James E. Williams v. David L. Stussy ( 2016 )

This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2014).
STATE OF MINNESOTA
IN COURT OF APPEALS
A15-1621
James E. Williams,
Respondent,
vs.
David L. Stussy,
Appellant.
Filed May 23, 2016
Affirmed
Bjorkman, Judge
Hennepin County District Court
File No. 27-CV-14-20400
Jeremy P. Knutson, Grannis & Hauge, P.A., Eagan, Minnesota (for respondent)
Thomas F. DeVincke, Malkerson Gunn Martin LLP, Minneapolis, Minnesota (for
appellant)
Considered and decided by Peterson, Presiding Judge; Bjorkman, Judge; and
Rodenberg, Judge.
UNPUBLISHED OPINION
BJORKMAN, Judge
Appellant challenges summary judgment in this contract action, arguing that his
personal guarantees are invalid because they lacked consideration and that the district
court erred in awarding respondent interest. We affirm.
FACTS
On September 27, 2012, respondent James E. Williams agreed to loan Activation
Life, Inc. up to $60,000 in exchange for Activation’s promise to repay the principal
amount with interest. The loan agreement (agreement) was accompanied by a note that
required Activation to pay interest on all loan proceeds. The agreement required that “a
designated Activation Life founder, shall absolutely and unconditionally guarantee to
Williams the full and prompt payment of the Note according to its terms and conditions.”
Appellant David L. Stussy is one of Activation’s founders. Stussy signed two documents
titled “Unlimited Continuing Guaranty.” In each document, he guaranteed to Williams
“the full and prompt payment of the [i]ndebtedness according to the terms and conditions
of said [p]romissory [n]ote.”
After receiving Stussy’s signed guarantees, Williams disbursed $60,000 to
Activation. In September 2014, Williams twice demanded repayment of the loan
proceeds. Neither Activation nor Stussy has made payments to Williams.
Williams commenced this action seeking to recover the unpaid principal and
interest from Stussy pursuant to the guarantees. Shortly thereafter, Williams moved for
summary judgment. The district court granted the motion, holding that the guarantees
were supported by sufficient consideration. Stussy appeals.
DECISION
On appeal from summary judgment, we review de novo whether there are any
genuine issues of material fact and whether the district court erred in applying the law.
Ruiz v. 1st Fid. Loan Servicing, LLC, 829 N.W.2d 53, 56 (Minn. 2013). We view the
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evidence in “the light most favorable to the party against whom summary judgment was
granted.” STAR Ctrs., Inc. v. Faegre & Benson, L.L.P., 644 N.W.2d 72, 76–77 (Minn.
2002). A genuine issue of material fact exists when there is sufficient evidence that could
lead a rational trier of fact to find for the nonmoving party. DLH, Inc. v. Russ, 566
N.W.2d 60, 69 (Minn. 1997).
I. Stussy’s personal guarantees were supported by valid consideration.
“A guaranty agreement, like any other contract, must be supported by a valid
consideration.” O’Neil v. Dux, 257 Minn. 383, 391, 101 N.W.2d 588, 594 (1960).
Consideration is “[s]omething . . . bargained for and received by a promisor from a
promissee.” Black’s Law Dictionary 370 (10th ed. 2014).
Stussy does not dispute that Activation has failed to make its loan payments or that
the guarantees, by their terms, obligate him to repay the loan proceeds. But he asserts
that the loan to Activation constitutes a preexisting debt that is not sufficient
consideration for his guarantees.1 See Baker v. Citizens State Bank of St. Louis Park, 349
N.W.2d 552, 557 (Minn. 1984) (holding that preexisting debts are not sufficient
consideration for guarantees made subsequent to the principle agreement). We are not
persuaded. In First Nat’l Bank of Hopkins v. Int’l Machs. Corp., our supreme court
created an exception to the general rule regarding preexisting debts:
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Stussy asserts that genuine fact issues exist as to whether he signed one or two
guarantees. But he did not provide competent evidence to challenge Williams’s verified
complaint that attached copies of the two guarantees and other loan documents.
Accordingly, Stussy’s argument fails. See Limberg v. Mitchell, 834 N.W.2d 211, 219
(Minn. App. 2013) (“[A] party opposing summary judgment must do more than show
that there is a metaphysical doubt as to material facts.” (quotation omitted)).
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[I]f it was the understanding at the time the creditor parted
with its money that an additional guaranty would be obtained,
and if it was furnished pursuant to the original agreement,
such guaranty or undertaking relates back to the inception of
the original contract and no new consideration is necessary.
279 Minn. 188, 192, 156 N.W.2d 86, 88 (1968) (citing Bowen v. Thwing, 56 Minn. 177,
179, 57 N.W. 468, 468 (1894)). This is precisely the situation in this case. Williams
agreed to loan $60,000 to Activation on the condition that a founder of the company
would personally guarantee the loan. Although Stussy signed the two guarantees several
months later, he did so to fulfill the agreement. Accordingly, his guarantees are deemed
contemporaneous in effect and require no further consideration. See First Nat’l Bank of
Hopkins, 279 Minn. at 192, 156 N.W.2d at 88.
II. Williams is entitled to recover interest under the note and guarantees.
Stussy argues that the district court erred in awarding Williams interest, asserting
that the guarantees only provide for the repayment of the principal. “[A] guaranty is
construed the same as any other contract, the intent of the parties being derived from the
commonly accepted meaning of the words and clauses used, taken as a whole.” Am.
Tobacco Co. v. Chalfen, 260 Minn. 79, 81, 108 N.W.2d 702, 704 (1961). Contract
interpretation presents a question of law, which we review de novo. Dorsey & Whitney
LLP v. Grossman, 749 N.W.2d 409, 417-418 (Minn. App. 2008). The guarantees, as well
as the agreement and note, are not ambiguous. Stussy expressly guaranteed “the full and
prompt payment of the [i]ndebtedness according to the terms and conditions of [the
note].” The note requires Activation to pay Williams “the aggregate unpaid principal
amount of all [a]dvances made by [Williams] to [Activation] under the Loan Agreement
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together with interest on the principal amount hereunder remaining unpaid.” The
language of the guarantees leaves no ambiguity as to Stussy’s intent to assume
Activation’s obligations under the terms of loan agreement and the note, which include
terms for the payment of interest.
Stussy next argues that the district court erred by not applying the statutory rate of
interest under Minn. Stat. § 334.01, subd. 1 (2014). We disagree. The note provides that
interest accrues at “the prime interest rate published by Wells Fargo . . . plus two
percent.” At the time of the summary-judgment hearing, the district court found the
Wells Fargo prime interest rate to be 3.25% and ultimately awarded interest at a rate of
5.25%. Because the parties unambiguously established an interest rate in the note, the
statute does not apply. See Bartley v. BTL Enters., Inc., 490 N.W.2d 664, 666 (Minn.
App. 1992) (holding that when parties expressly establish an interest rate in the note,
Minn. Stat. § 334.01, subd. 1 does not control).
Finally, Stussy argues that the district court erred by awarding interest from the
date Williams disbursed the loan proceeds. He contends that interest should be calculated
from the day payment came due. We are not persuaded. Stussy offers no legal support
for this assertion, and the note clearly states that interest will be calculated based on “the
actual number of days elapsed . . . from the date hereof until this [n]ote is fully paid.”
The district court properly calculated and awarded interest to Williams pursuant to the
terms of the note and personal guarantees.
Affirmed.
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