Title: FIRST FED. S & L v. Compass Investments

State: north-dakota

Issuer: North Dakota Supreme Court

Document:

342 N.W.2d 214 (1983) FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF BISMARCK, Plaintiff, Appellant, and Cross-Appellee, v. COMPASS INVESTMENTS, INC., R.F. Schirber, A.F. Kosir, and John C. Lindsay, Defendants, Appellees, and Cross-Appellants. Civ. No. 10451. Supreme Court of North Dakota. December 22, 1983. *215 James P. Rausch, of Rausch & Rausch, Bismarck, for plaintiff, appellant, and cross-appellee. Albert A. Wolf, of Wheeler, Wolf, Peterson, Schmitz, McDonald & Johnson, Bismarck, for defendants, appellees, and cross-appellants. VANDE WALLE, Justice. This is an appeal by First Federal Savings and Loan Association of Bismarck from a district court judgment dismissing its action on an agreement of a guaranty of completion of an apartment project and a subsequent agreement for substitution of guarantors. Compass Investments, Inc., R.F. Schirber, A.F. Kosir, and John C. Lindsay have lodged a cross-appeal, alleging error in the trial court's denial of expert witness fees. We affirm. This is the second appearance of this case before this court. In First Federal Savings and Loan Association v. Compass Investments, Inc., 321 N.W.2d 921 (N.D.1982), an appeal from a summary judgment of dismissal, we concluded that the complaint stated a cause of action and said, 321 N.W.2d at 923: The case has now been tried on the merits and a judgment of dismissal has been entered. Many of the essential facts were stated in the prior opinion in this case and most of them will not be repeated here. First Federal has stated the following issues on appeal: Compass, Schirber, Kosir, and Lindsay have stated the following additional issue in their cross-appeal: At the heart of this lawsuit is a "GUARANTY" which, after reciting that the Merchants National Bank and Trust Company of Fargo and Myron H. Atkinson, Jr., as co-trustees of the Diocese of Bismarck Trust and the Mary College, Inc., Trust [the Trust], and Compass had entered into a lease of certain described real property, and that Compass had executed a note and mortgage to First Federal, the proceeds of which were to be used to construct an apartment complex on the property, provides: With regard to the issues raised by First Federal, we deem the question of whether or not First Federal has a right to enforce the guaranty at all to be dispositive of its appeal. The trial court obviously deemed the agreement to be ambiguous. "A contract may be explained by reference to the circumstances under which it was made and the matter to which it relates." Section 9-07-12, N.D.C.C. The parties to this action presented testimony relating to the circumstances under which the agreement was made to provide the trial court with the information "necessary to determine the full and true meaning and effect of the action of the parties in relation to the guaranty." First Federal Savings and Loan Association v. Compass Investments, Inc., supra. The guaranty in issue is ambiguous. It is clear from the paragraph first quoted above that the parties who guaranteed completion of the project were Schirber, Bianco, Kosir, and Lovgren. (With the consent of the co-trustees, John C. Lindsay and Compass were later substituted for Bianco and Lovgren.) It is also clear that the Trust is the party to whom completion of the project has been guaranteed. It is clear from the recitals preceding the quoted provisions that Compass is the party for whose "debt, default, or miscarriage" the guarantors have promised to answer. Section 22-01-01, N.D.C.C. It is not clear, however, what status or rights were intended to be conferred upon First Federal. Was First Federal intended to receive the same guarantee as the Trust, or was it intended to receive only the same "use and benefit" as all other "persons, firms and corporations interested"? An action against the guarantors of notes "is not based on obligations imposed by the notes or the mortgages given to secure the notes, but on a separate and distinct contract of guaranty." Bank of Kirkwood Plaza v. Mueller, 294 N.W.2d 640, 643 (N.D.1980). Thus First Federal's reliance on what it considers a requirement of its loan commitment letter that Compass deposit $1,000,000 of "front end money" to "ensure the completion of the project," and its assertion that Compass never made such a deposit, is irrelevant, other than perhaps to set a ceiling on the guarantors' liability. See Section 22-01-12, N.D.C.C. Regardless of whether or not the commitment letter required such "front end money," which we think is far from clear, and regardless of how much, if any, was deposited, it is undisputed that First Federal disbursed the entire proceeds of the loan. Although we had hoped that upon trial after our prior remand, the trial court would "find the facts specially and state separately its conclusions of law thereon," which was not done here, it is "sufficient if the findings of fact and conclusions of law appear" in an opinion or memorandum of decision. Rule 52(a), N.D.R.Civ.P. In its Memorandum Opinion the trial court stated in part: Implicit in the above statements by the trial court are findings of fact that (1) First Federal required a first mortgage on the land, necessitating a subordination by the Trust of its interest in the land; (2) the Trust required a guaranty of completion of the project, which was not a requirement of First Federal; (3) First Federal was not a party to the guaranty; and (4) First Federal gave no additional consideration for the guaranty. These findings are supported by substantial evidence and are not clearly erroneous under Rule 52(a), N.D.R.Civ.P. First Federal can enforce the guaranty as a third-party beneficiary if it falls within the ambit of Section 9-02-04, N.D.C.C., which provides: "A contract made expressly for the benefit of a third person may be enforced by him at any time before the parties thereto rescind it." Section 9-02-04, N.D.C.C., has been construed many times. In Parlin v. Hall, 2 N.D. 473, 52 N.W. 405, 407 (1892), this court said: This court said in Syllabus No. 4, Farmers' State Bank v. Anton, 51 N.D. 202, 199 N.W. 582 (1924): We said in Syllabus No. 3, State v. Padgett, 54 N.D. 211, 209 N.W. 388 (1926): See also O'Connell v. Entertainment Enterprises, Inc., 317 N.W.2d 385 (N.D. 1982); Johnson v. Clark, 77 N.D. 14, 39 N.W.2d 431 (1949); Walters v. Calderon, 102 Cal. Rptr. 89, 25 Cal. App. 3d 863 (1972). That the mention of one's name in an agreement does not give rise to a right to sue for enforcement of the agreement where that person is only incidentally benefited is indicated by Johnson v. Clark, supra, and Walters v. Calderon, supra. It is evident from the testimony presented at trial that the purpose behind the guaranty was to induce the Trust to execute a subordination of its interest in the land upon which the apartment complex was to be built so that First Federal could have the first mortgage on the property that it required. There is evidence from which the trier of fact could reasonably conclude that the *219 matter of a guaranty arose after First Federal had issued its loan-commitment letter and arose at the instance of the Trust. Further, there was testimony that it was understood by the guarantors that the guaranty was for the benefit of the Trust. First Federal's officer in charge of the loan for this project, while testifying that First Federal relied on the guaranty, also testified: The record does not indicate that First Federal was the party intended to benefit from the guaranty, nor does it indicate that the guarantors or the Trust intended to confer upon First Federal a right to enforce the guaranty. Under our prior cases construing Section 9-02-04, N.D.C.C., and its predecessors, under Restatement of Contracts § 133(1) (1932), or under Restatement (Second) of Contracts § 302 (1979), First Federal is an incidental beneficiary. We conclude that as an incidental beneficiary of the guaranty in issue First Federal has no right to enforce the provisions of the guaranty. Our determination that First Federal is an incidental beneficiary with no right to enforce the guaranty renders unnecessary determination of the issues raised by First Federal. The only remaining issue for determination is that raised by Compass and the individual guarantors as to whether or not the trial court erred in denying expert witness fees. Without stating the reasons for its action, the trial court denied the taxation of expert witness fees, which is now asserted to be an abuse of discretion. Other than a reference to Section 28-26-06, N.D.C.C.,[3] Compass and the individual guarantors have provided us with no citations or supportive reasoning to buttress their assertion. Without more, we find their argument to be without merit. For the reasons stated, the judgment is affirmed. ERICKSTAD, C.J., and PEDERSON, GIERKE and SAND, JJ., concur. [1] Pursuant to a stipulation of the parties in a foreclosure action brought by First Federal against the co-trustees and against Compass, Crestview Park, and Prairie Builders Co., a judgment was entered that (1) dismissed First Federal's claim against the co-trustees; (2) dismissed the co-trustees' counterclaim against First Federal; (3) dismissed the co-trustees' cross-claim against Compass and Crestview Park; and (4) left unaffected all other claims and cross-claims of the parties. [2] After First Federal commenced the foreclosure action, but before judgment, the co-trustees of the Diocese of Bismarck Trust and Mary College, Inc., Trust gave to Riverside Service Corporation, a wholly owned subsidiary of First Federal, a trustee's deed to the real property in issue. The deed specifically stated that the deed was given by the trustees "in lieu of foreclosure of their interest pursuant to" First Federal's mortgage. In the same manner, Compass and Crestview Park gave Riverside a quitclaim deed to the property and an assignment of their lease from the Trust "in lieu of foreclosure of their interest." [3] Section 28-26-06, N.D.C.C., provides, in pertinent part: "28-26-06. Disbursements taxed in judgment. In all actions and special proceedings, the clerk must tax as a part of the judgment in favor of the prevailing party his necessary disbursements as follows: . . . . . "5. The fees of expert witnesses. Such fees shall be reasonable fees as determined by the court, plus his actual expense. The following shall nevertheless be in the sole discretion of the trial court: "a. The number of expert witnesses who shall be allowed fees or expenses; "b. The amount of fees to be paid such allowed expert witnesses, including an amount for time expended in preparation for trial; and "c. The amount of costs for actual expenses to be paid such allowed expert witnesses."