St. Regis Paper Co. v. Wicklund

• Decision Date: 29 May 1979
• Docket Number: No. 6260-I,6260-I
• Parties: , 27 UCC Rep.Serv. 470 ST. REGIS PAPER COMPANY, a New York Corporation, Appellant, v. Vernon WICKLUND and Jane Doe Wicklund, husband and wife, and Wicklund Builders, Inc., a Washington Corporation, Respondents.
• Court: Washington Court of Appeals

Page 552

24 Wn.App. 552

597 P.2d 926, 27 UCC Rep.Serv. 470

ST. REGIS PAPER COMPANY, a New York Corporation, Appellant, v. Vernon WICKLUND and Jane Doe Wicklund, husband and wife, and Wicklund Builders, Inc., a Washington Corporation,

Respondents.

No. 6260-I.

Court of Appeals of Washington, Division 1.

May 29, 1979.

Eisenhower, Carlson, Newlands, Reha, Henriot & Quinn, Richard A. Jessup, Tacoma, for appellant.

Newton, Newton & Kight, R. Michael Kight, Everett, for respondents.

DORE, Judge.

Plaintiff St. Regis Paper Company brought this action on a promissory note in the amount of $21,000 against defendant Vernon Wicklund, an individual. Defendant moved for reformation of the note alleging that the obligation was that of Wicklund Builders, Inc. and not his individual responsibility. The trial court granted judgment against Wicklund Builders, Inc. but exonerated Wicklund individually. Plaintiff appeals. We reverse.

ISSUE

Did the trial court err in admitting, over objection, parol evidence to show the purported intention of Wicklund that he signed as a corporate officer for and on behalf of Wicklund Builders, Inc. and not individually?

STATEMENT OF FACTS

Plaintiff St. Regis Paper Company, a retail and wholesale lumber company, had done business with defendant Vernon Wicklund, d/b/a Wicklund Builders, Inc., home builders, for a number of years on an open account basis. In late 1972 or early 1973, plaintiff's credit manager, Munger, contacted defendant and discussed the possibility of replacing the past-due amounts carried on an open account with a promissory note. Wicklund agreed to sign the promissory note. After some preliminary discussions by telephone, Munger and Wicklund met for the purpose of executing a promissory note for the past-due account. Munger brought with him a standard form promissory note and filled in the blank spaces with the amount, payee and other terms of payment. During the process of completing the blanks of the note, Munger wrote the words "Personal Guaranty" in a blank space in a paragraph referring to security for the note, later crossed the words out, and wrote his initials over the space and inserted the words "NONE." A photostat of the note, as ultimately completed and signed At trial the defendant testified, over objection, that he discussed the note with Munger as a corporate obligation only.

by Wicklund without designation that he was signing in a representative or corporate capacity, is set forth on following page.

Munger's testimony by deposition controverted Wicklund's statement that the words "Personal guaranty" had been mistakenly written into the form. The defendant, on the other hand, testified that when he saw the words "Personal Guaranty," he objected and stated that he understood the note to be a corporate rather than a personal obligation, and because of his objection Munger struck out the words "Personal Guaranty."

The trial court, in holding that the note represented a corporate obligation and that defendant was not personally liable, held that the crossed-out words "Personal Guaranty" created an ambiguity and therefore parol evidence was admissible to explain the intent of the parties. The court reasoned that there was substantial dispute between

the parties in the testimony concerning the intentions of the parties. The court found that plaintiff's witness Munger's explanation as to the use of the term "Personal Guaranty" was not as believable as that of the defendant, and entered findings and judgment that the note was a corporate obligation and that Wicklunds were not personally liable.

DECISION

ISSUE 1: Trial Court Erred in Admitting Parol Evidence as to Intentions of Parties

There was no ambiguity in the promissory note signed by Wicklund and parol evidence, as to the intention of the parties, should have been excluded.

The promissory note executed by the parties is controlled by the Uniform Commercial Code as enacted by the State of Washington. The code specifically provides that a party cannot avoid the obligations in a note by submitting parol evidence to the effect that he did not intend to sign the note as the signature appears.

The Uniform Commercial Code, RCW § 62A.3-403, and the cases which interpret that section, and the similar rule which applied prior to the adoption of the Uniform Commercial Code, prohibit the admission of parol evidence to vary the capacity in which an individual signed an instrument, unless some Ambiguity exists with respect to the capacity in which a person signed the note, and this Ambiguity is apparent on the face of the instrument.

RCW 62.A.3-403, Signature by authorized representative, provides:

(1) A signature may be made by an agent or other representative, and his authority to make it may be established as in other cases of representation. No particular form of appointment is necessary to establish such authority.

(2) An authorized representative who signs his own name to an instrument

(a) Is personally obligated if the instrument neither names the person represented nor shows that the representative signed in a representative capacity (b) except as otherwise established between the immediate parties, is personally obligated if the instrument names the person represented but does not show that the representative signed in a representative capacity, or if the instrument does not name the person represented but does show that the representative signed in a representative capacity.

(3) Except as otherwise established the name of an organization preceded or followed by the name and office of an authorized individual is a signature made in a representative capacity.

(Emphasis added.) The official comments to the code, when discussing subsection 2, is set forth in the footnote. ¹

The provisions of RCW 62A.3-403(2)(a) and the official comments to that subsection control and direct that defendant Vernon Wicklund signed the subject promissory note in his personal capacity. The note names no other person or entity which he was representing in signing the note, nor is there any indication that he was signing in a representative capacity, and the note contains no ambiguity with relation to his signature or the capacity in which he signed which, under that section, allows the admission of parol evidence. Under RCW § 62A.3-403, only an Ambiguity in connection With the form and style of the signature itself, and not some Other part of the note, will allow parol evidence of the capacity in which a signature was affixed. Official comment 2, quoted in footnote 1, states that a signature containing no reference to a principal but which is of an individual only, leaves no latitude for finding any ambiguity but binds the signer personally and bars the admission of any parol evidence. This case falls directly within RCW 62A.3-403(2)(a).

In Leonard v. Washinton Employers, Inc., 77 Wash.2d 271, 461 P.2d 538 (1969), the court refused to reform a formal pension plan document to read "years of service" rather than "years of credited service." The worker had claimed that the variation was due to a mistake. The president of the company had testified that the phrase at all stages of development of the plan contemplated the years of creditable service would be the yardstick by which vested rights would be measured. Appellant employee contended that such testimony violated the parol evidence rule and was irrelevant because it is evidence of subjective intent rather than a manifestation of objective intent.

The court brushed aside the objection that such testimony by the company president was a violation of the parol evidence rule and analyzed how the parol evidence rule operates where there is a request for reformation. On page 278, on page 543 of 461 P.2d of the quoted case it is stated:

In the first place, the parol evidence rule is not applicable in actions for reformation. Akers v. Sinclair, 37 Wash.2d 693, 226 P.2d 225 (1950); Nadreau v. Meyerotto, 35 Wash.2d 740, 215 P.2d 681 (1950). The reason is clear. The remedy of reformation is granted when necessary to conform a writing to correctly reflect the agreement actually reached by the parties. Thorsteinson v. Waters 65 Wash.2d 739, 399 P.2d 510 (1965); Tenco, Inc. v. Manning, 59 Wash.2d 479, 368 P.2d 372 (1962); McKelvie v. Hackney, 58 Wash.2d 23, 360 P.2d 746 (1961). In order to determine whether there was a mutual understanding which preceded the writing, and if so, what the mutual understanding was, parol must be admitted before a court can pass upon the question of whether the writing should be reformed.

Leonard v. Washington Employers, Inc., Supra at 278, 461 P.2d at 543.

The rule applicable where reformation for mutual mistake is sought has been stated in Restatement of Contracts, as follows:

"Where both parties have an identical intention as to the terms to be embodied in a proposed written conveyance, assignment, contract or discharge, and a writing executed by them is materially at variance with that intention, either party can get a decree that the writing shall be reformed so that it shall express the intention of the parties, if innocent third persons will not be unfairly affected thereby." 2 Restatement of Contracts, 968, § 504.

This rule has long been followed in this state. See Moeller v. Schultz, 11 Wash.2d 416, 119 P.2d 660, and cases there cited; Nadreau v. Meyerotto, 35 Wash.2d 740, 215 P.2d 681. It extends to cases involving the reformation of negotiable instruments. Union Machinery & Supply Co. v. Taylor-Morrison Logging Co., 143 Wash. 154, 254 P. 1094; 3 Pomeroy's Equity Jurisprudence (5th ed.), 395, § 871a; 45 Am.Jur. 596, Reformation of Instruments, § 25.

Akers v. Sinclair, 37 Wash.2d 693, at 702, 226 P.2d 225, at 230 (1950).

This action in equity comes before this court for trial de novo. It is therefore our duty to examine the entire evidence and the surrounding circumstances as disclosed by the statement of facts and from such...