Court Opinion

ID: 9729545
Source: CourtListenerOpinion
Date Created: 2023-08-26 14:41:53.084557+00
Date Added: 2024-06-11T18:25:59.389849
License: Public Domain

Larson, J.
I respectfully dissent from the holding of the majority that the defendant, P. J. Geerlings, absolutely and unconditionally guaranteed to pay holders of preferred stock a seven percent (7%) semiannual dividend within ten days after June 1 and December 1 of each year. Such was not the undertaking expressed by the language used in the agreement between the parties reduced to writing in Exhibit A.
Although the majority freely admit “there is no claim of ambiguity”, they spend most of their time discussing what they consider significant circumstances outside the instrument to determine the intent and beliefs of the parties concerning the meaning of the contract. The majority consider the resistance and affidavit filed, the “uneontroverted” allegations of the petition, the surrounding circumstances, and the parties’ alleged interpretation of the contract. Thus while saying the contract is not ambiguous, the majority indicate that it is, by resorting *582to' matters far outside the writing. They even draw improper inferences from outside matters, one of which I shall later point out.
I. I assumed the rule too well settled to require citation of authority that, where such a guaranty clause is clear-cut, concise and unambiguous, the wording of the contract must control; that it is only where the wording of the contract is ambiguous, or susceptible of two or more constructions, that the situation of the parties and the circumstances surrounding the transaction, together with the conduct of the parties in relation thereto, must be considered in ascertaining the intentions. Tucker v. Leise, 201 Iowa 48, 50, 206 N.W. 258; Sears, Roebuck and Co., Inc., v. Poling, 248 Iowa 582, 589, 81 N.W.2d 462, and citations; 12 Am. Jur., Contracts, section 229; 17 C. J. S., Contracts, section 294.
The general rule governing the authority of courts to construe written instruments has always been that if the language, given its plain and rational meaning, is precise 'and free from ambiguity, no more is necessary than to apply to the words used their natural and ordinary meaning in connection with-the subject considered. Case v. Olson, 234 Iowa 869, 873, 14 N.W.2d 717, and cases cited. We have repeated many times the statement that we are not permitted to write into agreements words which are not there, nor delete from agreements words that are there. Thus, if the meaning of the language used is clear, there is no room for construction and the courts are not permitted to search for its meaning beyond the agreement itself.
The important language of the guaranty agréément which is being considered is as follows: “* * * [the defendant] does hereby guarantee that in the event that the corporation does not pay seven percent (7%) dividends called for in said preferred stock semiannually m accordance, with the, terms and provisions of said preferred stoch, * * * he will pay said dividends * * * within ten (10) days after the-same become due:” (Emphasis supplied.)
The emphasized language cannot be read out of the agreement.' It is a part of the agreement; it is a condition; it means *583that the terms and provisions of the preferred stock must be considered in determining the liability of the defendant. It conditioned guarantor’s undertaking. The corporate undertaking found in the preferred stock certificate, Exhibit B, provides for 7 percent preferred dividends, payable semiannually, “to be paid out of the net earnings and undivided surplus of the corporation, * * *. No dividends shall be declared on common stock until all dividends on preferred stock have been paid.” (Emphasis supplied.)
As I see this guaranty, it is clearly a promise to answer for the performance of the duty of another when the other defaults on its obligation. Defendant promised to pay the semiannual dividends on June 10 and December 10 if under its stock certificate undertaking the corporation was obligated to do so; in other words, if the corporation had net earnings and undivided surplus from which to pay these dividends. I fail to see how the language used in the guaranty can mean anything else without reading out the words “in accordance with the terms and provisions of said preferred stock.”
II. As generally understood, “a contract of guaranty is an obligation in form and substance to answer for another’s default. It is collateral, secondary and expressly conditional upon breach by the principal debtor. The debtor is not a party to the guaranty, and the guarantor is not a party to the principal obligation. Although the same consideration (of detriment to the promisee creditor) may support both the promise of the guarantor and of the principal debtor, yet they are independent obligations.” See Simpson on Suretyship, Hornbook Series, 1950, section 6, page 10. Here the guaranty is not one of collectibility, i.e., that defendant will pay these dividends on those dates, but is conditional in the sense that it must appear that the principal’s obligation is in fact due and payable and that it is in default, before there is a cause of action against the guarantor.
Since the trial court declared on this contract, and apparently plaintiffs asked this relief in addition to the action to recover on presently-due dividends, I would hold: Defendant’s obligation to pay future semiannual dividends within ten days after they become due, arises only when it affirmatively appears *584that the corporation is liable to pay its preferred stockholders these dividends and defaults in that obligation.
It must be borne in mind the second half of this guaranty provides another obligation not dependent upon the corporation’s default. It provides the defendant guarantees that if the “said corporation on liquidation or dissolution does not pay in full the par value of said preferred stock, he will pay said [accumulated] dividends and/or said par value on said liquidation or dissolution * * This itself is a broad and comprehensive guaranty and not at all unreasonable so far as plaintiffs are concerned. Guaranteeing full return on one’s investment and all accumulated dividends in the future is not an insignificant or flimsy inducement, as the majority infer. See F. D. I. C. Few guaranties are so generous, broad and all-inclusive.
III. Next, let us briefly examine the circumstances which the majority feel are persuasive of the parties’ intent if the agreement is ambiguous. In the first place, they attach great significance to the fact that defendant had paid semiannual dividends during the past five years. Clearly, there is no compelling inference that in doing so he admitted present liability therefor. It is just as reasonable to conclude that he was aware of his eventual liability for all accumulated dividends, plus par value of the corporate stock in ease of liquidation or dissolution, and he would avoid interest and a heavy obligation if the corporation failed, by satisfying dividend liabilities as they accrued. I can find therein no admission of the alleged obligation under this guaranty. The corporation was young and its first few years would have been the uncertain ones. Defendant maintained he should be reimbursed by the corporation for those past amounts paid, and attempted to join it in this action. If it is true, as he asserts, that the corporation now has over $26,000 in net earnings and undivided surplus, it seems he may recover from the corporation in a separate action.
I find no unconditional admissions of liability by defendant in this record. In fact, in his resistance to the motion for a summary judgment, he specifically claims the contract was only a conditional one. The fact that he may misconceive that condition should not alter its legal effect. He further asserts the case *585is not one in which the summary judgment could be used. Can these affirmations be ignored? We thought not in Eaton v. Downey, 254 Iowa 573, 118 N.W.2d 583, to which we shall later refer.
IV. If so much extrinsic evidence is to be considered to develop the parties’ intent here, then the court’s right to grant summary judgment must be questioned.
To understand this issue, it is necessary to consider the method of decision used in the district court. After plaintiffs started the action defendant moved to strike, to dismiss, and for the production of books and papers. All were overruled, and a week later plaintiffs moved for a summary judgment. Eight days later a resistance was filed, and less than two weeks later the court sustained the motion for summary judgment, and judgment was entered the following day. An appeal followed.
We must first remember that the summary judgment under our rules can be used in only limited types of cases.
Rule 237, Rules of Civil Procedure, provides: “Summary judgment may be entered in an action, upon any claim therein, which is either: (a) To recover a debt, or some other money demand which is liquidated, with or without interest arising on a negotiable instrument, or on a recognizance, * * * or on any contract, express or implied, except quasi contract; or * * * (c) On a guaranty of a debt, or of some other claim that is liquidated; * *
As stated, defendant’s resistance to the motion for summary judgment specifically claimed this was not a case where summary judgment could be used; that the contract involved was only a conditional one. Thus, if the contract was susceptible of such construction, as the majority seem to indicate, questions of fact as well as law must be involved, and until those issues are fully tried, no judgment would be proper. I, therefore, seriously question whether under the majority’s method of consideration, either summary judgment or declaratory judgment was proper.
One of the troublesome problems in contract law, of course, is that of determining whether interpretation is a matter of fact or. law. See Corbin on Contracts, Volume 3, section 554. Clearly, *586if. interpretation here is a question of fact, the issue should have been submitted to a jury if either party requested it. Rule 177, R. C. P.; Becker v. Town of Churdan, 175 Iowa 159, 157 N.W. 221. On the other hand, if this is a question of law, then it should be decided by the court. But it should be decided by the court only after having received and considered all the evidence which is relevant.
Neither the trial court nor we should rule on this question on the sketchy record as to surrounding circumstances which we have before us. If the construction of this guaranty is not to be confined to the language used, the parties should be given a fair opportunity to introduce evidence on the issue of intent. How can the court declare its meaning without such evidence? Utica Carting Storage & Contracting Co. v. World Fire & Marine Ins. Co. (1950), 277 App. Div. 483, 486, 100 N. Y. S.2d 941, 944, 36 A. L. R.2d 500, 503, was decided under New York Rule 113, which is very similar to our rule 237, R. C. P. The court therein stated: “The intent of the parties is to be ascertained from the language employed if it is clear and unambiguous * * But where an ambiguity is present the contract must be construed in accordance with well established rules. * * * Our view is that an ambiguity is present * * * and that it should not be resolved against the plaintiff on a motion for summary judgment.”
So it would be my conclusion that if the majority insist on considering the resistance and affidavit filed, the “uncontro-verted” allegations of the petition, and such farfetched inferences as they draw from the surrounding circumstances, it was an error not to permit the litigants to introduce all the evidence available as to the meaning of the contract. If the court is to go outside the writing, certainly the parties should be given full opportunity to present all of the relevant evidence available. -■
V. The majority assume many things not self-evident. They say: “We determine the rights of the parties from the premise they themselves created and tendered.” The truth- is the parties have not elected to present the question of the contract’s interpretation beyond the writing itself. Upon that new question I feel defendant has not waived his right to file an an*587swer controverting some or all of the allegations which the majority hold were admitted by defendant. Actually, the motion of plaintiffs for summary judgment simply raised the question as to whether a judgment should be rendered on the basis of the affidavits presented.
Not long ago we reversed the granting of a summary judgment in a similar matter. In Eaton v. Downey, supra, 254 Iowa. 573, 580, 118 N.W.2d 583, defendant claimed that a promissory note “was delivered conditionally only and the condition has not been performed.” We remanded the case for a determination of that issue. Here defendant claimed in his affidavit the guaranty was conditional, and if the court is going beyond the clear meaning of the language of the instrument to find it was not, then I submit the defendant has stated a defense which requires the matter be remanded for the introduction of all relevant evidence on the meaning of the agreement, as was done in the Eaton v. Downey case. Also see Credit Industrial Co. v. Happel, Inc., 252 Iowa 213, 215, 106 N.W.2d 667; Cook, Iowa Rules of Civil Procedure, Volume 2, rule 237, Advisory Committee Comment, page 695.
. I feel this case can be affirmed on the judgment for the amounts due and payable December 10, 1962, and June 10, 1963, with 5 percent interest per annum from those dates, but would hold the trial court’s judgment must be modified to provide defendant need not pay future semiannual dividends on June 10 and December 10 unless it appears the Mahaska Industries, Inc. has defaulted on its obligation to pay said dividends from available net profits and undivided surplus. I would modify and affirm.
Hays and Thompson', JJ., join in this'dissent.