Case Title: Security State Bank of Basin v. Newton

Citation: 

Docket Number: 

State: wyoming

Court: Wyoming Supreme Court

Date: 1985-10-16T00:00:00Z

Document:
Security State Bank of Basin v. Newton1985 WY 166707 P.2d 173Case Number: 84-277Decided: 10/16/1985THE SECURITY STATE BANK OF BASIN, A WYOMING BANKING CORPORATION, APPELLANT (PLAINTIFF), 

v. 

BERTHA E. NEWTON, APPELLEE (DEFENDANT).
Supreme Court of Wyoming
THE SECURITY STATE BANK 
OF BASIN, A WYOMING BANKING CORPORATION, APPELLANT (PLAINTIFF), 

v. 

BERTHA E. NEWTON, APPELLEE (DEFENDANT).

 
 
Appeal from the District 
Court, WashakieCounty, Gary P. Hartman, 
J.

 
 
Robert A. Gish 
of Zaring & Gish, Basin, for 
appellant.

Elmer J. Scott 
of Scott & Shelledy, P.C., Worland, for appellee.

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

CARDINE, 
Justice.

[¶1.]     Security State Bank of 
Basin brought suit against Bertha Newton as guarantor of her husband, Woodrow 
Newton, who was guarantor upon a loan made by the bank to his son Albert Newton. 
From a summary judgment in favor of Bertha Newton, the bank 
appeals.

[¶2.]     We 
affirm.

[¶3.]     Appellant raises the 
following issue: 

"Can a guarantee, which 
is executory, guarantee another guarantee which is also 
executory?"

Appellee 
restates the issue as:

"Does the Guaranty 
Agreement of Appellee guarantee the secondary obligations of Woodrow Newton on 
Woodrow Newton's guarantee for loans made by the Bank to Woodrow's son, 
particularly if there was no consideration for her 
guaranty?"

[¶4.]     On May 7, 1979, Bertha 
Newton signed a guaranty agreement to enable her husband, Woodrow Newton, to 
obtain a loan from Security State Bank of Basin. The instrument signed by Bertha 
Newton reads as follows:

"LOAN GUARANTY 
AGREEMENT"

"For Value Received and 
to enable Woodrow Newton of Box 288 
Worland, WY., hereinafter designated as `Debtor,' to obtain credit, from 
time to time, of Security State Bank of Basin, we hereby request said Bank to 
extend to said Debtor such credit as said Bank may deem proper, and we hereby 
jointly and severally guarantee the full and prompt payment to said Bank at 
maturity, and at all times thereafter, and also at the time hereinafter 
provided, of any and all indebtedness, 
liabilities and obligations of every nature and kind of said Debtor to said 
Bank, and every balance and part thereof, whether now owing or due, or which may 
hereafter, from time to time, be owing or due, and howsoever heretofore or 
hereafter created or arising or evidenced, to the extent of One hundred fifty 
thousand and no/100 Dollars * * *.

* * * * * 
*

"The granting of credit 
from time to time by said Bank to said Debtor in excess of the amount of this 
guaranty and without notice to the undersigned, is hereby authorized and shall 
in no way affect or impair this guaranty." (Emphasis 
added.)

The loan 
guaranty agreement provides a continuing guarantee for loans made by the bank to 
Woodrow Newton. It contemplates a future course of dealings between the creditor 
and the principal debtor and is generally held to guarantee future loans 
"provided that the particular transactions fall within the * * * course of 
dealings contemplated by the * * * continuing guaranty." Fidelity National Bank of South Miami v. Melo, Fla.App., 366 So. 2d 1218, 1221 
(1979); 38 Am.Jur.2d Guaranty § 63.

[¶5.]     This guaranty agreement 
is a form agreement written in broad terms to cover all contingencies possible 
with respect to the loan being made to Woodrow Newton. It was signed by Bertha 
Newton for that express purpose. In reliance upon the agreement, the bank 
extended credit to Woodrow Newton making the loan and delivering its proceeds to 
him. He repaid the amount of the loan in full, and there was no claim that 
additional loans were ever made by the bank to Woodrow Newton. Thereafter Bertha 
Newton's guaranty agreement lay dormant in the bank's file until January 4, 
1982.

[¶6.]     On January 4, 1982, 
Woodrow Newton signed a guaranty agreement of the same type to enable his son, 
Albert, to obtain a loan from the bank. Albert failed to repay the loan and the 
bank brought suit against Woodrow Newton upon his contract of guaranty. The bank 
obtained judgment against Woodrow Newton upon his confession of judgment. The 
bank then brought suit against Bertha Newton, contending that the terms of her 
May 7, 1979 guaranty extended not only to the loan made to her husband, which 
had been repaid, but also to his guaranty of Albert's debt as 
well.

[¶7.]     Claiming that she 
signed the guaranty solely to enable her husband to obtain a loan for his well 
drilling business and that repayment of the loan in full extinguished her 
obligation under the guaranty, Bertha Newton denied liability and moved for 
summary judgment. The district court concluded that there was no genuine issue 
of fact to be determined and that Bertha Newton was entitled to judgment as a 
matter of law. Accordingly, the court granted summary judgment in favor of 
Bertha Newton. 

[¶8.]     A guarantor's liability 
cannot be extended by construction or by implication beyond the express terms of 
the guaranty. Farmers State Bank v. 
Doering, 80 Ill. App.3d 959, 400 N.E.2d 705 
(1980); Trego WaKeeney State Bank v. 
Maier, 214 Kan. 169, 519 P.2d 743 (1974). Unless a given 
transaction is expressly included within the guaranty, the guarantor is not 
liable upon the debtor's default. National Bank of Commerce of Kansas City, Mo. v. Rockefeller, 174 F. 22 (8th Cir. 
1909). A guarantor is liable only for the payment of debts expressly 
guaranteed.

[¶9.]     In Rohn v. Weld County Bank, 155 Colo. 490, 395 P.2d 1003 
(1964), as in this case, a wife signed a guaranty to enable her husband to 
obtain a loan. The husband in turn guaranteed a loan made by the bank to their 
son. The court held that the terms of the wife's guaranty did not include the 
husband's obligations as guarantor of a third party's loan. The court noted 
that:

"Simply stated, this is a 
suit to extend the provisions of [the] guarantee to cover an extraneous 
instrument to which [the guarantor] was not a party." Id. 395 P.2d  at 
1005.

Appellant here 
similarly seeks to extend Bertha Newton's guaranty to cover Albert Newton's debt 
to the bank which is represented by an instrument to which Bertha Newton was not 
a party.

[¶10.]  The agreement in this case does not 
contain an express promise to guarantee the debt sought to be collected by 
appellant. It does not mention the contingent liabilities of Woodrow Newton upon 
the debts of third persons. There was no evidence in the record that the parties 
intended that the bank might loan money to any myriad of third persons upon the 
guaranty of Woodrow Newton which would then be secured by the guaranty of Bertha 
Newton. Nothing in the record suggests that the parties intended a guaranty that 
would continue forever for the benefit of third parties unknown to appellee. 
Bertha Newton 
agreed only to guarantee payment of her husband's debt, not the debts of third 
persons for which her husband might be contingently liable. The bank was the 
scrivener of the guaranty agreement; and it will, therefore, be construed most 
strongly against the bank. Busch 
Development, Inc. v. City of Cheyenne, 
Wyo., 645 P.2d 65 (1982); Goodman v. Kelly, Wyo., 390 P.2d 244 (1964); 38 Am.Jur.2d Guaranty § 
71.

[¶11.]  If in this case the loan guaranty 
agreement was intended to cover the future contingent liabilities of Woodrow 
Newton, provision for such liabilities should have been stated with precision 
and clarity rather than in general language. The use of the phrase "any and all 
indebtedness, liabilities and obligations of every nature and kind" in this loan 
guaranty agreement does not, under the facts and circumstances of this case, 
satisfy the requirement of clarity. It is so indefinite as to be subject to 
either broad or narrow construction. However, in the context of this agreement, 
it is clear that when the bank titled the document a loan agreement and in the 
body of the document stated, "For Value Received and to enable Woodrow Newton of 
Box 288 Worland, WY., hereinafter designated as `Debtor,' to obtain credit," it 
described the primary indebtedness of Woodrow Newton. Upon similar facts and 
circumstances it was held in Trego 
WaKeeney State Bank v. Maier, supra, 519 P.2d 743, that this type catchall 
phrase would be construed to apply only to primary obligations of the debtor and 
did not extend to his secondary liability. There is an absence of clear language 
demonstrating the express intent of the parties to this loan guaranty agreement 
to guarantee the secondary liability of Woodrow Newton, and we cannot rewrite 
the agreement to provide coverage for this liability.

[¶12.]  In Fannin State Bank v. Grossman, 30 
Ill. App.2d 
484, 175 N.E.2d 268, 85 A.L.R.2d 1178 (1961), the guarantor agreed to guarantee 
payment of any indebtedness extended by the bank, "whether to [the borrower] 
alone or to him and others * * *." By its terms, the agreement provided for 
almost unlimited coverage. In contrast to the guaranty in that case, Bertha 
Newton agreed to guarantee payment of the loans of only one person - Woodrow 
Newton, the debtor. Bertha Newton's guaranty specifically limited its 
coverage to "said Debtor."

[¶13.]  Under the rule of ejusdem generis, when a 
specific term is followed by a more general provision, the meaning of the 
general provision is restricted so as to be consistent with the specific term. 1 
G. Brandt, The Law of Suretyship and Guaranty § 103 (3d ed. 1905); Trego WaKeeney State Bank v. Maier, 
supra. The specific term "Woodrow Newton * * * hereinafter designated as 
`Debtor'" is followed by a general provision describing the obligations of "said 
Debtor" guaranteed by the agreement. Applying the rule of ejusdem generis, we 
hold that the general terms, "indebtedness, liabilities and obligations" refer 
strictly to the loan directly contracted for by the "said Debtor," Woodrow 
Newton. As the court stated in National 
Bank of Commerce of Kansas City, Mo. v. Rockefeller, supra, 174 F. at 
29:

"The parties to this 
plain and simple contract never could have reasonably contemplated any liability 
brought about by [the] circuitous process,"

advanced by 
appellant.

[¶14.]  Bertha Newton guaranteed the payment of a loan made by 
the bank to Woodrow Newton and not the contingent liabilities he might assume 
for loans made to third parties. There was an absence of clear language in the 
agreement stating otherwise. We hold, therefore, for all the reasons stated 
herein that, where it is the intent of the parties to the loan guaranty 
agreement to secure a loan for the benefit of a particular person, the agreement 
does not also guarantee secondary liability for the payment of a loan made to a 
third party not mentioned nor within the contemplation of the 
parties.

[¶15.]  Appellee also raises the question of 
whether sufficient consideration was given for Bertha Newton's guaranty to 
support holding her liable for Albert's debts. Having found that the terms of 
the guaranty do not extend to Woodrow Newton's obligations as guarantor of 
Albert's loan, we find it unnecessary to address that 
question.

[¶16.]  The judgment of the district court is, 
therefore, affirmed.

ROONEY, Justice, specially 
concurring.

[¶17.]  I cannot agree that the language in the 
Loan Guaranty Agreement means anything other than what it says. I cannot find 
any ambiguity in the language used. The agreement states its purpose with 
precision and clarity.

[¶18.]  In doing so, it precisely and clearly 
says, as set out in the majority opinion, that the guarantee is for payment of 
credit extended to Woodrow Newton, the debtor, and not for credit extended some 
other debtor - even if Woodrow Newton were contingently liable 
thereon.

[¶19.]  I would affirm on this 
basis.