Ryco Packaging Corp. of Kansas v. Chapelle Intern., Ltd.
| Decision Date | 15 November 1996 |
| Docket Number | Nos. 73787,73921,s. 73787 |
| Parties | RYCO PACKAGING CORP. OF KANSAS, Appellee/Cross-Appellant, v. CHAPELLE INTERNATIONAL, LTD., et al., Appellants/Cross-Appellees. |
| Court | Kansas Court of Appeals |
Syllabus by the Court
1. The standard of review of an order granting summary judgment is stated and applied.
2. The cardinal rule of contract interpretation is that the court must ascertain the parties' intention and give effect to that intention when legal principles so allow.
3. Documents which are executed at different times but in the course of the same transaction concerning the same subject matter will be construed together to determine the intent of the parties to the contract.
4. When a guaranty agreement is executed at about the same time as the underlying transaction between a creditor and debtor, the guaranty is read and construed in conjunction with the underlying documents.
5. Although a guaranty promise may have been made at a time subsequent to the creation of the principal obligation, the guaranty is founded upon a consideration if the guaranty was given as a result of previous arrangement, the principal obligation having been induced by or created on the faith of the guaranty.
6. The extension of time of payment of an obligation constitutes in legal effect a forbearance to sue and may serve as consideration for a guaranty of the obligation.
7. A forbearance to sue is not a sufficient consideration if there is no possibility of enforcement and collection, making both the claim and the forbearance valueless.
8. Where, as here, the facts indicate a debtor corporation was currently without assets at the time a guaranty of the debt was given, that fact does not invalidate as consideration the forbearance to sue where the corporation is still active and presumably has the potential to earn assets to eventually pay the debt.
9. Generally, a statute will operate prospectively unless its language clearly indicates the legislature intended that it operate retrospectively. This rule is modified where the statutory change is merely procedural or remedial in nature and does not prejudicially affect the substantive rights of the parties.
10. Procedural statutes generally relate to the manner and order of conducting lawsuits, i.e., the mode of proceeding to enforce legal rights, while substantive laws establish the rights and duties of the parties.
11. K.S.A. 58-2312 affects the contractual rights and duties of the parties and is more substantive than procedural and, thus, operates prospectively.
William R. Stalter and Michael J. Gallagher, of Wassberg, Gallagher & Stalter, P.C., Kansas City, MO, for appellants/cross-appellees.
Martha A. Halvordson, Troy A. Stremming, and Leonard Rose, of Rose, Brouillette & Shapiro, P.C., Kansas City, MO, for appellee/cross-appellant.
Before PIERRON, P.J., and PADDOCK, S.J., and NELSON E. TOBUREN, District Judge, Assigned.
The individual defendants (guarantors) appeal from the district court's entry of summary judgment for the plaintiff Ryco Packaging Corporation of Kansas (Ryco).
Ryco cross-appeals from the district court's denial of its claim against the guarantors for its attorney fees.
We affirm the district court on the appeal and the cross-appeal.
Ryco and the defendant Chapelle International, Ltd. (Chapelle) are Kansas corporations.
Scott H. Kreamer, David Newcomer IV, F. Peter Newcomer, Frank Newcomer III, and Dwight D. Sutherland, Jr., are the officers and majority stockholders of Chapelle. Scott Kreamer and Dwight Sutherland are licensed to practice law in Kansas and have each practiced law for more than 10 years.
In December 1992, Ryco sold to Chapelle over 90,000 cases of 23-ounce bottles and over 900 pallets for $346,737.72, with payment due in April 1994. The goods were to be used in Chapelle's bottled water business.
As of April 21, 1993, Chapelle owed Ryco $738,417.06, which included the December 1992 purchase, an amount due on an open account, and $352,415.04 for bottles ordered from Ryco in 1991. Ryco had remained in possession of some of the bottles ordered in 1991.
Ryco became concerned about collecting the debt from Chapelle and Chapelle wanted the bottles still in Ryco's possession. On April 21, 1993, they entered into a credit agreement which required Ryco to deliver the bottles ordered in 1991 upon receipt from Chapelle of executed documents consisting of a promissory note for the balance due, a cash payment of $75,000 on the note, and a personal guaranty from the guarantors to pay to Ryco its balance of the note which was due on May 21, 1994. The promissory note stated it was guaranteed by the guarantors pursuant to a guarantee "dated contemporaneously herewith."
The credit agreement and promissory note were executed on or about April 21, 1993. The guaranty agreement was executed by the guarantors on or about April 29, 1993.
The relevant portions of the guaranty provide as follows:
(a) the Promissory Note of Debtor....;
(b) all sums owing and to be owing upon any and all renewals, extensions, and consolidations of such Note, and all instruments had and to be had in connection therewith; and
(c) all attorneys' fees, court costs and other costs and expenses incurred by Creditor in connection with the collection of such Note and/or any of the aforementioned amounts for the payment of which Debtor is or may become liable, subject to the limitations specified in the Note ..., or any renewal, extension, modification or consolidation thereof....
....
....
"(c) any renewal, extension, modification or consolidation of the payment of any part or all of the Note or the performance of any covenant contained in any instrument had or to be had in connection with or as security for the Note, either with or without notice to or consent of Guarantors, or any adjustment, indulgence, forbearance or compromise that may be granted or given by Creditor to any party;
....
In November 1993, Ryco and Chapelle executed an addendum to the credit agreement and promissory note. The addendum to the credit agreement indicated that a dispute had arisen between Ryco and Chapelle concerning Chapelle's various claims for storage fees and other credits. The addendum also notes that Chapelle was requesting an extension in the payments as set forth in the original credit agreement and promissory note. The addendum was entered into to resolve the dispute and extend the payment schedule. The addenda to both documents set forth a revised, graduated payment schedule of the remaining $372,159.69 Chapelle owed Ryco. Dwight Sutherland, Jr., signed both addenda on behalf of Chapelle.
In May 1994, Ryco filed this case against Chapelle and the guarantors. Ryco alleged that Chapelle had failed to make the monthly payments due under the promissory note after it was amended in November 1993. Ryco asserted that a principal balance of over $250,000 remained on the promissory note. Ryco sought judgment against Chapelle on the note and judgment against the guarantors under the terms of the guaranty agreement.
The guarantors filed an answer to Ryco's petition and asserted a counterclaim seeking a declaratory judgment that the guaranty was void and unenforceable for lack of consideration.
On August 22, 1994, Ryco filed its motion for summary judgment on its claims against Chapelle and the guarantors. The guarantors responded to Ryco's motion. The district court granted Ryco's motion for summary judgment against Chapelle after Chapelle failed to respond to the motion.
At the hearing on Ryco's motion, the parties conceded that the guaranty was unambiguous. The district court found that the guarantee was unambiguous and granted summary judgment in favor of Ryco against all the guarantors. The court found that consideration existed to support the guaranty agreement based upon (1) the consideration recited in the agreement itself; (2) that the guaranty agreement was a collateral document to Chapelle's credit agreement and promissory note, which were supported by consideration; and (3) Chapelle's promise to pay its outstanding trade debt over a period of time was sufficient legal consideration to support all the agreements. The court entered judgment in favor of Ryco in the amount of $302,247.73, plus costs.
The guarantors filed a timely notice of appeal. Chapelle did not appeal.
A separate hearing was held on Ryco's request for attorney fees in the amount of...
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