Tore, Ltd. v. Church, 18775

• Decision Date: 25 April 1989
• Docket Number: No. 18775,18775
• Citation: 105 Nev. 183,772 P.2d 1281
• Parties: TORE, LTD., Appellant, v. Herbert R. CHURCH, Jr., Respondent.
• Court: Nevada Supreme Court

Page 1281

772 P.2d 1281

105 Nev. 183

TORE, LTD., Appellant, v. Herbert R. CHURCH, Jr., Respondent.

No. 18775.

Supreme Court of Nevada.

April 25, 1989.

[105 Nev. 184] Swafford, Hoffman, Test and Dickey, Reno, for appellant.

Robison, Belaustegui & Robb, Reno, for respondent.

OPINION

PER CURIAM:

This is an appeal from summary judgment granted pursuant to NRCP 56(c). Appellant Tore, Ltd. (Tore) alleged below that respondent Herbert R. Church, Jr. orally promised to answer for the obligations of a newly-formed corporation Church had been instrumental in organizing. The new corporation, Hobby Towne, Inc., entered into a lease agreement with Tore which the corporation subsequently breached. Church moved for summary judgment, arguing that even assuming he made an oral promise, under the Nevada Statute of Frauds, NRS 111.220(2), ¹ enforceable promises to answer for the debt, performance or obligations of another must be in writing. After reviewing the pleadings and evidence, the district court granted Church's motion. On appeal, Tore's primary contention is that genuine issues of material fact remain unresolved. For reasons discussed below, we reverse.

On April 14, 1975, Church entered into an agreement with Tore to lease certain commercial property. The lease was to run for ten years with an option to extend it for another five years. After executing the lease agreement, Church entered the premises and began operating a business under the name "Hobby Towne."

Almost ten years later, Church incorporated Hobby Towne. Church became a Hobby Towne shareholder and corporate vice-president and Brett L. Jensen, not a party to this appeal, became corporate president. Subsequent to Hobby Towne's incorporation, Church sought to exercise the lease option and extend the lease term. Alice Jacobsen, Tore vice-president and general manager, swore that Church communicated his intention to extend the lease but requested that Hobby Towne, Inc. be substituted as lessee. She further averred that Tore agreed to this on condition that Church and Jensen be individually responsible for the corporation's lease obligations. Jacobsen maintained that Church and Jensen agreed and that Church's attorney revised the lease document to reflect the changes. The lease extension agreement was executed by Jensen as president and Church as vice-president on April 17, 1985. Additionally, the signatures of Church and Jensen appear individually on the lease extension agreement signature page with no accompanying explanation.

On April 29, 1985, Church sold his Hobby Towne stock to Jensen. Subsequently, Hobby Towne defaulted on the lease extension agreement. As a result, Tore brought an action against Hobby Towne, Inc., Jensen and Church. Church responded and denied promising to answer for Hobby Towne's performance under the lease. Additionally, Church moved for summary judgment, contending that even assuming an oral guaranty, under the statute of frauds, the promise had to be in writing and a sufficient writing did not exist. The district court agreed with Church and granted his motion. This appeal followed.

As a preliminary matter, it is important to note that we review orders granting summary judgment de novo. In other words, the question on appeal is whether any genuine issues of fact were created by the pleadings and proof offered below. McPherron v. McAuliffe, 97 Nev. 78, 79, 624 P.2d 21, 21 (1981). Furthermore, evidence is reviewed in a light most favorable to the party against whom summary judgment was entered. Tschabold v. Orlando, 103 Nev. 224, 225, 737 P.2d 506, 507 (1987).

Turning to the merits and reviewing the evidence in a light most favorable to Tore, we conclude that genuine issues of fact remain unresolved. First, the question of whether Church promised to guaranty Hobby Towne's lease extension agreement obligations remains unanswered. In making this determination, parol evidence is admissible. Specifically, "the existence of a separate oral agreement as to any matter on which a written contract is silent, and which is not inconsistent with its terms, may be proven by parol." Crow-Spieker # 23 v. Robinson, 97 Nev. 302, 305, 629 P.2d 1198, 1199 (1981) (quoting Alexander v. Simmons, 90 Nev. 23, 24, 518 P.2d 160, 161 (1974)).

In this case, the lease extension agreement is silent as to any guaranty of Hobby Towne, Inc.'s lease obligations. Given this silence, it follows that a separate oral guaranty would not contradict the lease extension agreement terms. Cf. Golden Press, Inc. v. Pac. Freeport Warehouse, 97 Nev. 163, 625 P.2d 578 (1981) (where parties had reduced contract to writing, district court erred in admitting parol evidence to show alleged guaranty which altered the express terms of the contract).

Second, assuming the existence of a guaranty promise, the question of whether the promise necessitates a writing under NRS 111.220 remains undetermined. Specifically, the "main purpose," "original promise" or "leading object" doctrine constitutes an exception to the statute of frauds. As the United States Supreme Court explained almost a century ago, if the alleged guarantor has a personal, immediate and pecuniary interest in the underlying transaction in which a third party is the original obligor, courts should give effect to the guarantor's oral promise. Davis v. Patrick, 141 U.S. 479, 488, 12 S.Ct. 58, 59, 35 L.Ed. 826 (1891). Since Davis, the doctrine has gained widespread approval. See, e.g., Merdes v. Underwood, 742 P.2d 245, 251-252 (Alaska 1987); Frei v. Hamilton, 123 Ariz. 544, 601 P.2d 307, 310 (App.1979); Merritt v. J.A. Stafford Co., 68 Cal.2d 619, 68 Cal.Rptr. 447, 452, 440 P.2d 927, 932 (1968); James D. Swoish, Inc. v. Panda Foods, Inc., 2 Haw.App. 679, ...