Best Tree Service, Inc. v. Adams, No. 22994-7-III (WA 3/24/2005)
| Decision Date | 24 March 2005 |
| Docket Number | No. 22994-7-III.,22994-7-III. |
| Court | Washington Supreme Court |
| Parties | BEST TREE SERVICE, INC., a Washington corporation; STEVEN L. ADAMS, a married man; and DANIEL L. NELSON, a married man, Appellants, v. LEE ADAMS and BARBARA ADAMS, husband and wife, Respondents and Cross-Appellants, STEVEN L. ADAMS and JENNIFER ADAMS, husband and wife; DAN NELSON and JUDY NELSON, husband and wife; BASIN TREE SERVICE & PEST CONTROL, INC., a Washington corporation, Defendants. |
Appeal from Superior Court of Grant County. Docket No: 02-2-01288-1. Judgment or order under review. Date filed: 04/22/2004. Judge signing: Hon. Ken L Jorgensen.
Counsel for Appellant(s), Michael Rex Tabler, Attorney at Law, 56 C St NW, PO Box 876, Ephrata, WA 98823-0876.
Counsel for Respondent/Cross-Appellant, Richard Jerabek Jr, Davis Arneil Law Firm, PO Box 2136, Wenatchee, WA 98807-2136.
Erik K Wahlquist, Attorney at Law, 617 Washington, PO Box 2136, Wenatchee, WA 98807-2136.
UNPUBLISHED OPINION
We will enforce an unambiguous agreement as a matter of law. When the subject matter of the suit is the interpretation of a written agreement, inherent issues of `integration, ambiguity, plain meaning and parol evidence' will generally render summary judgment inappropriate. Berg v. Hudesman, 115 Wn.2d 657, 663, 671, 801 P.2d 222 (1990). Those issues require findings on the facts and circumstances to discover the intent of the parties. The agreement that is the subject of this dispute is one such agreement. It is denominated a `guarantee' but the actual language suggests an unconditional joint and several obligation to pay debts (the debts are part of criminal sanctions). The respondents call it a true guarantee and say that, therefore, default by the primary obligor was a condition precedent to their obligation to pay. The appellants call it an unconditional joint and several obligation—period. The parties disagree about their mutual intent, and their intent is not clear from the document itself. We, accordingly, reverse the trial court's summary judgment and remand for trial.
Steven Adams bought Basin Tree Service, Inc. from his father, Lee Adams, in 1990. Lee then started a new company, Best Tree Service, Inc. Steven and Basin Tree successfully bid on federal brush control contracts with the Bonneville Power Administration. Lee agreed not to bid on these contracts in exchange for half the profits. This is `bid-rigging' and a federal offense. And the United States Department of Justice began an investigation. Lee Adams sold Best to Daniel Nelson in 1997. Daniel was employed by Steven at Basin Tree.
The United States indicted Best and unnamed others for conspiring to defraud the U.S. The U.S. Department of Justice negotiated with Steven, Daniel, Basin Tree, and Best, and their lawyers. They reached a plea agreement. The government agreed to proceed solely against the corporation, Best, and not name Steven or Daniel as defendants. The plea agreement called for Best to pay $100,000 in fines to the United States, over five years. Best also agreed to pay $200,000 in restitution to the Bonneville Power Administration (BPA), payable in cash or services.
The United States conditioned the plea agreement on a collateral agreement by Lee, Steven, and Daniel to guarantee Best's performance. The parties do not agree on whether Lee was also a target of the criminal investigation. Steven and Daniel allege that, by conference call during the negotiation session, Lee orally agreed to pay the $100,000 fine. This was confirmed in a letter from Steven's lawyer. According to Steven, Lee agreed (1) to sign the collateral agreement with the U.S. as a co-guarantor and (2) to assume an absolute, unconditional obligation to Daniel and Steven to pay $100,000. Clerk's Papers (CP) at 62, 80, 85. Lee says Steven told him on December 14, 1999 that he, Steven, was in trouble and needed Lee's help. Lee says he did not agree to CP at 187.
Lee signed the collateral agreement.
Daniel Nelson, Steven Adams, and Lee Adams ultimately signed the following as part of the plea agreement:
GUARANTEE OF PAYMENT OF FINE AND RESTITUTION
Due to Best's current precarious financial condition, the undersigned, as option holders of, or current and former owners of either equity or controlling interests in, Best agree to be jointly and severally liable to the United States for payment of the fine imposed on Best pursuant to the attached Plea Agreement. In addition, the undersigned agree to be jointly and severally liable to the BPA for payment of the restitution agreed to in the attached Plea Agreement.
CP at 57. The dispute here is over the effect of this agreement. Lee contends that they intended the agreement to be just what it says it is—a true guarantee—that is, a secondary obligation to pay in the event Best fails to pay. On the other hand, Steven and Daniel contend it was mutually understood from the outset that Best could pay nothing and that default by Best was never an option because it would mean criminal sanctions for Lee as well as Steven and Daniel. For that reason, they maintain, the parties always intended for the agreement to create primary liability—that is, all parties were jointly and severally liable for the debt.
Lee paid the United States $5,000 in 2000 and $20,000 in 2001, the amounts due on the fine pursuant to a five-year payment schedule. But in 2002, Lee refused to make another $20,000 payment. Daniel made up the difference by writing a personal check to Best. Basin Tree wrote Best a check to pay the $20,000 due on the fines in 2003. These payments kept Best out of default. Best, Daniel, and Steven sued Lee and Barbara Adams for contribution, based on (a) the written joint and several liability guarantee agreement and (b) Lee's alleged oral agreement to assume absolute liability for $100,000. Lee answered that, under the law of guarantee, he had no obligation under this collateral agreement absent proof of default by the primary obligor, Best. Lee also counterclaimed against Steven for trespass, nuisance, and damages caused by an allegedly unlawful entry onto Lee's land by Steven to dump herbicides. The counterclaim was factually unrelated to the dispute over the guarantee.
Everyone moved for summary judgment.
The court denied Steven and Daniel's claim for contribution and entered judgment for Lee. The corporation, Best, was dismissed as a party. The court concluded that the written agreement was a guarantee to the United States, not an absolute joint and several promise to each other; by signing on as guarantor, Lee promised the United States no more than to pay a one-third share of Best's obligation if Best was unable to perform. The court also dismissed Lee's counterclaim. The court concluded that the evidence of trespass was insufficient to survive summary judgment, because Steven's entry onto the property was permissive. Everyone appeals the court's rulings.
Steven and Daniel seek contribution from Lee. They argue (1) that the written agreement Lee signed was an unconditional promise to pay, not a guarantee conditioned upon Best's default; and (2) that Lee orally agreed to pay regardless of Best's financial position, anyway. Written Agreement
The question is whether this written collateral agreement makes Lee a primary obligor, jointly and severally liable with the cosigners, or whether he is instead a guarantor of Best's performance and only secondarily liable.
We apply the same rules of construction to a guarantee as to any other contract. Sherman, Clay & Co. v. Turner, 164 Wash. 257, 261, 2 P.2d 688 (1931). The touchstone of contract interpretation is the intent of the parties. Scott Galvanizing, Inc. v. N.W. EnviroServices, Inc., 120 Wn.2d 573, 580, 844 P.2d 428 (1993). Documents executed together are construed together in ascertaining the parties' intent. In re Estates of Wahl, 99 Wn.2d 828, 831, 664 P.2d 1250 (1983); Heino v. Libby, McNeill & Libby, 116 Wash. 148, 151, 205 P. 854 (1921). Extrinsic evidence is admissible as to the circumstances under which the contract was made, to aid the court in ascertaining the parties' intent. Berg v. Hudesman, 115 Wn.2d 657, 667, 801 P.2d 222 (1990).
Under the context rule, the court looks at "the contract as a whole, the subject matter and objective of the contract, all the circumstances surrounding the making of the contract, the subsequent acts and conduct of the parties to the contract, and the reasonableness of respective interpretations advocated by the parties." Id. at 667 (quoting Stender v. Twin City Foods, Inc., 82 Wn.2d 250, 254, 510 P.2d 221 (1973)). This context analysis applies also to surety agreements. Kenney v. Read, 100 Wn. App. 467, 474-75, 997 P.2d 455, 4 P.3d 862 (2000); 72 C.J.S. Principal and Surety sec. 82 (1987) ().
The court looks at the parties' objective manifestations of intent, not unilateral or subjective intentions. Go2Net, Inc. v. C I Host, Inc., 115 Wn. App. 73, 85, 60 P.3d 1245 (2003). Intent may be established directly or by inference, but any inference must be based solely on objective manifestations. Lynott v. Nat'l Union Fire Ins. Co. of Pittsburgh, Pa., 123 Wn.2d 678, 684, 871 P.2d 146 (1994). The purpose of such evidence is to aid the trial court in interpreting what is contained in the contract, not to prove intent independent of that contract. Berg, 115 Wn.2d at 669. The court does not consider evidence of an intent independent of the contract, or evidence that...
To continue reading
Request your trial