Case Title: MOORCROFT STATE BANK v. GERALD M. MOREL, RICHARD LEE SPAIN AND SANDRA LEE SPAIN

Citation: 

Docket Number: 84-92

State: wyoming

Court: Wyoming Supreme Court

Date: 1985-07-10T00:00:00Z

Document:
MOORCROFT STATE BANK v. GERALD M. MOREL, RICHARD LEE SPAIN AND SANDRA LEE SPAIN1985 WY 87701 P.2d 1159Case Number: 84-92Decided: 07/10/1985Supreme Court of Wyoming
MOORCROFT STATE BANK, 
APPELLANT (PLAINTIFF), 

v. 

GERALD M. MOREL, APPELLEE 
(DEFENDANT), RICHARD LEE SPAIN AND SANDRA LEE SPAIN 
(DEFENDANTS).

 
 
Appeal from the District 
Court, CrookCounty, Paul L. Liamos, 
Jr., J.

 
 
Thomas L. 
Whitley, Newcastle, for appellant.

Alan Jay Harper 
of Macy & Harper, Sundance, for 
appellee.

Before THOMAS, C.J., and 
ROSE, ROONEY, BROWN and CARDINE, JJ.

CARDINE, 
Justice.

[¶1.]     Moorcroft State Bank 
brought suit against Gerald Morel as guarantor of a promissory note. Trial to 
the court resulted in a judgment in favor of Morel. The bank appeals from that 
judgment. We affirm.

[¶2.]     Appellant raises the 
following issue:

"Whether the trial court 
committed reversible error in granting judgment to the appellee, Gerald M. 
Morel, based on its finding that there was a failure of consideration for 
appellee's guaranty of the pre-existing debt of another, in that said finding 
was not supported by the evidence before the trial court."

[¶3.]     We have often said 
that:

"The trial court, sitting 
without a jury, is the trier of fact. On appeal, we assume that the evidence in 
favor of the successful party is true, leave out of consideration entirely the 
evidence of the unsuccessful party in conflict therewith, and give to the 
evidence of the successful party every favorable inference which may reasonably 
and fairly be drawn from it." Krist v. 
Aetna Casualty&Surety, Wyo., 667 P.2d 665, 672 
(1983).

[¶4.]     On September 19, 1980, 
Richard Lee Spain and Sandra Lee Spain, employees of appellee, obtained a loan 
from the Moorcroft State Bank in the amount of $9,000 and executed and delivered 
to the bank a promissory note in that amount secured in part by a mortgage upon 
their livestock. Appellee, Gerald Morel, was not involved, nor did the bank rely 
upon him, in making this loan. On September 27, 1980, eight days after 
completing the loan to the Spains, the president of the bank asked Gerald Morel 
to his home where a discussion ensued concerning a guaranty of the loan. Morel 
refused to sign the guaranty saying he only agreed to furnish grass for the 
livestock; but the president of the bank insisted, "I've got to have [referring 
to the guaranty] - I must have this document." After considerable discussion and 
urging, Morel said, "So I succumbed to his argument and signed this guaranty." 
The guaranty of the note was by execution of a separate document dated September 
27, 1980. A year later the note was in default. The bank extended the due date 
of the note upon an extension agreement being signed by Richard Spain. The note, 
as extended, provided for an increase in the rate of interest. Appellee Morel 
did not agree to the increase in the interest rate.

[¶5.]     The bank sued and 
obtained a default judgment against Richard and Sandra Spain. The bank then 
brought suit against Morel upon his guaranty of the Spain 
obligation. The trial court, finding that no consideration had been given for 
the guaranty, entered judgment in favor of Gerald Morel. We agree with the trial 
court and hold that there was no consideration for Morel's guaranty. Since this 
holding disposes of the appeal, we need not address appellee's second argument, 
i.e., that the extension of the note with an increased rate of interest without 
the consent or agreement of the guarantor created a material difference - the 
effect of which was to release Morel from his obligation.

[¶6.]     The bank contends 
that

"* * * the Guaranty was, 
in fact, executed with the intent of receiving the continued benefit of having a 
good employee,"

and that 
appellee signed the guaranty

"* * * with the intent of 
receiving a benefit legally sufficient to support a finding of 
consideration."

We must, on 
appeal, view the evidence in a light most favorable to the prevailing party - 
here, appellee Morel. At trial, appellee testified that it was to his advantage 
to keep a good employee on the ranch, and that his agreement was to furnish 
grass for livestock that the Spains would purchase. He agreed that 
it was to his advantage to furnish the grass for the Spains' 
livestock which were, in part, the collateral for the loan. He did not agree to 
more than this at the time the loan was made to the Spains.

[¶7.]     When appellee conferred 
a benefit on his employee by permitting him to own cattle, furnished grass for 
the cattle, and conferred benefits that might "keep a good employee," that was a 
matter between appellee and his employee. It did not involve the bank at all. 
The bank had made the loan to the Spains eight days earlier. There was 
no evidence that it was made contingent upon its guaranty by Morel. The contrary 
in fact appears from the evidence. It is clear in the exchange between Morel and 
the bank president eight days later that there was no obligation on Morel's part 
to sign the guaranty. In this circumstance, it is necessary that there be a 
separate consideration flowing from the bank to Morel to support and create a 
valid contract of guaranty between the parties. That separate consideration 
might, among other things, be a forbearance to sue or call the note or foreclose 
the mortgage. But that threat does not appear from the record. The note was not 
in default and there was no apparent threat to the bank's security. Simply 
stated, at the time the bank sought Morel's guaranty, it conferred no benefit 
upon Morel nor did it suffer any detriment.

[¶8.]     The law of guaranty is 
part of general contract law. When the guarantor is not a part of the original 
transaction of the principal obligor, his promise must be supported by separate 
consideration. 38 Am.Jur.2d Guaranty § 45. A naked promise is not sufficient. 
Consideration is one of the basic elements of a contract. The burden of proving 
consideration is on the one seeking to recover on the contract. Miller v. Miller, Wyo., 664 P.2d 39 
(1983).

"A generally accepted 
definition of consideration is that a legal detriment has been bargained for and 
exchanged for a promise. The Restatement of Contracts says that a performance or 
a returned promise must be bargained for. `* * * The performance may consist of 
an act, other than a promise, or a forbearance, or the creation, modification or 
destruction of a legal relation.' Lack of consideration goes to the validity of 
contract formation. Absent some indicia of actual consideration, a contract will 
be held invalid by the courts.

"`For several centuries, 
it has been customary to say by the common law that no informal promise is 
enforceable if it is without consideration. * * *' 1 Corbin on Contracts, § 110, 
p. 491 (1963 Replacement)." (Citations omitted.) Id. at 40-41.

[¶9.]     There are many 
definitions given to valuable consideration

"* * * such as profit or 
benefit to the assignor or forbearance or detriment given or suffered by the 
assignee; a benefit to the promisor or a detriment to the promisee; performance 
of an act (the making of a loan) by a promisee which he is not legally obligated 
to perform. In 1 Williston on Contracts, 1936, § 102A, p. 327, it is said, `It 
[detriment] means giving up something which immediately prior thereto the 
promisee was privileged to keep * * *.'" (Citations omitted.) Laibly v. Halseth, Wyo., 
345 P.2d 796, 799 (1959).

[¶10.]  The trial judge was correct in finding a 
lack of evidence to support a finding of consideration. The "intent of receiving 
the continued benefit of having a good employee" is not "consideration" as will 
support the guaranty agreement in this instance. The bank did not give up 
anything nor promise anything. At the time the guaranty was executed, the bank 
did nothing that had not already been done that would assure appellee of keeping 
a good employee. The bank in truth did nothing at all other than obtain 
appellee's signature upon a separate guaranty document. As we have said, that 
was not sufficient.

[¶11.]  Appellant next contends that since the 
guaranty states:

"In consideration of the 
sum of One Dollar and other valuable consideration, receipt and sufficiency of 
which is hereby acknowledged,"

it presents 
prima facie evidence that sufficient evidence was present to support this 
contract. In Kay v. Spencer, 29 
Wyo. 382, 213 P. 571, 574, 27 A.L.R. 1122 (1923), we stated that:

"The acknowledgment of 
the receipt of $1, a mere statement of fact, known by both parties to be untrue, 
gained no sanctity by reason of being stated in writing, and could be 
disproved."

[¶12.]  Appellant contends, further, that the 
consideration requirement is satisfied by inclusion in this guaranty of the 
words "other valuable consideration." There is no evidence, however, that any 
valuable consideration was received by appellee either by way of benefit or 
detriment. We have already held that appellee's continuing to receive the 
services of a good employee was not a sufficient consideration. The judgment of 
the trial court is, therefore, affirmed.