Kafka v. Pope
| Decision Date | 20 July 1994 |
| Docket Number | No. 94-0098,94-0098 |
| Citation | 521 N.W.2d 174,186 Wis.2d 472 |
| Parties | Joseph J. KAFKA, Plaintiff-Appellant, v. James W. POPE, Rosanne Pope, M & I Northern Bank, First Financial Bank, F.S.B., and Chase Manhattan Leasing Corp., Defendants-Respondents. d |
| Court | Wisconsin Court of Appeals |
Before ANDERSON, P.J., and BROWN and SNYDER, JJ.
This is a case where the two major stockholders in a corporation signed separate personal guarantees with the same bank to secure the indebtedness of the corporation. We hold that a guarantor may be entitled to contribution from the other guarantor, even though their guarantees are evidenced by separate instruments, if the debt for which they are liable is the same. We reverse the trial court's conclusion to the contrary.
Joseph J. Kafka and James W. Pope were officers and shareholders of Wisconsin Truck Center, Inc. This corporation executed three promissory notes payable to M & I Northern Bank in the aggregate principal sum of $650,000. These notes were secured by personal guarantees that were executed separately by Kafka and Pope. The guarantees were identical and were secured by mortgages on real property owned by them individually.
The corporation floundered and was unable to meet its payments. The bank called the guarantees and Kafka paid $200,000 of his personal funds toward satisfaction of the amounts due on the promissory notes; Pope paid nothing. Kafka complained that, by virtue of the guarantees, both of them are obligated to pay one-half of the total amount of the promissory notes not paid by the corporation. The complaint alleged both a right of contribution and a right of subrogation.
The trial court granted summary judgment dismissing the complaint against Pope. The trial court found as controlling the fact that Kafka and Pope each executed separate guarantees, making each separately liable for the full amount of the debt of the notes. The trial court reasoned that coguarantee situations, where each guarantor pays its "fair share," arise only when the guarantors have signed the same instrument.
The trial court distinguished Bissell v. Wisconsin Tax Comm'n, 234 Wis. 421, 291 N.W. 325 (1940), one of only two Wisconsin cases remotely connected to the issue. In Bissell, a father and son, both shareholders in a lumber company, executed a guarantee to assure payment of the lumber company's debts. The father offered securities which he owned as collateral on the guarantee. After the father's death, his estate began paying off his indebtedness to the bank. The son paid nothing. While the dispute in Bissell was not over contribution rights, the supreme court cited the only other case related to this issue, Estate of Koch, 148 Wis. 548, 134 N.W. 663 (1912). The court cited Koch with approval and stated that "ordinarily the guarantor who pays would have a right of contribution against his coguarantor for one half of the amount of his payment." Bissell, 234 Wis. at 427, 291 N.W. at 328. The trial court here found it significant, however, that in Bissell, the two guarantors signed the same guarantee. Koch 's facts were similar.
We start with defining exactly what is meant by the term "contribution" because doing so provides the framework for a differing conclusion than that of the trial court. Contribution is the "process by which one person obtains reimbursement from another for a proportionate share of an obligation paid by the first person but for which they are both liable." Gardner v. Bean, 677 P.2d 1116, 1118 (Utah 1984).
This process is based upon principles of equity and natural justice, not express contract. Carey v. McCaslin, 43 N.E.2d 519, 520 (Ohio Ct.App.1942). The right to contribution arises out of the relationships of the coguarantors regardless of the fact that they signed separate guarantees. See Floyd Davis Sales, Inc. v. Central Mortgage Corp. of Michigan, 197 Ga.App. 532, 398 S.E.2d 820, 822 (1990).
The right to contribution is not based...
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