Am. Fed. Bank v. Grommesh

• Decision Date: 23 December 2021
• Docket Number: No. 20210080,20210080
• Citation: 968 N.W.2d 164
• Parties: AMERICAN FEDERAL BANK, Plaintiff and Appellee v. William GROMMESH and Jon W. Pansch, Defendants and Appellants
• Court: North Dakota Supreme Court

968 N.W.2d 164

AMERICAN FEDERAL BANK, Plaintiff and Appellee

v.William GROMMESH and Jon W. Pansch, Defendants and Appellants

No. 20210080

Supreme Court of North Dakota.

FILED DECEMBER 23, 2021

John M. Krings, Jr. (argued) and Asa K. Burck (on brief), Fargo, ND, for plaintiff and appellee.

Joel M. Fremstad, Fargo, ND, for defendants and appellants.

Crothers, Justice.

[¶1] Defendants William Grommesh and Jon Pansch appeal from summary judgment entered in favor of American Federal Bank in its action to enforce four guaranties. The defendants argue the district court erred in granting summary judgment because the court misinterpreted the guaranties and genuine issues of material fact exist regarding the defendants’ defenses. We affirm.

I

[¶2] In 2012, Sarah and Jerret Julsrud started Jerret's Plumbing, L.L.C. ("Jerret's"). The Julsruds obtained financing from American Federal to start Jerret's, including a $20,000 operating loan and a $200,000 loan to purchase assets. Grommesh, Jerret Julsrud's father, and Pansch, Sarah Julsrud's father, each signed two guaranties related to the loans, one guaranty up to $15,000 and a second guaranty up to $125,000. The promissory note for the operating loan stated it was for a revolving line of credit. Terms of the operating loan were modified multiple times, including increasing the principal balance and extending the maturity date.

[¶3] Jerret's loans went into default and in 2019 American Federal sued the defendants to enforce all four guaranties, alleging the defendants guaranteed payment and performance of Jerret's outstanding indebtedness to American Federal. American Federal claimed the amount of Jerret's outstanding obligations exceeded the guaranty amounts and requested the district court enter judgment in its favor against the defendants, jointly and severally, for $135,000.¹ The defendants filed a joint answer, disputing American Federal's claims and asserting various defenses.

[¶4] American Federal moved for summary judgment, arguing Jerret's had multiple outstanding loans with a combined total balance of $160,312.26 plus interest, Jerret's outstanding obligations were in default, the defendants guaranteed Jerret's outstanding indebtedness up to $140,000 each, the defendants never revoked their guaranties, and judgment should be entered as a matter of law in favor of American Federal. The defendants opposed American Federal's motion and moved for summary judgment in their favor, arguing the guaranties for $125,000 related to the asset loan, the asset loan was paid in full and never extended or renewed, and the guaranties ended when the loan was paid off. The defendants also argued the $15,000 guaranties were limited to the operating loan, the operating loan was paid down to zero, and the loan went away when it matured in June 2013. They asserted various defenses apply and genuine issues of material fact exist relating to their defenses. After a hearing on the motions and additional time for discovery, the parties filed supplemental briefs on the motions.

[¶5] The district court granted summary judgment in favor of American Federal. The court considered the language of the guaranties and determined the guaranties are unambiguous. The court concluded the guaranties are continuing guaranties, and they cover debt acquired by Jerret's after the initial operating and asset loans. The court found the total owed to American Federal as of January 2021 was $148,875.78, each of the defendants guaranteed $140,000 of Jerret's debt, and American Federal was entitled to a summary judgment against each defendant for $140,000. Judgment was entered.

II

[¶6] The standard for reviewing a district court's decision on a motion for summary judgment is well-established:

"Summary judgment is a procedural device under N.D.R.Civ.P. 56(c) for promptly resolving a controversy on the merits without a trial if there are no genuine issues of material fact or inferences that can reasonably be drawn from undisputed facts, or if the only issues to be resolved are questions of law. The party seeking summary judgment must demonstrate there are no genuine issues of material fact and the case is appropriate for judgment as a matter of law. In deciding whether the district court appropriately granted summary judgment, we view the evidence in the light most favorable to the opposing party, giving that party the benefit of all favorable inferences which can reasonably be drawn from the record. A party opposing a motion for summary judgment cannot simply rely on the pleadings or on unsupported conclusory allegations. Rather, a party opposing a summary judgment motion must present competent admissible evidence by affidavit or other comparable means that raises an issue of material fact and must, if appropriate, draw the court's attention to relevant evidence in the record raising an issue of material fact. When reasonable persons can reach only one conclusion from the evidence, a question of fact may become a matter of law for the court to decide. A district court's decision on summary judgment is a question of law that we review de novo on the record."

Solberg v. McKennett , 2021 ND 44, ¶ 6, 956 N.W.2d 767 (quoting Aftem Lake Dev., Inc. v. Riverview Homeowners Ass'n , 2020 ND 26, ¶ 8, 938 N.W.2d 159 ).

III

[¶7] The defendants argue the district court erroneously concluded the guaranties are unambiguous. The defendants claim the guaranties refer to the "Note" and define "Note" as the specific 2012 loans, which limits the guaranties to covering only Jerret's 2012 loans. They contend the original debt was paid off, any after-acquired debt is not covered by the guaranties, and they are not liable to American Federal under the guaranties. They also claim there was evidence from the defendants, the Julsruds, and former American Federal President Donald Abarr that the parties’ intent was to limit the guaranties to cover only specific debts.

[¶8] Generally, the interpretation of a written contract to determine its legal effect is a question of law. Discover Bank v. Hornbacher , 2020 ND 260, ¶ 3, 952 N.W.2d 83. We apply the general rules of contract construction to interpret guaranties. See Big Pines, LLC v. Baker , 2020 ND 64, ¶ 7, 940 N.W.2d 616.

[¶9] We ascertain the parties’ intent from the writing alone if possible. Big Pines , 2020 ND 64, ¶ 7, 940 N.W.2d 616 ; N.D.C.C. § 9-07-04. "The language of a contract is to govern its interpretation if the language is clear and explicit and does not involve an absurdity." N.D.C.C. § 9-07-02. "When a contract's language is plain and unambiguous and the parties’ intentions can be ascertained from the writing alone, extrinsic evidence is not admissible to alter, vary, explain, or change the contract." Big Pines , ¶ 7 (quoting Hallin v. Inland Oil & Gas Corp. , 2017 ND 254, ¶ 9, 903 N.W.2d 61 ). A contract is ambiguous if rational arguments can be made for different interpretations of the term, phrase, or clause in question. Estate of Seidel v. Seidel , 2021 ND 6, ¶ 16, 953 N.W.2d 636. Extrinsic evidence may be considered to determine the parties’ intent if a contract is ambiguous. Id. A contract is interpreted as a whole to give effect to every part if practicable. N.D.C.C. § 9-07-06. Several contracts related to the same matter between the same parties, made as part of substantially one transaction, are to be read and construed together. N.D.C.C. § 9-07-07. "The execution of a contract in writing, whether the law requires it to be written or not, supersedes all the oral negotiations or stipulations concerning its matter which preceded or accompanied the execution of the instrument." N.D.C.C. § 9-06-07.

[¶10] Undisputed evidence established Grommesh and Pansch each signed two guaranties related to Jerret's debt to American Federal. They each signed one guaranty for up to $15,000 related to Jerret's operating loan and a second guaranty for up to $125,000 related to Jerret's asset loan. The four guaranties contain identical language, except for the guarantor's name, the limit on the amount of the guarantor's liability, and references to a specific loan number or promissory note.

[¶11] The defendants’ guaranties state, "For good and valuable consideration, Guarantor absolutely and unconditionally guarantees full and punctual payment and satisfaction of Guarantor's Share of the Indebtedness of Borrower to Lender, and the performance and discharge of all Borrower's obligations under the Note and the Related Documents."

[¶12] The defendants’ guaranties for the operating loan define "Note" as "the promissory note dated June 1, 2012, in the original principal amount of $20,000.00 ... together with all renewals of, extensions of, modifications of, refinancings of, consolidations of, and substitutions for the promissory note or agreement." The guaranties for the asset loan include the same definition, except they refer to the promissory note "dated June 14, 2012, in the original principal amount of $200,000.00."

[¶13] This definition of "Note" refers to the initial loan, but also renewals, extensions, and modifications. The plain language of the guaranties required the defendants to guarantee the performance and discharge of Jerret's obligations under these two notes and any renewals, extensions, and modifications of those notes.

[¶14] The guarantors also unconditionally guaranteed payment of the guarantor's share of the borrower's indebtedness. The guaranties define "Indebtedness" as:

"[A]ll of the principal amount outstanding from time to time and at any one or more times ... arising from any and all debts, liabilities and obligations of every nature or form, now existing or hereafter arising or acquired, that Borrower ... owes or will owe Lender. ‘Indebtedness’ includes, without limitation, loans, advances, debts, overdraft indebtedness, credit card indebtedness, lease obligations, ... other obligations, and liabilities of Borrower, and any present or future judgments against Borrower, future

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