Parol Evidence Concerning Consideration Is Not Admissible.

Where consideration is apparent from the face of the contract or from admissions in the

pleadings, as is the case here, parol evidence is inadmissible as to the existence of consideration.

Under the Uniform Commercial Code (“UCC”), a promissory note given to memorialize a pre-

existing obligation is supported by sufficient consideration as a matter of law. See, Utah Code

Ann. §§70A-3-303(1)(c) & 70A-3-303(2); UCC §3- 303 official cmt. 1, case #1 & official cmt.

4. See also, Bradley v. Romeo, 716 P.2d 227, 228 (Nev. 1986) (holding that under former UCC

§3-408, (current version at §3-303(b)), a prior loan to a company was sufficient consideration to

hold company shareholder personally liable on a promissory note); 11 Am. Jur. 2d § 148. It is

also not necessary that consideration flow directly to the individual who signs a promissory note;

3
 Case 08-02077 Doc 40 Filed 02/13/09 Entered 02/13/09 17:26:58 Desc Main
Document Page 4 of 6

it may flow to a third party. Continental Ill. Nat. Bank v. Allen, 811 P.2d 168, 173 (Utah 1991)

(citing Restatement (Second) of Contracts §71(4)).1

Sleater admits that Atlas Capital, LLC did in fact receive from Bedrock and Enlightened

the full amount of money alleged in Plaintiff’s Complaint, and that the full amount of this

indebtedness is correctly memorialized in the Notes. Mem. in Opp. to Summary Judg. at 2, 3.

Sleater further admits that he was the sole member of Atlas Capital, LLC. See, Mem. in Opp. to

Motion to Strike, at pg. 6; Statement of Financial Affairs of Atlas Capital, LLC in Bkr. No. 08-

21725, at ¶ 21 (relevant pages attached as Exh. A to Trustee’s Reply Mem. in Supp. of Motion

Summary Judg.); and Sleater Declarations at ¶ 2. Sleater also admits that he signed the

promissory notes and the guaranties. Id.; Answer at ¶¶ 4,10. Thus, this Court can rule on the

consideration issue from the face of the pleadings alone pursuant to §§70A-3-303(1)(c) & 70A-

3-303(2). The Notes are valid as a matter of law and supported by consideration. Parol evidence

is inadmissible to vary the terms of the instruments.

Furthermore, the statements regarding consideration in the Sleater Declaration are

irrelevant because Sleater is liable regardless of whether he personally received consideration.

He clearly signed the guaranties as an accommodation maker. Pursuant to Utah Code §70A-3-

419(2), the obligation of an accommodation maker may be enforced “whether or not the

accommodation party receives consideration for the accommodation.” Id.

1
The Texas Supreme Court’s decision in Bohart also undermines Sleater’s argument regarding lack of
consideration. The court found that a guaranty was supported by sufficient consideration even though the guaranty
was executed three months after the machinery had been delivered to the company. 539 S.W.2d at 878. The
agreement recited “for value received” and the individuals “had a real interest in the acquisition of the machinery”
which was necessary to the company. “Under these facts there was consideration which supports the guaranty
agreement.” Id.

4
 Case 08-02077 Doc 40 Filed 02/13/09 Entered 02/13/09 17:26:58 Desc Main
Document Page 5 of 6

Based upon the foregoing, paragraphs 3, 7, 21, 22, 23, and 24 of the Sleater Declarations

are not admissible to show lack of consideration and should be stricken.

IV. Sleater Cannot Have Personal Knowledge of Another’s Thoughts or Intentions.

Sleater argues that he has personal knowledge of the thoughts and intentions of Bedrock

and Enlightened. See, Mem. in Opp. to Motion to Strike, at pg. 8, ¶ 5. Sleater could not have

personal knowledge that Bedrock and Enlightened intended liability to be different from what

was written in the Notes. Similarly, there is no basis for Sleater’s alleged knowledge of the

existence or extent of any detriment which Bedrock and Enlightened suffered in return for

Sleater’s guaranty, or whether the preparer of the Notes “mistakenly” stated the name of the

maker of the Notes. Paragraphs 10, 11, 16, 23 and 24 of the Sleater Declarations lack the

necessary foundation to support a finding of personal knowledge, as required by Rule 602 of the

Federal Rules of Evidence.

CONCLUSION

Based on the foregoing, the Trustee asks this Court to grant the relief requested in

Trustee’s Motion to Strike and the Memorandum filed in support thereof.

DATED this 13th day of February, 2009.

/s/ Gary E. Jubber

Gary E. Jubber
Douglas J. Payne
Clint R. Hansen
FABIAN & CLENDENIN,
a Professional Corporation
Attorneys for Plaintiff Gary E. Jubber, Ch. 7
Trustee

5
 Case 08-02077 Doc 40 Filed 02/13/09 Entered 02/13/09 17:26:58 Desc Main
Document Page 6 of 6

CERTIFICATE OF SERVICE

I hereby certify that on the 13th day of February, 2009, I caused a true and correct copy of

the foregoing REPLY MEMORANDUM IN SUPPORT OF MOTION TO STRIKE to be served

via first class mail and by e-mail to the following:

Ronald S. George, P.A.

389 N. Mink Creek Road
Pocatello, ID 83204
Email: 19ron48@gmail.com

/s/ Gary E. Jubber

ND: 4825-7541-1715, v. 3