Associated Catalog Merchandisers, Inc. v. Chagnon

• Decision Date: 18 April 1989
• Docket Number: No. 13525,13525
• Citation: Associated Catalog Merchandisers, Inc. v. Chagnon, 210 Conn. 734, 557 A.2d 525 (Conn. 1989)
• Court: Connecticut Supreme Court
• Parties: ASSOCIATED CATALOG MERCHANDISERS, INC. v. Pierre E. CHAGNON et al.

Page 525

557 A.2d 525

210 Conn. 734

ASSOCIATED CATALOG MERCHANDISERS, INC. v. Pierre E. CHAGNON et al.

No. 13525.

Supreme Court of Connecticut.

Argued Jan. 5, 1989.

Decided April 18, 1989.

F. Woodward Lewis, Jr., Yalesville, with whom, on the brief, was Robert J. Mead, for appellants-appellees (defendants).

Thomas H. Connell, Hartford, for appellee-appellant (plaintiff).

Before PETERS, C.J., and ARTHUR H. HEALEY, SHEA, GLASS and HULL, JJ.

GLASS, Judge.

The paramount issue in this case is whether the trial court erred in determining that a writing purporting to be an "installment note" executed by the defendants, Pierre E. Chagnon and Marian G. Chagnon, actually represented a continuing guaranty rendering the defendants liable for debts arising from their business's open credit account with the plaintiff. The defendants appealed to the Appellate Court from a judgment of $35,000 rendered in favor of the plaintiff, and the plaintiff cross appealed. We transferred the case to ourselves pursuant to Practice Book § 4023. We find no error with respect to the defendants' appeal, or with respect to the plaintiff's claim for interest on the cross appeal. We remand the case for further articulation on the plaintiff's claim for attorney's fees.

The facts may be summarized as follows. ¹ The plaintiff, Associated Catalog Merchandisers, Inc., supplied merchandise to the defendants' wholesale business, Hanover Gift House (Hanover), on a "running account." In 1975, after the defendants' business encountered financial difficulties, the plaintiff proposed that the defendants sign a promissory note making them personally liable for Hanover's debt. This note was never executed. At the plaintiff's behest, however, on September 1, 1977, an instrument entitled "Installment Note" was executed by Pierre Chagnon as vice president of Hanover and by both defendants in their individual capacities. The note provided in relevant part: "For Value Received [Hanover Gift House] and/or Pierre Chagnon and/or Marion [sic] Chagnon promise to pay to the order of Associated Catalog Merchandisers, Inc. the sum of $35,000.00 (Thirty-five thousand) with interest thereon at the rate of Twelve per cent (12%) per year, the principal and interest payable in installments as follows: October 1, 1977 $1,000.00 plus accrued interest and $1,000.00 plus accrued interest every month thereafter.... In the event of default hereunder the undersigned agree to pay all costs of collection including reasonable attorney's fees." There was no evidence that either party had legal assistance in the preparation or execution of the note.

The plaintiff continued to supply merchandise to Hanover for the next several years. During this period, the plaintiff applied all money received from the defendants to the open account balance. In September, 1978, the defendants sent the plaintiff a corporate check for $20,000 bearing a notation that the money should be applied to the installment note. Upon receipt of the check, however, the plaintiff's president, Richard C. Fredette, Jr., telephoned Pierre Chagnon and told him "you know better than that" and that the payment would not be applied to the note. Subsequently, Fredette directed his office manager to "white out" the notation, and credited the check to the open account balance. In December, 1980, the defendants' corporate check for $15,000 similarly was applied to reduce the open account balance without being altered. Further, in December, 1985, two other checks totaling $20,000 and bearing the notation "without prejudice" also were applied to the open account.

In late 1986, Fredette discussed Hanover's large outstanding balance with Pierre Chagnon. Chagnon told Fredette that "I don't owe you anything personally and my company may not be able to pay you." Thereafter, on November 19, 1986, the plaintiff's application for an ex parte attachment on the defendants' real property located in Meriden was granted. The plaintiff's complaint dated November 24, 1986, named Pierre and Marian Chagnon as defendants. In an amended complaint dated November 25, 1987, the plaintiff alleged that the installment note operated as the defendants' personal guaranty on the debt arising from the open account. The plaintiff sought $54,943.86 in money damages representing the principal on the note plus interest accruing to September 30, 1987, and also sought reasonable attorney's fees.

At trial, Fredette testified that the note was "security for past or future deliveries.... The consideration was the future deliveries which would be assured.... What I gave him [by his signing the instrument] was the ability to continue to receive merchandise ... the note was intended to be used solely as a guaranty of payments if the company was unable to make payments." Grita B. French, the plaintiff's former office manager, testified that the "defendants' company was very slow paying bills, and this was an attempt to guaranty personally the company's bills.... I whited out the check [of September, 1978,] after Mr. Fredette told Pierre Chagnon he wouldn't apply it to the note.... Mr. Fredette called Pierre Chagnon two minutes after he received the check and said to him 'you know better than that' ... the note was a guaranty." Edward Symanksy, the plaintiff's former employee and director, testified that "[o]n defendants' account we thought we should get a guaranty ... while I had frequent personal contact with defendants, I never heard them say they wanted to pay off the note." In a deposition admitted at the trial, Pierre Chagnon testified that "[w]hat we bought [with the agreement] was the ability to keep buying."

The trial court issued a memorandum of decision on January 22, 1988. Relying on the foregoing evidence, it concluded that the installment note was intended to represent a guaranty rendering the defendants personally liable for $35,000. The court rejected the defendants' argument that the checks they earmarked toward satisfaction of the installment note extinguished their liability on the underlying corporate debt. It found that when the note was executed, the plaintiff was unwilling to extend the defendants further credit without assurances of their personal liability, and that the defendants in executing the note intended to induce the plaintiff to continue to supply them with merchandise on credit. The trial court rendered a judgment against the defendants for $35,000, but denied the plaintiff interest. The memorandum made no reference to the plaintiff's claim for attorney's fees.

On appeal, the defendants claim that the trial court erred by (1) relying on parol evidence to interpret the installment note as a continuing guaranty, (2) rejecting the defendants' statute of limitations defense, and (3) finding the defendants personally liable without making any finding on the debt of the defendants' corporation. The plaintiff on cross appeal asserts that the trial court erred in refusing to award it interest on the $35,000 principal and reasonable attorney's fees incurred in bringing suit to enforce the defendants' liability.

I

The defendants claim that the trial court erred in adverting to parol evidence in its interpretation of the installment note, and, therefore, improperly reached the conclusion that the note was a continuing guaranty. They argue that the parol evidence was not admissible under any of the exceptions to the rule set forth in Jay Realty, Inc. v. Ahearn Development Corporation, 189 Conn. 52, 56, 453 A.2d 771 (1983). ² They also argue that any continuing guaranty between the parties was "revoked" by the actions of Pierre Chagnon and, further, that the trial court erred in "reforming" the written agreement since the plaintiff did not seek reformation in its pleadings.

" 'Whether the written contract was actually the final repository of the oral agreements and dealings between the parties depends on their intention, evidence as to which is sought in the conduct and language of the parties and the surrounding circumstances. If the evidence leads to the conclusion that the parties intended the written contracts to contain the whole agreement, evidence of oral agreements is "excluded," that is, excluded from consideration in the determination of the rights and obligations of the litigants, even though it is admitted on the issue of their intention. Cohn v. Dunn, 111 Conn. 342, 346, 149 A. 851 [1930].' Shelton Yacht & Cabana Club, Inc. v. Suto, 150 Conn. 251, 254-55, 188 A.2d 493 (1963)...." (Citations omitted.) Damora v. Christ-Janer, 184 Conn. 109, 113-14, 441 A.2d 61 (1981). A written agreement is "integrated" and operates to exclude evidence of the " 'alleged extrinsic negotiation' " if the subject matter of the latter " 'is mentioned, covered or dealt with in the writing ...; if it is not, then probably the writing was not intended to embody that element....' " Cohn v. Dunn, supra, 111 Conn. at 347, 149 A. 851; Shelton Yacht & Cabana Club, Inc. v. Suto, supra, 150 Conn. at 258, 188 A.2d 493; 2 Restatement (Second), Contracts § 215; 30 Am.Jur.2d, Evidence § 1045. If the evidence, however, does not indicate that the writing is intended as an integration, i.e., "a final expression of one or more terms of an agreement"; 2 Restatement (Second), Contracts § 209(1); then "the agreement is said to be 'unintegrated,' and the parol evidence rule does not apply." E. Farnsworth, Contracts § 7.3., p. 452. Whether the parties intended to integrate their negotiations in a writing is a question of fact for the court. Jarvis v. Cunliffe, 140 Conn. 297, 299, 99 A.2d 126 (1953); 2 Restatement (Second), Contracts § 210(3).

In the present case, the trial court's consideration of evidence extrinsic to the installment note to determine whether that writing was an "integration" was entirely proper. Cohn v. Dunn, supra; Shelton Yacht & Cabana Club, Inc. v. Suto, supra. Moreover, the trial court's conclusion that the parties had agreed to a...