No. 13422
IN THE SUPREME COURT OF THE STATE OF MONTANA
1977
S-W COMPANY,
Plaintiff and Respondent,
FRED E. SCHWENK, JR., PACIFIC
NATIONAL BANK OF WASHINGTON and
SHELL OIL COMPANY,
Defendants and Appellants.
Appeal from: District Court of the Sixteenth Judicial District,
Honorable Alfred B. Coate, Judge presiding.
Counsel of Record:
For Appellants:
Denzil R. Young argued, Baker, Montana
Moulton, Bellingham, Lbngo & Mather, Billings, Montana
For Respondent:
Berger, Anderson, Sinclair and Murphy, Billings,
Montana
Arnold Berger argued, Billings, Montana
For Amicus Curiae:
Fillner and Pitet, Billinas, Montana
Patrick Pitet argued, Billings, Montana
Submitted: May 31, 1977
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Mr. Justice Daniel J. Shea delivered the Opinion of the Court.
Fred E. Schwenk, Jr., appeals from an order of the district
court granting summary judgment for S-W Company and from the denial
of the district court to amend the court's findings of fact and
conclusions of law.
The action is on a contract involving interests in land in
Fallon County. S-W Company, a promisor to. the contract, brought
the action against Schwenk, Pacific National Bank of Washington
and Shell Oil Company, promisees. The latter two parties are stake-
holders who do not join Schwenk on appeal. John Wight was a co-
promisor on the contract. He was not made a party to the action
but filed a brief on leave of this Court as amicus curiae on appeal
after receiving notice of the judgment of the district court. On
appeal Wight requests joinder as an interested party to the action.
In settlement of a former dispute, Schwenk agreed to accept
the sum of $15,000 as full payment to him for his interest in the
particular lands described in the agreement with S-W Company and
Wight. The agreement stated:
"First Party [Schwenk] shall accept the sum of
Fifteen Thousand ($15,000.00) Dollars as full
payment to him for his right, title, interest
and claims in to the above described lands and
working interest embracing those lands, which
shall be paid in the following manner: One-
half of the net proceeds derived by S-W Company
from its working interest in and to said lands,
and one-half of the net proceeds to be derived
from the Wight Trust interest held by the First
National Bank of Denver embracing the said de-
scribed lands." (Bracketed material added.)
According to the agreement, instruments regarding the interests in
the land were to be held in escrow and delivered to S-W Company
"when the terms and conditions of this agreement and the escrow
agreement have been complied with fully."
Shell Oil, the producer of oil from the lands, later made
monthly payments towards the $15,000 debt, applying one-half the
monthly income of S-W Company. Wight Trust funds, meanwhile, were
indefinitely impounded by another unrelated lawsuit. When more
than $7,500 had been paid to Schwenk by income from S-W Company,
S-W Company sued Schwenk, the Bank and Shell Oil alleging that it
had fulfilled its obligations of the agreement. Schwenk answered,
alleging that the agreement did not limit S-W Company's obligation
to one-half of the $15,000 debt, and that instead, S-W Company was
jointly and severally liable for the whole amount. Wight, the
cosigner on the debt, was not joined or notified of the proceedings
until after judgment. Neither party to the action nor the court
raised the question of joinder prior to appeal.
The only evidence submitted to the court for interpretation
was a copy of the agreement itself. The trial court granted a motion
of S-W Company ruling that the language in dispute was not ambiguous
and accordingly that S-W Company was liable to pay only $7,500 of
the $15,000 debt. After the trial court refused to amend any of
its findings and conclusions, Schwenk appealed from the granting
of the summary judgment.
Schwenk's appeal raises three main issues:
1. Was the district court in error in determining there
was no ambiguity in the contract?
2. Did issues of fact exist which precluded the granting
of summary judgment?
3. Should the district court have required the joinder of
Wight as an interested party whose interests were affected by the
judgment?
If the district court was correct in determining that the
disputed language was not ambiguous, it would follow that there
were no material questions of fact as to the liability of S-W Com-
pany. However, we determine that the language is ambiguous and
accordingly that there were material facts in dispute.
Where ambiguity does exist on the face of the contract, the
question of the parties' intent as to the language involved is sub-
mitted to the trier of fact. Schell v. Peters, 147 Mont. 21, 410
P.2d 152. Ambiguity exists when a contract taken as a whole in its
wording or phraseology is reasonably subject to two different inter-
pretations. Watson v. Barnard, 155 Mont. 75, 82, 469 P.2d 539.
Here, the crux of the case is whether S-W Company is jointly and
severally liable for the total $15,000 debt, or only severally liable
for half, $7,500. The only language in the agreement relating to
liability is phrased in terms of the source of funds to pay the debt:
"One-half of the net proceeds derived by S-W
Company from its working interest in and to
said lands, and one-half of the net proceeds
to be derived from the Wight Trust interest
* * * -1'
What was meant by this language? Does it mean that the S-W
Company is liable to pay only $7,500 as the trial court held, Or
does it mean that one-half of the net proceeds (however large or
small that amount may be) of the S-W Company's working interest in
the land involved, shall go towards payment of the $15,000 debt?
Similarly, does it mean that one-half of the net proceeds of the
Wight Trust (however large or small that amount may be) shall go
towards payment of the $15,000 debt? We cannot conclude as a matter
of law that the meaning of this contract language was clearly stated
or unambiguous.
Nowhere in the agreement is the extent of each promisor's
liability defined other than to the extent of one-half of each source
of income. There are no time limitations, furthermore, on payment
from either S-W Company or Wight Trust; documents in escrow were
to be released only after the agreement was fully performed.
Under Montana law, obligations imposed upon several persons
may be (1) joint, (2) several, or, (3) joint and several. Section
58-201, R.C.M. 1947. Section 58-202, R.C.M. 1947, states:
"When joint and several. All joint obligations
and covenants shall hereafter be taken and held to
be joint and several obligations and covenants."
Sections on the interpretation of contracts, sections 13-725 and
13-726, R.C.M. 1947, raise the presumption of joint and several
liability. They provide:
"13-725. Where all the parties who unite in a
promise receive some benefit from the consideration,
whether past or present, their promise is presumed
to be joint and several."
"13-726. A promise, made in the singular number,
but executed by several persons, is presumed to be
joint and several."
These sections correspond directly with their California predeces-
sors and present counterparts, sections 1659 and 1660, Ca1.Civ.C.
No Montana cases are clearly on point here. California
courts, however, have made numerous distinctions regarding these
statutes. In a recent case, Vincent v. Grayson, 106 Cal.Rptr. 733,
738, 30 C.A.3d 899, 906, the court stated that the language of
'I8I/We hereby promise and agree to pay * * *I1'imparts joint and
7Q2
several liability. In Kaneko v. Okuda, 15 Cal.Rptr. 4-93, 195 C.A.2d
217, the court held that three signers of a contract and option to
purchase had benefited from the consideration and hence were liable
jointly and severally. In Williams v. Reed, 113 C.A.2d 195, 248
P.2d 147, the court held,comakers of a mortgage liable jointly and
severally when each note was in the form of a promise made in the
singular and executed by each of the makers. Finally, in Olson v.
Foster, 42 C.A.2d 493, 109 P.2d 388, the court held that a number
of trusts were jointly and severally liable for the balance due on
legal services made on behalf of and benefiting all of the trusts.
In the present case, there is no language expressly defining
the liabilities of the two promisors. There is no language compa-
rable to "I/We agree * * *". The debt, however, is named as a total
$15,000, and nowhere is it explicitly broken down into two halves
of $7,500 each. It is not clear what benefit each of the promisors
received from the agreement, but it specifically stated that the
$15,000 was to be satisfaction of an earlier "disagreement between
all of the parties." What relationship the promisors each had to
the earlier disagreement, or to each other, is not apparent from
the papers or the court files. A prior debt, however, is sufficient
to constitute consideration in a later promise regarding that debt,
sections 13-501 and 13-502, R.C.M. 1947, and both promisors here
received a benefit from the contract. These facts raise the presump-
tion of joint and several liability of each promisor, and as a matter
of law, Schwenk is entitled to this presumption. The burden of proof
is on S-W Company to rebut this presumption.
When a contract is ambiguous, the language of the parties
must be considered in light of subject matter and the surrounding
circumstances, as well as the positions of the parties at the time
the contract was made. Kintner v. Harr, 146 Mont. 461, 408 P.2d
487; McNussen v. Graybeal, 146 Mont. 173, 405 P.2d 447. The con-
struction that the district court gave to the language was just one
of many constructions which could reasonably be given it. The dis-
trict court erred in determining that there was no ambiguity in the
contract.
It follows that the court erred in granting summary judg-
ment for S-W Company. This Court stated in Fulton v. Clark, 167
Mont. 399, 404, 538 P.2d 1371, "Summary judgment is usually inap-
propriate where the intent of the contracting parties is an important
consideration." 6Moore's Federal Practice, Para. 56.17[41.-11. In
Fulton the contract did not specifically provide for the payment
of the fees in question. The Court stated:
" * * * To determine if the agreement precludes
management fees for long range services, the dis-
trict court must inquire as to the conduct of the
parties and as to the existence and substance of
the alleged oral agreement. Whether there was
an executed oral agreement, as well as whether
the conduct of the parties modified the written
agreement, are material questions of fact bear-
ing on the intent of the parties. * * * "
167 Mont. 404.
Similarly, here the contract does not state the extent of liability
of each promisor. The intent of the parties to the contract is a
genuine issue of fact and hence summary judgment is inappropriate.
The following considerations for example, would have been
appropriate inquiry for the trial court to arrive at the facts.
Which party was the source of the language used in the agreement
regarding how payment of the debt was to be made and how and why
was this language chosen? What interests, if any, did each of the
promisors to the agreement, namely S-W Company and John Wight or
his predecessor in interest, have in the prior dispute upon which
the agreement was based? What were the income-producing capacities
of each of the two parcels of land in which the promisors owned
interests at the time of the agreement, and was this information
within the knowledge of all parties at the time? What was the rela-
tionship between the promisors at the time of the agreement?
The remaining issue is whether Wight (the Wight Trust)
should have been joined as a party at the district court level.
Neither S-W Company nor Schwenk raised the issue of joinder before
appeal. In his amicus brief Wight claims, however, that he should
have been joined as a party, and it appears that he did not know of
the action pending in district court. Under Rule 19(a), M.R.Civ.P.,
the court is required to join a person subject to service of process
if:
"(2) he claims an interest relating to the subject
of the action and is so situated that the disposi-
tion of the action in his absence may (i) as a
practical matter impair or impede his ability to
protect that interest * * * ."
Since Wight did not claim an interest in the case below the court
was not required to join him as a party, but because his interests
would clearly have been affected by the court's judgment, the court
should have joined him as a party. Under Rule 21, M.R.Civ.P., the
district court may drop or add parties on motion of any party "or
of its own initiative" at any time during the proceedings.
In this situation Wight was not bound by the court's conclu-
sions of law and judgment since he was not a party. However, he
would be limited in exercising his right of contribution from S-W
Company on the debt if S-W's liability was decided in Wight's
absence. The basis of the rule on joinder is founded on due process
considerations of notice and a right to be heard. On remand Wight
should be joined as a party so that he is not deprived of due
process.
We reverse the summary judgment of the district court, set
aside the findings of fact and conclusions of law, and order further
proceedings not inconsistent with this opinion.
@-/$I@Justice &
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