Opinion
November 30, 1967. —
December 22, 1967.
APPEAL from a judgment of the circuit court for Manitowoc county: FERDINAND H. SCHLICTING, Circuit Judge. Reversed.
For the appellant there was a brief by John W. Kelley and Roy T. Traynor, both of Wausau, and oral argument by Mr. Traynor.
For the respondents there was a brief by Smith, Harlow Knab and Patrick J. Harlow, all of Manitowoc, and oral argument by Patrick J. Harlow.
Action by plaintiff Ervin J. Wipfli against defendants Ralph J. Bever, Esther Bever, his wife (who together are hereinafter referred to as "Bever"), and others, to foreclose a real estate mortgage.
This action arises out of four transactions. One obligation is common to all four, i.e., vendee Thompson's obligation to make cash payments under the land contract entered into with Anderson. These four transactions are:
(1) On August 1, 1963, Anderson sold a Lake Geneva hotel to Thompson under land contract, which provided that Thompson was to pay Anderson weekly installments of $350 for five years;
(2) On September 17, 1963, Bever sold a Manitowoc motel to Anderson under land contract, and Anderson assigned his interest in the Anderson-Thompson land contract to Bever as part payment of the purchase price;
(3) On October 2, 1963, Clintonville Sales Corporation (hereinafter "Clintonville") sold an Appleton home to Bever, and Bever assigned his interest in the Anderson-Thompson land contract to Clintonville as part payment of the purchase price and of an additional debt Bever owed it for real estate commission. On the same date Bever executed an instrument denominated a "bond" which "guaranteed" Thompson's payments up to $10,000, and executed a mortgage covering Manitowoc real estate securing the "bond;"
(4) On October 11, 1963, Clintonville assigned its interest in the Anderson-Thompson land contract to Wipfli for consideration received, and on October 14, 1963, Clintonville assigned Bever's bond and mortgage to Wipfli as part of the same transaction.
On March 3, 1965, Wipfli commenced the instant foreclosure action against Bever, alleging that Thompson had defaulted in his weekly payments, and that Bever had made no payments under his bond. Bever answered the complaint, issue was joined, and trial was had to the court. On March 23, 1967, the trial court entered judgment dismissing Wipfli's complaint on the merits. The court reasoned that the bond was a nonassignable special guaranty, under which Bever could only be held responsible to Clintonville.
Wipfli has appealed from this judgment.
The sole issue on this appeal is whether defendant Bever's bond issued to Clintonville is assignable. If it is, then Wipfli, as Clintonville's assignee, is entitled to foreclose the mortgage given to secure performance of the bond.
While the bond from Bever to Clintonville contained no language that it ran to Clintonville's assigns, the mortgage securing the same contained this clause:
"Provided always, and these presents are upon this express condition, that if the said Ralph J. Bever and Esther Bever, his wife parties of the first part, their heirs, executors, administrators or assigns, shall pay or cause to be paid to the said party of the second part [Clintonville], its successors or assigns, the sum of Ten Thousand and no/100 Dollars, according to the conditions of one certain Bond bearing even date herewith, executed by the said Ralph J. Bever and Esther Bever, his wife parties of the first part to the said party of the second part . . . ." (Italics supplied.)
The general rule is that instruments executed at the same time between the same contracting parties in course of the same transaction will be construed together. One application of this rule is the construction together of a mortgage and the note for which it was given as security. We deem it inconsequential that the instant mortgage, instead of securing a note, secured a bond requiring Bever to pay Clintonville in the event Thompson did not pay a minimum of $10,000 on the latter's land contract to Anderson. Both the bond and mortgage must be construed together to determine the assignability of Bever's bond to Clintonville.
Seaman v. McNamara (1923), 180 Wis. 609, 193 N.W. 377; 1 Restatement, Contracts, p. 319, sec. 235 (c); 4 Williston, Contracts (3d ed. Jaeger), p. 904, sec. 628; 17 Am. Jur. 2d, Contracts, p. 668, sec. 264; 17A C.J.S., Contracts, p. 128, sec. 298.
Security Trust Life Ins. Co. v. Ellsworth (1906), 129 Wis. 349, 358, 109 N.W. 125; Wisconsin Trust Co. v. Chapman (1904), 121 Wis. 479, 99 N.W. 341; General Missionary Baptist State Convention of Ark. v. Smith (1957), 227 Ark. 653, 300 S.W.2d 939; Bielanski v. Westfield Savings Bank (1943), 313 Mass. 577, 48 N.E.2d 627, 147 A.L.R. 1104; 36 Am. Jur., Mortgages, p. 748, sec. 123; 59 C.J.S., Mortgages, p. 208, sec. 156. One exception to this rule is that collateral agreements in a mortgage securing a negotiable note will not be imported into the note so as to render it nonnegotiable.
See Thorp v. Mindeman (1904), 123 Wis. 149, 101 N.W. 417. This exception is grounded on public policy, otherwise the most simple real estate mortgage would deprive the note which it secures of its negotiable character. Id. at page 154.
A reading of the bond and mortgage together makes it crystal clear that the bond is assignable. The condition of the mortgage is that Bever pay the $10,000, according to the provisions of the bond, to Clintonville, "its successors or assigns."
This disposition of the appeal makes it unnecessary to determine whether the bond constitutes a guaranty, and, if it does, whether it is a special or general guaranty. A special guaranty, as the name implies, is one addressed to a particular person and generally' may be enforced only by that person. However, a review of the cases dealing with special guaranties discloses that the general rule with respect to their nonassignability rests upon carrying out the intent of the parties. For example, Burkhardt v. Bank stressed the fact that the guaranty was so drawn only as to be binding upon the heirs and legal representatives of the guarantor, and not upon those of the guarantee. In Glassine Paper Co. v. Shannon the guaranty was held enforceable by a subsidiary of the corporation to which the guaranty was made, because of the specific finding of the trial court that defendant guarantor intended his guaranty to cover plaintiff subsidiary's shipments.
From the standpoint of the Statute of Frauds, Bever's undertaking on the bond is not a guaranty but an original undertaking because executed to promote his own interest, not that of Thompson. Mann v. Erie Mfg. Co. (1963), 19 Wis.2d 455, 120 N.W.2d 711; McCord v. Edward Hines Lumber Co. (1905), 124 Wis. 509, 102 N.W. 334; Eagle Mowing Reaping Machine Co. v. Shattuck (1881), 53 Wis. 455, 10 N.W. 690; 38 C.J.S., Guaranty, p. 1131, sec. 2; 2 Corbin, Contracts, p. 346, sec. 390.
Annot. (1955), Who May Enforce Guaranty, 41 A.L.R.2d, p. 1216, sec. 1. See also Tidioute Savings Bank v. Libbey (1898), 101 Wis. 193, 196, 77 N.W. 182.
(1953), 127 Colo. 251, 256 P.2d 234, 41 A.L.R.2d 1207.
(2d Cir. 1956), 238 F.2d 765.
In the instant case there is no need to search for the parties' intent as to who should be permitted to enforce the bond, because it is explicitly stated in the language of the mortgage that the assigns of Clintonville were to be accorded that right.
By the Court. — Judgment reversed and cause remanded for further proceedings consistent with this opinion.