Opinion ID: 849345
Heading Depth: 1
Heading Rank: 8

Heading: President

Text: Because Mr. Bayles signed without the corporation name or his corporate title, the court concluded that there is a personal guarantee made by Mr. Bayles. The court entered judgment against Mr. Bayles in the amount of $87,500. [6] Mr. Bayles appealed, but the Court of Appeals affirmed. [7] In doing so, the Court said that [g]eneral rules of construction apply in interpreting guaranty contracts, adding that [t]he primary goal in the construction or interpretation of any contract is to honor the intent of the parties. Rasheed v. Chrysler Corp., 445 Mich. 109, 127, n. 28, 517 N.W.2d 19 (1994). Examining the language of the fax, the Court of Appeals then listed eight reasons why the words and circumstances of this facsimile demonstrate that the intent of the parties was that Mr. Bayles would personally guarantee payment for the five chippers. [8] Mr. Bayles applied to this Court for leave to appeal. In lieu of granting leave, we remanded this case to the Court of Appeals for further consideration. [9] Bandit Industries, Inc. v. Hobbs Intern., Inc., 461 Mich. 861, 602 N.W.2d 576 (1999). In our order, we directed the attention of the Court of Appeals to the manner in which the word assurance is used in § 2-609 of the Uniform Commercial Code, M.C.L. § 440.2609; MSA 19.2609, and in the United States Bankruptcy Code, 11 USC 365(b)(1)(C). In each instance, it appears to refer to something less than a separate guarantee of payment. On remand, the Court of Appeals again affirmed. [10] It found neither M.C.L. § 440.2609; MSA 19.2609 nor 11 USC 365(b)(1)(C) applicable in the present case. Mr. Bayles has renewed his application to this Court for leave to appeal.
This case involves the interpretation of language that is said to form a contract. The proper construction and interpretation of [a] contract is a question of law we review de novo. Morley v. Automobile Club of Michigan, 458 Mich. 459, 465, 581 N.W.2d 237 (1998). Perry v. Sied, 461 Mich. 680, 681, n. 1, 611 N.W.2d 516 (2000).
As the Court of Appeals noted in its first opinion, the record contains facts from which one could conclude that Bandit wanted a personal guarantee from Mr. Bayles, and from which one could conclude that Bandit understood the fax to be that guarantee. However, a guaranty contractlike a surety contractis a special kind of contract. As this Court stated in Ann Arbor v. Massachusetts Bonding & Ins. Co., 282 Mich. 378, 380, 276 N.W. 486 (1937), The undertaking of a surety is to receive a strict interpretation. The surety has a right to stand on the very terms of the contract. To the extent and in the manner and under the circumstances pointed out in his obligation, the surety is bound, and no further. The liability of a surety is not to be extended by implication beyond the terms of his contract. Miller v. Steward, [22 U.S. (9 Wheat) 680, 6 L. Ed. 189 (1824) ]. A surety cannot be held beyond the precise terms of his agreement. Walsh v. Bailie, 10 Johns 180 [N.Y. Sup., 1813]. As said by Chancellor Kent, The claim against a surety is strictissimi juris. 3 Kent's Commentaries (14th Ed.), p. 217. See, also, Fellows v. Prentiss, 3 Denio 512 (45 Am.Dec. 484) [N.Y., 1846]. It is evident that other jurisdictions likewise apply the principle of strict interpretation to the construction of such a contract. [11] For these reasons, a court must approach with caution a claim that the parties have formed a guaranty contract. Ordinary experience teaches that assumption of another's debt is a substantial undertaking, and thus the courts will not assume such an obligation in the absence of a clearly expressed intention to do so. These principles have been in place in Michigan for over a century. The Columbus Sewer Pipe Co. v. Ganser, 58 Mich. 385, 25 N.W. 377 (1885). In Columbus Sewer Pipe, a man named August Ganser personally guaranteed up to $3,000 of the cost of purchasing pipe. The guaranty contract was executed in connection with a sewer project along First Street in Bay City. A dispute later arose regarding whether the guaranty contract was in force for other purchases, or just for the purchase of pipe used in the First Street project. This Court said that the intent of the parties was the controlling element in the interpretation of the guaranty contract and that, under the circumstances found in Columbus Sewer Pipe, Mr. Ganser's guarantee was limited to the cost of the pipe for the First Street project. As the Court explained, [a] guarantor is not liable beyond the express terms of his contract. 58 Mich. at 391, 25 N.W. 377. These authorities confirm the principle enunciated by the Court of Appealsthat the intention of the parties must be given effect. However, the Court of Appeals has failed to apply a more fundamental principle of law. As this Court explained 115 years ago in Columbus Sewer Pipe, [t]he rights of sureties are always favored in the law, and persons standing in that relation in this class of obligations will not be held, unless an intention to bind themselves is clearly manifested. 58 Mich. at 391, 25 N.W. 377. In the present case, the fax is insufficient, as a matter of law, to constitute a binding personal guarantee by Mr. Bayles. The Court of Appeals is correct that the surrounding facts evidence Bandit's desire for a personal guarantee, and even its hope or belief in that regard. However, such a belief cannot reasonably be maintained, nor can such an obligation lawfully be imposed, in the absence of an unambiguous expression of the guarantor's intention to accept that responsibility. No specific form of language is necessary Columbus Sewer Pipe teaches that such documents are frequently given without much care as to the language and that [t]echnical nicety should not, therefore, be applied in their construction. 58 Mich. at 391, 25 N.W. 377. The point, however, is that a personal guarantee cannot be implied from language that fails to clearly and unambiguously reflect an intention to assume such a responsibility. In the present case, the disputed fax speaks of my assurance, but it also mentions our commitment. Twice it recites Bandit's cooperation in working with us, and twice it says that Bandit will be paid when we are. In particular, the assurance of being paid when we are reflects a commitment to pay plaintiff out of corporate funds rather than out of anyone's personal funds. The informal signature on the fax (a handwritten Bill) implies neither a corporate signature as officer nor a personal assumption of a grave responsibility (one would not sign a note of indebtedness for $87,500 with an unadorned Bill). And the term assurance has developed a commercial usage that is not synonymous with a guarantee or a guarantee contract. [12] As indicated above, the fax sent to Mr. Tracy could not, as a matter of law, have been a personal guarantee from Mr. Bayles, giving rise to a guaranty contract. Accordingly, it was error for the circuit court to deny Mr. Bayles' motions for summary disposition, and it was error to enter judgment against him for the $87,500 price of the five custom-made chippers. For these reasons, we reverse the judgments of the Court of Appeals and the circuit court, and we remand this case to the circuit court for entry of a judgment in favor of the individual defendant. MCR 7.302(F)(1).