Frontier Fiscal Services LLC v. Pinky's Aggregates, Inc. , 2019 ND 147 ( 2019 )


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  •                 Filed 5/28/19 by Clerk of Supreme Court
    IN THE SUPREME COURT
    STATE OF NORTH DAKOTA
    
    2019 ND 147
    Frontier Fiscal Services, LLC,                            Plaintiff and Appellee
    v.
    Pinky’s Aggregates, Inc.,
    and Dale Honsey,                                      Defendants and Appellants
    No. 20180329
    Appeal from the District Court of McKenzie County, Northwest Judicial
    District, the Honorable Daniel S. El-Dweek, Judge.
    AFFIRMED.
    Opinion of the Court by McEvers, Justice.
    Trevor A. Hunter (argued) and Lisa M. Six (on brief), Williston, ND, for
    plaintiff and appellee.
    Matthew D. Kirschenmann (argued) and Michael T. Andrews (on brief), Fargo,
    ND, for defendants and appellants.
    Frontier Fiscal Services v. Pinky’s Aggregates
    No. 20180329
    McEvers, Justice.
    [¶1]   Pinky’s Aggregates, Inc., and its president, Dale Honsey, appeal from a
    judgment awarding Frontier Fiscal Services, LLC, $526,253.12 in its action for breach
    of contract and to collect on a personal guaranty. Because Pinky’s and Honsey failed
    to raise a genuine issue of material fact to preclude summary judgment, we affirm.
    I
    [¶2]   Honsey is the president and owner of Pinky’s, which is in the business of
    providing sand, gravel, and other aggregate and excavation and hauling services. In
    2016 the Department of Transportation contracted with Baranko Brothers, Inc., which
    subcontracted with Pinky’s to supply material and labor for a construction project.
    Pinky’s entered into at least 16 hauling agreements with sub-subcontractors to
    transport gravel and aggregate for the project. Many of the sub-subcontractors
    assigned their accounts receivable under the hauling agreements to Frontier, which
    provides invoice factoring services, purchasing receivables at a discount in exchange
    for an immediate cash payment. Pinky’s received notice of the assignments and made
    payments to Frontier for the sub-subcontractors’ invoices.
    [¶3]   Pinky’s eventually fell behind on its payments to Frontier, and Frontier in turn
    ceased factoring for the sub-subcontractors. The sub-subcontractors refused to do any
    more work for Pinky’s unless Frontier resumed factoring services for them. The
    situation resulted in Honsey signing a personal guaranty with Frontier as “an
    Individual & President of Pinky’s.”
    [¶4]   After Pinky’s failed to pay Frontier in full, Frontier brought a breach of
    contract action against Pinky’s and sought to collect on the personal guaranty signed
    by Honsey. The district court granted Frontier’s motions for summary judgment
    1
    against Pinky’s and Honsey and held them jointly and severally liable for
    $526,253.12.
    II
    [¶5]   Pinky’s and Honsey argue genuine issues of material fact precluded the district
    court from granting summary judgment against them.
    [¶6]   The standard of review for summary judgments is well established:
    Summary judgment is a procedural device under N.D.R.Civ.P.
    56(c) for promptly resolving a controversy on the merits without a trial
    if there are no genuine issues of material fact or inferences that can
    reasonably be drawn from undisputed facts, or if the only issues to be
    resolved are questions of law. The party seeking summary judgment
    must demonstrate there are no genuine issues of material fact and the
    case is appropriate for judgment as a matter of law. In deciding
    whether the district court appropriately granted summary judgment, we
    view the evidence in the light most favorable to the opposing party,
    giving that party the benefit of all favorable inferences which can
    reasonably be drawn from the record. A party opposing a motion for
    summary judgment cannot simply rely on the pleadings or on
    unsupported conclusory allegations. Rather, a party opposing a
    summary judgment motion must present competent admissible evidence
    by affidavit or other comparable means that raises an issue of material
    fact and must, if appropriate, draw the court’s attention to relevant
    evidence in the record raising an issue of material fact. When
    reasonable persons can reach only one conclusion from the evidence,
    a question of fact may become a matter of law for the court to decide.
    A district court’s decision on summary judgment is a question of law
    that we review de novo on the record.
    Becker v. Burleigh Cty., 
    2019 ND 68
    , ¶ 7, 
    924 N.W.2d 393
    (quoting Dahms v. Nodak
    Mut. Ins. Co., 
    2018 ND 263
    , ¶ 6, 
    920 N.W.2d 293
    ).
    A
    [¶7]   Pinky’s argues because an assignee receives no greater rights than the assignor,
    see Collection Ctr., Inc. v. Bydal, 
    2011 ND 63
    , ¶ 15, 
    795 N.W.2d 667
    , Frontier had
    the burden to establish that the sub-subcontractors complied with their various hauling
    contracts. Pinky’s does not claim any of the sub-subcontractors failed to comply with
    2
    the hauling contracts. Rather, Pinky’s argues that Frontier failed to present evidence
    that the sub-subcontractors timely and correctly completed paperwork, that they raised
    their dispute about nonpayment in a timely fashion, that they maintained proper
    hauling records, and that Pinky’s consented to the assignments.
    [¶8]   Pinky’s’ argument is without merit.         Frontier presented the following
    deposition testimony of Honsey:
    Q.      So then a follow-up question to that would be, you do
    believe that Pinky’s owes monies to Frontier Fiscal for the factoring
    we’ve been talking about?
    A.      Absolutely. . . . I mean, I owe the money; Pinky’s owes
    the money, I’m not disputing that whatsoever.
    Q.      So the only—okay. So you’re not contesting any
    assertion made against Pinky’s in the complaint by Frontier in this
    matter?
    A.      No.
    Q.      You’re not contesting any claims made by Pinky’s—or
    excuse me—made by Frontier in the complaint in this matter?
    A.      Huh–uh.
    ....
    Q.      . . . . Certain notices of assignment were filed in this
    action listing the assignment of certain debts of these leased truckers to
    Frontier. You’ve seen those notices of assignment; right?
    A.      Right.
    Q.      And you believe they’re valid?
    A.      Yes.
    Q.      And you don’t have any reason to believe they’re invalid
    or—
    A.      No.
    Q.      So you would agree with me that the money that was
    meant for the subcontractors that Pinky’s owed to those subcontractors
    following the notice of assignment was due Frontier; is that fair?
    A.      Right.
    Q.      And those subcontractors actually did work for Pinky’s;
    right?
    A.      Right.
    Q.      And were they entitled to be paid for that work?
    A.      Yes.
    Q.      Did they get paid in full for that work?
    A.      No.
    Q.      Has Pinky’s paid Frontier in full?
    A.      No.
    3
    ....
    Q.    Do you believe Pinky’s has any reason why that money
    is not owed to Frontier Fiscal today?
    A.    None, whatsoever.
    Q.    And just to confirm, you don’t have any documents
    showing otherwise; right?
    A.    No.
    Q.    And you don’t have any documents showing that Pinky’s
    paid Frontier in full for the amounts we just discussed?
    A.    No.
    [¶9]   It is undisputed that Pinky’s did not complain about the work performed under
    the hauling contracts, the paperwork, timeliness of disputes about nonpayment or the
    hauling records. Honsey admitted in a deposition that Pinky’s owes the money under
    the hauling contracts to Frontier, that he had seen the assignments, and that the
    assignments were valid. Honsey’s testimony establishes that Pinky’s consented to the
    assignments. Honsey signed the hauling agreements as president of Pinky’s and is
    presumed to have knowledge of their contents. See Hendricks Prop. Mgmt. Corp. v.
    Birchwood Props. Ltd. P’ship, 
    2007 ND 181
    , ¶ 23, 
    741 N.W.2d 461
    . The burden of
    proof ordinarily rests with the party who possesses the facts on the issue in dispute.
    Monster Heavy Haulers, LLC v. Goliath Energy Servs., LLC, 
    2016 ND 176
    , ¶ 17, 
    883 N.W.2d 917
    . Summary judgment is appropriate when a party fails to establish the
    existence of a factual dispute on an essential element of a claim on which the party
    will bear the burden of proof at trial. Baker Boyer Nat. Bank v. JPF Enters., LLC,
    
    2019 ND 76
    , ¶ 10, 
    924 N.W.2d 381
    . Pinky’s offered no evidence to establish
    noncompliance with the hauling contracts.
    [¶10] We conclude there are no genuine issues of material fact precluding summary
    judgment against Pinky’s.
    B
    4
    [¶11] Pinky’s and Honsey raise numerous issues regarding validity of the personal
    guaranty.
    [¶12] Honsey argues the guaranty is ambiguous because it is unclear whether Honsey
    signed on behalf of Pinky’s or in his individual capacity. The guaranty, which was
    signed by Honsey “[a]s an Individual & President of Pinky’s,” provides in relevant
    part:
    I, Dale Honsey as Pinky’s Aggregate’s (Pinky’s) Owner & President do
    personally guarantee the prompt, full and complete performance of the
    terms of this agreement and any Pinky’s Payable to Frontier Fiscal
    Services, LLC (Frontier).
    I, Dale Honsey personally guarantee that Seven Hundred and Ninty
    [sic] Thousand dollars ($790,000.00) from the funds resulting from a
    One Million Dollar loan that is currently being submitted to committee
    for approval at the Rollette State Bank will be paid within one business
    day of loan funding (via wire) to Frontier. The entire $790,000.00 are
    to be applied by Frontier against the oldest invoices owed to Frontier
    by Pinky’s.
    I, Dale Honsey agree not to pledge, hypothecate, mortgage, sell or
    otherwise transfer any of Pinky’s’s pledged assets that are these
    Frontier receivables without written consent of Frontier; . . . .
    Pinky’s and I, Dale Honsey represent that at the time of the execution
    and delivery of this Guarantee nothing exists to impair the effectiveness
    of this Guarantee[.]
    Because Honsey testified in his deposition that he believed he signed the guaranty as
    president of Pinky’s rather than in his individual capacity, Honsey argues the guaranty
    is ambiguous and there is a genuine issue of material fact precluding summary
    judgment.
    [¶13] Section 22-01-01(2), N.D.C.C., defines a “guaranty” as “a promise to answer
    for the debt, default, or miscarriage of another person.” (Emphasis added.) Since
    entities and persons are unable to guarantee their own debts, courts will not construe
    guaranties signed in both a representative and individual capacity as constituting a
    guaranty by the entity involved because to do so would render the guaranty a nullity.
    See, e.g., Nat. Fitness Ctr., Inc. v. Atlanta Fitness, Inc., 
    902 F. Supp. 2d 1098
    , 1106
    5
    (E.D. Tenn. 2012); Ubom v. SunTrust Bank, 
    17 A.3d 168
    , 174-75 (Md. Ct. App.
    2011); 780 L.L.C. v. DiPrima, 
    611 N.W.2d 637
    , 645-46 (Neb. Ct. App. 2000); 38 Am.
    Jur. 2d Guaranty § 19 (2010). As the court explained in Lab. Corp. of Am. v.
    McKown, 
    829 So. 2d 311
    , 313-14 (Fla. Dist. Ct. App. 2002):
    Simply because the letter was written on corporate stationery
    and the designation “President” appears over McKown’s signature does
    not necessitate a finding that the guarantee is ambiguous. Florida
    courts have consistently adhered to the general rule that an individual
    who executes a guarantee as officer of a corporation by inserting his or
    her corporate title after their name on the document cannot defeat the
    purpose of the guarantee when, by its terms, the document contains
    provisions for individual liability. See Robert C. Malt & Co. v. Carpet
    World Distribs., Inc., 
    763 So. 2d 508
    , 510 (Fla. 4th DCA 2000) (stating
    that personal liability may be imposed “where the contract contains
    language indicating personal liability or the assumption of personal
    obligations, despite a signature preceded by a corporate name and the
    word ‘by’ and followed by descriptio personae.”) (citation omitted);
    Nelson v. Ameriquest Techs., Inc., 
    739 So. 2d 161
    (Fla. 3rd DCA 1999);
    Summit Consulting, Inc. v. J.J. Walsh Constr., Inc., 
    568 So. 2d 1290
           (Fla.App.2d Dist.1990); Central Nat’l Bank of Miami v. Muskat Corp.
    of Am., Inc., 
    430 So. 2d 957
    (Fla. 3rd DCA 1983); see also Sabin v.
    Lowe’s of Florida, Inc., 
    404 So. 2d 772
    , 773 (Fla. 5th DCA 1981) (“The
    fact that he signed it ‘as president’ should not alter the plain and
    obvious meaning and intent expressed in the document.”). The reason
    for the general rule is that “[t]o interpret the guaranty as being a
    corporate guaranty because the word president was added to [the]
    signature would result in the guaranty being meaningless and add
    nothing to the existing obligation of the corporation.” 
    Summit, 568 So. 2d at 1292
    (citing Muskat Corp. Inc.; Roy v. Davidson Equip., Inc.,
    
    423 So. 2d 496
    (Fla. 4th DCA 1982)).
    [¶14] Here, the guaranty provides “I, Dale Honsey personally guarantee that . . .
    $790,000.00 . . . will be paid . . . to Frontier . . . to be applied by Frontier against the
    oldest invoices owed to Frontier by Pinky’s.” The guaranty is not ambiguous. As a
    matter of law, Honsey personally guaranteed Pinky’s’ debt notwithstanding that he
    also signed the document as president of the corporation.
    [¶15] Honsey argues a clause in the guaranty waiving legal defenses is void under
    N.D.C.C. § 9-08-05, which provides:
    6
    Every stipulation or condition in a contract by which any party thereto
    is restricted from enforcing that party’s rights under the contract by the
    usual legal proceedings in the ordinary tribunals or which limits the
    time within which that party thus may enforce that party’s rights is
    void, except as otherwise specifically permitted by the laws of this
    state.
    Honsey also argues the clause requiring payment of Frontier’s attorney fees is void
    under N.D.C.C. § 28-26-04, which bars provisions for attorney fees in certain
    agreements as against public policy.        There are two problems with Honsey’s
    arguments. First, neither clause was applied in this case. The district court addressed
    Honsey’s legal defenses in its lengthy order granting summary judgment and did not
    award Frontier attorney fees. Second, even if we assume for purposes of argument
    that the clauses are invalid, N.D.C.C. § 9-04-04 provides: “When a contract has
    several distinct objects, of which one at least is lawful and one at least is unlawful in
    whole or in part, the contract is void as to the latter and valid as to the rest.” The
    guaranty can be construed to give effect to its lawful objectives without consideration
    of the allegedly invalid clauses. See Schue v. Jacoby, 
    162 N.W.2d 377
    , 383 (N.D.
    1968). Honsey’s argument is without merit.
    [¶16] Honsey argues that he did not freely consent to the guaranty, which makes it
    voidable under N.D.C.C. § 9-03-04, because he made a mistake of fact, see N.D.C.C.
    § 9-03-13, and believed he signed the guaranty on behalf of Pinky’s and not in his
    individual capacity. A mistake of fact consists of “[a]n unconscious ignorance or
    forgetfulness of fact, past or present, material to the contract,” or the “[b]elief in the
    present existence of a thing material to the contract which does not exist, or in the past
    existence of such a thing which has not existed.” N.D.C.C. § 9-03-13. Honsey’s
    mistaken belief that by signing the personal guaranty in both his personal and
    representative capacities Pinky’s was guaranteeing its own debt does not amount to
    a mistake of fact as defined by the statute. Honsey’s misunderstanding of the effect
    of signing the guaranty in dual capacities was not a mistake of fact because he was
    aware of the fact that he needed to guarantee the debt for Frontier to continue
    factoring for the sub-subcontractors. See Lange v. Cusey, 
    379 N.W.2d 775
    , 779 (N.D.
    7
    1985) (misunderstanding of the effect of a legal document is not a mistake of fact if
    person claiming mistake was aware of the facts as they really were). Honsey’s
    misunderstanding also does not qualify as a mistake of law under N.D.C.C. § 9-03-14,
    which requires either a “misapprehension of the law by all parties” or a
    “misapprehension of the law by one party of which the others are aware at the time
    of contracting, but which they do not rectify.” There is no evidence that both parties
    were aware of Honsey’s misunderstanding or that Frontier was aware of Honsey’s
    misunderstanding and failed to rectify it. See Lange, at 779.
    [¶17] We have concluded Pinky’s could not guarantee Pinky’s’ debt. Honsey signed
    the guaranty in his personal capacity, even though he included his representative
    capacity for the corporation. The guaranty clearly states “I, Dale Honsey personally
    guarantee.” Parol evidence is not admissible to contradict unambiguous terms of a
    written agreement. See, e.g, In re Estate of Dionne, 
    2009 ND 172
    , ¶ 16, 
    772 N.W.2d 891
    . Honsey cannot challenge with parol evidence the unambiguous statement that
    he personally guaranteed Pinky’s’ debt.
    [¶18] Honsey argues the guaranty is void for lack of consideration under N.D.C.C.
    § 22-01-03, because it was not entered into at the same time as the original obligation
    and there is no evidence of consideration distinct from the original obligation.
    Frontier argues distinct consideration consists of Pinky’s and Honsey being able to
    meet their obligation to Baranko because sub-subcontractors would quit unless
    Frontier provided additional factoring for them and Frontier would not do so without
    a guaranty.
    [¶19] The existence of consideration is a question of law, see Anderson v.
    Zimbelman, 
    2014 ND 34
    , ¶ 18, 
    842 N.W.2d 852
    , and good consideration for a
    contract is any benefit conferred or detriment suffered. See Molbert v. Kornkven,
    
    2018 ND 120
    , ¶ 15, 
    910 N.W.2d 888
    . Consideration need not be expressed in a
    guaranty. See N.D.C.C. § 22-01-04. Pinky’s was conferred a benefit by being able
    to continue operations and Honsey was similarly conferred that benefit as Pinky’s’
    8
    president and owner. We conclude Honsey received good consideration for the
    personal guaranty.
    [¶20] We conclude the district court did not err in granting summary judgment
    against Honsey on his personal guaranty.
    III
    [¶21] Frontier seeks an award of costs and attorney fees against Pinky’s for a
    frivolous appeal. For purposes of N.D.R.App.P. 38, “[a]n appeal is frivolous if it is
    flagrantly groundless, devoid of merit, or demonstrates persistence in the course of
    litigation which could be seen as evidence of bad faith.” Witzke v. City of Bismarck,
    
    2006 ND 160
    , ¶ 19, 
    718 N.W.2d 586
    . We do not find Pinky’s’ appeal to be frivolous,
    and we deny Frontier’s request.
    IV
    [¶22] It is unnecessary to address other arguments raised because they are either
    unnecessary to the decision or are without merit. We affirm the judgment.
    [¶23] Lisa Fair McEvers
    Jon J. Jensen
    Jerod E. Tufte
    Mark T. Blumer, D.J.
    Gerald W. VandeWalle, C.J.
    [¶24] The Honorable Mark T. Blumer, D.J., sitting in place of Crothers, J.,
    disqualified.
    9
    

Document Info

Docket Number: 20180329

Citation Numbers: 2019 ND 147

Judges: McEvers, Lisa K. Fair

Filed Date: 5/28/2019

Precedential Status: Precedential

Modified Date: 3/3/2020

Authorities (19)

Central Nat. Bank of Miami v. Muskat Corp. , 430 So. 2d 957 ( 1983 )

Sabin v. Lowe's of Florida, Inc. , 404 So. 2d 772 ( 1981 )

Lange v. Cusey , 1985 N.D. LEXIS 452 ( 1985 )

Summit Consulting, Inc. v. JJ Walsh Const., Inc. , 1990 Fla. App. LEXIS 7544 ( 1990 )

Hendricks Property Management Corp. v. Birchwood Properties ... , 2007 N.D. LEXIS 184 ( 2007 )

Anderson v. Zimbelman , 2014 N.D. LEXIS 25 ( 2014 )

Laboratory Corp. of America v. McKown , 2002 Fla. App. LEXIS 15550 ( 2002 )

Collection Center v. Bydal , 2011 ND 63 ( 2011 )

Roy v. Davidson Equipment, Inc. , 1982 Fla. App. LEXIS 22174 ( 1982 )

780 L.L.C. v. DiPrima , 9 Neb. Ct. App. 333 ( 2000 )

Ubom v. SunTrust Bank , 198 Md. App. 278 ( 2011 )

Witzke v. City of Bismarck , 2006 N.D. LEXIS 163 ( 2006 )

Dahms v. Nodak Mutual Insurance Co. , 2018 ND 263 ( 2018 )

Frontier Fiscal Services LLC v. Pinky's Aggregates, Inc. , 928 N.W.2d 449 ( 2019 )

Becker v. Burleigh County , 2019 ND 68 ( 2019 )

Robert C. Malt & Co. v. Carpet World Distributors, Inc. , 2000 Fla. App. LEXIS 9001 ( 2000 )

Nelson v. Ameriquest Technologies, Inc. , 739 So. 2d 161 ( 1999 )

In Re Estate of Dionne , 2009 N.D. LEXIS 183 ( 2009 )

Monster Heavy Haulers, LLC v. Goliath Energy Services, LLC , 883 N.W.2d 917 ( 2016 )

View All Authorities »