WHEELER & CLEVENGER OIL COMPANY, INC . V. BRUCE L . WASHBURN
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2001-SC-0271-DG
WHEELER & CLEVENGER OIL
COMPANY, INC .
'
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APPELLANT
ON REVIEW FROM THE COURT OF APPEALS
1999-CA-001190-MR
LAWRENCE CIRCUIT COURT NO. 1994-CI-0111
V.
BRUCE L. WASHBURN
APPELLEE
OPINION OF THE COURT BY JUSTICE KELLER
REVERSING AND REMANDING
I. ISSUE
To secure credit with Appellant for his company, Appellee signed guaranty
agreements contained on both the front and back of an "Application for Credit." When
Appellant sought enforcement of Appellee's guaranties, Appellee claimed that his
guaranties were invalid and unenforceable under KRS 371 .065 because they did not
specify a maximum amount of liability and a termination date . Did the failure to include
those provisions in the guaranties render them invalid and unenforceable? Because
KRS 371 .065's requirement that a guaranty contain such provisions does not apply to a
guaranty set forth on the instrument being guaranteed, we hold that Appellee's
guaranties are valid and enforceable . Accordingly, we reverse the Court of Appeals's
opinion that affirmed the trial court's judgment finding Appellee's guaranties invalid and
unenforceable .
II. BACKGROUND
Appellee was president of HICO Transport, Inc . (hereinafter HICO) . On June 14,
1993, he submitted to Appellant an "Application for Credit" on behalf of RICO for the
purpose of establishing a line of credit to purchase fuel and other merchandise . At the
bottom of the front of the application was a section captioned "GUARANTY
AGREEMENT," which Appellee signed as a guarantor of any credit extended to HICO,
and it read as follows :
IN CONSIDERATION OF CREDIT BEING EXTENDED BY
WHEELER & CLEVENGER OIL CO., INC. TO THE ABOVE
NAMED APPLICANT FOR MERCHANDISE TO BE
PURCHASED WHETHER APPLICANT BE AN INDIVIDUAL,
A PROPRIETORSHIP, A CORPORATION OR ENTITY,
THE UNDERSIGNED GUARANTOR OR GUARANTORS
EACH HEREBY CONTRACT AND GUARANTEE TO
WHEELER & CLEVENGER OIL CO., INC ., THE FAITHFUL
PAYMENT, WHEN DUE OF ALL ACCOUNTS OF SAID
APPLICANT FOR PURCHASES MADE WITHIN FIVE
YEARS NEXT AFTER THE DATE OF THIS APPLICATION .
THE UNDERSIGNED GUARANTOR OR GUARANTORS
EACH HEREBY EXPRESSLY WAIVE ALL NOTICE OF
ACCEPTANCE OF THIS GUARANTY, NOTICE OF
EXTENSION OF CREDIT TO APPLICANT,
PRESENTMENT AND DEMAND FOR PAYMENT ON
APPLICANT, PROTEST AND NOTICE TO UNDERSIGNED
GUARANTOR OR GUARANTORS OR DISHONOR OR
DEFAULT BY APPLICANT, PROTEST AND NOTICE TO
UNDERSIGNED GUARANTOR OR GUARANTORS OR
DISHONOR OR DEFAULT BY APPLICANT OR WITH
RESPECT TO ANY SECURITY HELD BY WHEELER &
CLEVENGER OIL CO., INC . EXTENSION OF TIME OF
PAYMENT TO APPLICANT, ACCEPTANCE OF PARTIAL
PAYMENT OR PARTIAL COMPROMISE. ALL OTHER
NOTICES TO WHICH THE UNDERSIGNED GUARANTOR
OR GUARANTORS MIGHT OTHERWISE BE ENTITLED
AND DEMAND FOR PAYMENT UNDER THIS GUARANTY.
On the back of the application, another section also captioned "GUARANTY
AGREEMENT" was signed by Appellee, and it read as follows :
TO : WHEELER & CLEVENGER OIL CO ., INC
DATE : June 14, 1993
We, Bruce L. Washburn and Jay Crase' residing at HICO
Transport, Inc., POB 50571, Nashville, TN, for and in
consideration of your extending at our request credit to
HICO Transport, Inc., hereinafter referred to as the
"Company", of which Bruce L . Washburn/Jay Crase is
President & Director of Operations hereby personally
guarantees to you the payment at WHEELER &
CLEVENGER OIL CO., INC . in the state of Kentucky of any
obligation of the company and we hereby agree to bind
ourselves to pay you on demand any sum which may
become due to you by the Company whenever the Company
shall fail to pay the same . It is understood that this guaranty
shall be a continuing and irrevocable guaranty and indemnity
for such indebtedness of the Company. We do hereby waive
notice of default, nonpayment and notice thereof and
consent to any modification or renewal of the credit
agreement hereby guaranteed.
On September 7, 1994, Appellant filed suit against HICO and Appellee for past
due amounts, totaling $13,551 .26 . Appellee defended by asserting inter alia that the
guaranty agreements that he signed were not enforceable against him because "[KRS
371 .065] clearly makes void any guaranty agreement that . . . does not contain
provisions including a maximum amount of liability and a termination date" and the
subject agreements did not contain such provisions .
After a bench trial, the trial court found that "KRS 371 .065 is inapplicable to the
case at hand . . . in that this does not involve a guaranty of commercial paper."
Consequently, after rejecting Appellee's other defenses, on October 20, 1998, the trial
Jay Crase, who is shown on the credit application as "Director of Operations"
for HICO, was referred to in the trial court's "Findings of Fact, Conclusions of Law &
Order" as "merely a `truck driver."' Regardless, Crase did not sign either guaranty, the
personal judgment against him was vacated by the trial court, and he is not a party to
this appeal . Thus, no claim is now being asserted against him under the guaranty
agreements .
court awarded Appellant judgment against RICO and Appellee . However, Appellee
moved the trial court to "to Alter, Amend or Vacate its judgment" because, he asserted,
the trial court erroneously relied upon APL, Inc . v. Ohio Valley Aluminum, Inc . ,2 a case
that interpreted KRS 371 .065 prior to its later amendment, which applied the statute's
requirements "to all guaranty contracts, not just commercial paper." The trial court
agreed with Appellee and held that "[t]he guaranty agreement in question does not
meet the minimum standards as required by statute because it fails to specify the
maximum liability of the guarantor and does not specify a termination date which
renders it invalid and unenforceable . As a result, on February 6, 1999, the trial court by
amended judgment vacated "so much of the Court's Judgment . . . granting personal
Judgment [against Appellee]" but let stand Appellant's judgment against RICO .
Appellant's subsequent motion to alter, amend or vacate the amended judgment was
overruled, and it appealed from the amended judgment .
The Court of Appeals agreed with the trial court's conclusions that, as a result of
its amendment in 1990, KRS 371 .065 applies to all guaranty agreements, including the
guaranty agreement signed by [Appellee][,]" and thus "[Appellee's] guaranty does not
satisfy the statute, and is, therefore, unenforceable." Accordingly, the Court of Appeals
affirmed the trial court. We granted Appellant's motion for discretionary review, and we
reverse .
2 Ky. App ., 839 S.W.2d 571 (1992).
III . ANALYSIS
The dispositive issue in this case is the interpretation of KRS 371 .065, and since
the construction and application of statutes is a matter of law, we interpret KRS 371 .065
de novo3 without deference to the interpretations adopted by lower courts .4
KRS 371 .065 was first enacted in 19865 and the Act creating the statute was
titled "AN ACT relating to commercial paper . ,6 When first enacted, KRS 371 .065 read
as follows :
No guaranty which is not written on the instrument involved
shall be valid or enforceable unless it is in writing signed by
the guarantor and contains provisions specifying the amount
of the maximum aggregate liability of the guarantor
thereunder, and the date on which the guaranty terminates,
provided that such termination shall not affect the liability of
the guarantor with respect to:
(1)
Obligations created or incurred prior to such date, or
(2)
Extensions or renewals of, interest accruing on, or
fees, costs or expenses incurred with respect to, such
obligations on or after such date .
Kentucky's Constitution requires that "[n]o law enacted by the General Assembly
shall relate to more than one subject, and that shall be expressed in the title[.]"'
Because of the title of the Act and the "constitutional mandate," the Court of Appeals in
3 Bob Hook Chevrolet Isuzu, Inc. v. Commonwealth, Transp . Cabinet , Ky., 983
S.W.2d 488, 490 (1998) ("In the present case the questions to be answered deal with
the interpretation of statutes . The construction and application of statutes is a matter of
law and may be reviewed de novo .").
4 Cinelli v. Ward , Ky. App ., 997 S .W .2d 474, 476 (1998) ("We review questions
of law de novo and, thus, without deference to the interpretation afforded by the circuit
court .") .
5 1986 Ky. Acts ch. 485, § 1 .
6 Id .
7 KY. CONST . § 51 .
APL, Inc. v. Ohio Valley Aluminum held that KRS 371 .065, as first enacted, applied
exclusively to guaranties of commercial paper.$
In 1990, KRS 371 .065 was amended to read as follows :
No guaranty of an indebtedness which either is not
written on, or does not expressly refer to, the
instrument or instruments being guaranteed shall be
valid or enforceable unless it is in writing signed by
the guarantor and contains provisions specifying the
amount of the maximum aggregate liability of the
guarantor thereunder, and the date on which the
guaranty terminates . Termination of the guaranty on
that date shall not affect the liability of the guarantor
with respect to :
(a)
Obligations created or incurred prior to the
date ; or
(b)
Extensions or renewals of, interest accruing
on, or fees, costs or expenses incurred with
respect to, the obligations on or after the date .
Notwithstanding any other provision of this section, a
guaranty may, in addition to the maximum aggregate
liability of the guarantor specified therein, guarantee
payment of interest accruing on the guaranteed
indebtedness, and fees, charges and costs of
collecting the guaranteed indebtedness, including
reasonable attorneys' fees, without specifying the
amount of the interest, fees, charges and costs . 9
The 1990 Act amending the statute was titled "AN ACT relating to guaranties ."
Both the trial court and the Court of Appeals held that KRS 371 .065 as amended
applied to all guaranties . ° We agree. An Act's title may be considered in its
8 APL, Inc., 839 S .W .2d at 575 .
9 1990 Ky. Acts ch . 38, § 1 .
'o The trial court based its decision on Appellee's argument that "the legislature
amend[ed] the bills [sic] title to `An Act Relating to Guaranties,[`] from 'An Act relating to
Commercial Paper,"' and thus, the trial court ruled that the statute "was amended and
given broader application to apply to all guaranty agreements instead of just
commercial paper." The Court of Appeals, however, stated that "[t]he title of KRS
371 .065 is `Requirements for valid, enforceable guaranty,' which implies the elements
to be met therein would apply to all guaranty agreements ." Although we agree with the
-6-
interpretation .' The title of the 1990 Act clearly showed that its provisions applied to all
guaranties . But the inquiry does not end there.
Both the trial court and the Court of Appeals concluded that the guaranty
agreements 12 did not satisfy the requirements of KRS 371 .065 because the agreements
did not specify Appellee's maximum aggregate liability and a termination date .
Accordingly, the courts held the agreements unenforceable . In support of its holding,
the Court of Appeals stated that "the language of the statute, taken as a whole, refers
to all guaranties, not just to those not written directly on the instruments to be
guaranteed or specifically referencing those instruments ." It focused on subsection (2)
of the statute and stated that "[c]leary, this portion of KRS 371 .065 is not meant to
apply only to a certain category of guaranties but all guaranty agreements." The Court
reasoned that "[a]fter all KRS 371 .065 is a statute that is obviously directed at
Court of Appeals's interpretation of the statute, we would note that "[t]itle heads,
chapter heads, section and subsection heads or titles[ ] . . . in the Kentucky Revised
Statutes, do not constitute any part of the law[.]" KRS 446.140 . The titles of sections
and subsections in the statutes, vis-a-vis the titles of Acts, are often renamed and
inserted by the reviser of the statutes after the enactment of the statute, See KRS
7 .136(1) ("The [reviser of the statutes] . . . shall not alter the sense, meaning, or effect
of any act of the General Assembly, but may: . . . (b) Change the wording of
headnotes[.]"), and therefore, are not part of the legislature's deliberations and debate .
For that reason, unlike an Act's title, see infra note 11, the title of any statute, including
KRS 371 .065, should not be used as an aid in its interpretation.
11
Meyers v. Walter, Ky., 253 S .W .2d 595, 597 (1952) ("This construction is
further supported by the title of the Act . . . ."); Fayette County Fiscal Court v. Fayette
County , 314 Ky. 595, 236 S.W .2d 455 (1950); Ingram's Adm'r v. Advance Motor Co . ,
283 Ky. 87, 140 S .W .2d 840, 841 (1940) ("We have held frequently that in the
construction of an Act its title is to be read in connection with it."); Logsdon v . Howard ,
280 Ky. 342, 133 S .W.2d 60, 62 (1939) ("The meticulous care with which the legislature
circumscribed its title to the 1938 act not only sustains the interpretation we have made
of the described situation, but it even goes so far as to not admit of any other
interpretation .") .
12
Both courts refer to only one (1) guaranty agreement, but it is undisputed that
Appellee signed two (2) guaranty agreements, one on the front of the application and
one on its back.
protecting guarantors" and stated, "[w]e see no reason why this protection should only
be afforded to a certain class of guarantors and not to others ." We disagree with the
Court of Appeals's conclusion that the guaranty agreements were invalid and
unenforceable under KRS 371 .065 .
The most commonly stated rule in statutory interpretation is that the "plain
meaning" of the statute controls . 13 This Court has steadfastly adhered to the plainmeaning rule 14 "unless to do so would constitute an absurd result ." 15 The plain-meaning
rule is consistent with directions provided by the legislature on how to interpret the
statutes enacted by it . 16
13
RONALD BENTON BROWN & SHARON JACOBS BROWN, STATUTORY INTERPRETATION :
THE SEARCH FOR LEGISLATIVE INTENT § 4.2, at 38 (NITA, 2002).
14
Executive Branch Ethics Com'n v. Stephens, Ky., 92 S .W .3d 69, 73 (2002)
("The words of the statute are to be given their plain meaning unless to do so would
constitute an absurd result."); Commonwealth v. Plowman, Ky., 86 S .W .3d 47, 49
(2002) ("[A] reviewing court . . . must interpret the statute according to the plain
meaning of the act and in accordance with the legislative intent ."); County of Harlan v.
Appalachian Regional Healthcare, Inc . , Ky., 85 S .W .3d 607, 615 (2002) ("[T]he plain
text of the statutes should govern and this Court should give effect to the ordinary
meaning of the words therein .") ; Kentucky Registry of Election Finance v. Blevins , Ky.,
57 S .W .3d 289, 295 (2001) ("This interpretation does not offend the plain meaning of
the statute.") ; Hardin County Schools v. Foster , Ky., 40 S.W .3d 865, 868 (2001) ("The
proper standard of review of a question of law . . . involves the interpretation of a statute
according to its plain meaning and its legislative intent .") ; Bob Hook Chevrolet Isuzu,
Inc. , 983 S .W .2d at 492 ("A statute should be construed, if possible, so as to effectuate
the plain meaning and unambiguous intent expressed in the law."); Nelson Steel Corp .
v . McDaniel, Ky., 898 S .W .2d 66, 70 (1995) ("Courts are required to give the words of a
statute their plain meaning .").
15
16
Executive Branch Ethics Com'n v . Stephens , 92 S .W .3d at 73 .
KRS 446 .015 ("All bills introduced in the General Assembly after June 17,
1978, shall be written in nontechnical language and in a clear and coherent manner
using words with common and everyday meanings . Enactment of a bill by the General
Assembly shall be a conclusive presumption that such bill conforms to this section .");
KRS 446.080(4) ("All words and phrases shall be construed according to the common
and approved usage of language, but technical words and phrases, and such others as
may have acquired a peculiar and appropriate meaning in the law, shall be construed
-8-
KRS 371 .065 plainly provides that a guaranty agreement "which either is . . .
written on, or . . . expressly refer[s] to, the instrument or instruments being guaranteed"
is not required to specify the guarantor's maximum liability or the guaranty's termination
date . The Court of Appeals's interpretation overlooks that "[n]o guaranty of an
indebtedness" is modified by a restrictive clause, i .e . , "which either is not written on, or
does not expressly refer to, the instrument or instruments being guaranteed ." Rather
than considering the language of the statute as a whole as it professes, the Court of
Appeals's interpretation has the effect of deleting the modifying clause from the statute .
KRS 371 .065's requirement that a guaranty state the guarantor's maximum liability and
the guaranty's termination date is a consumer-protection provision designed to protect
the guarantor by reducing the risk of a guarantor agreeing to guarantee an unknown
obligation . When the guaranty agreement is found on the document being guaranteed,
however, that risk is negligible, which KRS 371 .065 recognizes by exempting such
guaranty agreements from its heightened requirements . Here, the guaranty agreement
is "written on" the credit application in two places . Thus, in accordance with the plainmeaning rule of statutory interpretation, we hold that, although KRS 371 .065 otherwise
applies to the guaranty agreements, e.g_, the agreements may "guarantee payment of
interest accruing on the guaranteed indebtedness, and fees, charges and costs of
collecting the guaranteed indebtedness, including reasonable attorneys' fees, without
specifying the amount of the interest, fees, charges and Co sts, ,,17 the agreements were
not required to state either Appellee's maximum liability or a termination date .
according to such meaning .").
17
KRS 371 .065(2) .
IV. CONCLUSION
For the above reasons, we reverse the Court of Appeals and remand this case to
the Lawrence Circuit Court for entry of a judgment in favor of Appellant .
All concur .
COUNSEL FOR APPELLANT :
Janet Smith Holbrook
Huddleston, Bolen, Beatty, Porter & Copen
1422 Winchester Avenue, Second Floor
PO Box 770
Ashland, Kentucky 41105-0770
COUNSEL FOR APPELLEE :
Bruce L. Washburn
6345 Torrington Road
Nashville, Tennessee 37205
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