Summary
explaining that notice is not required where an unambiguous, absolute guaranty is silent as to notice
Summary of this case from WXI/Z Southwest Malls Real Estate Liability Co. v. MuellerOpinion
No. 71-485
Decided August 29, 1972.
In action for balance due under terms of lease covering certain office machines, trial court found defendant-appellee, guarantor of the lease, to be relieved of liability under the guaranty. Plaintiff appealed.
Reversed
1. GUARANTY — Separate Agreement — Unambiguous — Error — Resort to Lease — Construe — Limiting Conditions. Where defendant executed separate agreement guarantying lease payments and trial court did not find that agreement to be ambiguous, it was error for trial court to resort to the language of the lease to construe the guaranty as to any limiting conditions.
2. Notice of Default — Conditions Distinguished — Must Be Given — And — — Not Required. Where a contract of guaranty provides that notice of default of the principal debtor must be given to the guarantor, such notice must be given for the guarantor to be liable; however, where an unambiguous, absolute guaranty is silent as to notice and the maximum amount guaranteed is determinable at the time the guaranty is entered into, there is no basis to imply a requirement of notice.
Appeal from the District Court of Boulder County, Honorable John B. Barnard, Jr., Judge.
A. L. (Sid) Overton, for plaintiff-appellant.
No appearance for defendant-appellee.
Western States Leasing Co. (Western), plaintiff-appellant, initiated this action to recover the balance due under the terms of a lease covering certain office machines wherein defendant Adturn, Inc., was lessee and defendant William J. Turner was guarantor. Prior to trial, Adturn, Inc., was dismissed due to lack of service of process, and trial to the court proceeded against defendant William J. Turner as guarantor. Plaintiff appeals from a judgment relieving defendant Turner of liability under the guaranty. Turner has not entered an appearance in this court.
The material facts are not in dispute. On September 16, 1965, Turner, as president of Adturn, Inc., executed a five-year lease with Western. The lease provided for monthly payments and several different remedies which Western could elect to pursue in event of default. On the following day, Turner personally executed a separate instrument guarantying the lease payments. In September 1967, Adturn, Inc., defaulted in its lease payments and plaintiff elected to terminate the lease agreement and to declare the unpaid balance due and payable.
The trial court found that the guaranty, standing alone, was unconditional, but when construed together with the lease agreement, was conditional "by necessary implication," and plaintiff was required to give timely notice of default to Turner. Since no notice of default was given to Turner prior to the time he was served with the papers in this action, the trial court held that Turner was relieved of liability under the guaranty. Western alleges the trial court erred in holding the guaranty conditional. We agree with this allegation.
[1] The guaranty in question reads in part:
"[Turner] does guaranty to said Lessor, its successors and assigns that any and all rent or rents which shall become due under the provisions of the above described lease shall be paid in full when due, and the undersigned does hereby acknowledge to be personally obligated to pay said rents together with interest thereon as specified under the lease at the due date thereof."
The trial court did not find, nor do we find, that this guaranty was ambiguous. It was therefore error for the trial court to have resorted to the language of the lease to construe the guaranty as to any limiting conditions. See Christmas v. Cooley, 158 Colo. 297, 406 P.2d 333. The guaranty, by its own terms, is absolute and contains no condition other than the lessee's default.
[2] In addition, there is no basis for implying that timely notice of default should have been given to Turner before liability could be imposed under the guaranty. Where contract of guaranty provides that notice of default of the principal debtor must be given to the guarantor, such notice must be given for the guarantor to be liable. Yama v. Sigman, 114 Colo. 323, 165 P.2d 191. However, where an unambiguous, absolute guaranty is silent as to notice and the maximum amount guaranteed is determinable at the time the guarantee is entered into, as in the case at hand, there is no basis to imply a requirement of notice.
Judgment reversed and remanded with directions that judgment be entered for plaintiff in the amount of the rental payments due, plus interest.
JUDGE DWYER and JUDGE PIERCE concur.