Court Opinion

ID: 5140144
Source: CourtListenerOpinion
Date Created: 2021-12-23 17:06:54.18485+00
Date Added: 2024-06-11T08:24:21.745092
License: Public Domain

NOT DESIGNATED FOR PUBLICATION

                                             No. 122,903

              IN THE COURT OF APPEALS OF THE STATE OF KANSAS

                                           CONWAY BANK,
                                             Appellee,

                                                   v.

                                      O'BRATE REALTY, LLC,
                                           Appellant.

                                   MEMORANDUM OPINION

        Appeal from Harper District Court; R. SCOTT MCQUIN, judge. Opinion filed December 23, 2021.
Affirmed.

        Thomas B. Diehl, of Ralston, Pope & Diehl, LLC, of Topeka, and Benjamin Jackson, of Jackson
Legal Group, LLC, of Scott City, for appellant.

        H. Douglas Pfalzgraf, of Pfalzgraf Law Office, of Wellington, for appellee.

Before GARDNER, P.J., GREEN and BUSER, JJ.

        BUSER, J.: This is an appeal by O'Brate Realty, LLC from the district court's
judgment entered against it and in favor of Conway Bank. After a bench trial, the district
court ruled that O'Brate Realty and Barbara Shrum had entered into a "Transfer/Purchase
of Membership Interests" agreement (Agreement). This Agreement provided that Shrum
transfer her membership shares in Harper Hotel Group, LLC (Harper Group) to O'Brate
Realty. In return, according to Conway Bank, O'Brate Realty agreed to assume the
$50,000 obligation that Shrum had personally guaranteed (Shrum Guaranty) to facilitate
the Harper Group's obtaining a loan from The Farmers and Merchants State Bank of

                                                   1
Argonia (Farmers Bank), later Conway Bank. Conway Bank sued O'Brate Realty on the
Shrum Guaranty, and the district court entered judgment in the amount of $50,000 and
attorney fees against O'Brate Realty and in favor of Conway Bank. Upon our review, we
affirm the judgment and award attorney fees to Conway Bank.

                          FACTUAL AND PROCEDURAL BACKGROUND

       In May 2013, the Harper Group executed a promissory note with Farmers Bank in
the amount of $1,740,000 to fund a hotel construction project in Harper, Kansas. Cecil
O'Brate, O'Brate Realty, and Barbara Shrum were members of the Harper Group. The
Harper Group had several other members, and each one signed the promissory note.

       Additionally, as part of this lending transaction, Cecil, O'Brate Realty, Shrum, and
other members of the Harper Group, executed personal guaranties with Farmers Bank in
amounts equal to their initial investment with the Harper Group. Sharon Brozovich, the
former president of Farmers Bank, testified that the personal guaranties were part of a
bank policy that required any LLC, such as Harper Group, to have its members guarantee
debts. Brozovich said that Farmers would not have loaned the Harper Group money
without the personal guaranty of each member.

       Accordingly, Shrum executed her personal guaranty with Farmers Bank for
$50,000, which equaled her initial investment with the Harper Group in the hotel. In
relevant part, the Shrum Guaranty included the following provisions:

       "2. SPECIFIC AND FUTURE DEBT GUARANTY. For good and valuable
       consideration, the receipt and sufficiency of which is hereby acknowledged, and to
       induce you [Farmer's Bank], at your option, to make loans or engage in any other
       transactions with the Borrower from time to time, I [Shrum] absolutely and
       unconditionally agree to all terms of and guaranty to you the payment and performance of
       each and every Debt, of every type, purpose and description that the Borrower either

                                                  2
      individually, among all or a portion of themselves, or with others, may now or at any
      time in the future owe you, including, but not limited to the following described Debt(s)
      including without limitation, all principal, accrued interest, attorneys' fees and collections
      costs, when allowed by law, that may become due from the Borrower to you in collecting
      and enforcing the Debt and all other agreements with respect to the Borrower.

      "A promissory note or other agreement, No. 21178 F 17 CB 10, dated May 17, 2013,
      from HARPER HOTEL GROUP, LLC (Borrower) to you, in the amount of
      $1,740,000.00.

      ....

      "My liability will not exceed $50,000.00 of the principal amount outstanding at default,
      plus accrued interest, attorneys' fees and collections costs, when allowed by law, and all
      other costs, fees and expenses agreed to be paid under all agreements evidencing the Debt
      and securing the payment of the Debt. You may, without notice, apply this Guaranty to
      such Debt of the Borrower as you may select from time to time.

      In October 2017, the Office of the State Bank Commissioner of Kansas closed
Farmers Bank and the Federal Deposit Insurance Corporation (FDIC) assumed control of
the financial institution. Conway Bank later purchased the assets of the Farmers Bank
from the FDIC. The purchase included the promissory note between Farmers and the
Harper Group, and the personal guaranties executed by its members.

      One month later, on November 7, 2017, Shrum, Cecil, and O'Brate Realty entered
into the Agreement. The Agreement lists Shrum as the seller, and Cecil, as an individual,
and O'Brate Realty as the buyers. In relevant part the Agreement provided:

      "1.     The Seller is a member of the Harper Hotel Group, LLC and purchased two (2)
      Membership Units in the Harper Hotel Group Limited Liability Company for a total of
      one hundred thousand [(]$100,000) dollars. Member hereby voluntarily transfers and
      conveys for value and consideration, to Cecil O'Brate, an individual, and O'Brate Realty

                                                    3
       LLC, who is also a member of the Harper Hotel Group, LLC, her two (2) Membership
       Units. This transfer is intended to be Permitted Transfer in compliance with the Operating
       Agreement of Harper Hotel Group, LLC dated November 2, 2012.

       "2.     This transfer and conveyance of the two (2) Membership Units is [effective] on
       the 7th day of November, 2017.

       "3.     Buyer agrees to also take any debt associated to the Seller as his own and to
       specifically hold Seller harmless as to the debt owed by the Harper Hotel Group, LLC to
       Farmers & Merchants Bank of Argonia, Kansas."

       By stipulation in the pretrial order, Conway Bank agreed not to pursue Cecil in his
individual capacity for payment of the Shrum Guaranty. Thus, the only buyer in the
Agreement pertinent to the appeal is O'Brate Realty.

       The Harper Group defaulted on the promissory note, and the hotel was sold. On
April 20, 2018, after the sale of the hotel, Conway Bank sent a letter to various members
of the Harper Group stating the loan balance as of April 18, 2018, the net proceeds from
the sale, and the total amount remaining on the loan after the proceeds were subtracted
from the loan balance. The letter demanded payment of the members' personal guaranties.
Although Shrum was not contacted, a demand letter was sent to O'Brate Realty regarding
the $50,000 Shrum Guaranty which Conway Bank asserted O'Brate Realty had assumed
under terms of the Agreement.

       Conway Bank later sued O'Brate Realty on its original guaranty and the Shrum
Guaranty. After the lawsuit was filed, O'Brate Realty satisfied its guaranty by paying
Conway Bank the full amount of its original obligation. As a result, the O'Brate Realty
guaranty has no bearing on this appeal. The O'Brate Realty guaranty payment was
tendered, however, with the express reservation that the litigation would continue as to

                                                   4
the Shrum Guaranty, since O'Brate Realty maintained it was not liable for payment of
that guaranty.

       After discovery, Conway Bank filed a motion for summary judgment which was
opposed by O'Brate Realty. The district court granted the motion. The district court later
reconsidered its ruling, however, and denied the motion. According to the district court,
there were "factual issues regarding the assignment of the guarantee and the crediting of
payments on the debt owed the bank."

       A bench trial was held in February 2020, with the district judge ruling in favor of
Conway Bank:

                 "With regard to the assignment of the Shrum . . . guaranty over to O'Brate Realty,
       LLC, I don't think Plaintiff's Exhibit 12 [Agreement] is ambiguous. It clearly shows in
       that Paragraph 3 the intention to––for O'Brate Realty, LLC, to take any debt associated to
       the seller. Specifically, hold the seller harmless as to the debt owed by the [Harper
       Group] to [Farmers Bank]. The agreement saying you could assign the guaranties. That
       was done.
                 "I think the plaintiff has proven their case and they're entitled to a judgment for
       the [$]50,000.
                 "Per the agreements, they're entitled to attorney's fees."

       The district court ordered O'Brate Realty to pay $16,471.77 in attorney fees.
O'Brate Realty did not dispute the reasonableness of the fees but reserved the right to
contest whether they were legally obligated to pay any attorney fees.

       O'Brate Realty timely appeals. It asks our court to vacate the judgment and remand
the case with directions for the district court to enter judgment in favor of O'Brate Realty.

                                                      5
                         DID THE AGREEMENT ASSIGN LIABILITY
                    UNDER THE SHRUM GUARANTY TO O'BRATE REALTY?

       On appeal, O'Brate Realty presents the following question for our determination:
"[W]hether the Agreement executed between Shrum, Mr. O'Brate, and Defendant O'Brate
Realty transferred and assigned liability under the Shrum Guaranty to Defendant O'Brate
Realty." In answering this question, O'Brate Realty principally argues that

       "a personal guaranty is not a debt; that no personal guaranty was transferred or assigned
       to it by virtue of the Agreement; and that the Agreement itself is legally insufficient to
       transfer or assign a personal guaranty, or, in the alternative, is vague and ambiguous as to
       whether a personal guaranty was transferred and assigned."

       Conway Bank responds:

       "Actually, the narrowness of this appeal should be further defined . . . specifically,
       O'Brate [Realty] tellingly at page 12 of its brief states, 'Here [O'Brate Realty] does not
       dispute the validity of the Shrum Guaranty itself. Shrum (the guarantor) guaranteed the
       debt of the Harper Group (the debtor) to Famer's Bank (the creditor) with a maximum
       liability of $50,000. [O'Brate Realty] further does not dispute that the Shrum Guaranty
       was purchased or assumed by Plaintiff Conway Bank.' The only legal issue herein goes to
       the assignment document, and the precise issue is whether the clear language therein is
       eviscerated by the desired interpretation advanced by O'Brate [Realty] in its briefing."

       "The rules governing the interpretation and construction of contracts generally
apply to the interpretation or construction of contracts of guaranty." Botkin v. Security
State Bank, 281 Kan. 243, Syl. ¶ 2, 130 P.3d 92 (2006). "'The primary rule for
interpreting written contracts is to ascertain the parties' intent. If the terms of the contract
are clear, the intent of the parties is to be determined from the language of the contract
without applying rules of construction.' [Citation omitted.]" Peterson v. Ferrell, 302 Kan.
99, 104-05, 349 P.3d 1269 (2015).

                                                     6
       At the outset, it is necessary to understand what is meant by the term "guaranty."
In Trego WaKeeney State Bank v. Maier, 214 Kan. 169, 173, 519 P.2d 743 (1974), our
Supreme Court explained:

               "A guaranty is a contract between two or more persons, founded upon
       consideration, by which one person promises to answer to another for the debt, default or
       miscarriage of a third person, and, in a legal sense, has relation to some other contract or
       obligation with reference to which it is a collateral undertaking. The contract of a
       guarantor is his own separate contract. It is in the nature of a warranty by him that the
       thing guaranteed to be done by the principal shall be done, and is not an engagement
       jointly with the principal to do the thing. A guarantor, not being a joint contractor with
       the principal, is not bound like a surety to do what the principal had contracted to do, but
       answers only for the default of the principal. The original contract of his principal is not
       his contract. [Citation omitted.]"

       In other words:

               "A guaranty involves least three parties: a guarantor; a creditor; and a debtor and
       includes two different obligations: that of the principal debtor and that of the guarantor.
       The party executing the guaranty is called the guarantor who promises to pay the debt or
       perform some duty in the event of the failure of another who is primarily liable for that
       payment or performance. The one to whom the guaranty is given is the guarantee or
       creditor, and the person whose debt, conduct, or contract is guaranteed is known as the
       principal (or principal debtor). A person cannot be both the principal debtor and the
       guarantor since an agreement to guarantee a debt and an agreement to be the original
       promisor are mutually exclusive." 38A C.J.S., Guaranty § 2.

       Based on these definitions, the role of the parties involved in the litigation on
appeal are easily understood. When the original promissory note was executed in 2013,
Farmers Bank was the creditor, the Harper Group was the debtor, and Shrum was the
guarantor. By the time the case went to trial in 2020, the parties had changed. By
purchasing the loans of Farmers Bank from the FDIC, Conway Bank became the creditor
                                                     7
while the Harper Group remained the debtor. The critical question: Was Shrum still the
guarantor or—presuming O'Brate Realty assumed the Shrum Guaranty—was O'Brate
liable to pay Conway Bank $50,000 on the Shrum guaranty?

       O'Brate Realty acknowledges it "does not dispute that the Shrum Guaranty was
appropriately purchased or assumed by Plaintiff Conway Bank." O'Brate Realty also
"does not dispute the validity of the Shrum Guaranty itself." However, O'Brate Realty
challenges "that the Shrum Guaranty was transferred to, assigned to, or assumed by [it]."

       The Agreement between Shrum and O'Brate Realty consists of a one-page, three
paragraph, seven sentence document that lists Shrum as the seller, and Cecil and O'Brate
Realty as the buyer. The first paragraph stated that Shrum transferred and conveyed her
two membership units in the Harper Group, that she had purchased for $100,000. The
third paragraph of the Agreement, particularly relevant to this appeal, simply provides:
"Buyer agrees to also take any debt associated to the Seller as his own and to specifically
hold Seller harmless as to the debt owed by the [Harper Group] to [Farmers Bank]."
(Emphasis added.)

       The district court ruled the Agreement was unambiguous. It held the Agreement
"clearly shows in that Paragraph 3 the intention to––for O'Brate Realty, LLC to take any
debt associated to the seller." It should be noted that an appellate court is not bound by
the lower court's interpretations or rulings. Born v. Born, 304 Kan. 542, 554, 374 P.3d
624 (2016).

       For their part, the parties agree with the district court that the Agreement's
language is unambiguous. However, the parties understanding of the unambiguous
meaning of "Buyer agrees to also take any debt associated to the Seller as his own" is
totally at variance with one another. Conway Bank argues that the phrase "any debt" in
the Agreement unambiguously refers to the Shrum Guaranty, while O'Brate Realty

                                              8
argues that the Agreement does not mention the word "guaranty" and that a "debt" is not
a "guaranty." Importantly, "the parties' agreement or lack of agreement on the existence
of ambiguity does not compel the court to arrive at the same conclusion." Waste
Connections of Kansas, Inc. v. Ritchie Corp., 296 Kan. 943, 964, 298 P.3d 250 (2013).

       At the outset, we must determine whether the Agreement is ambiguous. Whether a
written instrument is ambiguous is a question of law subject to de novo review. Waste
Connections, 296 Kan. at 964. "Unambiguous contracts are enforced according to their
plain, general, and common meaning in order to ensure the intentions of the parties are
enforced. The intent of the parties is determined from the four corners of an unambiguous
instrument, harmonizing the language therein if possible." Johnson County Bank v. Ross,
28 Kan. App. 2d 8, 10, 13 P.3d 351 (2000).

       We are persuaded that the Agreement is ambiguous. As highlighted by O'Brate
Realty, the Agreement did not mention the Shrum Guaranty or any guaranty. Moreover,
the term "debt" is not defined in the Agreement. O'Brate Realty argues: "A guaranty is
not a debt; a debt is not a guaranty. Where a contingency which may trigger liability
under a guaranty has not occurred, there is no obligation under the guaranty. That is to
say, there is no debt."

       On the other hand, the Agreement relates to Shrum's membership interest in the
Harper Hotel Group which was indebted to Farmer's Bank on the promissory note, and
for which Shrum, as part of that transaction, had executed a personal guaranty of "the
payment and performance of each and every Debt, of every type, purpose and description
that the Borrower . . . may now or at any time in the future owe you . . . ."

       Given the sparse language and undefined terminology in the Agreement, we
conclude the intent of the parties is not clear from the four corners of the document. The
significance of this finding is that when "the court determines that a written contract's

                                              9
language is ambiguous, extrinsic or parol evidence may be considered to construe it."
Waste Connections, 296 Kan. at 963. In this regard, we have reviewed the trial transcript,
exhibits, and considered parol evidence that convinces us that the parties intended for
O'Brate Realty to be liable for Shrum's $50,000 guaranty to Farmer's Bank, later Conway
Bank.

        Our analysis is limited by the fact that the two individuals who could provide first-
hand testimony regarding their intent in executing the Agreement, Shrum and Cecil, did
not testify at trial. O'Brate Realty attempted to elicit testimony from H. J. Swender Jr.,
vice president and manager of O'Brate Realty, regarding the company's understanding of
the Agreement. This testimony was disallowed as hearsay under K.S.A. 60-460, however,
and O'Brate Realty did not appeal the evidentiary ruling. Nonetheless, other evidence
presented at trial ameliorates the Agreement's ambiguity and shows the parties' intent to
transfer the Shrum Guaranty to O'Brate Realty. There are four reasons for our conclusion.

        First, at or about the time of the execution of the Agreement, it was readily
apparent that Conway Bank was enforcing the payment of loan guaranties, like the one
Shrum had executed. At the time the Agreement was executed on November 7, 2017, the
promissory note had been in default or past due status on several occasions since 2015.
The note also had been extended and, on February 27, 2017, it was modified to terms
more favorable to the Harper Group to facilitate payments on the note. According to
Brozovich, the note was a "troubled asset" that "went in and out of default several times."
Subsequently, FDIC regulators spent about one year investigating the lending practices
and troubled assets of Farmer's Bank before Brozovich resigned in July 2017. The FDIC
subsequently took over the bank's operations, placed it in receivership, and on October
13, 2017, Conway Bank purchased the bank's assets from the FDIC.

        With the changeover in bank ownership and the hotel having been sold for
significantly less than the loan amount, the promissory note was in default, and meetings

                                             10
were held involving Conway Bank officials and debtors and guarantors regarding
payment of the loan and guaranties. About this time, on November 7, 2017, Shrum and
O'Brate Realty executed the Agreement. Should there be any doubt that during this
period Conway Bank was instituting collection efforts on the personal guaranties of the
Harper Group members, on December 15, 2017, the bank sought and received $100,000
of Cecil's guaranty.

       A few months later, Conway Bank sent numerous demand letters to other
members of the Harper Group seeking payment of their respective guaranties. In short,
about the time the Agreement was executed, Conway Bank was enforcing the payment of
the individual members' loan guaranties.

       On appeal, O'Brate Realty acknowledges that "[a]t best, the Agreement . . .
recognizes that, at some point, [Shrum] may owe a debt related to the Harper Group." But
the Shrum Guaranty defined "debt" as "debts, liabilities, and obligations of the
Borrower . . . whether now existing or created or incurred in the future, due or to become
due, or absolute or contingent . . . ." (Emphasis added.) Conway Bank's takeover, the sale
of the hotel leaving a loan deficiency, and the bank's efforts to enforce the members'
guaranties at about the time the Agreement was executed make clear that Shrum was
indebted to the bank. Shrum's promise in her guaranty that "I am unconditionally liable
under this Guaranty" was, at the time the Agreement was executed, a clear and present
obligation or debt that she was required to pay.

       Second, against this foreboding financial backdrop, evidence at trial established
that about this time, Shrum was unable to fulfill her promise to pay the guaranty. Ronald
D. Carr, the chief lending officer of Conway Bank who worked on problem assets related
to the former Farmer's Bank testified, "I knew Barbara Shrum had no ability to pay."
Given Conway Bank's enforcement actions to collect on the Harper Group members'

                                            11
guaranties and Shrum's inability to pay, Shrum had an imperative to alleviate her
financial liability on the guaranty.

       Third, O'Brate Realty's promise to "take any debt associated to" Shrum comprised
important consideration for Shrum to transfer her two membership units back to Harper
Realty. Swender, although not employed by O'Brate Realty at the time of the signing of
the Agreement, testified to his knowledge of the transaction. According to Swender,
O'Brate Realty informed Shrum "we weren't interested" in paying her $100,00 for her
two membership units which she had purchased for that amount. Although the
Agreement stated that the transfer of the membership units was for "value and
consideration," when asked how much O'Brate Realty agreed to pay Shrum for her
transfer of the membership units, Swender replied, "Zero."

       O'Brate Realty's only consideration for the transfer of Shrum's membership units,
therefore, consisted of its agreement to take any debt associated to Shrum and to hold
Shrum harmless as to the debt owed by the Harper Group. This suggests that the language
relating to "any debt associated to" Shrum was purposeful and not illusory or merely
boilerplate wording. O'Brate Realty's assumption of Shrum's liability for her debt was
part and parcel of the consideration and value Shrum received in return for her transfer of
the two membership units.

       Fourth, Carr testified about Shrum's debt owed to the bank, in particular, the debt
referenced in the Guaranty.

       "Q. The guaranty in question, Exhibit 2, was the only debt Miss Shrum owed
       individually to either Farmers and Merchants and then Conway Bank as it relates to the
       Harper Hotel Group? Is that correct?
       "A. Yes.
       "Q. So by implication the only debt that that could possibly refer to at least from the
       bank's records on the Assumption Agreement is this 50,000-dollar guaranty, Exhibit 2?

                                                   12
       "A. Correct."

Carr's testimony established that the only personal indebtedness Shrum had in relation to
Farmers Bank or Conway Bank and the Harper Group was her $50,000 personal
guaranty. As a result, the only "debt associated to" Shrum to which the Agreement could
possibly reference is the Shrum Guaranty.

       These four reasons, based on the Agreement's language, and direct and
circumstantial evidence presented at trial, persuade us that at the time the Agreement was
executed, the parties intended for O'Brate Realty to assume the Shrum Guaranty. "'The
law favors reasonable interpretations, and results which vitiate the purpose of the terms of
the agreement to an absurdity should be avoided.' [Citations omitted.]" Waste
Connections, 296 Kan. at 963. In our view, given the trial evidence, this is the only
reasonable interpretation of the Agreement consonant with its terms and the parol
evidence presented at trial.

       In the alternative, O'Brate Realty argues that the Agreement is unenforceable
because it is missing essential and material terms. But O'Brate Realty's argument is
undercut by the fact that it cites to cases dealing with the creation of a guaranty, not a
transfer or assignment of one.

       For example, O'Brate Realty cites in support, Kutilek v. Union National Bank of
Wichita, 213 Kan. 407, 411-12, 516 P.2d 979 (1973), wherein our Supreme Court held
that a guaranty was unenforceable under the statute of frauds because it contained two
blanks when it was signed; one to indicate the loan amount requested, and the other to
indicate the total limit of the guarantor's liability. In another case cited by O'Brate Realty,
Walton v. Piqua State Bank, 204 Kan. 741, 466 P.2d 316 (1970), the guaranty had
numerous blanks when it was executed and failed to, among other things, properly

                                              13
identify the other party to the contract or state whose debt was guaranteed for what
amount. Thus, it was unenforceable under the statute of frauds. 204 Kan. at 748.

       These cases properly set forth Kansas law regarding the construction or
interpretation of guaranties. But this precedent relates to guaranties, not transfers or
assignments of guaranties. O'Brate Realty acknowledges the distinction between the
creation of a guaranty and the assignment of one, but it asserts that, since Kansas courts
have held the omission of essential and material terms renders a guaranty unenforceable,
"[i]t stands to reason, then, that the omission of similar terms in an alleged guaranty
assignment or transfer agreement would make said agreement void and unenforceable as
a matter of law as to the alleged assignee." O'Brate Realty fails to cite any on-point
support for this assertion.

       Our court has previously stated:

       "'A valid assignment must contain clear evidence of the intent to transfer rights, must
       describe the subject matter of the assignment, must be clear and unequivocal, and must be
       noticed to the obligor.' '[I]n determining whether an assignment has occurred, the courts
       look to the substance, rather than the form.' 'No particular words or special form of words
       are necessary to effect an assignment in the absence of statutory provisions prescribing a
       particular mode or form.' [Citations omitted.]" Johnson County Bank, 28 Kan. App. 2d at
       11.

       As we have found, the Agreement—albeit ambiguous—still contains essential and
material terms capable of reasonable interpretation that permits discernment of the
parties' intention in transacting the Agreement. Under the circumstances, this is sufficient
to effectuate O'Brate Realty's assumption of Shrum's debt under the Guaranty. We do not
find O'Brate Realty's alternative argument persuasive.

                                                   14
       Finally, O'Brate Realty argues in the alternative that the Agreement should be
construed as a hold harmless or indemnity agreement instead of an assignment of the
Shrum Guaranty. Like its earlier argument regarding debts and guaranties, O'Brate Realty
asserts that guaranties and indemnity agreements are inherently different and have
different obligations.

       To support its argument, O'Brate Realty cites to In re Dvorak, 176 B.R. 929, 933
(Bankr. D. Kan. 1994) to differentiate between an indemnity agreement and a guaranty.
There, the court stated that "an indemnity agreement [is not] an evidence of indebtedness.
At the time the indemnity agreement is entered into, there is no debt. The indemnitor is
not indebted in any way to the indemnitee." Dvorak, 176 B.R. at 934. O'Brate Realty also
cites Haysville U.S.D. No. 261 v. GAF Corp., 233 Kan. 635, 642, 666 P.2d 192 (1983),
where our Supreme Court stated that "[t]here are two traditional situations in which
claims of indemnity are allowed. The first occurs where there is an expressed contract of
indemnity, such as a 'hold harmless' agreement."

       Based on these cases, O'Brate Realty claims that paragraph 3 of the Agreement
should be construed as a hold harmless agreement because it contains those words. As
before, O'Brate Realty also asserts that Shrum had no debt when executing the
Agreement. Further, it argues that Conway Bank is not a party to the Agreement between
O'Brate Realty and Shrum. Thus, O'Brate Realty argues that Conway Bank does not have
any legal claim against it to collect the Shrum Guaranty.

       O'Brate Realty's argument overlooks the first part of the disputed third paragraph
of the Agreement which states: "Buyer agrees to also take any debt associated to the
Seller as his own and to specifically hold Seller harmless as to the debt owed by the
Harper Hotel Group LLC to Farmers & Merchants Bank of Argonia, Kansas." (Emphasis
added.) The language of the Agreement memorializes that O'Brate Realty obligated itself
to take any debt associated to Shrum and hold Shrum harmless as to the debt owed by the

                                            15
Harper Group. Thus, the Agreement bound O'Brate Realty to assume Shrum's personal
Guaranty, and to hold her harmless for the debt incurred by the Harper Group in which
she had a financial interest.

       Moreover, the "Unconditional Liability" provision in the Shrum Guaranty states:

       "I am unconditionally liable under this Guaranty, regardless of whether or not you pursue
       any of your remedies against the Borrower, against any other maker, surety, guarantor or
       endorser of the Debt or against any Property. You may sue me alone, or anyone else who
       is obligated on this Guaranty, or any number of us together, to collect the Debt."

       Under the terms of this provision, Conway Bank was not obligated to attempt to
collect from Shrum before attempting to collect from O'Brate Realty because O'Brate
Realty was obligated under the Shrum Guaranty by virtue of the Agreement. Moreover,
O'Brate Realty's argument on this issue contradicts its earlier statements that it "does not
dispute the validity of the Shrum Guaranty itself" or "that the Shrum Guaranty was
appropriately purchased or assumed by Plaintiff Conway Bank." Taken together, Conway
Bank, as the entity that purchased the promissory note and accompanying personal
guaranties from the members of the Harper Group, has a legal claim to collect on the
Shrum Guaranty.

       In Federal Land Bank of Wichita v. Krug, 253 Kan. 307, 313, 856 P.2d 111
(1993), our Supreme Court found that "[a]n assumption agreement is an act of assuming
or taking an obligation on one's self and can include the undertaking or adoption of a debt
or obligation resting upon another." Since O'Brate Realty assumed the Shrum Guaranty
when it entered into the Agreement, Conway Bank may collect the monies promised
under the Shrum Guaranty.

                                                   16
       In conclusion, for all the reasons stated, we affirm the district court's judgment in
favor of Conway Bank regarding O'Brate Realty's assumption of the Shrum Guaranty.
See Gannon v. State, 302 Kan. 739, 744, 357 P.3d 873 (2015) (If a district court reaches
the correct result, its decision will be upheld even though it relied on the wrong ground or
assigned erroneous reasons for its decision.).

                       CONWAY BANK IS ENTITLED TO ATTORNEY FEES

       The district court ordered O'Brate Realty to pay $16,471.77 in attorney fees and
costs. O'Brate Realty did not dispute the amount of the award but disputed that the
attorney fees were payable at all. On appeal, O'Brate Realty argues that attorney fees are
not warranted because it did not assume liability for the Shrum Guaranty under the
Agreement.

       The Shrum Guaranty included a specific paragraph entitled "Collection Expenses
and Attorneys' Fees," which states:

       "On or after the occurrence of an Event of Default, to the extent permitted by law, I agree
       to pay all expenses of collection, enforcement or protection of your rights and remedies
       under this Guaranty or any other document relating to the Debt. To the extent permitted
       by law, expenses include, but are not limited to, reasonable attorneys' fees, court costs
       and other legal expenses."

       Given our holding that O'Brate Realty assumed the Shrum Guaranty under the
terms of the Agreement, we affirm the district court's award of attorney fees and costs as
provided in the Shrum Guaranty.

       Affirmed.

                                                    17