Rainier Nat. Bank, Bellevue Midlakes Branch v. Clausing
| Decision Date | 18 April 1983 |
| Docket Number | No. 10006-8-I,10006-8-I |
| Parties | RAINIER NATIONAL BANK, BELLEVUE MIDLAKES BRANCH, a Washington corporation, federally chartered, Respondent, v. Herbert P. CLAUSING, M.D., and Jane Doe Clausing, his wife, and the marital community comprised thereof, if married, Appellants. |
| Court | Washington Court of Appeals |
Murphy & McGowan, Thomas H. Murphy, James P. McGowan, Seattle, for appellants.
Stroh & Funk, Inc. P.S., James J. LaMont, Bellevue, for respondent.
Herbert P. Clausing appeals from a judgment entered against him as a co-borrower and as guarantor on past due loans from Rainier Bank (Bank). 1 He assigns error to: (1) the trial court's imposition of liability upon his marital community; (2) the trial court's failure to void his contractual obligation because of the Bank's alleged misrepresentations; and (3) the trial court's award of interest. We find no error and affirm.
BW Industries (BW) was a corporation engaged in the manufacture of cement pumping equipment. Peter Wilton was its sole stockholder. On June 21, 1978 Wilton borrowed $20,000 from the Bank, signing a promissory note providing for full payment within 60 days. By August 22, 1978 Wilton had not repaid the loan, and BW was in desperate need of funds to continue operating. Wilton sought assistance from Clausing, 2 since 1976 a major investor in BW.
On September 29, 1978 Clausing accompanied Wilton to the Bank to seek additional funds. They requested a The guaranty agreement originally provided for unlimited liability, but was changed to limit Clausing's liability to a principal amount of $20,000. The agreement provides in pertinent part:
renewal of the $20,000 loan already made to Wilton and by then past due plus a new loan of $15,000. The Bank granted the new $15,000 loan, Clausing and Wilton signing a promissory note for $15,000 as co-makers. The Bank also agreed to renew the $20,000 past due loan upon Wilton's execution of a new promissory note and Clausing's guaranty of the note. Wilton executed a new promissory note for $20,000 bearing interest at 12 percent, thus renewing his prior obligation. Clausing then executed a guaranty agreement securing payment of Wilton's $20,000 note.
1. To induce the Bank to grant or extend and/or continue to grant or extend to or for the benefit of the Customer such loan(s), ... the Guarantors, and each of them (if more than one), and their respective marital communities, hereby jointly and severally guarantee to the Bank ... payment ... from the Customer to the Bank, ... including in such indebtednesses and/or liabilities (and in addition to whatever limiting amount may be set forth herein), all interest, charges and expenses accrued with respect thereto, ... up to a limiting principal amount of ____________ dollars [$20,000 written in], ...
Within 2 months of the execution of these loan documents Wilton filed a petition for bankruptcy and his liability as maker of the $20,000 note and as co-maker of the $15,000 note was discharged. The Bank sought payment of the two notes from Clausing and upon his refusal brought this action.
Clausing's primary contention is that the original $20,000 loan to Wilton was for Wilton's personal use, of no possible benefit to Clausing or his marital community, and therefore a gratuitous lending of credit unenforceable against his community assets. The trial court entered no finding concerning the purpose for or use Wilton made of the original The defendants' involvement with BW Industries and Mr. Wilton was based on the expectation that the defendants and the marital community comprised thereof would benefit financially. All the acts performed on September 29, 1978, as set forth above by the defendant Herbert P. Calusing, [sic] were done with the expectation that he, his wife, and their marital community would benefit financially.
$20,000 loan later guaranteed by Clausing. It did, however, enter the following regarding community liability:
Finding of Fact 6.
All the acts in the above-referenced matter performed by the defendant Herbert P. Clausing were performed for the benefit of Herbert P. Clausing, Margerie Illa Clausing, his wife, and the marital community comprised thereof, and therefore, they are all liable pursuant to the terms of the two promissory notes and guaranty.
Conclusion of Law 10.
An appellate court will not substitute its judgment for that of the trial court where the trial court's findings are based on conflicting testimony. Beeson v. Atlantic-Richfield Co., 88 Wash.2d 499, 563 P.2d 822 (1977). Appellate review is limited to determining whether substantial evidence supports the findings, and if so, whether the findings support the trial court's conclusions of law and judgment. Ridgeview Properties v. Starbuck, 96 Wash.2d 716, 638 P.2d 1231 (1982).
The court's finding of expected financial benefit is supported by substantial evidence. Clausing testified that he and his wife expected to benefit financially from his involvement with BW, and that the income derived therefrom was directed toward community purposes. He also testified to the value of BW's manufacturing rights, and that he fully expected to recover on the BW debts he had guaranteed. Although Clausing stated that he could not possibly have received any material benefit from lending money to Wilton for personal expenses, the trial court could have inferred from the evidence that Clausing guaranteed repayment of the prior loan in order to secure the new $15,000 loan for BW's operating costs. As a means to The trial court's finding of expected benefit also supports its conclusion of community liability. Ridgeview. A suretyship obligation of one spouse creates a presumption of community liability. Warren v. Washington Trust Bank, 19 Wash.App. 348, 575 P.2d 1077 (1978). The party seeking to avoid the obligation has the burden of rebutting this presumption by clear and convincing evidence. Warren. The presumption may be rebutted by a showing that the spouse who incurred the debt or obligation did so without "the intention or expectation, at the inception of the transaction, ... that a material economic benefit would accrue to the community." Warren, at 360.
this end, the guaranty was made with the requisite expectation of financial benefit. That the $20,000 may not have been spent exclusively on BW was immaterial.
Clausing argues that the presumption of community liability was rebutted, relying on Bank of Washington v. Hilltop Shakemill, 26 Wash.App. 943, 614 P.2d 1319 (1980). In Hilltop the husband had acted as surety on bank loans made to his son's corporation. Bank officers and the husband testified that the husband anticipated no financial gain as a result of the guaranty, having been motivated solely by filial devotion. Hilltop, at 948, 614 P.2d 1319. We held that substantial evidence supported the trial court's finding that the presumption of community liability had been rebutted, and affirmed. Here, in contrast, Clausing was motivated purely by business interests, cf. Sun Life Assurance Co. v. Outler, 172 Wash. 540, 20 P.2d 1110 (1933), the record revealing a continuous financial involvement in BW. Clausing bound his marital community by signing the guaranty agreement.
Clausing next contends that his guaranty of the $20,000 renewal loan was unenforceable because it was induced by Bank officers' misrepresentations that proceeds from the original loan to Wilton had been used exclusively for BW. The victim of a fraud or...
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