CoreFirst Bank & Trust

NOT DESIGNATED FOR PUBLICATION
No. 120,607
IN THE COURT OF APPEALS OF THE STATE OF KANSAS
COREFIRST BANK & TRUST,
f/k/a COMMERCE BANK & TRUST
Appellant,
v.
GARY L. WEIGEL
and BONITA K. WEIGEL, et al.,
Appellees.
MEMORANDUM OPINION
Appeal from Shawnee District Court; FRANKLIN R. THEIS, judge. Opinion filed April 17, 2020.
Affirmed.
R. Patrick Riordan and Erin A. Beckerman, of Riordan, Fincher & Beckerman, P.A., of Topeka,
for appellant.
Terry A. Iles, of Law Office of Terry A. Iles, of Topeka, for appellees.
Before GARDNER, P.J., BUSER, J., and BURGESS, S.J.
PER CURIAM: CoreFirst Bank & Trust appeals the district court's decision about a
commercial guaranty and debt owed by Gary and Bonita Weigel. The district court found
that Gary's guaranty applied to only one promissory note referenced in the guaranty,
rather than to all the indebtedness of the debtor to CoreFirst. CoreFirst argues that the
district court ignored the "four corners" rule of contract interpretation by considering
extrinsic evidence before finding the guaranty ambiguous. It then argues that the guaranty
was not ambiguous, was continuing, and was not limited to only one note. We find that
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the district court properly considered the guaranty's related documents in finding the
guaranty ambiguous and properly found that Gary Weigel guaranteed only one note.
Finding no reversible error, we affirm.
Factual and Procedural Background
Gary executed a commercial guaranty in favor of CoreFirst in 2007. The guaranty
was secured by a mortgage for two adjoining parcels of real estate in Tecumseh—one
parcel was the Weigels' residential property and the other was a rental property. The
contract guaranteed repayment of debt owed by KMCC, Inc. CoreFirst and KMCC had
entered into several commercial loan agreements over the years. The loans at issue on
appeal were made from 2007 to 2010.
KMCC eventually defaulted on its loans and CoreFirst sought reimbursement for
these debts:
Loan No. Principal Interest/Costs/Fees Total
****9900 $57,258.65 $33,954.66 $91,213.31
****0783 $61,819.61 $36,659.11 $98,478.72
***2327 $27,286.23 $20,874.88 $48,161.11
***2394 $32,320.77 $65,260.19 $97,580.96
****9875 $436,000.01 $321,029.07 $757,029.08
Totals $614,685.27 $477,777.91 $1,092,463.18
CoreFirst made a demand on Gary under his commercial guaranty but he refused to pay.
As a result, CoreFirst filed a foreclosure action.
CoreFirst's amended petition claimed Gary owed $727,777.91, which reflected
$250,000 in principal and $477,777.91 in interest, costs, and fees. CoreFirst also sought
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to foreclose the Weigels' mortgage. In due course, CoreFirst moved for summary
judgment. Gary responded that his guaranty applied only to a single promissory note
referenced in the guaranty and that the mortgage covered only the Weigels' residential
property, not their rental property. The district court denied the summary judgment
motion and set the case for a bench trial.
At trial, the parties' exhibits were admitted without objection. CoreFirst admitted
copies of the commercial guaranty, mortgage, forbearance agreement, and all promissory
notes between CoreFirst and KMCC. The Weigels admitted, among other documents:
• commercial guaranties executed by the president of KMCC (Mark Boling), his
wife, and CoreFirst; and
• a letter from Michael Meyers (the senior vice president of CoreFirst's commercial
loan department) to the Bolings' realtor.
Gary contrasted his guaranty, which expressly referenced only a single promissory note,
with Bolings' guaranties, which expressly referenced without limitation all of the
borrower's notes.
In its memorandum opinion, the district court found that the mortgage covered
both the Weigel residence and the rental property. No one challenges that ruling on
appeal. The district court also determined the scope of Gary's guaranty. It considered
extrinsic evidence to find the intent of the parties and found the guaranty ambiguous. The
district court then found that the guaranty applied to only one of KMCC's promissory
notes—Note 9681, later renewed as Note 2327. As a result, the district court found the
Weigels owed $27,286.23 and foreclosed the mortgage on both properties.
CoreFirst timely appeals, arguing that Gary's guaranty is unambiguous, is
continuing, and applies to all of KMCC's debts with CoreFirst.
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Did the District Court Err in Considering Evidence Other Than the Guaranty in Finding
the Guaranty Ambiguous?
CoreFirst first argues that the district court erred in considering extrinsic evidence.
CoreFirst argues that the guaranty was unambiguous, so the district court erred by
considering other evidence in concluding that the guaranty was restricted and applied
only to one of KMCC's loans.
Standard of Review
An appellate court exercises unlimited review over the interpretation and legal
effect of written instruments and is not bound by the lower court's interpretations or
rulings. Born v. Born, 304 Kan. 542, 554, 374 P.3d 624 (2016). And whether a written
instrument is ambiguous is a question of law subject to de novo review. Waste
Connections of Kansas, Inc. v. Ritchie Corp., 296 Kan. 943, 964, 298 P.3d 250 (2013).
Analysis
CoreFirst first argues that the district court erred in not looking solely to the
guaranty in finding it ambiguous. Instead, CoreFirst maintains that the district court used
circular logic by determining that it could look to extrinsic evidence to decide the scope
of the guaranty—"by relying on extrinsic evidence, the district court finds the guaranty to
be ambiguous, and consequently, the district court uses that extrinsic evidence it has
already considered to resolve that ambiguity."
The primary rule for interpreting written contracts is to ascertain the parties' intent.
If the terms of the contract are clear, the intent of the parties is to be determined from the
language of the contract without applying rules of construction. See Peterson v. Ferrell,
302 Kan. 99, 104, 349 P.3d 1269 (2015). So CoreFirst contends the court should construe
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and consider the entire instrument "'from its four corners.'" Wasinger v. Roman Catholic
Diocese of Salina, 55 Kan. App. 2d 77, 80, 407 P.3d 665 (2017).
CoreFirst is correct that our law generally precludes a court's consideration of
other evidence in finding a document to be ambiguous. "If a [guaranty] contract is
unambiguous, the court can look only to the four corners of the agreement to determine
the parties' intent, harmonizing the language therein if possible." TMG Life Ins. Co. v.
Ashner, 21 Kan. App. 2d 234, 242, 898 P.2d 1145 (1995). Extrinsic evidence may not be
used to construe an unambiguous guaranty. 21 Kan. App. 2d at 242.
And CoreFirst is also correct that the district court appears to have decided that the
guaranty was ambiguous by reviewing documents other than the guaranty, namely, the
related promissory notes and mortgage:
"The Weigel guaranty references a note of January 16, 2007 in the amount of
$250,000.00, as does the Weigel mortgage, which is the exact dollar limit of the Weigel
guaranty, yet the only note advanced before the Court to be tied to the guaranty of that
specific date is actually note 9681 for $150,000.00. However, as noted, five other notes
were executed at the same time that day, which numbers are each referenced additionally
and separately along with Note 9681 on the Weigel mortgage but of which none are
documentarily advanced in the record, but Note 9681. This dollar discrepancy between
the note referenced by the Weigel guaranty and Note 9681 entered into on that date,
which is advanced by Plaintiff as the note referenced in the Weigel guaranty, is the true
source of ambiguity, particularly when considering the multiple notes signed that date
and the Weigel mortgage's handwritten reference to all six notes, and not, as the Bank
argues, the general Language concerning indebtedness versus the particular identification
of the indebtedness as expressed for its identification in the Weigel guaranty. Ambiguity
diminishes, but not wholly eliminated, if one does not fixate on the loan amount noted
and rather relies on the date for the Note and recognizes, as the section of the Weigel
guaranty under 'DEFINITIONS' notes, that 'words and terms used in the singular shall
include the plural and the plural shall include the singular as the context may require'. See
'DEFINITIONS' supra, at p. 24. Considering the term 'Note', in conjunction with the
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January 16, 2007 date would be a gateway to including lending under the other notes
executed that day."
But the Weigels cite Ryco Packaging Corp. v. Chapelle Int'l, Ltd., 23 Kan. App.
2d 30, 36-37, 926 P.2d 669 (1996), to show the district court could consider the
underlying transactions in finding ambiguity. We agree that Ryco is on point.
Ryco involved the construction of a guaranty. It began its legal analysis by
recognizing the rule that the court must look only to the four corners of the agreement to
determine the parties' intent:
"The guarantors' liability involves the construction of a written contract.
'"Regardless of the construction of the written contract made by the trial court, on appeal
a contract may be construed and its legal effect determined by the appellate court."
[Citation omitted.]' TMG Life Ins. Co. v. Ashner, 21 Kan. App. 2d 234, 241, 898 P.2d
1145 (1995). If a contract is unambiguous, this court must 'look only to the four corners
of the agreement to determine the parties' intent, harmonizing the language therein if
possible.' 21 Kan. App. 2d at 242. Moreover, the fact that the parties differ as to what an
unambiguous contract requires does not force this court to find that the contract was, in
fact, ambiguous. 21 Kan. App. 2d at 242." Ryco, 23 Kan. App. 2d at 35-36.
But Ryco then recognized that a guaranty agreement signed at about the same time
as related documents may be read in conjunction with those documents.
"The cardinal rule of contract interpretation is that the court must ascertain the
parties' intention and give effect to that intention when legal principles so allow.
Hollenbeck v. Household Bank, 250 Kan. 747, 751, 829 P.2d 903 (1992). 'Documents
which are executed at different times, but in the course of the same transaction
concerning the same subject matter, will be construed together to determine the intent of
the parties to the contract.' 250 Kan. at 752.
"When a guaranty agreement is executed at about the same time as the
underlying transaction between the creditor and debtor, the guaranty is read in
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conjunction with the underlying documents. In Federal Land Bank of Wichita v. Krug,
253 Kan. 307, 856 P.2d 111 (1993), the Supreme Court considered whether there was
consideration supporting a buyer's agreement to assume a mortgage on real estate the
buyer purchased. In reviewing the facts, the Supreme Court reasoned that the court had to
review both the contract to sell the land and the mortgage assumption agreement together.
253 Kan. at 313. 'When one contracts to assume a mortgage even though the documents
are executed at different times, but in the course of the same transaction concerning the
same subject matter, they will be construed together to determine the intent of the parties
to the contract.' 253 Kan. 307, Syl. ¶ 4." 23 Kan. App. 2d at 36-37.
Similarly, our Supreme Court has applied the "'settled rule that documents
executed at the same time, with one referring to the other, are to be construed as a single
instrument.'" Shunga Plaza, Inc. v. American Employers' Ins. Co., 206 Kan. 16, 19, 476
P.2d 642 (1970); see also Overland Park Savings & Loan Ass'n v. Miller, 243 Kan. 730,
738, 763 P.2d 1092 (1988) (finding a contract of guaranty is to be construed according to
the intention of the parties, which is determined by a reasonable interpretation of the
language used in light of the circumstances).
We apply Ryco's rule here—Gary's guaranty may be read in conjunction with its
related documents. And we need not speculate as to which documents are related because
Gary's guaranty tells us. It defines "related documents" as: "[A]ll promissory notes[,]
credit agreements[,] loan agreements[,] environmental agreements[,] guaranties[,]
security agreements[,] mortgages[,] deeds of trust[,] security deeds[,] collateral
mortgages[,] and all other instruments[,] agreements[,] and documents[,] whether now or
hereafter existing[,] executed in connection with the Indebtedness."
"Indebtedness" is defined twice in Gary's guaranty. It is most specifically defined
as "Borrower[']s indebtedness to Lender as more particularly described in this Guaranty."
The Weigels' mortgage, all notes executed on January 16, 2007, and the Boling
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guaranties executed on January 16, 2007, are thus among the related documents that the
district court could consider in determining the ambiguity of Gary's guaranty.
We thus find no error in the district court's reliance on the notes, the mortgage, and
other related documents in determining ambiguity. To the extent the district court may
have also relied on parol or other evidence in finding ambiguity, any such error is
harmless because, as we explain below, Gary's guaranty is ambiguous even without
considering parol or other evidence.
Did the District Court Err in Finding the Guaranty is Ambiguous?
CoreFirst contends that Gary's guaranty is not ambiguous because it clearly shows
that it is continuing and unrestricted. Gary counters that the guaranty is ambiguous
because it includes language indicating Gary's guaranty is both continuing and restricted.
Our Supreme Court has distinguished between a continuing guaranty and a
restricted guaranty:
"A guaranty may be either continuing or restricted. The contract is restricted if it
is limited to guarantee a single transaction or a number of specific transactions and is not
effective for transactions other than those guaranteed. The contract is continuing if it
contemplates a future course of dealing during an indefinite period or it is intended to
cover a series of transactions or a succession of credits, or if its purpose is to give to the
principal debtor a standing credit to be used by him from time to time." Iola State Bank v.
Biggs, 233 Kan. 450, 454, 662 P.2d 563 (1983).
Our Supreme Court has provided basic guidance about the purpose and scope of
guaranties:
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"'If a guaranty is free from ambiguity, it is strictly construed in favor of the guarantor.
Scott v. City of Tampa, 158 Fla. 712, 30 So. 2d 300, 302, cert. denied, 332 U.S. 790, 68
S. Ct. 99, 92 L. Ed. 372 (1947). If ambiguous, it is construed against the drafter—here,
the Bank and its assignee, the FDIC. See Miami Nat'l Bank v. Fink, 174 So. 2d 38, 40
(Fla. 3d DCA), cert. denied, 180 So. 2d 658 (Fla. 1965). A guaranty is a collateral
promise to answer for the debt or obligation of another. Nicolaysen v. Flato, 204 So. 2d
547, 549 (Fla. 4th DCA 1967), cert. denied, 212 So. 2d 867 (Fla. 1968). The extent of the
guarantor's liability depends upon the language of the guaranty itself and is usually equal
to that of the principal debtor. 38 Am. Jur. 2d Guaranty § 74 (1968). "[A] guarantor is
liable only in the event and to the extent that his principal is liable." Id. at § 77.'"
Overland Park Savings & Loan Ass'n, 243 Kan. at 741.
Our law regarding ambiguity is well established. "'The language in a contract is
ambiguous when the words used to express the meaning and intention of the parties are
insufficient in the sense that the contract may be understood to reach two or more
possible meanings." McBride Electric, Inc. v. Putt's Tuff, Inc., 9 Kan. App. 2d 548, 555,
685 P.2d 316 (1984) (construction of guaranty contract); accord Brown v. Lang, 234 Kan.
610, 615, 675 P.2d 842 (1984). In determining whether a contract is ambiguous, the court
must not read one part of the contract to the exclusion of another. Ashner, 21 Kan. App.
2d at 249. The court will not strain to find an ambiguity where, in common sense, there is
none. Iron Mound v. Nueterra Healthcare Management, 298 Kan. 412, 420, 313 P.3d 808
(2013).
Having reviewed the applicable law, we turn to the facts. CoreFirst points to
several provisions in the guaranty that show Gary's guaranty was broad and continuing.
First, the first and seventh paragraphs of the guaranty are titled "CONTINUING
GUARANTEE OF PAYMENT AND PERFORMANCE" and "CONTINUING
GUARANTY." And the last sentence of the first paragraph unequivocally states that
"Guarantor[']s obligations are continuing." The paragraph reads:
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"For good and valuable consideration Guarantor absolut[e]ly and unconditionally
guarantees full and punctual payment and satisfaction of Guarantor[']s Share of the
Indebtedness of Borrower to Lender and the performance and discharge of all
Borrower[']s obligations under the Note and the Related Documents[.] This is a guaranty
of payment and performance and not of collection so Lender can enforce this Guaranty
against Guarantor even when Lender has not exhausted Lender[']s remedies against
anyone else obligated to pay the Indebtedness or against any collateral securing the
Indebtedness this Guaranty or any other guaranty of the Indebtedness[.] Guarantor will
make any payments to Lender or its order on demand in legal tender of the United States
of America in same day funds without set off or deduction or counterclaim and will
otherwise perform Borrower[']s obligations under the Note and Related Documents[.]
Under this Guaranty Guarantor[']s obligations are continuing[.]"
Second, a provision entitled "CONTINUING GUARANTY" states that the
guaranty is continuing and applies to future debt:
"CONTINUING GUARANTY[.] THIS IS A CONTINUING GUARANTY UNDER
WHICH GUARANTOR AGREES TO GUARANTEE THE FULL AND PUNCUTAL
PAYMENT[,] PERFORMANCE[,] AND SATISFACTION OF THE GUARANTOR[']S
SHARE OF THE INDEBTEDNESS OF BORROWER TO LENDER NOW EXISTING
OR HEREAFTER ARISING OR ACCQUIRED ON A CONTINUING BASIS[.]
ACCORDINGLY ANY PAYMENTS MADE ON THE INDEBTEDNESS WILL NOT
DISCHARGE OR DIMINISH GUARANTOR[']S OBLIGATIONS AND LIABILITY
UNDER THIS GUARANTY FOR ANY REMAINING AND SUCCEEDING
INDEBTEDNESS EVEN WHEN ALL OR PART OF THE OUTSTANDING
INDEBTEDNESS MAY BE A ZERO BALANCE FROM TIME TO TIME[.]"
Third, under the first of two definitions of "Indebtedness," Gary was liable for
future debts:
"Indebtedness . . . means all of the principal amount . . . and all debts[,] liabilities[,] and
obligations of every nature or form now existing or hereafter arising or acquired that
Borrower individually or collectively or interchangeably with others owes or will owe
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Lender[.] Indebtedness includes . . . loans[,] advances[,] debts[,] overdraft indebtedness[,]
credit card indebtedness[,] lease obligations[,] liabilities . . . and any present or future
judgments against Borrower[,] future advances[,] loans[,] or transactions that renew[,]
extend[,] modify[,] refinance[,] consolidate[,] or substitute these debts[,] liabilities[,] and
obligations[.]"
Fourth, under the "Duration of Guaranty" provision, Gary's guaranty could
become ineffective only upon written revocation, and revocation would not affect his
liability for previous indebtedness:
"DURATION OF GUARANTY[.] This Guaranty will take effect when received by
Lender without the necessity of any acceptance by Lender or any notice to Guarantor or
to Borrower and will continue in full force until all the Indebtedness incurred or
contracted before receipt by Lender of any notice of revocation shall have been fully and
finally paid and satisfied and all of Guarantor[']s other obligations under this Guaranty
shall have been performed in full[.] If Guarantor elects to revoke this Guaranty
Guarantor may only do so in writing[.] Guarantor[']s written notice of revocation must be
mailed to Lender by certified mail at Lender[']s address listed above . . . [.] Written
revocation of this Guaranty will apply only to new Indebtedness created after actual
receipt by Lender . . . [.] [N]ew Indebtedness does not include all or part of the
Indebtedness that is incurred by Borrower prior to revocation[,] incurred under a
commitment that became binding before revocation[,] any renewals[,] extensions[,]
substitutions[,] and modifications of the Indebtedness[.] This Guaranty shall bind
Guarantor[']s estate as to the Indebtedness created both before and after Guarantor[']s
death or incapacity regardless of Lender[']s actual notice of Guarantor[']s death[.]"
See 38 Am. Jur. 2d, Guaranty § 23; see also Iola State Bank, 233 Kan. at 454 ("[a]n offer
for a continuing guaranty contract is ordinarily effective until revoked by the guarantor or
extinguished by some rule of law").
Other provisions of the guaranty, however, favor Gary's contrary view. The
Guaranty references a single promissory note, which suggests it was to apply to only that
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loan and promissory note. At the top left corner of the guaranty, a handwritten note
reflects number "9681" and "1-16-07[.]" And typed on the top left of each corner of each
remaining page of the guaranty is "Loan No . . . 9681 C." This is the only loan number
referenced in the guaranty.
Similarly, the guaranty limits Gary's debt to a specific dollar amount. The
definition for "Guarantor[']s Share of Indebtedness" states that the extent of Gary's debt is
more particularly described in the guaranty. The only description of the debt is a "Note,"
defined as "the promissory note dated January 16, 2007 in the original principal amount
of $250,000.00 from Borrower to Lender together with all renewals of[,] extension of[,]
modifications of[,] refinancing of[,] consolidations of[,] and substitutions for the
promissory note or agreement." But the promissory note dated January 16, 2007, from
Borrower to Lender was in the amount of $150,000, not $250,000. Still, the parties agree
that Note 9681 in the amount of $150,000 is the same note referenced in the Weigel
guaranty as being in the amount of $250,000. These limitations on the "[G]uarantor[']s
share of the Indebtedness" seemingly restrict Gary's liability to $250,000.
But the primary guarantee of performance in the very first paragraph of Gary's
guaranty states that "Guarantor absolutely and unconditionally guarantees full and
punctual payment and satisfaction of Guarantor[']s Share of the Indebtedness of Borrower
to Lender and the performance and discharge of all Borrower[']s obligations under the
Note and the Related Documents." (Emphasis added.) Were it not for the latter clause,
which we have italicized, Gary's liability would clearly be restricted, as his share of
KMCC's indebtedness to CoreFirst is $250,000. But by also guaranteeing payment of "all
[KMCC's] obligations under the Note and the Related Documents," Gary's liability is
arguably unrestricted. This is because, as noted above, "related documents" is broadly
defined to include, "all promissory notes[,] credit agreements[,] loan agreements[,] . . .
and all other instruments[,] agreements[,] and documents[,] whether now or hereafter
existing[,] executed in connection with the Indebtedness." And the $150,000 note was
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only one of six notes signed on January 16, 2007, in connection with the indebtedness.
And "Note" may be read as plural because the DEFINITIONS section of Gary's guaranty
says so—"Words and terms used in the singular shall include the plural and the plural
shall include the singular as the context may require." So the definition of "Note" as "the
promissory note dated January 16, 2007," is, as the district court found, "a gateway to
including lending under the other notes executed that day." And the district court
correctly found that the Weigels' mortgage bears a handwritten reference to all six notes.
When one considers the multiple notes signed that same date, along with the mortgage,
ambiguity is apparent.
The language of the guaranty, viewed with its related documents, shows that the
guaranty was ambiguous with regard to its scope. So despite the guaranty's unambiguous
language that it was continuing, that same guaranty limits Gary's share of indebtedness to
a single promissory note and to a specific dollar amount. The guaranty may be
understood to reach two or more possible meanings. The district court did not err in
finding the guaranty ambiguous.
Did the District Court Err in Determining the Guaranty was Restricted?
CoreFirst next contends that the district court erred in determining that the
commercial guaranty was restricted to the sole loan it expressly referenced. It held Gary's
guaranty applied solely to Note 9681 and his liability was not to exceed the amount of
$250,000. We find the record supports that decision.
"A contract of guaranty is to be construed, as are other contracts, according to the
intention of the parties as determined by a reasonable interpretation of the language used
in the light of the attendant circumstances. After the intention of the parties or the scope
of the guarantor's undertaking has been determined by application of general rules of
construction, the obligation is strictly construed and may not be extended by construction
or implication. Iola State Bank v. Biggs, 233 Kan. 450, Syl. ¶¶ 1, 2, 662 P.2d 563 (1983);
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Trego WaKeeney State Bank v. Maier, 214 Kan. 169, Syl. ¶¶ 2, 3, 519 P.2d 743 (1974)."
Overland Park Savings & Loan Ass'n, 243 Kan. at 738.
See also 38 C.J.S., Guaranty § 40.
Besides the fact that Gary's guaranty references only promissory Note 9681, the
attendant circumstances and the related documents support the district court's holding that
the guaranty applied solely to Note 9681 and was not to exceed the amount of $250,000.
Parol evidence supports the district court's finding
Generally, the parol evidence rule provides that oral testimony of a prior
agreement cannot be used to vary the terms of a written instrument. See State v. Hood,
255 Kan. 228, 236, 873 P.2d 1355 (1994).
"[T]he parol evidence rule prevents a party to a written contract from attempting to vary
its terms by relying on oral representations, be they characterized as negotiations or
promises, made in discussions leading up to the agreement. A written contract, in most
instances, subsumes earlier oral discussions or agreements. [Citation omitted.]" Bouton v.
Byers, 50 Kan. App. 2d 35, 46, 321 P.3d 780 (2014).
But when a court finds the written contract language is ambiguous, parol evidence
may be used to determine the intent of the parties. Waste Connections of Kansas, Inc. v.
Ritchie Corp., 296 Kan. 943, Syl. ¶ 3, 298 P.3d 250 (2013). And, "there is a wide
distinction between an attempt to contradict the terms of a written instrument and to
explain the circumstances and conditions under which it was executed and delivered." In
re Estate of Goff, 191 Kan. 17, 29, 379 P.2d 225 (1963). "[T]he parol evidence rule is not
violated when the evidence tends to show the relation of the parties and the circumstances
under which the contract was executed." Miles Excavating, Inc. v. Rutledge Backhoe &
Septic Tank Services, Inc., 23 Kan. App. 2d 82, 84, 927 P.2d 517 (1996) (citing Goff, 191
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Kan. at 29). Such is the case here. Because the intent of the parties was not clear in the
guaranty, the district court properly considered parol evidence in making its decision.
We summarize the testimony here. KMCC builds and sells houses. KMCC sought
to purchase 53 real estate lots—the Sutter Woods lots in Junction City. But those lots
were unavailable until around six to eight months after KMCC wanted to purchase them
and had received pre-approval from the bank to do so. Twelve lots known as the Deer
Creek lots were more immediately available, but CoreFirst told Boling that KMCC would
need additional collateral to secure them. Although Boling had sufficient collateral to get
loans for the Sutter Woods lots, he needed other collateral for the Deer Creek lots.
So Boling contacted Gary about investing. The bank then drafted promissory Note
9681 for $150,000, which Boling understood would be used for "one spec house" in the
Deer Creek area. Later, Note 9681 was renewed into loan 2327. Boling understood that
Gary was assuming a debt only to secure the Deer Creek lots. Boling testified that he
thought Gary was responsible for only Note 9681 and nothing else. Meyers testified,
however, that he met with both Boling and Gary and explained that Gary would be held
liable for all of KMCC's debts. Yet Boling contradicted that testimony and stated he
would not have asked Gary to be responsible for all of KMCC's debts.
Likewise, Gary testified that he did not recall the meeting Meyers described, that
he thought he had agreed to secure a note for up to $250,000, and that he would not have
guaranteed any other note. He testified that he did not read the guaranty, despite having
signed the guaranty's acknowledgement that he had read its terms. And Gary was not
represented by counsel. He thought he was signing a contract that guaranteed payment for
only one note and that is what was represented to him. But Gary acknowledged that his
basic understanding of the deal was that his guaranty would ensure KMCC had enough
collateral to obtain all 12 Deer Creek lots. And he did not know that the note referenced
in his guaranty was to be used for a spec house.
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Gary's misunderstanding of the purpose of his guaranty does not contradict the
evidence that the parties intended the guaranty to apply only to Note 9681. The district
court recognized this in its memorandum decision. In this regard, the district court also
found that extending the intended purpose of the guaranty based on Gary's initial
understanding would flout the strict construction of the guaranty as it was written with
reference to a single note:
"To extend the Weigel guaranty beyond the lending had on January 16, 2007, to other
debt exclusively assigned to the Deer Creek Addition, would extend the guaranty by
implication only based on Mr. Weigel's initial understanding of the purpose for seeking
his guaranty was to purchase twelve lots in Deer Creek, a purpose or disbursement over
which he had no power to control or some internal conduct of the Bank for which he,
again, had no control."
Gary's testimony in relation to the date and the amount listed on Note 9681 supports the
district court's finding that the parties intended the scope of the guaranty to be limited to
Note 9681 only.
Only one note in the record—Note 9681—was signed on the date written at the
top of the guaranty—January 16, 2007. But that note was not in the amount of
$250,000—it was $150,000. Still, the $250,000 that Gary understood he would be liable
for is the amount listed in his guaranty. Meyers testified that together with Note 9681,
five other notes were signed on the same date. Those notes were not given to the Weigels'
counsel before trial but their respective numbers were listed on the Weigels' mortgage.
And although this could show that the parties intended for the mortgage to be tied to
those other notes, the sum of the principal amounts of those notes far exceeds the specific
amount of $250,000 listed in Gary's guaranty. And the principal amounts of the other
promissory notes presented on appeal are $57,258.65, $114,513.65, $121,499.75, and
$390,000. From this, it can at least be said that $150,000 is closest numerically to the
$250,000 amount listed in the guaranty. And the guaranty references only Note 9681 and
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specified that Gary's debt was limited to $250,000. Meyers agreed that Gary's guaranty
was purposefully drafted to reference only one note—Note 9681. Yet Meyers testified
that CoreFirst intended to require that Gary be held liable for all already pre-approved
KMCC debts even though CoreFirst already had collateral and guaranties for those debts.
Comparison of Bolings' guaranties to Gary's guaranty supports the district court's
finding
The district court compared Bolings' guaranties to Gary's guaranty and found them
distinctively different. It concluded: "If the Bank truly intended the broadest construction
for indebtedness to apply, it knew how to do so, but did not. This can be ascertained by a
comparison with the relevant language used in the other individual guaranties obtained
from each of Mr. and Mrs. Boling."
We agree that the differences between Bolings' guaranties and Gary's guaranty are
substantial. Both of the Bolings' guaranties were signed on the same day as Gary's. The
Bolings' guaranties, like Gary's, include a handwritten "9681" and "1-16-07" on the top
left of the first page. They also include "Loan No . . . 9681 C" printed on the top of every
subsequent page. And much of the stock language is the same.
But the first sentence of Gary's guaranty states that "Guarantor absolutely and
unconditionally guarantees full and punctual payment and satisfaction of Guarantor[']s
Share of the Indebtedness of Borrower to Lender and the performance and discharge of
all Borrower[']s obligations under the Note and the Related Documents." (Emphasis
added.) In contrast, the first sentence of the Bolings' guaranties states that "Guarantor
absolutely and unconditionally guarantees full and punctual payment and satisfaction of
the Indebtedness of Borrower to Lender and the performance and discharge of all
Borrower[']s obligations under the Note and the Related Documents." (Emphasis added.)
So the Bolings' primary promise to pay was quite different than Gary's.
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Later, Gary's "CONTINUING GUARANTY" section states:
"THIS IS A CONTINUING GUARANTY UNDER WHICH GUARANTOR AGREES
TO GUARANTEE THE FULL AND PUNCTUAL PAYMENT[,] PERFORMANCE[,]
AND SATISFACTION OF THE GUARANTOR[']S SHARE OF INDEBTEDNESS OF
BORROWER TO LENDER NOW EXISTING OR HEREAFTER ARISING OR
ACQUIRED ON A CONTINUING BASIS."
In contrast, the Bolings' guaranties "CONTINUING GUARANTY" provision
states:
"THIS IS A CONTINUING GUARANTY UNDER WHICH GUARANTOR AGREES
TO GUARANTEE THE FULL AND PUNCTUAL PAYMENT[,] PERFORMANCE[,]
AND SATISFACTION OF THE INDEBTEDNESS OF BORROWER TO LENDER
NOW EXISTING OR HEREAFTER ARISING OR ACQUIRED ON A CONTINUING
BASIS."
The broader scope of the Bolings' promise to pay is here repeated—the Bolings
guaranteed payment of KMCC's indebtedness to CoreFirst, while Gary guaranteed
payment of his share of KMCC's indebtedness to CoreFirst.
Gary's guaranty tells us what his share of KMCC's indebtedness to CoreFirst was.
It twice defines the term "GUARANTOR[']S SHARE OF THE INDEBTEDNESS." First,
as stated on page one: "The words 'Guarantor[']s Share of the Indebtedness' as used in
this Guaranty mean an amount not to exceed Two Hundred Fifty Thousand & 00/100
Dollars ($250[,]000[.]00) of all the principal amount interest thereon to the extent not
prohibited by law and all collection costs[,] expenses[,] and attorney fees whether or not
there is a lawsuit and if there is a lawsuit any fees and costs for trial and appeals[.]"
Second, on page three, Gary's guaranty defines that same term to mean "[Guarantor's]
indebtedness to Lender as more particularly described in this Guaranty." The more
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particular description in the guaranty is the definition on page one, which limits Gary's
guaranty to a maximum of $250,000. Thus, the amount of Gary's guaranty was restricted.
In contrast, the Bolings' guaranties do not use or define the term "Guarantor[']s
Share of Indebtedness." The Boling guaranties underscore the difference by concluding
the first paragraph with this expansive statement: "Under this Guaranty Guarantor[']s
liability is unlimited and Guarantor[']s obligations are continuing[.]" (Emphasis added.)
In contrast, Gary's guaranty concludes the first paragraph by omitting that italicized
language: "Under this Guaranty Guarantor[']s obligations are continuing[.]" This, too,
shows Gary's liability is not unlimited.
The Bolings' guaranties do not refer to a specific note or amount. Instead, they
expansively state: "Note means and includes without limitation all of Borrower[']s
promissory notes and/or credit agreements evidencing Borrower[']s loan obligations in
favor of Lender." But Gary's guaranty defined "Note" restrictively as "the promissory
note dated January 16[,] 2007 in the original amount of $250,000[.]00 from Borrower to
Lender." The differences between the Bolings' guaranties and Gary's guaranty are stark
and compel us to interpret them differently.
Because the guaranty was ambiguous, the district court properly considered parol
evidence and found Gary's guaranty to be restricted. The district court properly found that
Gary's guaranty can be applied only to the balance plus interest due under Note 9681,
now 2327, limited to $250,000.
Affirmed.
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