Opinion
NO. 03-15-00506-CV
06-23-2017
Eugene Miles Prentice, Richard M. Spaziano, and Carl William Pollock, Appellants v. Frost Bank, Appellee
FROM THE DISTRICT COURT OF TRAVIS COUNTY, 126TH JUDICIAL DISTRICT
NO. D-1-GN-13-000711 , HONORABLE GISELA D. TRIANA, JUDGE PRESIDING MEMORANDUM OPINION
The focus of this appeal is four guaranty agreements that were executed pursuant to the same loan transaction. At issue is whether these agreements, as they interact with each other, give rise to a latent ambiguity that should be construed in favor of the guarantors to absolve them of liability. Concluding otherwise, the district court rendered final summary judgment for the lender and denied a cross-motion the guarantors had filed, and the guarantors challenge these rulings on appeal. Upon applying well-established rules of contract construction, we agree with the district court and affirm.
BACKGROUND
The basic events leading up to the underlying litigation are undisputed. National Insurance Partners, Inc. (NIP) borrowed $1,000,000 from Frost National Bank (Frost) in 2007. NIP signed a promissory note (the 2007 Note) in connection with the transaction, and the appellants, Carl William Pollock, Eugene Miles Prentice, and Richard M. Spaziano, plus a fourth individual who is not a party to this appeal, Bruce W. Ling, each signed a separate Commercial Guaranty (i.e., a "Guaranty Agreement") to secure the debt evidenced by the 2007 Note. The 2007 Note and the Guaranty Agreements are each dated May 22, 2007, and each Guaranty Agreement contains terms identical to the others. Pertinent to this appeal, each Guaranty Agreement provides that the "Guarantor absolutely and unconditionally guarantees full and punctual payment and satisfaction of Guarantor's Share of the Indebtedness of [NIP] to [Frost]," which is defined as "50.000% of all the principal amount, interest thereon to the extent not prohibited by law," and related collection costs, expenses, and reasonable attorney's fees.
Appellants' cross-motion for summary judgment acknowledged that "this case . . . involves little, if any, in the way of disputed facts" but instead involves "disputed legal issues." Most of the undisputed facts are based on the guaranty agreements and related documentation submitted by each of the parties in support of their respective motions for summary judgment. The remaining undisputed facts, which relate to NIP Partners, Inc.'s bankruptcy and to payments by guarantor Bruce Ling, were established through affidavits of a Frost senior Vice President (submitted by Frost in support of its motion) and through an affidavit of Mr. Ling attaching his December 2012 release agreement with Frost (submitted by appellants in support of their motion).
Pollock was NIP's President. Appellants represent that Prentice, Spaziano, and Ling were neither officers, directors, nor employees of NIP.
NIP and Frost later agreed to modify the loan and, in connection therewith, NIP signed a promissory note dated October 16, 2009 (the 2009 Note) in the principal amount of $1.292 million, with a maturity date of October 16, 2012. NIP subsequently declared bankruptcy and defaulted on its payment obligations under the 2009 Note. As of October 2012, the debt outstanding totaled $712,554.68, including principal, accrued interest, and attorney's fees. Frost made demand on each of the four guarantors to pay $356,277.34, a figure representing 50 percent of the $712,554.68 figure.
Pollock signed the 2009 Note on behalf of NIP.
In December 2012, Frost and Ling agreed to a settlement pursuant to which Ling paid Frost $358,684.32 (apparently representing the $356,277.34 amount demanded, plus interest accruing in the meantime) as satisfaction of his "entire liability and obligations under the Guaranty." In addition to Ling's payment, the trustee overseeing NIP's bankruptcy made a one-time payment of $66,281.49 toward the 2009 Note. Frost sued the remaining guarantors (i.e., appellants) and sought a joint-and-several recovery from them of the "Guarantor's Share of the Indebtedness as defined in the Guaranty Agreements." Appellants answered with general denials and also asserted a "partial payment" affirmative defense based on the payments previously made by Ling and NIP.
Prentice and Spaziano filed a joint answer, and Pollock separately answered. Each answer asserted an affirmative defense alleging that "all, or part, of the amounts [Frost] may otherwise be lawfully entitled to ha[ve] been paid by . . . [NIP], and/or . . . [Ling]."
As we will detail below, the parties joined issue as to the meaning of the "Guarantor's Share of the Indebtedness of [NIP] to [Frost]," and eventually presented that issue for judicial resolution through cross-motions for summary judgment. Frost's motion sought to adjudicate each appellant liable for the full amount of each one's "Guarantor's Share of the Indebtedness"—i.e., a 50 percent share of such indebtedness—until the full amount due under the 2009 Note had been paid in full. Appellants' cross-motion sought to disprove an "essential element" of Frost's claim, "the amount of liability," based on appellants' argument that the "Guarantor's Share of the Indebtedness" is a collective liability for no more than 50 percent of the total indebtedness, which Ling had already paid.
As in its prior demand, Frost represented that each "Guarantor's Share of the Indebtedness" was $356,277.34.
Frost's motion was brought as both a traditional and a no-evidence motion. The motion we term appellant's "cross-motion" was more precisely styled as a cross-motion for summary judgment (pursued by Prentice and Spaziano), and as a motion for summary judgment (pursued by Pollock), and sought summary judgment on traditional grounds. In their cross-motion, Prentice and Spaziano also sought reconsideration of a prior order (signed by a visiting judge) that had denied a motion for summary judgment previously filed by Prentice and Spaziano on the same grounds.
The district court rendered a final summary judgment granting Frost's motion, denying appellants' cross-motion, and ordering that Frost recover from each appellant the sum of $356,277.34 (the "Guarantor's Share of the Indebtedness" as described in Frost's motion), plus $4,194.26 in accrued pre-judgment interest, costs, and fees (in other words, a total of $360,471.60 from each appellant). However, the judgment also provides that "once [Frost] receives or collects sums from any one or more of the above [appellants] equal to 'Guarantor's Share of the Indebtedness'"—i.e., the sum of "$356,277.34 plus 100% of accrued pre-judgment and post-judgment interest, collection costs and reasonable attorney's fees for trial and appeal since the date 'Guarantor's Share of the Indebtedness' was determined"—"then this judgment shall be deemed to be satisfied in full."
The district court granted Frost's motion without distinguishing between the traditional and no-evidence grounds asserted in the motion.
More specifically, the judgment awards Frost, from each of the appellants, "the sum of $360,471.60, which sum includes 'Guarantor's Share of the Indebtedness' as described in Plaintiff's Motion of $356, 277.34 and 50% of accrued pre-judgment interest, collection costs and reasonable attorney's fees through June 22, 2015 of $8,388.52 which equals $4,194.26, plus 50% of the interest accruing on the $360,471.60 calculated at the rate of eighteen percent (18.0%) per annum from the date of judgment until paid, plus 50% of reasonable attorney's fees of at least $7,500.00 for each successive appeal, and plus 50% of all costs of court incurred herein."
Prentice and Spaziano are represented by counsel and Pollock is acting pro se.
ANALYSIS
As both sides acknowledge, this case is amenable to summary judgment because it hinges on the proper interpretation of the Guaranty Agreements rather than on a dispute about the material facts. We review the parties' cross-motions for summary judgment de novo and render the judgment that the trial court should have rendered. "[E]ach party bears the burden of establishing that it is entitled to judgment as a matter of law."
Appellants do not seek a remand of the summary judgment rendered for Frost but instead seek a reversal and rendition of "the judgment that the trial court should have entered," i.e., a judgment on the grounds raised in their cross-motion for summary judgment.
See, e.g., City of Garland v. Dallas Morning News, 22 S.W.3d 351, 356 (Tex. 2000) (plurality op.) ("Because the parties do not dispute the relevant facts, this is a proper case for summary judgment." (citing Gaines v. Hamman, 358 S.W.2d 557, 563 (Tex. 1962))); Guynes v. Galveston Cty., 861 S.W.2d 861, 862 (Tex. 1993) ("As the parties dispute not the facts but the legality of the Commissioners Court's action, we review the cross-motions for summary judgment by determining all legal questions presented." (citing Jones v. Strauss, 745 S.W.2d 898, 900 (Tex. 1988) (orig. proceeding))).
See, e.g., Colorado Cty. v. Staff, 510 S.W.3d 435, 444 (Tex. 2017) ("When both parties move for summary judgment and the trial court grants one motion and denies the other, . . . we determine all issues presented and render the judgment the trial court should have rendered." (citing Merriman v. XTO Energy, Inc., 407 S.W.3d 244, 248 (Tex. 2013))); City of Garland, 22 S.W.3d at 356 ("When the trial court grants one motion and denies the other, the reviewing court should determine all questions presented." (citations omitted)).
City of Garland, 22 S.W.3d at 356 (citing Guynes, 861 S.W.2d at 862); see Tex. R. Civ. P. 166a(c) (requiring rendition of summary judgment if "there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law").
Appellants raise three issues, the latter two of which are dispositive. In those issues, appellants contend that, respectively, the district court erred in rendering a traditional summary judgment in Frost's favor and in denying appellants' cross-motion for summary judgment. Both issues hinge on what appellants have characterized as the "determinative question" underlying the parties' competing traditional summary-judgment motions—whether, under the terms of the Guaranty Agreements, each guarantor (and, therefore, each appellant) is individually liable for 50 percent of the total debt, such that the four guarantors' cumulative liability would be 200 percent of the total debt, or conversely, whether the appellants are collectively liable for 50 percent of such debt, such that all four guarantors' liability was extinguished by Ling's payment of 50 percent of the total debt. Reading the Guaranty Agreements together, appellants insist, gives rise to a latent ambiguity that, construed in their favor, renders the latter scenario applicable (i.e., a collective liability), and that Ling's payment satisfied this collective liability in full. Predicated on that conclusion, appellants maintain that they have negated any further liability to Frost, entitling them to a summary judgment that Frost take nothing on its claims against them.
In their first issue, appellants contend that the district court erred in rendering a no-evidence summary judgment for Frost on its affirmative claim for relief. While we ordinarily address the no-evidence grounds first in a combined traditional and no-evidence motion, see Merriman, 407 S.W.3d at 248, in this case we begin by addressing what appellants have characterized as the "determinative" question that underlies the parties' traditional summary-judgment motions. Our ultimate conclusion that Frost asserted meritorious and dispositive traditional grounds renders unnecessary our consideration of appellants' first issue. See id. ("When the trial court does not specify the grounds for its ruling, a summary judgment must be affirmed if any of the grounds on which judgment is sought are meritorious." (citation omitted)); Bennett v. Reynolds, No. 03-12-00568-CV, 2014 Tex. App. LEXIS 9345, at *29 (Tex. App.—Austin Aug. 22, 2014, pet. denied) (mem. op.) ("[W]e may affirm the summary judgment based on any of the grounds appellees presented in their motions, if meritorious, whether they be traditional or no-evidence grounds.").
"To succeed on a traditional summary judgment motion, the 'movant must establish that there is no genuine issue of material fact so that the movant is entitled to judgment as a matter of law.'" Katy Venture, Ltd. v. Cremona Bistro Corp., 469 S.W.3d 160, 163 (Tex. 2015) (per curiam) (quoting Western Invs., Inc. v. Urena, 162 S.W.3d 547, 550 (Tex. 2005)). "'When a movant meets that burden of establishing each element of the claim or defense on which it seeks summary judgment, the burden then shifts to the non-movant to disprove or raise an issue of fact as to at least one of those elements.'" Id. (quoting Amedisys, Inc. v. Kingwood Home Health Care, LLC, 437 S.W.3d 507, 511 (Tex. 2014)). "In deciding which party should prevail in this situation, '[w]e examine the record in the light most favorable to the non-movant, indulge every reasonable inference against the motion and likewise resolve any doubts against it.'" Id. (quoting Henkel v. Norman, 441 S.W.3d 249, 250 (Tex. 2014) (per curiam)).
The elements of a breach-of-guaranty claim are: (1) the existence and ownership of the guaranty; (2) the performance of the terms of the underlying contract; (3) the occurrence of the condition on which liability is based, and (4) the guarantor's failure or refusal to perform the promise. See, e.g., Stone v. Midland Multifamily Equity REIT, 334 S.W.3d 371, 378 (Tex. App.—Dallas 2011, no pet.). To the extent the appellants' liability is a collective liability under the terms of the Guaranty Agreements, Ling's payment in satisfaction of this liability would negate the fourth element of Frost's claim against each of the remaining guarantors, i.e., that they failed or refused to perform their promise. Cf. Pham v. Mongiello, 58 S.W.3d 284, 288 (Tex. App.—Austin 2001, pet. denied) ("A guarantor's liability on a debt is measured by the principal's liability unless the guaranty expressly sets out a more limited . . . liability." (emphasis added)).
It is well settled in Texas that guaranty agreements must be "strictly construed" in the sense of not being extended beyond their precise unambiguous terms. We "construe unambiguous guaranty agreements as any other contract," but uncertainties in meaning are "'given a construction which is most favorable to the guarantor.'" We therefore begin by examining the Guaranty Agreements to ascertain the terms to which the appellants agreed. The following terms are material to the dispute:
See, e.g., Vastine v. Bank of Dall., 808 S.W.2d 463, 464-65 (Tex. 1991) (per curiam); McKnight v. Virginia Mirror Co., 463 S.W.2d 428, 430 (Tex. 1971); see also U.S. Foodservice, Inc. v. Winfield Project Mgmt., LLC, No. 03-14-00405-CV, 2016 Tex. App. LEXIS 4075, at *15-16 (Tex. App.—Austin Apr. 20, 2016, no pet.) (mem. op.) (citing Vastine, 808 S.W.2d at 464-65; McKnight, 463 S.W.2d at 430).
Moayedi v. Interstate 35/Chisam Rd., L.P., 438 S.W.3d 1, 7 (Tex. 2014) ("Courts construe unambiguous guaranty agreements as any other contract." (citing Coker v. Coker, 650 S.W.2d 391, 393-94 (Tex. 1983))); see McKnight, 463 S.W.2d at 430 ("After the terms of a guaranty agreement have been ascertained, the rule of strictissimi juris applies, meaning that the guarantor is entitled to have his agreement strictly construed and that it may not be extended by construction or implication beyond the precise terms of his contract." (citations omitted) (emphasis added)). The construction of an unambiguous contract is a question of law, Kachina Pipeline Co. v. Lillis, 471 S.W.3d 445, 449 (Tex. 2015) (citing Tawes v. Barnes, 340 S.W.3d 419, 425 (Tex. 2011)), as is the question of whether a contract is ambiguous. See id. (citing Dynegy Midstream Servs., Ltd. P'ship v. Apache Corp., 294 S.W.3d 164, 168 (Tex. 2009)); Progressive Cty. Mut. Ins. Co. v. Kelley, 284 S.W.3d 805, 808 (Tex. 2009) (per curiam) (citing, inter alia, J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 229 (Tex. 2003)); Coker, 650 S.W.3d at 394 (citing R & P Enterprises v. LaGuarta, Gavrel & Kirk, Inc., 596 S.W.2d 517, 518 (Tex. 1980)).
Moayedi, 438 S.W.3d at 7 (quoting Coker, 650 S.W.2d at 394 n.1); see Pham, 58 S.W.3d at 288 ("If a guaranty is ambiguous and susceptible to two reasonable interpretations, courts should use the interpretation that favors the guarantor." (citations omitted)). But see Lopez v. Munoz, Hockema & Reed, L.L.P., 22 S.W.3d 857, 861 (Tex. 2000) ("Ambiguity does not arise simply because the parties advance conflicting interpretations of the contract; rather, for an ambiguity to exist, both interpretations must be reasonable." (citing Columbia Gas Transmission Corp. v. New Ulm Gas, Ltd., 940 S.W.2d 587, 589 (Tex. 1996); National Union Fire Ins. Co. v. CBI Indus., Inc., 907 S.W.2d 517, 520 (Tex. 1995) (per curiam))); Pham, 58 S.W.3d at 288 ("[T]he fact that the parties to a contract disagree over the interpretation of the contract does not necessarily render it ambiguous." (citation omitted)).
See U.S. Foodservice, Inc., 2016 Tex. App. LEXIS 4075, at *19 ("Our analysis begins by examining the text of the Personal Guaranty to ascertain the terms to which [the guarantor] agreed." (citing Moayedi, 438 S.W.3d at 7; McKnight, 463 S.W.2d at 430; Barnes v. Old Am. Mut. Fire Ins. Co., No. 03-07-00404-CV, 2010 Tex. App. LEXIS 1353, at *8 (Tex. App.—Austin Feb. 26, 2010, no pet.) (mem. op.))). Our "'primary concern . . . is to ascertain the true intentions of the parties as expressed in the instrument,'" Moayedi, 438 S.W.3d at 7 (quoting J.M. Davidson , 128 S.W.3d at 229), and in doing so we must "'examine and consider the entire writing in an effort to harmonize and give effect to all the provisions of the contract so that none will be rendered meaningless,'" id. (quoting Seagull Energy E&P, Inc. v. Eland Energy, Inc., 207 S.W.3d 342, 345 (Tex. 2006)). "[U]nless the agreement shows the parties used a term in a technical or different sense," we give terms "their plain, ordinary, and generally accepted meaning." Id. (citing Heritage Res., Inc. v. NationsBank, 939 S.W.2d 118, 121 (Tex. 1996)).
GUARANTEE OF PAYMENT AND PERFORMANCE. For good and valuable consideration, Guarantor absolutely and unconditionally guarantees full and punctual payment and satisfaction of Guarantor's Share of the Indebtedness of [NIP] to [Frost], and the performance and discharge of all [of NIP's] obligations under the Note and the Related Documents. This is a guaranty of payment and performance and not of collection, so [Frost] can enforce this Guaranty against Guarantor even when [Frost] has not exhausted [its] 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. . . .
INDEBTEDNESS. The word "Indebtedness" as used in this Guaranty means all of the principal amount outstanding from time to time and at any one or more times, accrued unpaid interest thereon and all collection costs and legal expenses related thereto permitted by law, [Frost's] reasonable attorneys' fees, arising from any and all debts, liabilities and obligations that [NIP] individually or collectively or interchangeably with others, owes or will owe [Frost] under the Note and Related Documents and any renewals, extensions, modifications, refinancings, consolidations and substitutions of the Note and Related Documents.
If [Frost] presently holds one or more guaranties, or hereafter receives additional guaranties from Guarantor, [Frost's] rights under all guaranties shall be cumulative. This Guaranty shall not (unless specifically provided below to the contrary) affect or invalidate any such other guaranties. Guarantor's liability will be Guarantor's aggregate liability under the terms of this Guaranty and any such other unterminated guaranties.
GUARANTOR'S SHARE OF THE INDEBTEDNESS. The words "Guarantor's Share of the Indebtedness" as used in this Guaranty mean 50.000% of all the principal amount, interest thereon to the extent not prohibited by law, and all collection costs, expenses and [Frost's] reasonable attorneys' fees whether or not there is a lawsuit, and if there is a lawsuit, any fees and costs for trial and appeals.
[Frost] shall determine Guarantor's Share of the Indebtedness when [Frost] makes demand on Guarantor. After a determination, Guarantor's Share of the Indebtedness will only be reduced by sums actually paid by Guarantor under this Guaranty, but will not be reduced by sums from any other source including, but not limited to, sums realized from any collateral securing the Indebtedness or this Guaranty, or payments by anyone other than Guarantor, or reductions by operation of law, judicial order or equitable principles. [Frost] has the sole and absolute discretion to determine how sums shall be applied among guaranties of the Indebtedness. . . .
DURATION OF GUARANTY. This Guaranty . . . will continue in full force until all the Indebtedness 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. Release of any other guarantor or termination of any other guaranty of the Indebtedness shall not affect the liability of Guarantor under this Guaranty. A revocation [Frost] receives from any one or more Guarantors shall not affect the liability of any remaining Guarantors under this Guaranty. . . . Guarantor's liability . . . shall terminate only upon (A) termination in writing by [NIP] and [Frost] of the line of credit, (B) payment of the Indebtedness in full in legal tender, and (C) payment in full in legal tender of all of Guarantor's other obligations under this Guaranty.
GUARANTOR'S AUTHORIZATION TO LENDER. Guarantor authorizes [Frost], without notice or demand and without lessening or otherwise affecting Guarantor's liability under this Guaranty, from time to time: . . . (D) to release, substitute, agree not to sue, or deal with any one or more of [NIP's] sureties, endorsers, or other guarantors on any terms or in any manner [Frost] may choose. . .
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of this Guaranty: . . .
Interpretation. In all cases where there is more than one . . . Guarantor, then all words used in this Guaranty in the singular shall be deemed to have been used in the plural where the context and construction so require; and . . . when this Guaranty is executed by more than one Guarantor, the word[] . . . "Guarantor" . . . shall mean all and any one or more of them. . . .
Notices. . . . Unless otherwise provided or required by law, if there is more than one Guarantor, any notice given by [Frost] to any Guarantor is deemed to be notice given to all Guarantors. . . .
DEFINITIONS. The following capitalized words and terms shall have the following meanings when used in this Guaranty. . . . Words and terms used in the singular shall include the plural, and the plural shall include the singular, as the context may require. . . .
Guarantor. The word "Guarantor" means everyone signing this Guaranty, including without limitation [the signing party], and in each case, any signer's successors and assigns.
Guarantor's Share of the Indebtedness. The words "Guarantor's Share of the Indebtedness" mean Guarantor's indebtedness to [Frost] as more particularly described in this Guaranty.
Guaranty. The word "Guaranty" means this guaranty from Guarantor to [Frost].
Indebtedness. The word "Indebtedness" means [NIP's] indebtedness to [Frost] as more particularly described in this Guaranty. . . .
Related Documents. The words "Related Documents" mean all promissory notes, credit agreements, loan agreements, . . . guaranties, . . . and all other instruments, agreements and documents, whether now or hereafter existing, executed in connection with the Indebtedness. . . .
EACH UNDERSIGNED GUARANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS GUARANTY AND AGREES TO ITS TERMS.
Each Guaranty Agreement "covers a revolving line of credit" and provides that such "GUARANTY SHALL BE OPEN AND CONTINUOUS UNTIL THE INDEBTEDNESS IS PAID IN FULL AND [FROST] DECLARES THAT THE LINE OF CREDIT IS FULLY SATISFIED, PERFORMED AND TERMINATED."
Appellants contend that the Guaranty Agreements should be construed together as a single agreement, and upon doing so, a latent ambiguity arises regarding the meaning of the term "Guarantor's Share of the Indebtedness." They invoke the rule that uncertainties in meaning are construed in favor of the guarantor and urge that summary judgment should therefore have been rendered in their favor rather than for Frost.
See, e.g., In re Prudential Ins. Co. of Am., 148 S.W.3d 124, 135 (Tex. 2004) (orig. proceeding) ("[A]greements executed at the same time, with the same purpose, and as part of the same transaction, are construed together." (citing Jim Walter Homes, Inc. v. Schuenemann, 668 S.W.2d 324, 327 (Tex. 1984))); DeWitt Cty. Elec. Co-op., Inc. v. Parks, 1 S.W.3d 96, 102 (Tex. 1999) ("Under generally accepted principles of contract interpretation, all writings that pertain to the same transaction will be considered together, even if they were executed at different times and do not expressly refer to one another. . . . [H]owever, . . . this rule is simply a device for ascertaining and giving effect to the intention of the parties and cannot be applied arbitrarily." (citations omitted)).
A latent ambiguity "arises 'when a contract which is unambiguous on its face is applied to the subject matter with which it deals and an ambiguity appears by reason of some collateral matter.'" Kelley, 284 S.W.3d at 807 (quoting National Union Fire Ins. Co., 907 S.W.2d at 520); see id. ("Here, the surrounding circumstances—the existence of . . . two documents—creates a latent ambiguity as to the intent of the parties."). "When a contract contains an ambiguity, the granting of a motion for summary judgment is improper because the interpretation of the instrument becomes a fact issue." Coker, 650 S.W.2d at 394 (citation omitted); accord Kelley, 284 S.W.3d at 808-09 ("After reviewing the face of the documents and extrinsic evidence, we hold that the documents are ambiguous, and therefore, a fact finder should resolve the meaning." (citing J.M. Davidson, 128 S.W.3d at 230-31; Coker, 650 S.W.2d at 394)).
See, e.g., Moayedi, 438 S.W.3d at 7 (citing Coker, 650 S.W.2d at 394 n.1); Pham, 58 S.W.3d at 288.
Appellants point to the "interpretation" clause in the Guaranty Agreements as the source of the purported ambiguity. As described above, this clause provides that, "[i]n all cases where there is more than one . . . Guarantor, then all words used in this Guaranty in the singular shall be deemed to have been used in the plural where the context and construction so require[.]" Appellants contend that applying this clause to the term "Guarantor's [singular] Share of the Indebtedness" could render the term as meaning "Guarantors' [plural] Share of the Indebtedness," thereby giving rise, as they see it, to an ambiguity as to whether the term "Guarantor's Share" refers to an individual obligation, versus a collective obligation. Under this view, the purported ambiguity would require this Court to interpret the Agreements in favor of the guarantors, i.e., the latter (collective obligation) interpretation.
(Emphasis added.)
Moayedi, 438 S.W.3d at 7 (citing Coker, 650 S.W.2d at 394 n.1); Pham, 58 S.W.3d at 288.
Frost disputes that the Guaranty Agreements are ambiguous. Under Frost's interpretation, the Guaranty Agreements unambiguously provide that (1) each Guarantor is liable for a 50 percent share of the debt outstanding, and (2) Frost has a cumulative right to enforce each Guaranty against the signing Guarantor (regardless of any other guarantor's payment in satisfaction of his own individual share) until the underlying debt is paid in full. Frost relies principally on what it terms as the "cumulative remedy" clause of each Guaranty Agreement, pursuant to which its "rights under all guaranties shall be cumulative," and pursuant to which the guaranty being signed (i.e., "this Guaranty") "shall not . . . affect or invalidate any such other guaranties." Under Frost's interpretation, Ling's payment in satisfaction of his individual Guaranty Agreement did not "affect or invalidate" the other guarantors' respective duties under their own individual Guaranty Agreements.
Frost refers to the ordinary meaning of "cumulative," see, e.g., The American Heritage Dictionary of the English Language 443 (5th ed. 2011) (defining "cumulative," when used as an adjective, as "[i]ncreasing or enlarging by successive addition"), and contends that its remedies "against the various individual guarantors" are "unaffected by the presence of other guarantors."
Frost notes that each Guaranty Agreement capitalizes the terms "Guaranty" and "Guarantor" when referenced in connection with "this Guaranty" but does not capitalize these terms when referenced in connection with "any other guaranty." Given that the terms "Guarantor" and "Guaranty" are capitalized in the "interpretation" clause on which the appellants rely—i.e., "[i]n all cases where there is more than one . . . Guarantor, then all words used in this Guaranty in the singular shall be deemed to have been used in the plural where the context and construction so require"—Frost contends that the "interpretation" clause refers "only to the parties who actually signed that particular Guaranty Agreement, and not to any other guaranty instruments that Frost might also hold in connection with the Note." Frost urges that the sole purpose of the "interpretation" clause is to accommodate more than one signatory to a single Guaranty Agreement, in which case each signatory becomes a "Guarantor" as defined by such Agreement. Under Frost's view, the "interpretation" clause applies only where more than one guarantor has signed a common guaranty instrument, as opposed to this case, in which multiple guarantors each signed a separate Guaranty Agreement.
For example, (i) "[t]he following capitalized words and terms shall have the following meanings when used in this Guaranty"; (ii) "[t]he word 'Guarantor' means everyone signing this Guaranty, including without limitation [the signing party], and in each case, any signer's successors and assigns"; (iii) "[t]he words 'Guarantor's Share of the Indebtedness' mean Guarantor's indebtedness to [Frost] as more particularly described in this Guaranty"; and (iv) "[t]he word 'Guaranty' means this guaranty from Guarantor to [Frost]." (Emphases added.)
For instance, (i) "[t]his is a guaranty of payment and performance and not of collection, so [Frost] can enforce this Guaranty against Guarantor even when [Frost] has not exhausted [Frost'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"; (ii) "[i]f [Frost] presently holds one or more guaranties, . . . [Frost's] rights under all guaranties shall be cumulative"; (iii) "[t]his Guaranty shall not . . . affect or invalidate any such other guaranties"; (iv) "[Frost] has the sole and absolute discretion to determine how sums shall be applied among guaranties of the Indebtedness"; (v) "[r]elease of any other guarantor or termination of any other guaranty of the indebtedness shall not affect the liability of Guarantors under this Guaranty"; (v) "Guarantor authorizes [Frost], . . . without lessening or otherwise affecting Guarantor's liability under this Guaranty, from time to time: . . . (D) to release, substitute, agree not to sue, or deal with any one or more of [NIP's] sureties, endorsers, or other guarantors on any terms or in any manner [Frost] may choose"; and (vi) "[t]he words 'Related Documents' mean all promissory notes, credit agreements, . . . guaranties, . . . and all other instruments, agreements and documents, whether now or hereafter existing, executed in connection with the Indebtedness." (Emphases added.)
(Emphases added.)
Upon considering the Guaranty Agreements—each in its entirety, and also construed collectively together, we agree with Frost's interpretation. We conclude that the Guaranty Agreements are not ambiguous and that the term "Guarantor's Share of the Indebtedness" refers to an individual obligation, i.e., each "Guarantor" separately guaranteed 50 percent of the total "Indebtedness." Under the terms of each Guaranty Agreement (i.e., "this Guaranty"), the signing party (i.e., the "Guarantor") agrees to guarantee 50 percent of the total "Indebtedness" (i.e., the "Guarantor's Share"). Each Agreement also provides that Frost's rights held under multiple "guaranties" are "cumulative" (meaning that the presence of one guaranty does not affect the others) and that payments by, or releases of, other "guarantors" shall not affect or reduce the "Guarantor's" liability under "this Guaranty." Moreover, each Agreement is set to continue until "all the Indebtedness shall have been fully and finally paid and satisfied." Under the plain meaning of these terms, each "Guarantor" guarantees 50 percent of the total "Indebtedness," and such Guarantor's liability is not reduced by payments from other "guarantors" (with the caveat that the Guaranty Agreements terminate once the underlying debt has been paid in full).
See Moayedi, 438 S.W.3d at 7 (citing Heritage Res., Inc., 939 S.W.2d at 121).
See In re Prudential Ins. Co. of Am., 148 S.W.3d at 135; Parks, 1 S.W.3d at 102.
As noted by Frost, each Guaranty Agreement distinguishes between itself and other guaranties ("Guaranty" as opposed to "guaranty"), and likewise distinguishes the signatory to "this Guaranty" (the "Guarantor") from a signatory to some other guaranty (a "guarantor").
Namely, (i) "[Frost] can enforce this Guaranty against Guarantor even when [Frost] has not exhausted [its] remedies against anyone else obligated to pay the Indebtedness"; and (ii) "If [Frost] presently holds one or more guaranties, . . . [Frost's] rights under all guaranties shall be cumulative. This Guaranty shall not . . . affect or invalidate any such other guaranties."
In other words, (i) "Guarantor's Share of the Indebtedness will only be reduced by sums actually paid by Guarantor under this Guaranty, but will not be reduced by sums from any other source including, but not limited to, . . . payments by anyone other than Guarantor"; (ii) "Release of any other guarantor or termination of any other guaranty of the Indebtedness shall not affect the liability of Guarantor under this Guaranty"; and (iii) "Guarantor authorizes [Frost] . . . (D) to release . . . any one or more of [NIP's] sureties, endorsers, or other guarantors on any terms or in any manner [Frost] may choose."
Each Guaranty Agreement conditions its termination on the occurrence of certain events in addition to payment in full of the underlying debt, i.e., "termination in writing by [NIP] and [Frost] of the line of credit," and "payment in full . . . of all of Guarantor's other obligations under this Guaranty." (Emphasis added.) However, Frost acknowledges that its "right to enforce these various guaranties," while "cumulative," shall last only "until the underlying debt [is] paid in full."
We also conclude that the "interpretation clause"—pursuant to which singular words (including the word "Guarantor") "shall be deemed to have been used in the plural where the context and construction so require"—does not give rise to a latent ambiguity here. By its unambiguous terms, the "interpretation clause" does not apply unless "there is more than one . . . Guarantor" (and "Guarantor" is defined as "everyone signing this Guaranty"). Given that a single individual "Guarantor" (as opposed to "more than one . . . Guarantor") signed each individual "Guaranty" (i.e., "this Guaranty"), the "interpretation clause" does not apply in this case.
In addition, had the four "Guarantors" jointly signed a single "Guaranty," the "interpretation clause" would appear to deem plural usage of both the terms "Guarantor" and "Share" (i.e., "Guarantors' Shares of the Indebtedness"), thereby referring to an individual obligation in which each individual "Guarantor" agreed to separately guarantee his respective 50 percent "share" of the overall "Indebtedness" (as opposed to the Guarantors agreeing to jointly guarantee a single 50 percent "share").
In contending otherwise, appellants rely principally upon two decisions, but neither ultimately aids them. In the first, Whitney National Bank v. Labry, three guarantors each individually signed four identical guaranties for each of four notes. Each guaranty provided (1) the signing guarantor jointly and severally guaranteed the borrower's obligations, limited to 30 percent of the obligations outstanding, and (2) if signed by more than one person, each signatory was jointly and severally liable (up to the full amount of the guaranty) as if such signatory was the only person signing the guaranty. A federal district court, applying Florida law, interpreted the guaranties in light of their joint-and-several-liability terms and concluded that the guarantors were jointly and severally liable for 30 percent of the debt outstanding (plus related interest, costs, and fees). Unlike Labry, the Guaranty Agreements at issue here contain no "joint and several" terms. Instead, the Guaranty Agreements provide that Frost's rights against each Guarantor are limited to such Guarantor's "Share of the Indebtedness," i.e., 50 percent of the Indebtedness, but Frost's rights are also "cumulative," meaning that a signing "Guarantor's" obligation under "this Guaranty" is not satisfied by payments by other "guarantors" in satisfaction of their own "guaranties." Accordingly, we conclude that Labry does not support appellants' interpretation of the Guaranty Agreements at issue here.
See Whitney Nat'l Bank v. Labry, No. 09-cv-02518-STA-dkv, 2011 U.S. Dist. LEXIS 33276 (W.D. Tenn. Mar. 29, 2011); JMW Partners, L.P. v. Northstar Bank of Tex., No. 2-09-167-CV, 2010 Tex. App. LEXIS 4416 (Tex. App.—Fort Worth June 10, 2010, no pet.) (mem. op.).
See Labry, 2011 U.S. Dist. LEXIS 33276, at *1-7.
Id. at *21-22 ("Guarantor jointly, severally and unconditionally guarantees to Bank the prompt payment in full of all obligations and liabilities of Borrower to Bank, . . . but in no event shall Guarantor's liability under this Guaranty exceed THIRTY PER CENT (30%) of the principal amount of the Obligations outstanding . . . .").
Id. at *22 ("If this Guaranty is executed by more than one person, each person is bound by all of the provisions of this Guaranty and is jointly and severally liable for the payment in full of the Obligations up to the full amount of this Guaranty as if such person was the only person executing this Guaranty.").
See id. at *27-28 ("'[I]f a guaranty is free from ambiguity, it is strictly construed in favor of the guarantor.'" (quoting Federal Deposit Ins. Corp. v. University Anclote, Inc., 764 F.2d 804, 806 (11th Cir. 1985) (citing Scott v. City of Tampa, 158 Fla. 712, 30 So.2d 300, 302 (Fla. 1947)))).
Id. at *26-33. The court observed that "joint and several liability" means that (i) "'[l]iability . . . may be apportioned either among two or more parties or to only one or a few select members of the group, at the adversary's discretion,'" and (ii) "'each liable party is individually responsible for the entire obligation, but a paying party may have a right of contribution and indemnity from nonpaying parties.'" Id. at *30 (quoting Black's Law Dictionary).
The second case on which appellants rely, JMW Partners, L.P. v. Northstar Bank of Texas, involved guaranty agreements from two different loan transactions (the first in 2005 and the second in 2007), in which the agreements from the first loan provided that each guarantor "jointly and severally guaranteed all of the indebtedness," and the agreements from the second loan limited the "Guarantor's Share of the Indebtedness" to 33.33 percent of the borrower's "Indebtedness." The issue on appeal was whether the guaranty agreements from the 2007 loan superseded the guaranty agreements from the 2005 loan, thereby limiting each guarantor's share of liability to 33.33 percent of both loans. Upon considering the agreements together, our sister court of appeals concluded that a latent ambiguity existed, "not as to the meaning of a specific provision in either set of agreements, but as to the interaction of the agreements." This ambiguity gave rise to a fact issue that precluded the rendition of summary judgment against the guarantors for 100 percent of the 2005 loan, though our sister court affirmed the portion of the summary judgment holding each of the guarantors severally liable for 33.33 percent of the 2007 loan. The latent ambiguity in JMW Partners, which arose from the interaction of two sets of guaranty agreements with materially different terms, does not exist here. Moreover, our sister court's construction of the 2007 guaranty agreements in JMW Partners, pursuant to which each guarantor was severally liable for 33.3 percent of the "Indebtedness," supports Frost's interpretation of the Guaranty Agreements at issue here.
2010 Tex. App. LEXIS 4416 at *2.
Id. at *4-5.
Id. at *1-2, *12-23.
See id. at *12-13 (citing, inter alia, Parks, 1 S.W.3d at 102).
Id. at *22 (citing Kelley, 284 S.W.3d at 807); see also Kelley, 284 S.W.3d at 807-09 (after reviewing two documents issued by an insurance company and extrinsic evidence, holding that such documents were ambiguous as to whether they constituted two separate policies or a single policy).
See id. at *22-23 ("We conclude that a fact issue exists as to whether the parties intended for the 2007 guaranty agreements to supersede the 2005 agreements and thereby limit each [Appellant's] liability under the 2005 agreements to several liability for 33.33 percent of the 2005 note, requiring remand for trial." (citing Kelley, 284 S.W.3d at 809)).
See id. at *1-2, *23.
See id. at *12-23.
Specifically, the court observed that "the 2007 guaranty agreements expressly provide that each guarantor's share of liability is limited to 33.33 percent of the 'Indebtedness,' which is in turn expressly defined as all of the principal amount arising from 'any and all' debts and obligations 'now existing' that [borrower] owes to [lender] . . . ." Id. at *19 (emphasis added).
In sum, we conclude that the Guaranty Agreements are not ambiguous and, by their express terms, each Guarantor (including each of the appellants here) is individually liable for 50 percent of the underlying debt until such debt has been paid in full. We therefore overrule the appellants' second and third issues.
CONCLUSION
We conclude that the district court did not err in granting Frost's motion for summary judgment and in denying the appellants' cross-motion. We accordingly affirm the district court's judgment.
/s/_________
Bob Pemberton, Justice Before Chief Justice Rose, Justices Pemberton and Bourland Affirmed Filed: June 23, 2017