Opinion
No. C8-99-583.
Filed September 7, 1999.
Appeal from the District Court, Ramsey County, File No. CX-95-6856.
Kevin M. Busch, Moss Barnett, (for appellant)
John A. Pecchia, Charles E. Keenan, Christoffel Elliott, P.A., (for respondent)
Considered and decided by Kalitowski, Presiding Judge, Lansing, Judge, and Crippen, Judge.
This opinion will be unpublished and may not be cited except as provided by Minn. Stat § 480A.08, subd. 3 (1998).
UNPUBLISHED OPINION
In an appeal from a district court order enforcing James Trapp's personal guaranty on a debt, Trapp contests the finding that the enforcement action was brought within a reasonable time. The district court's findings are adequately supported by the record, and we affirm.
FACTS
James Trapp executed a personal guaranty in favor of Rod Rubens in June 1990. The guaranty was for a debt owed by Trapp's company to Rubens' company. When James Trapp sued Lowell Hancuh for usury in July 1995, Hancuh purchased the guaranty from Rubens and counterclaimed for enforcement of the guaranty, which was then more than five years old. The district court initially found that the statute of limitations barred Hancuh's counterclaim. But this court reversed, holding that the period a guaranty was enforceable was distinct from the statute of limitations on the underlying debt.
Trapp v. Hancuh, No. C5-96-2406, 1997 WL 396234, at *4 (Minn.App. July 15, 1997), review denied (Minn. Oct. 31, 1997).
On remand, the district court interpreted the appellate opinion to require judgment for Hancuh and entered judgment accordingly. Trapp appealed and we again reversed, holding that because the guaranty did not include an expiration date, it was necessary for the court to determine as an issue of fact whether the counterclaim to enforce the guaranty had been brought within a reasonable period. We remanded to the district court to determine whether the five-year-and-one-month period was reasonable on the facts of this case.
Trapp v. Hancuh, No. C4-98-828, 1998 WL 779032, at *3 (Minn.App. Nov. 10, 1998).
On remand from the second appeal, the district court reasoned that the statute of limitations for contract actions provided guidance on what constitutes a reasonable period. Because the five-year-and-one-month period did not exceed the statute of limitations, the court found that it was a reasonable period and entered judgment for Hancuh. Trapp appeals, contending precedent has established a three-year presumption for the reasonable period and that the district court erred by looking to the statute of limitations period for contract claims to decide what time period is reasonable.
DECISION
A guaranty "is construed the same as any other contract." A guaranty that does not contain an expiration date injects ambiguity into the term of the guaranty's coverage. To construe an ambiguous guaranty, the district court must make findings on the parties' intentions when they executed the guaranty. Relying on those findings, the court determines the reasonable time period that is covered by the guaranty. This legal conclusion, like the interpretation of a contract, is "a question of law subject to de novo review."
American Tobacco Co. v. Chalfen, 260 Minn. 79, 81, 108 N.W.2d 702, 704 (1961).
See Taney v. Hodson, 170 Minn. 230, 233, 212 N.W. 196, 197 (1927).
Employers Mut. Cas. Co. v. A.C.C.T., Inc., 580 N.W.2d 490, 493 (Minn. 1998).
Trapp asserts that in Borg Warner Acceptance Corp. v. Shakopee Sports Center, Inc. this court established a presumption that three years was a reasonable period. Although in Borg Warner we noted that a number of cases had found three years to be a reasonable period, we emphasized that the reasonableness of the period depended on the specific facts and "the circumstances of the case." In arguing that three years has become a presumptive time limit, Trapp construes precedent too narrowly.
418 N.W.2d 749 (Minn.App. 1988), rev'd, 431 N.W.2d 539 (Minn. 1988).
Id. at 750; see Tri-County State Bank v. Golf Properties, Inc., 395 N.W.2d 409, 412 (Minn.App. 1986) ("In [ Continental Can Co. v. Lanesboro Canning Co., 180 Minn. 27, 29, 230 N.W. 121, 122 (1930)], the supreme court held that three years was a reasonable time. We believe three years is reasonable in this case also.").
Precedent has consistently held that if the guaranty does not contain an expiration date, it should be limited to a reasonable time, taking into consideration the circumstances of the case. Circumstances of each case vary, and the district court did not err in rejecting Trapp's assertion that a guaranty with no expiration date presumptively expires in three years.
Wyman, Partridge Co. v. Bible, 150 Minn. 26, 29, 184 N.W. 45, 46 (1921); see also Donlin v. Wamsley, 176 Minn. 234, 237, 223 N.W. 98, 99-100 (1929) (guaranty to be construed to effect parties' intent); Lehigh Coal Iron Co. v. Scallen, 61 Minn. 63, 66, 63 N.W. 245, 246 (1895) (guaranty to be construed based on "all the circumstances of the case").
Although the district court appropriately rejected Trapp's claim for a three-year presumption, its reliance on a six-year period created by the statute of limitations for contract actions suggests the danger of creating a substitute presumption. The proper analysis is a case-by-case consideration of the facts and circumstances, focusing on the parties' intent discerned from their words and actions.
Taney, 170 Minn. at 233, 212 N.W. at 197; see Wyman, Partridge Co., 150 Minn. at 29, 184 N.W. at 46 (unreasonable to construe the guaranty at issue as continuing beyond one year).
The lengthy history of this case has generated an abundance of factual findings and an extensive record that examines the parties' intentions. The record contains a number of communications between Trapp and Rubens relating to the guaranty. In an April 1990 letter to Rubens, Trapp stated, "I want you to know that it is and always was my intention to see that [Rubens' company] was repaid," and "I will personally guarantee the amount due your company." On several occasions after Trapp provided his personal guaranty, Trapp and Rubens discussed the debt and Trapp expressed his intent to fulfill his obligations.
Reviewing the district court's findings of fact and the record, Trapp's actions indicate he intended his personal guaranty to be enforceable for a lengthy period. On this evidence, the district court did not err in holding that five years and one month was a reasonable time period within which to bring a claim to enforce Trapp's personal guaranty.