Gallagher, Langlas & Gallagher v. Burco

• Citation: 587 N.W.2d 615
• Decision Date: 29 October 1998
• Docket Number: No. 97-1577,97-1577
• Parties: GALLAGHER, LANGLAS & GALLAGHER, A Professional Corporation, Plaintiff-Appellee, v. Gaylen BURCO, Defendant-Appellant, and Lynn L. Roose, Defendant.
• Court: Iowa Court of Appeals

Page 615

587 N.W.2d 615

GALLAGHER, LANGLAS & GALLAGHER, A Professional Corporation, Plaintiff-Appellee, v. Gaylen BURCO, Defendant-Appellant, and Lynn L. Roose, Defendant.

No. 97-1577.

Court of Appeals of Iowa.

Oct. 29, 1998.

R.L. Van Veldhuizen, Oelwein, for appellant.

David A. Roth of Gallagher, Langlas & Gallagher, P.C., Waterloo, for appellee.

Considered by SACKETT, P.J., and HUITINK and STREIT, JJ.

STREIT, J.

A father appeals a law firm's judgment against him for guaranteeing his daughter's expenses in a custody trial over his grandchildren. Because the statute of frauds renders Burco's oral contract unenforceable, the judgment is reversed.

I. Background Facts & Proceedings.

Lynn Roose requested the law firm Gallagher, Langlas and Gallagher, P.C. represent her in her dissolution action. Attorney Thomas Langlas signed an attorney fee contract in August 1994, and gave it to Roose to sign and return. He also requested a $2000 retainer fee. Roose never signed or returned the contract. She did not pay the retainer fee in full.

The firm represented Roose despite her not signing the contract or paying the retainer fee in full. On April 10, 1995, the Gallagher attorneys met with Roose and her father, Gaylen Burco. The attorneys told Burco about the anticipated child custody trial. The firm contends during the meeting Burco agreed to be responsible for the remainder of Roose's account. Burco denies an agreement. At the end of the meeting Burco gave the firm a check for $1000 to pay the outstanding balance of $814.92 on Roose's account.

Before trial, Mary Chicchelly, an attorney with the firm, contacted Burco requesting an additional retainer to secure fees to be incurred and Burco told her, "My word as a gentleman should be enough.... I told Mr. Langlas I would pay and I will pay."

Roose failed to pay her legal fees. In July 1995, the attorneys sent Burco a letter requesting $5000 for Roose's legal fees or the signing of a promissory note. At the end of July, they sent Burco another letter asking him to sign a promissory note for $10,000. Neither Roose nor Burco paid the attorney fees or signed the notes. The firm represented Roose in the July 1995 trial.

After trial, Burco returned the second letter and promissory note with a notation stating he was not responsible for his daughter's attorney fees. The firm filed a motion to withdraw in July 1996 and the motion was granted.

The firm filed a petition against Burco and Roose for the unpaid legal fees. Burco denied the allegations and raised affirmative defenses of statute of frauds, revocation, and waiver. On August 6, 1997, the trial court entered a trial judgment against Burco and a default judgment against Roose for $14,588.53. Burco appeals.

II. Standard of Review.

Our review is for the correction of errors at law. The district court's findings of fact have the effect of a special verdict and are binding on us if supported by substantial evidence. Iowa R.App. P. 14(f)(1); Waukon Auto. Supply v. Farmers & Merchants Sav. Bank, 440 N.W.2d 844, 846 (Iowa 1989).

III. Sufficiency of Evidence to Prove Oral Contract.

Burco contends the district court erred in finding there was sufficient evidence of an oral contract between himself and the law firm to pay Roose's bill.

The existence of an oral contract, as well as its terms and whether it was breached, are ordinarily questions for the trier of fact. Dallenbach v. Mapco Gas Prod., Inc., 459 N.W.2d 483, 486 (Iowa 1990). To prove the existence of an oral contract, the terms must be sufficiently definite for a court to determine with certainty the duties of each party, the conditions relative to performance, and a reasonably certain basis for a remedy. Netteland v. Farm Bureau, 510 N.W.2d 162, 165 (Iowa App.1993); Burke v. Hawkeye Nat'l. Life Ins. Co., 474 N.W.2d 110, 113 (Iowa 1991); Severson v. Elberon Elevator, Inc., 250 N.W.2d 417, 420 (Iowa 1977); Rest.2d Contracts § 33 at 597 (1979). Where a contract appears to exist, courts are reluctant to find it too uncertain to be enforceable. Audus v. Sabre Communications Corp., 554 N.W.2d 868, 872 (Iowa 1996). However, when the terms are not definite, courts are reluctant to impose reasonable terms on contracting parties. Bowser v. PMX Industries, Inc., 545 N.W.2d 898, 900 (Iowa App.1996).

The question is, then, whether the terms of the communications between Burco and the firm were definite enough to form a contract.

At the April 10, 1996, meeting, Burco was told the estimated expense of his daughter's custody trial would be approximately $1000 per day. The firm would not guarantee Burco the trial would only last two or three days. Burco paid $1000 towards an existing $814.92 bill and said he would pay for future services. Before trial, Burco was pressed for payment or to sign a promissory note. Burco said he would pay and his word was good enough. Burco took an active part in the trial by testifying and participating in conferences with counsel during recesses.

Burco claims his guarantee to pay future legal expenses is too vague and uncertain to form a contract. The dealings described above are definite. Each party's duties are clear. The attorneys were to continue representing Roose in her custody fight. Burco was to pay her legal fees. These terms are as definite as many attorney-fee agreements. These facts are sufficient evidence to prove an oral contract existed.

The trial courts finding an oral contract existed between Burco and the firm is supported by substantial evidence. This may not suffice, however. Because the contract was in the nature of a surety or guaranty contract, the evidence or proof of the contract may have to be written. We now consider the statute of frauds.

IV. Enforceability of Oral Contract Under the Statute of Frauds Section 622.32(2).

Burco next contends evidence of the oral contract is barred by the statute of frauds. Our appellate courts have held in a number of cases the statute of frauds is a rule of evidence and not of substantive law. The statute relates to the manner of proof, but does not forbid oral contracts or render them invalid. Stauter v. Walnut Grove Products, 188 N.W.2d 305, 313 (Iowa 1971); Meylor v. Brown, 281 N.W.2d 632, 634 (Iowa 1979). If the statute renders evidence of the guaranty incompetent and thus inadmissible, the judgment against Burco must be reversed. See Maresh, 304 N.W.2d at 437.

The statute of frauds requires that certain contracts be evidenced by some kind of writing before they are enforceable. The statute applies to surety contracts--a promise to a creditor to answer for debt, default, or miscarriage of another. ¹

Iowa Code section 622.32(2) codifies this doctrine:

Except when otherwise specifically provided, no evidence of the following enumerated contracts is competent, unless it be in writing and signed by the party charged or by the party's authorized agent:

....

2. Those wherein one person promises to answer for the debt, default, or miscarriage of another, including promises by executors to pay the debt of the decedent from their own estate.

Iowa Code § 622.32(2) (1997).

In construing Iowa Code section 622.32(2), the Iowa Supreme Court has distinguished between collateral and original promises. Maresh Sheet Metal Works v. N.R.G., Ltd., 304 N.W.2d 436, 438 (Iowa 1981). Original promises are made when the promise to pay the debt of another arises out of new and original consideration between the newly contracting parties. Id. With an original promise the surety has a personal concern in the debtors obligation and will achieve a personal benefit out of the debtors obligation. See id. The "leading object of his promise is to secure some benefit or business advantage for himself." Id. at 439. Original promises are not within the statute of frauds. Id.

Collateral promises are made when a promise is made in addition to an already existing contract and the surety has no personal concern in the debtor's obligation and gains no benefit from the debtors obligation. The "main purpose" of the promise must not be the benefit of the surety. Rest. (Second) of Contracts § 116 (1979). Collateral promises fall within the statute of frauds. Maresh, 304 N.W.2d at 438.

In addition to ascertaining whether the promisor receives a benefit, we ascertain who the credit was extended to, the promisor or the party who was rendered the services. ² See id. at 439; Hudson v. Ashley, 411 A.2d 963, 967 (D.C.App.1980)(citing Kerner v. Eastern Dispensary & Casualty Hospital, 214 Md. 375, 135 A.2d 303, 306-07 (1957)). This intention is ascertained from the promissory words used, the situation of the parties, and all surrounding circumstances when the promise was made. See Hudson, 411 A.2d at 968.

Whether a promise is collateral to an existing contract or creates a primary obligation on the part of the promisor is a question of fact. Maresh, 304 N.W.2d at 440. Thus, it is for this court to decide whether the trial court's ruling Burco's promise was original rather than collateral is supported by substantial evidence on the record. The trial court determined the promise was original rather than collateral "inasmuch as it involved his daughter and grandchild."

There is nothing in the record which supports the trial court's conclusion the promise was original rather than collateral except for a vague notion his family was affected by the matter. The evidence shows the benefit to Burco was indirect in that if his daughter won custody of his granddaughter he may get to visit her more. There is no evidence this was Burco's primary motivating factor in promising to pay his daughter's debt. From this record, it cannot be found Burco gained a benefit from his promise. This being so, his promise was collateral rather than original. There is not substantial evidence supporting the courts finding Burco made an original promise which falls outside the statute of frauds. The statute of frauds renders evidence of the...