Court Opinion

ID: 9782281
Source: CourtListenerOpinion
Date Created: 2023-08-30 18:16:17.141817+00
Date Added: 2024-06-11T12:15:34.798432
License: Public Domain

HOWARD, Judge,
dissenting.
¶ 22 I agree completely with the majority’s analysis of A.R.S. § 33-814 and with its reasoning and disposition concerning the writ of attachment. But I respectfully dissent from the majority’s conclusion that the guaranty precludes the application of the collateral proceeds to the Silvers’ liability on the guaranty. I submit that the guaranty is reasonably susceptible to both parties’ interpretations and, accordingly, that summary judgment should have been denied.
¶ 23 Preliminarily, I disagree with the majority’s viewing the evidence in the light most favorable to Tenet, as the party opposing summary judgment. While that is appropriate in reviewing the grant of summary judgment to the Silvers, it is inappropriate in determining whether to grant summary judgment to Tenet. In that instance, the facts should be viewed in the light most favorable to the Silvers, the party opposing that request for summary judgment. See Nestle Ice Cream Co. v. Fuller, 186 Ariz. 521, 523, 924 P.2d 1040, 1042 (App.1996). Because the majority construes the agreement as a matter of law, the difference is not important to its analysis. But, because I conclude an issue of fact exists on the intent of the parties to the agreement, the distinction is important here.
¶24 As with other contracts, our goal in construing a guaranty is to determine the intent of the parties at the time the guaranty ivas executed. Taylor v. State Farm Mut. Auto. Ins. Co., 175 Ariz. 148, 153, 854 P.2d 1134, 1139 (1993); see also Provident Nat’l Assurance Co. v. Sbrocca, 180 Ariz. 464, 465, 885 P.2d 152, 153 (App.1994) (applying rules of contract interpretation to guaranty); Restatement (Second) of Contracts § 202 cmt. b (1981) (“In interpreting the words and conduct of the parties to a contract, a court seeks to put itself in the position they occupied at the time the contract was made.”) If the language of the guaranty is reasonably susceptible to only one interpretation, we can construe the guaranty as a matter of law. See Taylor, 175 Ariz. at 158, 854 P.2d at 1144. But, when the terms of a guaranty are reasonably susceptible to more than one interpretation, parol evidence is admissible in order to determine the parties’ true intent, and the determination of that intent is a question of fact. See id. at 158-59, 854 P.2d at 1144-45.
¶25 The Silvers argue that, according to the terms of the guaranty, the collateral proceeds that were applied to the outstanding balance on the note also apply to the limitation of their guaranty liability. The guaranty releases the Silvers from liability in two separate circumstances: (1) when the Silvers have paid $1.5 million of the “Guaranteed Obligations”; or (2) when “payment of One Million Dollars ... or more has been made on the outstanding principal balance of the Note.” Although the $1.5 million cap contains language specifically requiring payments by the Silvers to satisfy the obligation, the $1 million limitation contains no similar requirement. It does not require the $1 million principal reduction to be made by any particular person, in any particular manner, or at any particular time. And Arizona law has recognized that an involuntary payment may still be considered a payment. Nestle Ice Cream Co., 186 Ariz. at 523-24, 924 P.2d at 1042-43. Accordingly, the language of the *224guaranty is reasonably susceptible to the Silvers’ interpretation.
¶ 26 Furthermore, contrary to Tenet’s argument, the Silvers’ interpretation does not render any provision of the guaranty meaningless or ineffective. The entire term of TCC’s $7 million note was less than ninety days. The guaranty contains several references to the bankruptcy code, and the parties clearly contemplated that TCC might default on the note. At the time the guaranty was signed, Tenet received the legal right to sue the Silvers without resort to the collateral or the primary obligor, TCC. This right could be very beneficial to Tenet if TCC filed a bankruptcy petition and Tenet was unable to pursue the collateral or TCC. The Silvers’ interpretation — that the collateral proceeds apply to the $1 million limitation if the proceeds are received prior to judgment against them — does not eviscerate these provisions or diminish this valuable right. Furthermore, under this interpretation, the agreement is a guaranty of payment, not a guaranty of collection.
¶ 27 Tenet claims, however, that the sequence of events here would render the prompt payment provisions nugatory and turn the guaranty merely into a guaranty of collection. Tenet controlled the sequence of filing causes of action against the guarantors and/or TCC and the deed of trust sale. No provision in the guaranty required that Tenet sue all guarantors and TCC and give notice of the deed of trust sale simultaneously, as it chose to do. It is not entirely clear why Tenet was unable to proceed against the' guarantors while TCC was under bankruptcy protection. But if the sequence of events resulted in Tenet receiving payments that inured to the Silvers’ benefit, Tenet created the problem and must suffer any consequences. Although these subsequent events may affect the application of the guaranty, they do not transform it from a guaranty of payment into a guaranty of collection. See Taylor, 175 Ariz. at 153, 854 P.2d at 1139 (courts strive to effectuate parties’ intent at time of contract’s execution).3
¶ 28 Nor does the guaranty provision stating that the Silvers’ liability is not affected by “any action taken or not taken” by Tenet render the Silvers’ interpretation unreasonable. That phrase is modified by the language, “which action or inaction is herein consented and agreed to.” In the guaranty, the Silvers agreed that they could be sued without resort to the collateral and that Tenet could, if it desired, collect simultaneously against the collateral and the guarantors. But the guaranty does not state that the Silvers agreed that Tenet did not have to apply the proceeds of that collection against the guaranty limitation. In fact, that is the very issue involved in the interpretation of the guaranty.
¶29 I agree with the majority that the guaranty is also reasonably susceptible to Tenet’s interpretation. But I disagree with the majority’s implicit conclusion that Tenet’s interpretation is the only reasonable interpretation. The majority relies on several out-of-state cases to support its conclusion. In Bank of America National Trust & Savings Ass’n v. Schulson, 305 Ill.App.3d 941, 239 Ill.Dec. 462, 714 N.E.2d 20, 23 (1999), the guaranty provided that the guarantors’ liability was reduced by thirty-six percent of any “principal payments made with respect to the Liabilities, but only to the extent that the amount of any such principal payments [we]re not subsequently reborrowed by Debtor.” This language focuses on payments made, not on reduction of the outstanding principal balance. And, based on this language, the court could have reasonably determined that the language contemplated an ongoing, prebreach relationship with the debtor at the time the “principal payments” were made. Presumably, the borrower would not be reborrowing sums after breaching the agreement. There is no such language in the guaranty in this case. Schulson thus presents a stronger case for interpreting the agreement to require prede-fault voluntary payment.
*225¶ 30 The guaranty in MacCulley v. Fidelity Federal Savings & Loan Ass’n of Ocala, 335 So.2d 327, 329 (Fla.Dist.Ct.App.1976), required reduction of the debt to a certain level in order to release the guarantor, rather than a reduction of a certain amount, as here. Nevertheless, the language is similar. But, unlike the guaranty here, the guaranty in MacCulley stated that the guarantor was a “party” to the underlying obligation, which would support a finding of continuing liability. Id. Furthermore, the majority in that case did not explain the basis for its conclusion that the guaranty required the debtor to reduce the debt below the specified level before default could trigger the release provision. See id. at 330. This deficiency in the majority’s reasoning in MacCulley was the subject of a dissent in that case. Id. at 331-32 (Boyer, C.J., dissenting). To the extent that MacCulley bolsters Tenet’s position, I disagree with it as I do with the majority here.
¶ 31 The guaranty in TMG Life Insurance Co. v. Ashner, 21 Kan.App.2d 234, 898 P.2d 1145, 1153 (1995), provided that the guarantor’s liability was “limited to an amount equal to one-third of the amount of the [l]oan from time to time outstanding.” The court held that the entire amount of the collateral proceeds did not apply to extinguish the guarantor’s liability. Id. at 1155. But it also stated that the guarantor’s liability was not fixed at the time of default and that the guarantor only remained liable for one-third of the debt after receipt of the collateral proceeds. Id. at 1155-56. This in fact supports the Silvers’ interpretation of their guaranty. And finally, the court in Ashner also noted that each case is fact-intensive and that other cases “ ‘are generally not controlling’ ” in interpreting a guaranty. Id. at 1155, quoting 38 Am.Jur.2d Guaranty § 70, p. 1071. Ashner supports the Silvers’ position far more than Tenet’s.
¶32 In Southern Bank & Trust Co. v. Harley, 292 S.C. 340, 356 S.E.2d 410, 410 (App.1987), the guaranty contained the following language of limitation: “provided, however, the liability of the undersigned hereunder shall not exceed at any one time a total of ... $775,000.00____” The limitation made no reference to reduction of the principal balance, as the Silvers’ limitation does; rather, it provided that the guarantors were liable up to a specific sum. The court simply applied the collateral proceeds to the underlying debt, determined that an amount less than $775,000 remained, and ordered judgment in that amount. Id. at 411. Harley has no application to the Silvers’ guaranty.
¶ 33 In Crown Life Insurance Co. v. La-Bonte, 111 Wis.2d 26, 330 N.W.2d 201, 203 (1983), the limitation provided that it would remain effective until the first $45,000 of principal had “been fully performed and observed by the Debtor.” (Emphasis added.) The court specifically relied on the phrase, “by the Debtor,” in construing the limitation. Id. at 205. The limitation here contains no such language. Likewise, the guaranty in Preston Ridge Financial Services Corp. v. Tyler, 796 S.W.2d 772, 779 (Tex.Ct.App. 1990), contained specific language from which the court concluded that only the debtor could “reduce the guaranteed indebtedness.” Again, we have no similar language here.
¶ 34 The majority states that if the Silvers’ liability was not triggered when the principal defaulted, Tenet’s only recourse would have been to wait until the trustee’s sale, apply the proceeds to the principal debt, and then sue the Silvers. The Silvers’ interpretation does not require that and, in fact, suggests the opposite. As the Silvers conceded at oral argument, they breached the contract by failing to pay on demand. That does not necessarily mean that the amount of their liability was forever fixed at that time. See Ashner. The best course of action under the Silvers’ interpretation would have been for Tenet to obtain judgment against the Silvers first for the breach of the guaranty, thereby fixing the amount of the Silvers’ liability. Tenet then could conduct the trustee’s sale. At that point, the proceeds of the trustee’s sale could not have been applied to the $1 million principal reduction requirement.
¶35 The majority also mentions that the Silvers failed to pay on demand when required, thereby depriving Tenet of due and prompt payment as contemplated. The Silvers did breach the agreement to pay on demand. But that does not fix the amount of their liability. If, for example, the collateral proceeds paid the entire debt after the default, no one would dispute that they would then have been released from their guaranty. Thus, their breach of the promise to pay *226promptly does not bear on the issue of whether the parties intended the collateral proceeds to apply to the release provision.
¶ 36 Because the guaranty here is reasonably susceptible to both interpretations, the parties’ true intent is a material question of fact that may be resolved using parol evidence. Taylor, 175 Ariz. at 159, 854 P.2d at 1145. Summary judgment is only appropriate after a conclusion that there is “no genuine issue as to any material fact and ... the moving party is entitled to a judgment as a matter of law.” Ariz.R.Civ.P. 56(c)(1), 16 A.R.S., Pt. 2. And, in considering granting summary judgment to Tenet,, we should construe the facts most favorably to the Silvers. See Nestle Ice Cream Co. Accordingly, “[ejven though cross motions for summary judgment [are] filed, a court may not grant a summary judgment unless there remains no genuine issue as to any material fact and one of the parties is entitled to judgment as a matter of law.” Grain Dealers Mut. Ins. Co. v. James, 118 Ariz. 116, 118, 575 P.2d 315, 317 (1978). Likewise, that the parties do not dispute the facts does not make summary judgment appropriate in the absence of such a conclusion. See Nelson v. Phoenix Resort Corp., 181 Ariz. 188, 191, 888 P.2d 1375, 1378 (App.1994) (“Summary judgment is inappropriate where the facts, even if undisputed, would allow reasonable minds to differ.”); State ex rel. Arizona Dep’t of Revenue v. Cochise Airlines, 128 Ariz. 432, 437-38, 626 P.2d 596, 601-02 (App.1980) (if stipulation for cross-motions for summary judgment omits important fact, cross-motions deniable); see also Stewart v. United States, 739 F.2d 411, 414 (9th Cir.1984) (“When a material issue of fact is not addressed in a statement of stipulated facts, summary judgment is improper for either party.”); Charles Alan Wright et al., Federal Practice and Procedure § 2724, at 400 (1998) (“[E]ven if some facts are stipulated, summary judgment must be denied if the stipulation is equivocal or if a genuine issue of material fact remains in dispute despite the stipulation.”). Consequently, the trial court erred by granting summary judgment. See Ariz.R.Civ.P. 56(c)(1).
¶ 37 Based on the parties’ failure to present any parol evidence, it is understandable that the trial court ruled on the motions as a matter of law. See Scholten v. Blackhawk Partners, 184 Ariz. 326, 328, 909 P.2d 393, 395 (App.1995) (interpretation of contract is matter of law and not question of fact). Deciding solely on the language of the guaranty, I would have no difficulty in construing the guaranty in favor of the Silvers and upholding the trial court. See Consolidated Roofing & Supply Co. v. Grimm, 140 Ariz. 452, 455, 682 P.2d 457, 460 (App.1984) (guaranties construed to limit liability of guarantor). Tenet cannot belatedly add the words “voluntary and pre-default” before the word “payment” in the limitation. But, because this appeal arises from the trial court’s ruling on cross-motions for summary judgment, it is not necessary to reach that conclusion.
¶ 38 When an agreement is reasonably susceptible to both parties’ interpretations, a trial court should not be forced into granting summary judgment for either side without a complete knowledge of the facts. This is not a case in which the agreement is many years old and the parties who originally entered into the agreement are unavailable. The Silvers’ and Tenet’s representatives are presumably still available. Because our standard of review is de novo, Hahn v. Pima County, 200 Ariz. 167, ¶ 4, 24 P.3d 614, ¶ 4 (App.2001), this court should reverse the judgment, remand the case for further proceedings, and instruct the trial court to deny both parties’ motions for summary judgment.

. Additionally, the Silvers’ position in the trial court that Tenet could not obtain judgment against them because it might eventually recover its debt from the collateral was simply erroneous under the language of the guaranty and similarly cannot change the original nature of the guaranty-