Orange-Co., Inc. v. Brown

• Decision Date: 06 August 1979
• Docket Number: ORANGE-CO,No. 1-278A51,1-278A51
• Citation: 393 N.E.2d 192,181 Ind.App. 536
• Parties: , INC., Defendant-Appellant, v. Elizabeth L. BROWN, Plaintiff-Appellee.
• Court: Indiana Appellate Court

Page 192

393 N.E.2d 192

181 Ind.App. 536

ORANGE-CO., INC., Defendant-Appellant, v. Elizabeth L. BROWN, Plaintiff-Appellee.

No. 1-278A51.

Court of Appeals of Indiana, First District.

Aug. 6, 1979.

Henry N. Leist, Naville, Crumbo, Leist & Naville, New Albany, Hamilton J. Teaford, Teaford & Bernard, Columbus, Ohio, for defendant-appellant.

Robert H. Kempf, Jr., Jeffersonville, David B. Hughes, David L. Walsh, Hughes & Hughes, Indianapolis, for plaintiff-appellee.

LYBROOK, Judge.

Defendant-appellant, Orange-Co., Inc. (hereinafter referred to as Orange) brings this appeal from a judgment in favor of plaintiff-appellee, Elizabeth Brown (Lessor), who brought suit for specific performance of a lease guaranty executed by Orange as guarantor, damages resulting from the breach of the lease and the guaranty.

Orange-Co., Inc., the defendant-appellant in this action, was a successor corporation to National Fast Food Corporation, who entered into the guaranty agreement which is the subject of this action, on May 27, 1970, the day following the execution of a lease agreement between Lessor Elizabeth Brown and Lessee Arthur Treachers.

On October 30, 1970, over five months after the execution of the lease agreement and the guaranty, Lessor and Lessee entered into an agreement to secure a loan of $55,000 and Lessee executed a note in the amount of $55,000 with an interest rate of 101/2% Per annum; Lessee and Lessor then executed a mortgage of the property to the Portland Federal Savings and Loan Association to secure payment of the note.

Five individuals completely unconnected with the guarantor on the lease (Orange), executed guaranties of the payment of the note contemporaneously with the note and mortgage. The mortgage does not contain any reference to Orange, the guarantor on the lease, or to its guaranty, nor is there any evidence that Portland Federal was aware of the guaranty on the lease since it was not recorded.

Orange was unaware of the negotiation of the note and mortgage until March, 1975, some four and one-half years after its execution, when it was advised that Lessee was in breach of the mortgage note by Lessor.

Lessee defaulted on the mortgage and the mortgage was foreclosed. Because neither Lessor nor Lessee answered, a default judgment was entered against Lessor and Lessee, as mortgagors, and against the five individuals as co-guarantors on the mortgage. The real estate was ordered sold.

The real estate was sold at sheriff's sale for the sum of $54,525. Lessor, through her attorney, bid $54,259.75 in an unsuccessful attempt to preserve her interest in the fee. Lessor then brought suit against Orange for damages resulting from Lessor's loss of the real estate.

On June 21, 1977, the trial court entered judgment that Lessor was damaged by the loss of the fee interest and ordered Orange to pay Lessor damages in the amount of $54,298.51 and attorneys' fees of $17,000. Both parties filed separate motions to correct errors which were overruled by the trial court who also granted remitter to Orange in the amount of $225.49. The parties each filed a second Motion to Correct Errors, both of which were overruled by the trial court on December 1, 1977, and this appeal follows.

Orange raises the following issues for our review:

(1) Whether the Lessee was obligated under the terms of the lease to make payments on the mortgage and note executed subsequent to the lease.

(2) Whether Orange guaranteed any payments other than those provided by the lease.

(3) Whether the parties to the lease and guaranty of the lease intended that such guaranty would include payment of the mortgage and note entered into by Lessee subsequent to the lease.

(4) Whether Orange is liable for Lessee's default in the repayment of the mortgage and note.

(5) Whether Lessor failed to mitigate her damages which failure increased her injury or loss.

(6) Whether the attorneys' fees were excessive and unreasonable.

The issues presented by Lessor in her cross-errors assigned on appeal include:

(7) Whether the trial court's judgment was inadequate.

(8) Whether the trial court's judgment for attorneys' fees was inadequate.

The appellant herein has set out several issues in its brief which differ from those enunciated in its Motion to Correct Errors, has argued several without benefit of citation and has addressed others by means of citation Sans argument. It is only because the first four issues raised by the appellant may be consolidated into a single argument, that this court has decided to reach the merits of this appeal rather than affirm the trial court's judgment for failure to comply with the Ind.Rules of Procedure, Appellate Rule 8.3(A)(7).

The first four issues of Orange's Motion to Correct Errors and its brief on appeal challenge the trial court's finding that Orange guaranteed payments other than those provided by the lease, and was therefore obligated to make payments on the mortgage and note which were executed subsequent to the lease and guaranty agreements. Orange argues that the trial court's finding was contrary to law and the evidence.

When a judgment is attacked as being contrary to law, this court on appeal may neither weigh the evidence nor consider credibility of witnesses. We may consider only the evidence most favorable to the judgment and all reasonable inferences to be drawn therefrom. It is only where the evidence and inferences so considered lead to but one conclusion and the trial court has reached a contrary conclusion that the judgment will be disturbed as contrary to law. Reynolds v. Meehan, (1978) Ind.App., 375 N.E.2d 1119; Bureau of Motor Vehicles v. Penecostal House of Prayer, Inc., (1978) Ind., 380 N.E.2d 1225.

In considering the alleged errors, we must keep in mind that a guaranty is an independent contract. In such contract, the guarantor undertakes in writing, upon a sufficient consideration, to be answerable for the debt, or for the performance of some duty, in case of the failure of some other person who is primarily liable to pay or perform, Indianapolis Morris Plan Corp. v. Sparks, (1961) 132 Ind.App. 145, 172 N.E.2d 899. As in the case of any other contract, guaranties should neither be so narrowly or technically interpreted as to frustrate the obvious design of the parties, nor be so loosely interpreted as to relieve the guarantor, as obligor, from a liability fairly within the scope or spirit of its terms. Pierce v. Yochum, (1975) 164 Ind.App. 443, 330 N.E.2d 102; House v. Lesow, (1975) Ind.App., 339 N.E.2d 86.

The contract of a surety or guarantor is to be construed according to the intention of the parties which is to be ascertained from the instrument itself read in the light of surrounding circumstances. Our courts have held that instruments of this sort should receive a liberal interpretation, which means that words should not be forced out of their natural meaning, but that they should receive a fair and reasonable interpretation so as to attain the objects for which the instrument is designed and the purposes to which it is applied. Merchants National Bank & Trust Co. v. Winston, (1959) 129 Ind.App. 588, 159 N.E.2d 296; ...