No. 13422 IN THE SUPREME COURT OF THE STATE OF MONTANA 1977

S-W COMPANY, Plaintiff and Respondent,

FRED E. SCHWENK,JR., PACIFIC NATIONAL BANK OF WASHINGTON and SHELL OIL COMPANY, Defendants and Appellants.

Appeal from: District Court of the Sixteenth Judicial District, HonorableAlfred B. Coate, Judgepresiding. Counsel of Record: For Appellants: Denzil R. Young argued, Baker,Montana Moulton, Bellingham,Lbngo & Mather, Billings, Montana For Respondent: Berger, Anderson, Sinclair and Murphy, Billings,

Montana Arnold Berger argued,Billings, Montana ForAmicus Curiae: Fillner and Pitet,Billinas, Montana Patrick Pitet argued, Billings,Montana

Submitted: May 31, 1977 Decided:/.:',<

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# 1fd>~~:yclerkMr. Justice Daniel J. Shea delivered the Opinion of the Court.

Fred 

### E. Schwenk,Jr., appeals from an order of the district court granting summary judgment for S-W Company and from the denial of the district court to amend the court's findings of fact and conclusions of law. The action is on a contract involving interests in land in Fallon County. S-W Company, a promisor to.the contract,brought the action against Schwenk,Pacific National Bank of Washington and Shell Oil Company,promisees. The latter twoparties are stakeholders who do not join Schwenk on appeal. JohnWight was a copromisor on the contract. He was not made a party to the action but filed a brief on leave of this Court as amicus curiae on appeal after receiving notice of the judgmentof the district court. On appeal Wight requests joinder as an interested party to the action. In settlementof a formerdispute, Schwenk agreed to accept the sum of $15,000 as fullpayment to him for his interest in the particular landsdescribed in the agreement with S-WCompany and Wight. The agreement stated: "FirstParty [Schwenk] shall accept the sum of Fifteen Thousand ($15,000.00)Dollars as full payment to him for his right, title, interest and claims in to the above described lands and working interest embracing those lands,which shallbe paid in the followingmanner: Onehalf of the netproceeds derived by 

### S-W Company from itsworking interest in and to said lands, and one-half of the net proceeds to be derived from theWight Trust interestheld by the First National Bank of Denver embracing the said described lands." (Bracketedmaterial added.) According to the agreement, instruments regarding the interests in the land were to be held in escrow and delivered to S-W Company "when the terms and conditions of this agreement and the escrow agreement have been complied with fully." ShellOil, the producer of oil from the lands, latermade monthly payments towards the $15,000 debt, applying one-half themonthly income of S-W Company. Wight Trust funds, meanwhile, were indefinitely impounded by another unrelated lawsuit. When more than $7,500had been paid to Schwenk by income from S-W Company, S-W Company sued Schwenk, the Bank and Shell Oil alleging that it had fulfilled its obligations of the agreement. Schwenk answered, alleging that the agreementdid not limit S-W Company'sobligation to one-half of the $15,000 debt, and that instead, S-W Company was jointly and severally liable for thewhole amount. Wight, the cosigner on the debt, was not joined or notified of the proceedings until after judgment. Neitherparty to the action nor the court raised the question of joinderprior to appeal. The only evidence submitted to the court for interpretation

was a copy of the agreement itself. The trial court granted amotion of S-W Company ruling that the language in disputewas not ambiguous and accordingly that S-W Company was liable to pay only $7,500 of the $15,000 debt. After the trial court refused to amend any of its findings and conclusions,Schwenk appealed from the granting of the summary judgment. Schwenk's appeal raises three main issues: 1. Was the district court in error in determining there

was no ambiguity in the contract? 2. Did issues of fact exist which precluded the granting of summary judgment? 3. Should the district court have required the joinder of Wight as an interestedparty whose interestswere affected by the judgment? If the district courtwas correct in determining that the disputed languagewas not ambiguous, itwould follow that there

were no material questions of fact as to the liability of S-W Company. However, we determine that the language is ambiguous and accordingly that therewerematerial facts in dispute.Where ambiguity does exist on the face of the contract, the question of the parties' intent as to the language involved is submitted to the trier of fact. Schellv. Peters, 147Mont. 21, 410 P.2d 152. Ambiguity exists when a contract taken as a whole in its wording or phraseology is reasonably subject to two different interpretations. Watson 

### v. Barnard, 155 Mont. 75, 82, 469 P.2d 539. Here, the crux of the case iswhether S-W Company is jointly and severally liable for the total $15,000 debt, or only severally liable for half, $7,500. The only language in the agreement relating to liability is phrased in terms of the source of funds to pay the debt: "One-half of the net proceeds derived by S-W Company from itsworking interest in and to said lands, and one-half of the net proceeds to be derived from the Wight Trust interest 

## * * * -1' What was meant by this language? Does itmean that the S-W Company is liable to pay only $7,500 as the trial court held, Or does it mean that one-half of the netproceeds (howeverlarge or small that amountmay be) of the S-W Company'sworking interest in the land involved, shall go towardspayment of the $15,000 debt? Similarly,does it mean that one-half of the net proceeds of the Wight Trust (howeverlarge or small that amountmay be) shall go towards payment of the $15,000 debt? We cannot conclude as amatter of law that the meaning of this contract languagewas clearly stated

or unambiguous. Nowhere in the agreement is the extent of each promisor's liability defined other than to the extent of one-half of each source of income. There are no time limitations, furthermore,onpayment from either S-W Company or Wight Trust;documents in escrowwere to be released only after the agreementwas fully performed. Under Montana law, obligations imposed upon several persons may be (1) joint, (2) several,or, (3) joint and several. Section 58-201,R.C.M. 1947. Section 58-202,

### R.C.M. 1947, states:"When joint and several. All joint obligations and covenants shall hereafter be taken and held to be joint and several obligations and covenants." Sections on the interpretation of contracts, sections 13-725 and 13-726,R.C.M. 1947, raise the presumption of joint and several liability. They provide: "13-725. Where all the parties who unite in a promise receive some benefit from the consideration, whether past or present, their promise is presumed to be joint and several." "13-726. 

### A promise, made in the singular number, but executed by several persons, ispresumed to be joint and several." These sections correspond directly with their California predecessors and present counterparts, sections 1659 and 1660,Ca1.Civ.C.

No Montana cases are clearly onpoint here. California courts,however, have made numerous distinctions regarding these statutes. In a recent case,Vincent v. Grayson, 106 Cal.Rptr. 733, 738, 30 C.A.3d 899, 906, the court stated that the language of 'I8I/Wehereby promise and agree to pay 

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### 7Q2 several liability. InKaneko v. Okuda, 15 Cal.Rptr. 4-93, 195 C.A.2d 217, the court held that three signersof a contract and option to purchase had benefited from the consideration and hence were liable jointly and severally. InWilliams v. Reed, 113 C.A.2d 195, 248 P.2d 147, the court held, comakers of amortgage liable jointly and severallywhen each note was in the form of a promisemade in the singular and executed by each of the makers. Finally, in Olson v. Foster, 42 C.A.2d 493, 109 P.2d 388, the court held that a number of trusts were jointly and severally liable for the balance due on legal services made on behalf of and benefiting all of the trusts. In the present case, there is no language expressly defining the liabilitiesof the two promisors. There is no language comparable to "I/We agree

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## *". The debt, however, isnamed as a total $15,000, and nowhere is it explicitly broken down into two halvesof $7,500 each. It is not clear what benefit each of the promisors received from the agreement,but it specifically stated that the $15,000was to be satisfaction of an earlier "disagreement between all of the parties." What relationship thepromisors each had to the earlier disagreement, or to each other, is not apparent from the papers or the court files. A prior debt, however, is sufficient to constitute consideration in a later promise regarding that debt, sections 13-501and 13-502,R.C.M. 1947,and both promisors here received a benefit from the contract. These facts raise the presumption of joint and several liability of each promisor, and as amatter of law, Schwenk is entitled to this presumption. The burden of proof is on S-W Company to rebut thispresumption. When a contract is ambiguous, the language of the parties must be considered in light of subjectmatter and the surrounding circumstances,as well as the positions of the parties at the time the contractwas made. Kintner v. Harr, 146 Mont. 461, 408 P.2d 487;McNussen v. Graybeal, 146 Mont. 173, 405 P.2d 447. The construction that the district court gave to the languagewas just one of many constructionswhich could reasonably be given it. The district court erred in determining that therewas no ambiguity in the contract. It follows that the court erred in granting summary judgment for S-W Company. This Court stated in Fultonv. Clark, 167 Mont. 399, 404, 538 P.2d 1371, "Summary judgment is usually inappropriate where the intent of the contracting parties is an important consideration."6Moore's Federal Practice, Para. 56.17[41.-11. In Fulton the contractdid not specificallyprovide for the payment of the fees in question. The Court stated: 

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## * * * To determine if the agreementprecludes management fees for long range services, the district courtmust inquire as to the conduct of the parties and as to the existence and substance of the alleged oral agreement. Whether therewasan executed oral agreement,as well aswhether the conduct of the partiesmodified the written agreement, are material questions of factbearing on the intent of the parties. 

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## * " 167Mont. 

### 404. Similarly,here the contract does not state the extent of liability of each promisor. The intent of the parties to the contract 

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### a genuine issue of fact and hence summary judgment is inappropriate. The following considerations for example,would have been appropriate inquiry for the trial court to arrive at the facts. Which party was the source of the language used in the agreement regarding how payment of the debtwas to be made and how and why

was this language chosen? What interests, if any,did each of the promisors to the agreement,namely S-W Company and JohnWight or his predecessor in interest, have in the prior dispute upon which the agreementwas based? What were the income-producing capacities of each of the two parcels of land inwhich the promisors owned interests at the time of the agreement, and was this information within the knowledge of allparties at the time? What was the relationship between the promisors at the time of the agreement? The remaining issue iswhether Wight (the Wight Trust) should have been joined as a party at the district court level. Neither S-W Company nor Schwenk raised the issue of joinder before appeal. In his amicusbrief Wight claims,however, that he should have been joined as a party, and it appears that he did not know of the actionpending in district court. Under Rule 19(a), M.R.Civ.P., the court is required to join a person subject to service of process if: "(2) he claims an interest relating to the subject of the action and is so situated that the disposition of the action in his absencemay (i)as a practical matter impair or impedehis ability to protect that interest

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# ." Since Wight did not claim an interest in the casebelow the court

was not required to join him as a party, but because his interestswould clearly have been affected by the court's judgment, the court should have joined him as 

### a party. Under Rule 21,M.R.Civ.P., the district courtmay drop or add parties onmotion of any party "or 

### of its own initiative" at any time during the proceedings. In this situationWight was not bound by the court's conclusions of law and judgment sincehe was not a party. However, he would be limited in exercising his right of contribution from S-W Company on the debt if S-W's liabilitywas decided inWight's absence. The basis of the rule on joinder is founded on due process considerations of notice and a right tobe heard. On remand Wight should be joined as a party so that he is not deprived of due process.We reverse the summary judgmentof the district court, set aside the findings of fact and conclusionsof law, and order further proceedings not inconsistent with this opinion. 

# @-/$I@ Justice &*