Utah Valley Bank v. Tanner, 17302
| Decision Date | 17 September 1981 |
| Docket Number | No. 17302,17302 |
| Citation | 636 P.2d 1060 |
| Parties | UTAH VALLEY BANK, a Utah bank corporation, Plaintiff and Appellant, v. Paul TANNER dba Paul Tanner Homes and Dan McGraw, Defendants and Respondents. |
| Court | Utah Supreme Court |
Kenneth A. Rushton, Lehi, Craig S. Cook, Salt Lake City, for plaintiff and appellant.
Paul J. Merrill, Spanish Fork, for defendants and respondents.
Plaintiff Utah Valley Bank appeals the judgment of the district court which denied recovery of the balance due and owing on a promissory note from defendant Dan McGraw. 1 The issue presented by this appeal is whether the court erred in its determination that the promissory note was ambiguous in its terms necessitating the introduction of extrinsic evidence to resolve the ambiguity. The following is a reproduction of pertinent portions of the note executed by the parties:
NOTE: OPINION CONTAINS TABLE OR OTHER DATA THAT IS NOT VIEWABLE
The trial judge aptly observed that the initial recital in the note designates Paul Tanner Homes and Dan McGraw as the "undersigned" and as "Borrower," "jointly and severally." However, he found an inconsistency to exist between the initial recital and the signature recital, he taking the view that the latter was susceptible to an interpretation that both Paul Tanner and Dan McGraw signed only on behalf of Paul Tanner Homes, and not in their individual capacities as joint and several borrowers. He thereupon authorized the introduction of extrinsic evidence.
The evidence presented is not generally in dispute. Both Tanner and McGraw executed the note in the presence of the bank's agent, Robert Chatfield. The proceeds of the loan went solely to Paul Tanner in the form of two checks, one in the amount of $8,000 payable to Paul Tanner Homes and Dan McGraw, and the other in the amount of $2,500 payable to Paul Tanner Homes and Central Bank. Each of the checks was endorsed "Paul Tanner Homes by Paul Tanner" and Dan McGraw endorsed the check drawn jointly in his favor.
McGraw was not an employee of or otherwise affiliated with Paul Tanner Homes, but was a subcontractor working on houses under construction by Paul Tanner Homes. McGraw was purchasing from Paul Tanner Homes the equipment listed as collateral in the note, making monthly installments thereon.
The only significant dispute in the evidence pertains to what motivated McGraw to sign the note. McGraw testified that he signed because he was persuaded to do so by Tanner and because the bank required him to assent to the pledge of his interest in the equipment listed as collateral for the loan. He further testified that Chatfield assured him that only Tanner had liability for payment on the note. Conversely, Chatfield testified that although McGraw's interest in the equipment was to be used as collateral for the loan, he nevertheless was informed that he was also jointly liable with Tanner for repayment of the loan. The trial court found, inter alia, as follows:
... that McGraw did not intend to sign individually for the note, but only to give up whatever interest he had in the collateral the bank wanted in the event resort was made to satisfy the note.
and concluded that:
... the claim of the plaintiff should be dismissed as to Dan McGraw personally reserving to the bank any interest Dan McGraw has in the collateral, ....
The basic rule of contract interpretation is that the intent of the parties is to be ascertained from the content of the instrument itself, 2 the rationale for the rule being to preserve the sanctity of written instruments. Each contract provision is to be considered in relation to all of the others with a view toward giving effect to all and ignoring none. 3 It is only when an ambiguity exists which cannot be reconciled by an objective and reasonable interpretation of the contract as a whole that resort may be had to the use of extrinsic evidence. 4
Applying the foregoing legal principles to the case at hand, we deem the trial judge to have erred in permitting the introduction of extrinsic evidence.
The note itself, when viewed objectively and reasonably, reflects that McGraw signed in his individual capacity as a co-maker of the note and not in a representative...
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