Case Information
*1 Before BYE, BEAM, and BENTON, Circuit Judges.
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BYE, Circuit Judge.
*2 David Wild appeals the district court's determination that a personal guaranty [1] he executed as security for a loan could be enforced by the original creditor's assignee under Iowa law. We affirm.
I
David Wild is the sole member of a limited liability company called Braveheart Equity Holdings, LLC (Braveheart). Braveheart, in turn, is one of two members of another limited liability company called Catalyst Resources Group, LLC (Catalyst). In 2008, Catalyst borrowed $500,000 from Laurus Technologies, Inc. (Laurus). Wild signed a personal guaranty as security for Catalyst's loan. In relevant part, the personal guaranty provides as follows: "The undersigned [does] hereby personally guarantee . . . to Laurus Technologies, Inc, the Holder, full complete and timely performance by the Borrower [Catalyst], of all obligations of the Borrower under the foregoing Promissory Note." The personal guaranty did not expressly extend Wild's promise to Laurus's "successors and assigns," but it also did not expressly prohibit assignment of the guaranty.
Several years after making the loan, Laurus assigned the Catalyst promissory note to a company called Avnet, Inc., as part of a forbearance agreement on a debt Laurus owed to Avnet. After the assignment, an attorney for Avnet contacted Catalyst demanding payment of the $500,000 loan plus interest. When Catalyst did not make any payments on the loan, Avnet's attorney contacted Wild and demanded that he honor his personal guaranty.
*3 When Wild did not honor his personal guaranty, Avnet filed a complaint in federal district court against both Catalyst and Wild. Avnet sought a judgment against Catalyst on the promissory note and a judgment against Wild on his personal guaranty. Catalyst did not respond to the suit, and eventually a default judgment was entered against the company in the amount of $770,065.80 (representing both the original $500,000 loan as well as accrued interest), plus post-judgment interest. Wild did respond to the suit. He contended his guaranty was a "special guaranty" (one directed solely to a specific creditor) rather than a "general guaranty" because it was only directed to Laurus. Wild further contended a special guaranty could not be assigned under Iowa law, and could only be enforced by the original creditor.
Avnet filed a motion for summary judgment. The disputed issue was whether the Iowa Supreme Court would follow the common law rule under which a special guaranty is not enforceable by a creditor's assignee, or would follow the rule set forth in the Restatement (Third) of Suretyship and Guaranty § 13 which generally allows a creditor's assignee to enforce a guaranty even if it would have traditionally been considered a special guaranty under the common law. After a thorough examination of Iowa law, the district court determined the Iowa Supreme Court would adopt § 13. The district court further held none of § 13's exceptions applied in this case. The district court therefore concluded Avnet could enforce Wild's personal guaranty and granted summary judgment in Avnet's favor. Wild filed this timely appeal.
II
We review the district court's grant of summary judgment de novo. Loomis v.
Wing Enters., Inc., 756 F.3d 632, 634 (8th Cir. 2014). The parties agree Iowa
substantive law applies in this diversity case. See Erie R. Co. v. Tompkins, 304 U.S.
64, 78 (1938). Because the issue before us has not been decided by the Iowa courts,
"[w]e must predict how the Iowa Supreme Court would rule, and we follow decisions
of the intermediate state court when they are the best evidence of Iowa law."
*4
Amera-Seiki Corp. v. Cincinnati Ins. Co.,
Wild relies upon the common law rule and contends Avnet could not enforce
his personal guaranty because he executed it only in favor of Laurus, the original
creditor. See, e.g., New Holland, Inc. v. Trunk,
Avnet counters that the modern rule generally permits the assignment of a personal guaranty irrespective of whether it would have been considered a special guaranty under the common law. This rule is set forth in the Restatement (Third) of Suretyship and Guaranty § 13. The Restatement does not distinguish between the assignment of special or general guaranties, but instead recognizes any guaranty can be assigned unless:
(a) the substitution of a right of the assignee for the right of the obligee would materially change the duty of the secondary obligor or materially increase the burden or risk imposed on it by its contract; or (b) the assignment is forbidden by statute or is otherwise ineffective as a matter of public policy; or
(c) the assignment is validly precluded by contract.
Restatement (Third) of Suretyship and Guaranty § 13(1) (1996). Avnet further
contends the Iowa courts would adopt § 13 because they have adopted other sections
of the Restatement. See, e.g., Hills Bank & Trust Co. v. Converse,
772 (Iowa 2009) (adopting § 22 of the Restatement (Third) of Suretyship and
Guaranty); Gallagher, Langlas & Gallagher v. Burco,
After reviewing the relevant Iowa case law, which has not specifically addressed whether a special guaranty may be assigned, we conclude the Iowa [2] Supreme Court would adopt the modern rule set forth in § 13 if faced with the issue. [3] *6 The Iowa Supreme Court has long recognized that, "like every other contract [a personal guaranty] must receive a reasonable and sensible construction, according to the intent of the parties as read in the light of the circumstances surrounding the transaction, and the purposes for which it was made." Harman v. Hartman, 160 N.W. 295, 297 (Iowa 1916). Significantly, "[n]o different rule obtains in construing [personal guaranties] than [other contracts], save that when the terms of a guaranty are once ascertained the liability of the guarantor is not to be extended by implication." Id.; see also Andrew v. Austin, 232 N.W. 79, 81 (Iowa 1930) (indicating contracts of guaranty are subject to the same rules of construction as other contracts).
This well-established principle of Iowa law – that the same rules of construction generally applicable to contracts apply equally to personal guaranties – is the very premise upon which § 13 is based. See Restatement (Third) of Suretyship and Guaranty § 13, cmt. a (noting § 13 abolished the historical common law rule distinguishing special guaranties from general guaranties because the secondary obligations arising from a guaranty should be "subject to general contract principles concerning assignment"). For this reason, as well as the fact that the Iowa courts have adopted other sections of the Restatement (Third) of Suretyship and Guaranty, we believe the Iowa Supreme Court would also adopt § 13.
We further conclude that none of the three exceptions listed in § 13 apply here.
First, the assignment from Laurus to Avnet did not materially change Wild's duties
under the guaranty, or materially increase the burden or risk imposed upon him.
Before the assignment, Wild was bound by the guaranty to repay the loan should
Catalyst fail to do so. After the assignment, Wild had the same obligation to repay
This statute appears to govern the circumstances involved in this case, but its
applicability was not addressed by the parties in the district court or on appeal.
Without adversarial briefing on the issue, we decline to decide at this time whether
§ 539.1 is dispositive, and would permit the assignment of Wild's personal guaranty.
*7
the loan should Catalyst fail to do so. The assignment thus did not extend Wild's
liability "by implication" or otherwise. Harman,
Second, the assignment between Laurus and Avnet was not forbidden by statute or otherwise ineffective as a matter of public policy. Indeed, Wild does not contend otherwise.
Finally, the assignment was not precluded by the original contract. Although
the guaranty referred specifically to Laurus, it also referred to Laurus as "the Holder"
of the note, and thus inferred the guaranty inured to the benefit of the party holding
the note. More significantly, the personal guaranty did not expressly state it was not
assignable. Wild contends the guaranty was ambiguous because it did not expressly
state it
could be
assigned, and it was his intention that the guaranty not be assigned.
We disagree the guaranty was ambiguous. Even if it were, however, the ambiguity
would be strictly construed against Wild as the drafter (via his attorney) of the
guaranty. See Iowa Fuel & Minerals, Inc. v. Iowa State Bd. of Regents, 471 N.W.2d
859, 863 (Iowa 1991) ("[W]hen there are ambiguities in a contract, they are strictly
construed against the drafter."). In addition, Wild's undisclosed intentions are
immaterial because the guaranty itself contains no language clearly identifying to a
*8
potential assignee that the note and guaranty were not assignable. See First Nw. Nat'l
Bank v. Crouch,
Because we believe the Iowa Supreme Court would adopt § 13 of the Restatement (Third) of Suretyship and Guaranty, and none of the three exceptions listed under § 13 apply in this case, the district court did not err in granting summary judgment in favor of Avnet. [4]
III
We affirm the judgment of the district court.
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Notes
[1] The Honorable John Stuart Scoles, Chief Magistrate Judge for the Northern District of Iowa, presiding with the consent of the parties pursuant to 28 U.S.C. § 636(c).
[2] See, e.g., Schoonover v. Osborne,
[3] The Iowa Code generally provides as follows: [A]ll instruments by which the maker promises to pay another, without words of negotiability, a sum of money . . . are assignable by endorsement on the instrument, or by other writing. The assignee . . . has a right of action on them in the assignee's own name, subject to any defense or counterclaim which the maker or debtor had against an assignor of the instrument before notice of the assignment. Iowa Code § 539.1.
[4] With respect to the other issues raised by Wild on appeal, we affirm for the reasons stated by the district court. See 8th Cir. R. 47B.