Miller v. Walter, 12702

• Citation: 527 P.2d 240,165 Mont. 221
• Decision Date: 21 October 1974
• Docket Number: No. 12702,12702
• Parties: Evan M. MILLER, Plaintiff and Appellant, v. Pete WALTER and Bank of Columbia Falls, a banking corporation, Defendants and Respondents.
• Court: United States State Supreme Court of Montana

Page 240

527 P.2d 240

165 Mont. 221

Evan M. MILLER, Plaintiff and Appellant, v. Pete WALTER and Bank of Columbia Falls, a banking corporation, Defendants and Respondents.

No. 12702.

Supreme Court of Montana.

Submitted Sept. 12, 1974.

Decided Oct. 21, 1974.

Graybill, Graybill, Ostrem & Warner, Leo Graybill, Jr. (argued), Great Falls, for plaintiff and appellant.

White, Vadala, Springer & Astle, David L. Astle (argued), Patrick M. Springer (appeared), Kalispell, for defendants and respondents.

CASTLES, Justice.

This is an appeal from a judgment of the district court of the eleventh judicial district, in the County of Flathead, rendered for the defendant Bank of Columbia Falls as against the plaintiff Evan M. Miller. A default judgment rendered for plaintiff, Evan M. Miller, against the defendant, Pete Walter, Has not been appealed.

In July 1972, Al Sihrer owned a 1965 Mack logging truck which was mortgaged to the defendant Bank of Columbia Falls (hereinafter referred to as the Bank) for the sum of $5,000. On July 18, 1972, Sihrer sold the truck to defendant Walter. Also on July 18, 1972, Walter gave a security interest in the truck to the Bank for a loan of $6,000. $5,000 of this loan went directly to pay off the Bank's loan to Sihrer. The other $1,000 was deposited into Walter's checking account with the Bank. This $1,000 arose out of the discussion Walter had with the Bank to the effect that the truck needed a new engine and was for that purpose. On that date, the Bank wrote the following letter:

'bank of COLUMBIA FALLS

'P. O. BOX 280

TELEPHONE (406) 892-3281

COLUMBIA FALLS, MONTANA 59912

'HOWARD AUSTIN, Executive Vice President

'July 18, 1972

'Mr. Pete Walter

'Route 4

'Kalispell, Montana 59901

'Dear Pete:

'This is to advise you that the Bank of Columbia Falls has committed for a loan of $1,000 for the purchase of the Cummings engine to be used as a replacement engine in your truck. It is understood that this will be put with the $1,000 that you have coming from your accounts receivable for a total of $2,000 to be used in the purchase of this item.

'It is our recommendation that a portion of these funds be held back for a certain number of days to give yourself a chance to install the motor for a trial period. On this basis, we are willing to guarantee these funds to whomever you purchase this engine from subject to the above conditions.

'Very truly yours,

'/s/ Howard Austin

'Howard Austin

'Exec. Vice President

'HA/sk' The district court made the following conclusion of law:

'5. That it was not the intention of the defendant Bank of Columbia Falls that exhibit 'A' be a letter of credit or guarantee but a means by which the purchase of said engine could be accomplished.'

Although Walter had previously located an engine in Miller's shop in Havre, Austin testified that he did not recall whether there had been any discussion between himself and Walter as to a particular engine to be purchased with the loan. On July 20, 1972, Wlater went to Havre and purchased the engine for $2,000 and a starter for $100. Miller testified that, on the strength of the letter, which he read, he let Walter take the engine and the starter, Walter paying only $1,000 by his personal check at that time. Miller testified that he would not have let Walter take the engine and starter without paying the full price if it had not been for the letter. Miller then attached the letter to the sales slip which he retained.

Walter later installed the engine in the truck. On September 21, 1972, shortly after installation, the Bank repossessed the truck for nonpayment by Walter of his obligation to the Bank. Sometime prior to September 27, 1972, but after the Bank repossessed the truck, Miller contacted Walter about payment of the balance due on the engine and learned of the Bank's repossession. Miller then contacted the Bank about the matter. On December 29, 1972, the Bank sold the truck to satisfy its security interest.

Miller brought this action in the district court to recover damages for nonpayment of the $1,000 due on the engine and the $100 due on the starter. A default judgment was entered against Walter for the sum of $1,100. Walter is bankrupt. The case was heard by the court without a jury and judgment was rendered for the Bank. Miller filed a motion to amend judgment to substitute plaintiff's proposed findings of fact and conclusions of law. The court by order dated December 27, 1973, denied Miller's motion. From the Judgment and order Miller appeals.

The issues raised herein are as follows:

1. Whether the Bank's letter constitutes a guaranty of the purchase price of the engine purchased by Walter from Miller.

2. If the letter is a guaranty, whether it is binding against the Bank in light of the fact that Miller did not communicate notice of acceptance of the alleged guaranty to Bank.

3. Whether Bank is responsible for payment of the purchase price of the engine merely because it held a security interest in the truck.

From a reading of the letter that is the subject of this dispute and the facts above enumerated, this Court holds as a matter of law that the letter is a guaranty. Section 30-101, R.C.M.1947, defines 'guaranty' to be '* * * a promise to answer for the debt, default, or miscarriage of another person.' The Bank specifically uses the word 'guarantee'. In addition, the last sentence of the letter is rendered absolutely meaningless if not construed as a collateral promise to another: The Bank had already stated in the first paragraph that they were committed to the loan to Walter. The promise was to answer for the debt of 'another', Walter, in that it was a guarantee 'to whomever you purchase this engine from * * *.'

The Bank's contention that there could be no guaranty because the Bank did not intend the letter to be a guaranty and thus there was no meeting of the minds is without merit. The mutual assent essential to the formation of a contract, in this case a contract of guaranty, must be gathered from the outward objective manifestations of the parties and not by the subjective undisclosed intent of one of the parties. Montana-Dakota Power Co. v. Johnson, 95 Mont. 16, 22, 23 P.2d 956. Wyoming Farm Bureau Mutual Ins. Co. v. Smith, 259 F Supp. 870, 873 (D.Mont.), aff'd 377 F.2d 918 (9th Cir.); Williston on Contracts, Vol. 1, section 98 (rev. ed. 1936) p. 314.

The Bank next contends that even though the letter is a guaranty, notice of acceptance of the guaranty was not given to the Bank as required by section 30-106, R.C.M.1947. It reads:

'A mere offer to guaranty is not binding until notice of its acceptance is communicated by the guarantee to the guarantor; but an absolute guarantty is binding upon the guarantor without notice of acceptance.'

Assuming for the purpose of this argument that the letter was not an absolute guaranty but was merely an offer to guaranty, we hold that the notice of Miller's acceptance was communicated to the Bank at the very latest, shortly after the Bank's repossession of the truck and that such notice satisfies the requirements of the statute.

In support of our holding, we cite from 1 Corbin on Contracts, Section 68:

'Any attempt to review and criticize the innumerable cases in the field of suretyship and guaranty must be left to monographic treatises on that special topic. The confusion and conflict in that field seem to be due in large part to a similar confusion in the general doctrines applicable to all agreements.

'It is beyond question that in many thousands of cases and offer to become guarantor for another has been made in such terms as to induce the offeree to advance money, goods, or services on credit without first sending any notice of acceptance to the offeror. Later, when demand is made for him to pay the debt of another in accordance with his promise, the guarantor complains of this lack of notice and...