NORTH CAROLINA COURT OF APPEALS
Filed: 18 April 2006
v. Mecklenburg County
No. 03 CVS 21771
STEVEN GILLIS, WILLIAM R. SCOTT
and SAL LICITRA,
Defendants.
Appeal by Defendant Steven Gillis from an order entered 3
February 2005 by Judge Robert P. Johnston in Mecklenburg County
Superior Court. Heard in the Court of Appeals 6 March 2006.
Horack, Talley, Pharr & Lowndes, P.A., by William B. Hamel and
John W. Bowers, for Plaintiff-Appellee.
Hamilton, Fay, Moon, Stephens, Steele & Martin, PLLC, by David
G. Redding, for Defendant-Appellant Steven Gillis.
STEPHENS, Judge.
Weinbrenner Shoe Company (“Plaintiff”) is a Wisconsin
corporation in the business of manufacturing shoes and other
footwear. At all times pertinent hereto, Record Industrial
Company, Inc. (“RICO”) was a North Carolina corporation in the
business of selling shoes and other footwear. Steven Gillis
(“Defendant”), William R. Scott and Sal Licitra were shareholders
in RICO who, prior to 23 January 1995, approached Plaintiff to
obtain financing for RICO's business operations, which Plaintiff
agreed to extend. Pursuant to a “Note” dated 23 January 1995, RICOborrowed $200,000.00 from Plaintiff with interest to accrue at a
rate of prime plus one point five percent per year. On that same
day, pursuant to a separate “Inventory Note,” RICO borrowed an
additional $100,000.00 related to the sale of inventory from
Plaintiff, with the same interest terms. Each document set forth
RICO's repayment obligations. RICO fully and timely complied with
the schedule for payment of these two loans.
In addition, pursuant to a Loan and Security Agreement
(“Agreement”), RICO agreed to purchase additional footwear from
Plaintiff at certain levels in the years following Plaintiff's
extension of the cash and inventory loans. From 1996 to and
including 2001, RICO purchased footwear products from Plaintiff for
which RICO failed to pay all sums due. RICO is no longer in
business.
On 30 December 2003, Plaintiff filed a verified complaint
alleging that Defendant, Scott and Licitra were jointly and
severally liable for the products RICO purchased but did not pay
for, as well as accrued and continuing interest and attorney fees.
On 2 March 2004, Defendant and Licitra filed an answer
(See footnote 1)
in which
they admitted that RICO, in its corporate capacity, purchased
products from Plaintiff for which RICO failed to pay all sums duePlaintiff, but denied that they were personally liable for any debt
of RICO other than the loan amounts covered by the cash and
inventory notes, both of which had been fully paid.
On 15 November 2004, Plaintiff moved for summary judgment. On
3 February 2005, the Honorable Robert P. Johnston allowed
Plaintiff's motion on the issue of Defendant's, Scott's and
Licitra's liability for payment of the balance owed Plaintiff, but
denied the motion on the amount of damages. The parties then
entered into a joint stipulation as to the amount of damages, and
on 7 February 2005, Judge Johnston entered a judgment against
Defendant, Scott and Licitra, jointly and severally, in the
principal amount of $186,301.12, together with interest in the
amount of $206,610.35 and attorney fees in the amount of
$58,936.72. Defendant, through counsel, timely gave notice of
appeal to this Court.
(See footnote 2)
For the reasons stated herein, we affirm
the trial court's determination.
The dispositive question on this appeal is whether the
“Guaranty” executed by Defendant created a continuing guaranty to
pay the open account debts incurred by RICO for additional
inventory after the original cash and inventory notes were paidoff. Plaintiff argues that the plain language of the Guaranty, as
well as the terms of the contemporaneously executed Loan and
Security Agreement, unambiguously establish a continuing guaranty
that Defendant would be responsible for payment of RICO's ongoing
debts. Defendant argues that the Guaranty is ambiguous and does
not contain sufficient language to establish a legally binding
continuing guaranty. We agree with Plaintiff and therefore hold
that summary judgment for Plaintiff on the liability issue was
proper as a matter of law.
North Carolina law governing summary judgment motions is well-
settled. A motion for summary judgment should be granted when,
considering the evidence in a light most favorable to the
non-moving party, there is no genuine issue of fact and the moving
party is entitled to judgment as a matter of law. N.C. Gen. Stat.
§ 1A-1, Rule 56 (2005); Carolina Water Serv., Inc. v. Town of Atl.
Beach, 121 N.C. App. 23, 27, 464 S.E.2d 317, 320 (1995), disc.
review denied, 342 N.C. 894, 467 S.E.2d 901 (1996). “The party
moving for summary judgment has the burden of clearly establishing
a lack of any triable issue of fact by the record proper before the
court.” Jennings Communication Corp. v. PCG of the Golden Strand,
Inc., 126 N.C. App. 637, 639, 486 S.E.2d 229, 231 (1997). The
appellate court's review of a trial court's entry of summary
judgment is de novo. Cater v. Barker, ___ N.C. App. ___, 617S.E.2d 113, 116 (2005), aff'd per curiam, ___ N.C. ___, ___ S.E.2d
___ (No. COA04-795) (Filed Mar. 3, 2006).
In this case, the trial court found Defendant liable as a
matter of law under the terms of the parties' Guaranty. “A
guaranty of payment is an absolute promise to pay the debt of
another if the debt is not paid by the principal debtor.” Amoco
Oil Co. v. Griffin, 78 N.C. App. 716, 718, 338 S.E.2d 601, 602,
disc. review denied, 316 N.C. 374, 342 S.E.2d 889 (1986). Since a
guaranty is a contract between the parties, O'Grady v. First Union
Nat'l Bank, 296 N.C. 212, 250 S.E.2d 587 (1978), “[t]he
enforceability of the guarantor's promise is determined primarily
by the law of contracts.” Gillespie v. De Witt, 53 N.C. App. 252,
259, 280 S.E.2d 736, 741, disc. review denied, 304 N.C. 390, 285
S.E.2d 832 (1981). We thus apply the principles of contract
construction in our interpretation of the terms of the Guaranty at
issue.
“A guarantor's liability depends on the terms of the contract
as construed by the general rules of contract construction.”
Carolina Place Joint Venture v. Flamers Charburgers, Inc., 145 N.C.
App. 696, 698, 551 S.E.2d 569, 571 (2001) (citing Jennings
Communications Corp., 126 N.C. App. at 641, 486 S.E.2d at 232).
When the language of a contract is clear and unambiguous, no
genuine issue of material fact exists and construction of thecontract is a matter of law for the court. Id.; see also Hagler v.
Hagler, 319 N.C. 287, 354 S.E.2d 228 (1987). “It is a well-settled
principle of legal construction that it must be presumed the
parties intended what the language used clearly expresses, and the
contract must be construed to mean what on its face it purports to
mean.” Hagler, 319 N.C. at 294, 354 S.E.2d at 234 (quoting
Hartford Accident & Indem. Co. v. Hood, 226 N.C. 706, 710, 40
S.E.2d 198, 201 (1946)). Moreover, all contemporaneously executed
written instruments between the parties, relating to the subject
matter of the contract, are to be construed together in determining
what the parties undertook or intended. Carolina Place Joint
Venture, 145 N.C. App. at 699, 551 S.E.2d at 571; see also Yates v.
Brown, 275 N.C. 634, 640-41, 170 S.E.2d 477, 482 (1969) (holding
that the negotiable note at issue in that case must be construed
together with the writing on the back of the note and the
assignment and transfer contained in a separate document: “This is
not varying the written contract. It is a construction of the
written contract in its entirety.” (citations omitted)).
In this case, the pertinent terms of the parties' Guaranty are
as follows:
1. Guarantor hereby jointly and severally
unconditionally and irrevocably guarantees to
Weinbrenner the full and prompt payment and
performance of all Liabilities, when and as
the same become due from time to time, whetherby lapse of time, acceleration or otherwise.
As used in this Guaranty, “Liabilities”
shall mean all debt owed by Debtor to
Weinbrenner and outstanding from time to time,
all interest thereon and all other sums which
may or shall become due and payable pursuant
thereto or to any other document executed in
connection therewith.
2. In the event of any default by Debtor
in making payment of any part of the
Liabilities as it becomes due, Guarantor
agrees, on demand by Weinbrenner, to pay all
sums due, . . .
. . . .
4. . . . it being the intent hereof that
Guarantor shall remain liable as principal for
performance of the obligations guaranteed
hereby until all Liabilities now or hereafter
due has [sic] been paid in full, . . .
. . . .
6. This is an absolute, present and
continuing guaranty of payment and performance
and not of collection.
. . . .
8. The obligations of Guarantor under
this Guaranty shall continue in full force and
effect until such time as all sums. . .due and
payable to Weinbrenner under the terms of the
Note or any other document executed in
connection therewith have been indefeasibly
paid in full.
(Emphasis added).
We believe that the following terms in the “Definitions”
section of the Loan and Security Agreement, the “other documentexecuted in connection” with the notes and the Guaranty, are
pertinent to our disposition of the issue before us:
“Guarantors” shall mean Russ Scott, Steve
Gillis, and Sal Licitra.
“Guaranty” shall mean the continuing
unconditional guaranties referred to in
Section IV . . . pursuant to which each
Guarantor unconditionally guarantees all
obligations owed by Borrower [RICO] to Lender
[Plaintiff].
. . . .
“Obligations” shall mean and include all
loans, advances, debts, liabilities,
obligations, covenants and duties owing,
arising, due or payable from Borrower to
Lender of any kind or nature, present or
future, whether or not evidenced by any note,
guaranty or other instrument, whether arising
under this Agreement, the Note, or under the
other Loan Documents or otherwise, . . . due
or to become due, now existing or hereafter
arising however acquired.
(Emphasis added). In Section 4, “Guaranty” is defined to mean that
“each Guarantor shall unconditionally guarantee the payment in full
of all Obligations of Borrower owed to Lender . . . under this
Agreement or the other Loan Documents.” (Emphasis added).
We agree with Plaintiff and the trial court that the language
of the Guaranty, standing alone, creates a continuing liability for
the guarantors to be responsible for payment of RICO's debts. In
Amoco Oil Co., 78 N.C. App. at 720, 338 S.E.2d at 603, this Court
found a continuing guaranty where the “guaranty expressly statesthat it is a continuing guaranty.” The actual language in Amoco
Oil Co. was “[t]his instrument shall be considered as a general and
continuing guaranty.” Id. at 719, 338 S.E.2d at 603. In the
instant case, the Guaranty states that “[t]his is an absolute,
present and continuing guaranty of payment and performance[.]”
(Emphasis added). The language of the instant Guaranty is
virtually identical to the language in Amoco Oil Co. Indeed, this
case cannot be rationally distinguished from Amoco Oil Co. Here,
as in Amoco Oil Co., “[t]he clear language of the guaranty rules.”
Id. at 720, 338 S.E.2d at 603.
We also agree with Plaintiff that the contemporaneously
executed Loan and Security Agreement makes it clear that the
guaranty was intended to be continuing in nature, “to enable the
principal debtor to have credit over an extended time and to cover
successive transactions.” Id. In fact, consideration for the
Agreement included “extensions of credit now or hereafter made” by
Plaintiff to RICO. Further, the Agreement specifically and plainly
defined its guaranty terms as “continuing” and expressly described
the responsibility of each guarantor under the Guaranty to pay
“all” obligations. Such obligations are broadly defined to include
all debts, liabilities and obligations, “of any kind or nature,”
present “or future,” “now existing or hereafter arising.”
Moreover, the Agreement specifically contemplated that there wouldbe an ongoing debt relationship between RICO and Plaintiff by
setting out a future purchase schedule, which included accelerating
amounts of footwear for each succeeding year and provided for
penalties if RICO did not meet its obligation to purchase such
amounts from Plaintiff. Plaintiff's intent to secure the payment
of these ongoing debts is evidenced by Plaintiff's insistence on
defining “Liabilities” under the Guaranty to mean “all debt owed by
Debtor to Weinbrenner and outstanding from time to time[.]” That
Defendant agreed to this language, in lieu of the language
originally drafted by Defendant's attorney which limited the
definition of liabilities to “all principal of the Note outstanding
from time to time,” unequivocally establishes that Defendant
acquiesced in the creation of a continuing guaranty of payment of
RICO's debts.
For these reasons, we reject Defendant's argument that the
Guaranty terminated upon payment of the cash and inventory notes
and hold that the trial court properly granted summary judgment for
Plaintiff on the issue of Defendant's liability to Plaintiff for
payment of the outstanding debts.
Affirmed.
Chief Judge MARTIN and Judge WYNN concur.
Report per Rule 30(e).
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