Bruce W. Meidinger and Sherry L. Meid-inger appealed from a corrected summary judgment awarding Kenneth 0. Moen $15,-000, plus interest, costs, and disbursements, in Moen’s lawsuit to enforce the Meidingers’ alleged guaranty of a debt owed by their corporation, Dakota Farm & Home, Inc. (Dakota). We reverse and remand.
On March 28, 1984, with a $240,000 loan from First National Bank of Bowman, underwritten by thе United States Small Business Administration (SBA), to Dakota, Meidingers purchased the assets of Econo Farm & Home Centers, Inc., in Bowman, North Dakota, and transferred them to Dakota. Meidingers individually guarantied the SBA loan. Bruce Meidinger, as President, and Sherry Meidinger, as Secretary of Dakota, executed a promissory notе by Dakota to Moen, a shareholder of Econo Farm & Home Centers, Inc., for $15,000. Dakota and Moen executed a standby agreement on an SBA form whеreby Moen agreed not to collect or enforce the $15,000 note without the prior written consent of First National Bank of Bowman.
In April 1986, Dakota alsо received a disaster loan from the SBA for $84,500. Meid-ingers executed an additional guaranty on an SBA form whereby each guarantied payment of this debt to thе SBA. Dakota and Moen again executed a standby agreement on an SBA form whereby Moen agreed not to enforce or collect on the 1984 note for $15,000 without the prior written consent of the SBA. Paragraph 1 of the 1986 standby agreement said:
1. There is owing by Borrower to Standby Creditor the amount of Fifteen thousand and no/100 Dollars ($15,000.00) without-interest* with interest at the rate of 10 per cent per annum from March 28, 198k * (which amount and all interest, if any, now and hereafter owing thereon, are in this Agreement collectively called “Claim”). The Claim is not evidenced by any promissory note, bond or other written obligation of any kind whatever except, Promissory Note. A true and correct copy of each such note, bond or other written obligation (if any), is annexed hereto and made a part hereof. The name of each endorser, guarantor and surety (if any), liable upon the Claim, or any-part thereof, is as follows?
As shown, the words “without interest” and the entire last sentence in the printed form were lined out. Meidingers signed at the end of the standby agreement as President and Secretary of Dakota, and additionally signed below the signatures of the parties to the agreement in this manner:
Guarantors, Endorsers, Sureties
/s/ Bruce W. Meidinger
Bruce W. Meidinger, Individually
/s/ Sherry L. Meidinger
Sherry L. Meidinger, Individually
The dispute in this case centеrs on the effect of the latter signatures.
The business operated by Dakota failed, and Dakota became a defunct corporation. In 1994, Moen sued Meidingers for payment of his 1984 promissory note for $15,000, asserting Meidingers had individually guarantied this debt owed by Dakota. Both sides moved for summary judgment. In his affidavit for summary judgment, Mоen stated: “Bruce W. Meidinger and Sherry L. Meid-inger, individually, guaranteed the debt owed to the Plaintiff by [Dakota] (Exhibits 1 and 2 herein) pursuant to the terms of the standby agreement.” In their affidavits for summary judgment, Meidingers each stated: “That the only personal guarantee given by your affiant was to the U.S. Small Business Administration, in consideration for two lоans in the amount of $240,000, and $84,500.”
The trial court granted Moen’s motion for summary judgment and denied Meidingers’ motion, ruling that Meidingers individually guarantied the debt of Dakota to Moеn by signing the standby agreement as “Guarantors.” After a corrected summary judgment was entered for the right amount with interest, Meidingers appealed.
The rules of civil procedure permit summary judgment “if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that any party is entitled to a judgment as a matter of law.” NDRCivP 56(c). From our review, we conclude that the standby agreement is ambiguous on whether Meidingers individually guarantied the debt of Dakota to Moen, and that a genuine issue of material fact about the parties’ intent precludes summary judgment in this case.
The trial court concluded, without explanation, that “Meidingers did sign a personal guarantee in return for Moen’s agreement tо delay seeking payments due,” and that “Meidingers, individually, guaranteed the debt under the terms of the standby agreement.” We encourage trial courts to fully explаin the rationales for their decisions to aid public understanding and to facilitate appellate review.
Muller v. Custom Distributors, Inc.,
The construction of a written contract to determine its legal effect is a question of law for the court to decide and, on appeal, we independently examine and construe the contract to determine if the trial court erred in its contract interpretation.
General Elec. Credit Corp. v. Larson,
Whether or not a contract is ambiguous is a question of law.
Habeck
at 811. “A determination of ambiguity is but the starting point in the search for the parties’ ambiguously expressed intentions,” since an ambiguity creates “questions of fact to be determined with the aid of extrinsic evidence.”
Bohn v. Johnson,
Meidingers argue: “Paragraph 1 of the Standby Agreement provides cleаr, definitive and unambiguous evidence that no personal guaranty existed on the part of the Meidingers for the Dakota Farm debt.” This is a reasonable argument because the space in Paragraph 1 for listing the names of each guarantor of the promissory note from Dakota to Moen was left blank аnd, additionally, the whole last sentence of that paragraph in the form, designed for naming each guarantor, “(if any),” was lined out. Additionally, Meidingers insist that it is more reasonable to infer that their signatures were “required by the SBA to evidence the consent of the Meidingers in their capacity as guarantors of the SBA indebtеdness ..., and not as guarantors of the Dakota Farm debt to Moen.”
Moen counters: “In light of the undisputed facts and circumstances, the caption ‘Guarantоrs, Endorsers, Sureties’ above Meidingers signatures, together with the fact that below each signature line the Meidingers names are specifically typed with the indication that they are signing in their individual capacities, are sufficient to clearly infer a guarantee.” This too is a reasonable argument.
Reasonаble arguments are thus made for different positions on the intent of Meiding-ers’ individual signatures on the standby agreement. Therefore, the standby agreement is ambiguous on whether or not Meid-ingers individually guarantied the debt of Dakota to Moen. This leaves a question of fact to be determined with extrinsic evidence at a trial.
Bohn v. Johnson,
Because we conclude that the standby agreement is ambiguous, we need nоt reach other arguments made by the parties. We reverse the summary judgment and remand for trial.