Bank of Sun Prairie v. Opstein

• Decision Date: 09 January 1979
• Docket Number: No. 76-189,76-189
• Parties: BANK OF SUN PRAIRIE, a Wisconsin Banking Corporation, Plaintiff-Appellant, v. Donald I. OPSTEIN, Defendant-Respondent.
• Court: Wisconsin Supreme Court

Page 279

273 N.W.2d 279

86 Wis.2d 669

BANK OF SUN PRAIRIE, a Wisconsin Banking Corporation, Plaintiff-Appellant, v. Donald I. OPSTEIN, Defendant-Respondent.

No. 76-189.

Supreme Court of Wisconsin.

Submitted on Briefs Nov. 1, 1978.

Decided Jan. 9, 1979.

Aulik & Brill, S. C., Sun Prairie, submitted brief for plaintiff-appellant.

Tod B. Linstroth and Michael, Best & Friedrich, Madison, submitted brief for defendant-respondent.

DAY, Justice.

This is an appeal from a judgment of the Dane County Circuit Court, the Honorable Richard W. Bardwell, presiding, dated July 8, 1976, dismissing the action brought by the Bank of Sun Prairie against Donald Opstein as guarantor of two notes owed to the bank.

Two principal issues are raised on this appeal:

1. Was the finding by the trial court that the guarantee contract was modified by the parties to provide that assignment of the security interest in the collateral by the bank to Mr. Opstein was a condition precedent to his liability as a guarantor against the great weight and clear preponderance of the evidence?

We hold the finding by the trial court was not against the great weight and clear preponderance of the evidence. 2. Was the bank equitably estopped from enforcing the guarantee contract against Mr. Opstein?

We hold the bank was estopped. We affirm.

On February 28, 1972, the Bank of Sun Prairie made two loans to Larry and Patricia Sornberger. The loans were to consolidate debts which the Sornbergers had accumulated in the past. Two separate notes were made: one for.$4,125.24 was secured by an interest in the Sornbergers' household goods, the second for $1,499.76 was secured by security interests in two automobiles owned by the Sornbergers. In addition, the bank asked for a guarantor or co-signer. Donald Opstein, Mr. Sornberger's employer, agreed to guarantee the loans up to $3,300.

The guarantee contract was a printed, standard guarantee form. However, typed at the bottom of the sheet were the words "The Bank of Sun Prairie agrees to assign first mortgage of household goods to Guarantor."

The Sornbergers defaulted on their payments and the bank brought action against Mr. Opstein as guarantor of the notes. Trial was to the court without a jury. The trial court found in favor of Mr. Opstein and entered judgment that the bank could not recover from Mr. Opstein and dismissed the action on its merits. The bank appealed from that judgment.

At the trial, Duane Manley, Vice President of the bank, testified that he explained to Mr. Opstein the obligations he would have as a guarantor. He testified that he told Mr. Opstein that the bank would assign the security interest after he paid off the loans in the event of default by the Sornbergers. Mr. Opstein testified that he guaranteed the notes with the understanding that the security interest in the household goods was to be transferred to him upon his signing the guarantee. ¹ Mr. Opstein also testified that he requested that he be given notice within ten days of default by the Sornbergers.

Mr. Manley testified that the bank did not usually appraise household goods used as security for a loan, but usually went by a rule of thumb that furnishings of a three-bedroom house would be worth approximately $1,000-$1,500. However, Mr. Opstein testified that he relied on a list of household goods with values attached shown to him at the bank. This list was prepared by Mr. Sornberger. Mr. Opstein testified, "I was given to understand that by this list that there was more than $4,000 worth of security. That did not include the antiques, which have additional values and were not listed." There was no testimony that the bank actually represented the goods as worth $4,000, but neither did it inform Mr. Opstein that they were not worth that amount.

There was testimony that the Sornbergers were falling behind in their payments in 1973. Extensions on payment were granted by the bank on March 16, 1973 and January 9, 1974. Mr. Opstein had no notice of these extensions. Mr. Manley testified to repeated efforts to make telephone contact with Mr. Opstein. He said he would leave word for Opstein to call him "which he very seldom did." Mr. Manley's testimony was unclear as to whether he actually reached Mr. Opstein by telephone. However, Mr. Opstein flatly denied ever receiving any communication from the bank about delinquencies on the loan until March 22, 1974 when he received a letter from Mr. Manley.

The Sornbergers filed bankruptcy in October, 1974. Mr. Opstein denied receiving notice of a meeting at the Sornbergers' home to appraise the household goods. Mr. Manley testified that on November 4, 1974, he went to the Sornbergers' home and appraised the entire list of household goods and automobiles at a maximum of $150 to $200. The Sornbergers offered to buy the items from the bank at $300. About fifty per cent of the items on the list were missing at the time of this appraisal. Mr. Manley testified that the bank did not want to foreclose on the household goods, but that the bank would assign the list to Mr. Opstein when he paid off the loan. The balance owed as of August 30, 1974 was $1,994.54 on one note, and $720.58 on the smaller note.

The first question is: Was the finding by the trial court that the guarantee contract was modified by the parties to provide that assignment of the security interest in the collateral by the bank to Mr. Opstein was a condition precedent to his liability as guarantor against the great weight and clear preponderance of the evidence?

Findings of fact by the trial court will not be upset on appeal unless they are clearly erroneous and against the great weight and clear preponderance of the evidence. In re Estate of Taylor, 81 Wis.2d 687, 696, 260 N.W.2d 803 (1978). The evidence supporting the findings of the trial court need not in itself constitute the great weight or clear preponderance of the evidence; nor is reversal required if there is evidence to support a contrary finding. Rather, to command a reversal, such evidence in support of a contrary finding must itself constitute the great weight and clear preponderance of the evidence. In re Estate of Jones, 74 Wis.2d 607, 611, 247 N.W.2d 168 (1976). In addition, when the trial judge acts as the finder of fact, and where there is conflicting testimony, the trial judge is the ultimate arbiter of the credibility of the witnesses. When more than one reasonable inference can be drawn from the credible evidence, the reviewing court must accept the inference drawn by the trier of fact. Gehr v. Sheboygan, 81 Wis.2d 117, 122, 260 N.W.2d 30 (1977).

A question of fact is presented when the language of a contract is reasonably susceptible of different constructions. Lemke v. Larsen Co., 35 Wis.2d 427, 432, 151 N.W.2d 17 (1967). The general rule is that ambiguous contracts are to be construed against the maker or drafter. Garriguenc v. Love, 67 Wis.2d 130, 135, 226 N.W.2d 414 (1975). If the contract of a gratuitous surety is ambiguous it must be liberally construed in favor of the gratuitous surety. Vandervest v. Kauffman Pizza, Inc., 60 Wis.2d 230, 244, 208 N.W.2d 428 (1973). ²

This dispute essentially involved a conflict in testimony between Mr. Manley and Mr. Opstein. Mr. Manley testified that it was clear that the security interest would be assigned after Mr. Opstein paid off the loan. Mr. Opstein testified that he expected the security interest to be assigned to him if the Sornbergers should default. The phrase "The Bank of Sun Prairie agrees to assign first mortgage of household goods to guarantor" was ambiguous in that it did not make clear when the assignment was to be made. The judge was entitled to rely on Mr. Opstein's testimony, and come to the conclusion that the assignment was a condition precedent to the guarantor's liability. The trial court's ruling was in accordance with the principle that an ambiguous contract will be construed against the party who prepared the document.

The bank argues that it had no legal duty to assign its collateral to the guarantor prior to payment, that it had no legal duty to proceed against the collateral security, and that it had no duty to give notice of default to the guarantor.

A guaranty may be one of several types: absolute or conditional, a guaranty of payment or collection, a general, special, continuing or unlimited guaranty, or a letter of credit. See 38 C.J.S. Guaranty § 7, p. 1139.

With a guaranty of payment, a creditor is " 'not under any legal obligation to first enforce collection from the maker or any other guarantor, or to first resort to securities given by the principal debtor . . . . Under (a) guaranty of payment, and not merely of collection, plaintiff was entitled to immediate recovery from the sureties, and his right to immediate recovery from them could not be postponed for their benefit until after efforts to recovery by foreclosure or otherwise were exhausted.' " First Wis. Nat. Bank of Oshkosh v. Kramer, 74 Wis.2d 207, 246 N.W.2d 536, 538-539 (1976).

"Guaranties of payment ' are absolute, not collateral, promises. . . . Unlike the contract of an indorser, there is no condition as to demand and notice of default annexed to a contract of guaranty of payment or of performance.' " Estate of Menzner, 189 Wis. 340, 341, 207 N.W. 703, (1926). Nor is it any defense for a guarantor of payment as distinguished from a guarantor of collection that the creditor "through negligence, or lack of due diligence, lost or dissipated the collateral furnished by the debtor." United States v. Klebe Tool & Die Co., 5 Wis.2d 392, 397, 92 N.W.2d 868, 871 (1958).

With an absolute guarantee of payment, the law imposes no duty upon the creditor to notify the guarantor of the nonpayment of the note by the principal maker. Farmers State Bank v. Hansen, 174 Wis. 100, 103, 182 N.W. 944 (1921).

However, the note in this case was not an absolute guarantee, but rather was found by the trial court to have been...