Opinion ID: 1298482
Heading Depth: 1
Heading Rank: 3

Heading: mistake by guardian

Text: This case is here on an appeal from a directed verdict against Guardian and from the trial court's refusal to grant relief to Guardian on its declaratory judgment action. The trial court recognized that the evidence was not in conflict and ruled that Guardian could not recover as a matter of law. We agree that the evidence was not in conflict, but we conclude that Guardian does have a legal right to reformation. It is clear that Guardian made a mistake by indorsing the Sargetis note without limiting its own liability either by a restrictive indorsement or by an assignment of the note to Stangl. There is no evidence that either party contemplated that Guardian would be liable to Stangl on the Sargetis note. The very idea is contrary to what the parties intended to accomplish and is inconsistent with any kind of reasonable business transaction. Stangl admittedly owed Guardian some $192,000 on the Sargetis note; there is no evidence whatsoever that either party thought that Stangl should be entitled to avoid that debt. The deal between Guardian and Stangl was simple and straightforward. Guardian would provide Stangl with a possible means of mitigating losses by giving Stangl the indorsed Sargetis note and Stangl's guarantee of the note in exchange for a new note. Indeed, Stangl does not even contend that the agreement was that he could recover on Guardian's indorsement. He correctly states in his brief that indorsement of the note was never discussed. The subject never arose. In fact, Stangl refutes Guardian's arguments in support of its fraud claim by stating in his brief, [Stangl] did not have a duty to disclose something to Mr. Webb he never even became aware of until a week later, i.e., after the deal was structured, as Stangl puts it. In a similar vein, Stangl concedes that [o]ne cannot misrepresent an intent which does not exist and [o]nce Stangl did learn of his rights respecting the indorsement by Guardian, the negotiations were over and the deal was struck. All of that is true, and that is no doubt why Guardian lost its fraud claim in the trial court. However, those statements emphasize the point that Stangl never intended Guardian to be liable on the Sargetis note as an indorser and neither did Guardian. In other words, the liability of Guardian in the amount of $192,000 on the Sargetis note was a pure windfall to Stangl. Although Stangl's attorney, Maak, testified that he never specifically stated that Stangl sought recovery against NACM, he also testified that the sole purpose for obtaining the note from Guardian was to enable Stangl to recover from Sargetis. Dearinger, Guardian's attorney, testified as follows: Q. Mr. Dearinger, you have testified that you had no discussion with Mr. Maak concerning whether or not Mr. Stangl would come back against the bank; isn't that correct? A. I think I said I had no discussions with him that Mr. Stangl had any desire to go against the bank. Q. Did the subject even come up? A. Only in the context that he indicated that he only wanted the assignment of the note so they could pursue Mr. Sargetis and Sargetis Fine Cars. Q. Did he say that was the only reason he wanted to purchase that note? A. To my recollection. Russell Webb, who initially negotiated and ultimately approved the transaction with Stangl, agreed that he did not understand or have any kind of understanding that [Stangl] was seeking any kind of endorser liability back against the bank. In fact, Webb flatly stated that he would have refused to sign the documents if he had known that Stangl sought indorser liability from Guardian. The evidence unequivocally supports the conclusion that the parties did not intend Guardian to be liable on the Sargetis note after transferring it to Stangl. [2] In short, Guardian's indorsement allowing recourse against it was an error on Guardian's part which Stangl has unjustifiably sought to take advantage of.