Botkin v. Security State Bank
| Decision Date | 17 March 2006 |
| Docket Number | No. 92,380.,92,380. |
| Citation | 130 P.3d 92 |
| Parties | David E. BOTKIN, et al., Appellees, v. SECURITY STATE BANK, Wellington Kansas, a Kansas Corporation, Appellant. |
| Court | Kansas Supreme Court |
Martin J. Peck, of Hyndman & Peck, L.L.P., of Wellington, argued the cause and was on the briefs for appellant.
W. Thomas Gilman, of Redmond & Nazar, L.L.P., of Wichita, argued the cause and was on the briefs for appellees.
This case requires us to determine whether certain written guaranties are enforceable. After Security State Bank's borrower, Botkin, LLC, defaulted on its loan obligations, David Botkin and 33 others filed a declaratory judgment action to determine whether their signed guaranty agreements were enforceable under the statute of frauds, K.S.A. 33-106. The Bank filed a counterclaim seeking to enforce the guaranties. The district court granted the guarantors' motion for summary judgment, and the Court of Appeals reversed and remanded in Botkin v. Security State Bank, 33 Kan.App.2d 914, 111 P.3d 182 (2005). We granted the guarantors' petition for review and jurisdiction exists under K.S.A. 60-2101(b).
The issues on appeal, and this court's accompanying holdings, are as follows:
1. Do the written guaranties contain the essential terms of a contract so that they are enforceable under the statute of frauds, K.S.A. 33-106? Yes.
2. Did the guarantors waive the statute of frauds defense? Moot.
3. Is the guaranty waiver provision contrary to public policy? Moot.
The Court of Appeals is affirmed in part and reversed in part; the district court is reversed, and the case is remanded for further proceedings.
The principal facts, largely as recited by the Court of Appeals, are not in dispute. In March 2001, Security State Bank (Bank) loaned money to Botkin, LLC. In return, 34 individuals and entities executed separate three-page guaranty agreements securing the loan. With the exception of the guarantors' names and dates signed, the guaranties were identical and stated in relevant part:
"For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and to induce the Security State Bank, Wellington, Kansas (herein, with its participants, successors and assigns, called `Lender'), at its option, at any time or from time to time to make loans or extend other accommodations to or for the account of Botkin LLC (herein called `Borrower') or to engage in any other transactions with Borrower, the Undersigned hereby absolutely and unconditionally guarantees to Lender the full and prompt payment when due, whether at maturity or earlier by reason of acceleration or otherwise, of the debts, liabilities and obligations described as follows:
. . . .
. . . .
. . . .
This guaranty is . . . [x] secured by a mortgage and security agreement dated 3-9-01.
. . . .
Sometime after the guaranties were executed, the Bank received a document printed on the formal letterhead of Botkin, LLC captioned "Member totals as of December 7, 2001." Among other things, the document provided the names of members and the amounts of each member's (1) "original investment," (2) "stock purchased," (3) "total investment," and (4) "percent ownership."
After Botkin, LLC defaulted on its loan obligations to the Bank, the 34 guarantors filed a preemptive petition in the district court seeking declaratory judgment because they were "at risk of being called upon to pay on their respective guaranty agreements." They argued that the guaranties violated the statute of frauds, K.S.A. 33-106, and were therefore unenforceable.
The Bank answered and counterclaimed for the amount due on the loan, $776,449.99, and costs including attorney fees. Its answer also included each guarantor's alleged percentage of liability. The answer/counterclaim was later amended to include the assertion that guarantors waived the statute of frauds defense.
Guarantors denied all percentages of liability attributed by the Bank's answer. On March 31, 2003, they filed a motion for summary judgment, arguing that the guaranties were not enforceable because the amount each guarantor would be liable for could only be determined by inadmissible parol evidence in violation of the statute of frauds.
In the Bank's response to guarantors' motion for summary judgment, it conceded that "evidence other than the guaranties themselves will need to be introduced into evidence." The Bank attached as evidence the document captioned "Member Totals as of December 7, 2001," and argued that the itemized list was nonparol evidence. It also attached an affidavit from its president, stating that the list was provided "in connection with the guaranties."
In the guarantors' reply, they objected to the Bank's "attempt to supplement the terms of the agreements by adding a list of members that was allegedly `provided' to the Bank `in connection with the guaranties' made by the [Guarantors]." They also noted that "[i]n [Bank's] responses [to guarantors' requests for admissions], the Bank made no reference to any list of members that was allegedly `provided' to the Bank `in connection with the guaranties made by the [guarantors].'"
The Bank supplemented its response to the guarantors' motion for summary judgment with lists documenting changes to guarantors' ownership interests in Botkin, LLC over time. It argued that even if each guarantor's percentage of liability changed during the time of the relationship between Botkin, LLC and the Bank, thus making the instruments ambiguous, the guarantors should at least be liable for the smallest amounts because the language "my proportional ownership share" in paragraph 4 would have given them notice of their exposure to liability. The Bank filed its own motion for summary judgment based upon the least percentage each guarantor ever owned in Botkin, LLC.
In April 2004, the district court granted summary judgment for the guarantors. It primarily held that under the statute of frauds, the guaranties were required to "be complete in [themselves], leaving nothing to rest in parol." It concluded they were incomplete and unenforceable. The court also denied reliance on the December 7, 2001, ownership list, stating "there is no evidence proffered that the list even existed at the time of the execution of the agreements, let alone that the list was part of the agreements."
The Court of Appeals reversed, finding the guaranties satisfied the statute of frauds and that any escape of the guarantors from liability would not be consistent with the underlying purpose of the statute, i.e., to prevent fraud and injustice. It also remanded for determination of the parties' intent and of the meaning of the phrase "my proportional ownership share" in paragraph 4 of the guaranties. The court concluded that if "the parties fail to satisfy the district court regarding an enforceable intent of the parties regarding the phrase `my proportional ownership share' at the time of execution, the guaranties must be enforced without limitation against each guarantor." It also held that the guarantors' possible waiver of the defense of the statute of frauds was moot. Botkin v. Security State Bank, 33 Kan. App.2d 914, 921-22, 111 P.3d 182 (2005).
Issue: Do the written guaranties contain the essential elements of a contract so that they are enforceable under the statute of frauds, K.S.A. 33-106?
The facts are undisputed, and our decision requires us to interpret and give legal effect to the written guaranties. Our standard of review of the district court's grant of summary judgment is therefore de novo. See Bomhoff v. Nelnet Loan Services, Inc., 279 Kan. 415, 419-20, 109 P.3d 1241 (2005). Additionally, the rules governing the interpretation and construction of contracts generally apply to the interpretation or construction of a...
To continue reading
Request your trial
-
Jeanes v. Bank of America, N.A.
...of an agreement, this court's review is unlimited. See LSF Franchise REO I, 283 Kan. at 19, 152 P.3d 34; Botkin v. Security State Bank, 281 Kan. 243, 248, 130 P.3d 92 (2006). In making her argument, Jeanes, however, does not address the issue of whether Wrenick can be held liable, first, on......
-
Central Natural Resour. v. Davis Oper. Co.
...However, the parties do not contend that there is a factual dispute. Therefore, our review is de novo. See Botkin v. Security State Bank, 281 Kan. 243, 248, 130 P.3d 92 (2006). Moreover, we are being asked to determine the legal effect of the coal deeds, which is a question of law subject t......
-
Genesis Health Club v. City of Wichita, No. 97,486.
...these facts are material. Here, because the material facts are undisputed, this court's review is unlimited. See Botkin v. Security State Bank, 281 Kan. 243, 130 P.3d 92 (2006) (when facts are undisputed, appellate review of the district court's grant of summary judgment is de novo). Additi......
-
Cooke v. Gillespie
...material facts. Accordingly, we may review the district court's denial of Cooke's motion for summary judgment de novo. See Botkin v. Security State Bank, 281 Kan. 243, Syl. ¶ 1, 130 P.3d 92 Our analysis begins, however, with a reaffirmation of the statement that "[i]n Kansas, `piecemeal app......