Opinion
No. 1861.
October 13, 1969.
Appeal from the Court of Record for Broward County, B.L. David, J.
Leon F. Weaver, of Weaver Brannen, Boca Raton, for Ahrens Materials, Inc.
G.E. Hartwig, of Lasher Hartwig, Fort Lauderdale, for R W Contractors, Inc.
On March 15, 1966, the J.D. Yaun Roofing Corporation (hereafter Yaun) was indebted to Ahrens Materials, Inc. (hereafter Ahrens) in the sum of approximately $11,000 on an open materials account and the additional sum of approximately $2,000 on a separate equipment account. On that date Charles Rowan and Willie Whittington acquired the controlling interest in Yaun and in order to be able to continue to purchase materials from Ahrens on open account, Rowan and Whittington executed the "guarantee letter" which is the principal subject of this appeal.
The letter, written on Yaun letterhead and addressed to Ahrens was signed by Charles Rowan as treasurer and Willie Whittington as vice president and secretary (the respective offices which they held in Yaun), and consisted of the following single paragraph:
"WE, Charles Rowan and Willie Whittington, sole owners of R W Contractors, Inc., do as of this date, guarantee all payments which might be accrued by J.D. Yaun Roofing Corporation to your concern."
From March 15, 1966, to August 30, 1966, Ahrens continued to furnish materials to Yaun on open account. During that five and one-half-month interval Yaun's purchases from Ahrens were approximately $5,100, and payments on the account during the same interval were approximately $10,900, so that as of August 30, 1966, the balance due on the open materials account had been reduced to approximately $5,200. On this latter date Rowan and Whittington gave written notice to Ahrens that they were no longer associated with Yaun, and were terminating the guarantee which they had previously signed.
Ahrens then brought suit against Yaun for the balance due on the open materials account in the sum of approximately $5,200 and for the balance due on the separate equipment account in the sum of $2,000, the complaint naming R W Contractors, Inc., and Rowan and Whittington, individually, as defendants by virtue of the "guarantee letter". The court granted a motion to dismiss as to Rowan and Whittington, individually, but denied such motion as to R W Contractors, Inc. At the conclusion of the nonjury trial against Yaun as the principal debtor and R W Contractors, Inc. as the obligor on the "guarantee letter", judgment was rendered against Yaun for the total of all sums due Ahrens, and against R W Contractors, Inc. for approximately $5,100 as the amount of purchases made between the date of the "guarantee letter" and the termination of such guarantee. Ahrens appeals contending that the court erred in dismissing Rowan and Whittington, individually, and in finding that the guarantee letter extended only to purchases occurring after March 15, 1966, and in further finding that the guarantee letter applied only to the open materials account and not to the equipment account as well. R W Contractors, Inc. cross-appeals on the grounds that the judgment against it is contrary to the evidence.
The so-called "guarantee letter" was clearly ambiguous in a number of respects. The evidence was conflicting as to whether it was intended to be a personal guarantee on the part of Rowan and Whittington, individually, or a guarantee on the part of R W Contractors, Inc., or whether the letter was signed solely with intention that it bind J.D. Yaun Roofing Corporation to pay its own debts. There was conflicting evidence as to whether the parties intended the guarantee to apply not only to future purchases but also to the balance then due on the open materials account and the equipment account, or whether it was intended to apply only to future purchases made on the open materials account. These conflicting factual issues were resolved by the trial court, as trier of fact, by a determination that R W Contractors, Inc. was the guarantor and that the guarantee of payment was to apply only to materials purchased on open account subsequent to March 15, 1966. There being substantial competent evidence in the record to support these findings they will not be disturbed.
The judgment in favor of Ahrens against Yaun is not questioned on this appeal and is affirmed. However, the judgment in favor of Ahrens against R W Contractors, Inc. as guarantor is contrary to the evidence and must be reversed.
The guarantee upon which R W Contractors, Inc. had liability as a guarantor applied only to purchases on the open materials account made subsequent to March 15, 1966, the amount of which was approximately $5,100. During that period of time and while the "guarantee letter" was in effect, Yaun actually paid to Ahrens to apply on the open materials account, the sum of approximately $10,900, or $5,800 in excess of purchases made during the same interval. Notwithstanding the fact that Yaun did not expressly designate to Ahrens that such payments were to be applied first against purchases made subsequent to March 15, 1966, Ahrens was obligated as a matter of equity to have such payments applied to discharge the debt which R W Contractors, Inc. had guaranteed. Standard Accident Insurance Co. v. Bear, 1938, 134 Fla. 523, 184 So. 97, 127 A.L.R. 1; Consolidated Naval Stores Co. v. Wilson, 1921, 82 Fla. 396, 90 So. 461, 21 A.L.R. 681; 40 Am.Jur., Payments, § 148.
Since that portion of the debt for which the guarantor had liability had been discharged, R W Contractors, Inc. was entitled to judgment in its favor on the claim made against it as guarantor. Any liability which Rowan and Whittington, individually, would have had as guarantors would likewise have been discharged, so that the question of whether the court properly dismissed them as parties defendant is rendered moot.
That portion of the judgment in favor of Ahrens against R W Contractors, Inc. is reversed and upon remand an appropriate judgment will be entered in favor of R W Contractors, Inc. That portion of the judgment in favor of Ahrens against Yaun is affirmed.
Affirmed, in part; reversed, in part.
McCAIN, J., concurs.
CROSS, C.J., dissents, with opinion.
I must of necessity respectfully dissent to that part of the majority opinion which would reverse the judgment in favor of Ahrens Materials, Inc., against R W Contractors, Inc.
The law of payments as it is universally adhered to today generally is as follows:
1. The payment is applied as the debtor intends and so manifests to the creditor before or at the time of payment.
2. If the debtor fails to so indicate, the payment is applied as the creditor within a reasonable time determines.
3. If neither the debtor nor the creditor seasonably so indicates, the payment is applied as a just regard to its effect upon the debtor, the creditor and third persons make it desirable that it should be applied. This usually results in its application to the oldest, unsecured account.
4. If the debtor is under a duty to a third person to devote funds paid by him to the discharge of a particular debt, the payment must be so applied if the creditor knows or has reason to know of that duty. This is so despite the debtor's contrary direction.
These rules of freedom of application of payments rest upon the concept that the money which the debtor is utilizing to make the payment is his own and is free for use as he pleases. The noted exception phrased in terms of duty rests on equitable considerations. Examples which the cases recognize without much conflict are where the surety itself makes a payment to the debtor, or where the money which comes to the creditor from the debtor is the same money for the payment of which the surety is bound and the creditor knows the source of that fund. These rules are outlined in detail with illustrations, in the Restatement of the Law of Contracts, §§ 387, 388 and 394. They are also noted in 70 C.J.S. Payment §§ 50 and 80; 72 C.J.S. Principal and Surety § 144; and 40 Am. Jur., Payment, §§ 108 through 150; and in 21 A.L.R. 704; 57 A.L.R.2d 855; 41 A.L.R. 1297; 130 A.L.R. 198; and 166 A.L.R. 641.
The following cases have alluded to these propositions: Herrman v. Daffin, Mo. App. 1957, 302 S.W.2d 313; Maryland Casualty Company v. City of South Norfolk, 4 Cir. 1932, 54 F.2d 1032 (cert. den. 286 U.S. 562, 52 S.Ct. 644, 76 L.Ed. 1295); First National Bank of Mandan v. Larsson, 1937, 67 N.D. 243, 271 N.W. 289; Depositors Holding Company v. Brown, 1933, 64 N.D. 222, 251 N.W. 295; United States to Use of General Electric Distribution Corporation v. Bell Construction Co., 7 Cir. 1955, 226 F.2d 99.
The courts of Florida are in accord with the above stated principles. Alford v. Leonard, 1925, 88 Fla. 532, 102 So. 885; Atlantic Gulf Properties, Inc. v. Palmer, Fla.App. 1959, 109 So.2d 768; Turner Produce Company, Inc. v. Lake Shore Growers Cooperative Association, Fla.App. 1969, 217 So.2d 856.
Under the facts presented in the instant case, I am of the conviction that Ahrens Materials, Inc., the creditor, was not obligated either by law or equity to apply the payments made by J.D. Yaun Roofing Corporation, the debtor, to discharge the debt which R W Contractors had guaranteed.
I would affirm the complete judgment of the lower court.