Granite Equipment Leasing Corp. v. Hutton, 42983

• Decision Date: 22 August 1974
• Docket Number: No. 42983,42983
• Citation: 84 Wn.2d 320,72 A.L.R.3d 1172,525 P.2d 223
• Parties: , 72 A.L.R.3d 1172 GRANITE EQUIPMENT LEASING CORPORATION, a New York corporation, Appellant, v. Arthur J. HUTTON, Jr., et ux., et al., Defendants, and Desert Carmel Service Company, Respondent.
• Court: Washington Supreme Court

Page 320

84 Wn.2d 320

525 P.2d 223, 72 A.L.R.3d 1172

GRANITE EQUIPMENT LEASING CORPORATION, a New York

corporation, Appellant, v. Arthur J. HUTTON, Jr., et ux., et al., Defendants, and Desert Carmel Service Company, Respondent.

No. 42983.

Supreme Court of Washington, En Banc.

Aug. 22, 1974.

Montgomery, Purdue, Blankinship & Austin, Gale D. Barbee, Seattle, for appellant.

Davis, Wright, Todd, Riese & Jones, Duncan A. Bayne, John A. Tidwell, Seattle, for respondent.

WRIGHT, Associate Justice.

This case involves an action by appellant seeking to enforce the terms of a written guaranty. All defendants except Desert Carmel Service Company, the respondent herein, confessed judgment. The action against respondent proceeded to trial. This appeal is from the trial court's judgment dismissing with prejudice appellant's action against respondent on respondent's written guaranty.

On August 29, 1969, in Seattle, Washington, a written agreement for the lease of furniture and equipment was executed between appellant, Granite Equipment Leasing, Inc., and defendants Angell, Hutton, Smith, Magnus and Corning, a copartnership known as 'Bayshore Partners.' The lease agreement provided for the leasing of furniture and equipment to a motel and restaurant near Waldport, Oregon, owned and operated by the above copartnership. Appellant's performance under the lease agreement was to be consummated with delivery of the leased items in Oregon.

Coincident with the execution of the lease and other written guaranties, defendants Angell and Hutton executed a written guaranty in the name of respondent, Desert Carmel Service Company, in favor of appellant guaranteeing performance of defendant 'Bayshore Partners' under the terms of the lease agreement. This guaranty was accompanied by a printed corporate resolution form stating that any officer of respondent corporation was authorized to execute the guaranty in question on behalf of respondent. At the time the guaranty was executed, defendant Angell was vice-president and defendant Hutton was secretary of respondent corporation. The lease agreement, as well as the guaranty, contained clauses which made New York law applicable to each transaction. However, New York law was neither pleaded nor proved.

The parties involved in the August 29, 1969 transaction are from several different states. Appellant is a New York corporation engaged in the business of leasing personal property, with offices in Seattle, Washington and Garden City, New York. Respondent is an Arizona corporation empowered to engage in business as a public service corporation within the state of Arizona, providing water and sewer service to a land development in that state.

On August 29, 1969, all the stock of respondent was owned by defendant Desert Carmel Development, Inc., an Arizona corporation engaged in the development of land in Arizona for homesite purposes. At that time, defendant Desert Carmel Development, Inc., was, in turn, owned by defendant Wendell-West Company, a partnership engaged in the business of land development, with its principal office located in Seattle, Washington. Corporate and financial records of respondent were maintained at the principal office of defendant Wendell-West Company. Prior to this action, defendant Wendell-West Company sold defendant Desert Carmel Development, Inc., along with respondent corporation, to a Georgia corporation.

Defendant 'Bayshore Partners,' comprised of defendants Angell, Hutton, Smith, Magnus and Corning, owns and operates the Pat Boone Bayshore Inn, a motel and restaurant near Waldport, Oregon. The members of this copartnership are all Washington residents with their principal place of business in Seattle, Washington; and all, except defendant Corning, are also copartners in defendant Wendell-West Company.

In response to the conflict of laws problem raised by the parties, the trial court found that Arizona, rather than Washington or Oregon, had the most significant relationship to the guaranty and respondent corporation since the impact of enforcement of the guaranty, it determined, would be felt principally in Arizona. Accordingly, the trial court applied Arizona law and concluded that under that state's law, execution of the guaranty by respondent's officers was ultra vires so as to make the guaranty void and unenforceable.

The first issue raised on appeal is whether the trial court erred in deciding Arizona law was the rule for decision of this case. This was error.

First, procedural law dictates that Washington law must be applied to the instant case. The guaranty in question contains a clause stating that the guaranty shall be interpreted in accordance with the laws of the state of New York and that the rights and liabilities of the parties shall be determined in accordance with the laws of that state. The principal obligation, I.e., the lease agreement, likewise contains a clause making New York law applicable to any litigation arising from that transaction. However, the record discloses that, although these documents were introduced into evidence, New York law was not pleaded by either party as required by RCW 5.24.040. New York law is, therefore, considered to be the same as Washington law under the rule that, unless the law of another state is specifically pleaded, it will be assumed to be the same as that of Washington. Investment Service Co. v. LaLonde, 63 Wash.2d 834, 389 P.2d 414 (1964); Save-Way Drug, Inc. v. Standard Investment Co., 5 Wash.App. 726, 490 P.2d 1342 (1971). Thus, because of the choice of law by the parties and the failure of either to plead it, Washington law governs the principal obligation, as well as the guaranty.

Second, even if the above procedural law did not exist so as to make the choice of law of the parties effective via substitution of the law of Washington for that of New York, substantive law would still dictate that Washington law must be applied to the instant case.

Washington has adopted the view that, absent a choice of law by the contractual parties, the validity and effect of a contract are governed by the law of the state which has the most significant relationship to the contract, except as to questions of usury and details of performance. Baffin Land Corp. v. Monticello Motor Inn, Inc., 70 Wash.2d 893, 425 P.2d 623 (1967). This rule has been specifically extended to contracts of suretyship or guaranty. Potlatch Fed. Cr. Union v. Kennedy, 76 Wash.2d 806, 459 P.2d 32 (1969).

Factors which may be significant in regard to a guaranty contract include the place of contracting, negotiation, and performance; the location of the contract subject matter; and the domicile, residence, and place of business of the parties. Consideration should also be given to the interests and public policies of potentially concerned states as they relate to the transaction in question, as well as to the justified expectations of the parties as to which of the competing policies would be applicable to them. Potlatch Fed. Cr. Union v. Kennedy, Supra at 809--810, 459 P.2d 32.

The facts of the instant case show that the guaranty was signed in Seattle, Washington. The record indicates that it probably was also negotiated there, although no witness specifically testified to that effect. As to the place of performance, appellant has offices in Washington and New York and would expect that rent payments would be made at one of those places by the principal obligators or guarantors. The subject matter of the guaranty is the obligation of the guarantor to pay the debt of the principal debtor....