This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. §480A.08, subd. 3 (1998).


Minnesota Trust Company of Austin,


Bruce D. Yanke, et al.,

Filed April 6, 1999
Reversed and remanded
Anderson, Judge

Mower County District Court
File No. C5-97-689

Paul R. Spyhalski, Warren F. Plunkett & Associates, 107 West Oakland Avenue, P.O. Box 463, Austin, MN 55912 (for appellant)

Eric D. Larson, Dunlap & Seeger, P.A., 206 South Broadway, Suite #505, P.O. Box 549, Rochester, MN 55903-0549 (for respondent)


Considered and decided by Amundson, Presiding Judge, Anderson, Judge, and Huspeni, Judge.*

U N P U B L I S H E D   O P I N I O N


Appellant challenges the district court’s ruling that a guaranty agreement signed by respondent was void for lack of consideration. Because the district court (1) erred in interpreting the law of guaranty agreements and (2) failed to analyze both respondent’s and appellant’s additional defenses, we reverse and remand for proceedings consistent with this opinion.


This case arises from a forfeiture on a surety bond. In 1993, respondent Cheryl Howell (Howell) signed as co-guarantor for a surety bond provided by appellant Minnesota Trust Company of Austin through an insurance agency. Minnesota Trust would not issue the bond without Howell’s guarantee. Howell alleges that she signed the guaranty after she was told that she would have no liability under the agreement. The insurance agency’s representatives (representatives) do not remember promising Howell that she would not be liable, but it is undisputed that Minnesota Trust required Howell’s signature on the agreement because she lived in the same residence with the principal guarantor, Bruce Yanke. After Yanke misappropriated funds from a guardianship account, Minnesota Trust claims a loss of approximately $192,000 as a result of forfeiture on the bond.

Minnesota Trust sued Yanke and Howell as principal and co-guarantor on the agreement. In response to cross motions for summary judgment, the district court ruled in favor of Howell, finding a lack of consideration for her guaranty. Minnesota Trust challenges that holding and seeks dismissal of Howell’s defenses of misrepresentation, estoppel, and mistake.


On appeal from summary judgment, a reviewing court must determine whether the district court erred in its application of the law and whether there are any genuine issues of material fact. State by Cooper v. French, 460 N.W.2d 2, 4 (Minn. 1990). In so doing, a reviewing court views "the evidence in the light most favorable to the party against whom judgment was granted." Fabio v. Bellomo, 504 N.W.2d 758, 761 (Minn. 1993). Nonetheless, this court is not bound by a district court’s decision on a question of law. Frost-Benco Elec. Ass’n v. Minnesota Pub. Utils. Comm’n, 358 N.W.2d 639, 642 (Minn. 1984). The Minnesota supreme court has explained that the "construction and effect of a contract are questions of law for the court." Turner v. Alpha Phi Sorority House, 276 N.W.2d 63, 66 (Minn. 1979).

Minnesota Trust claims that the district court committed error by concluding the guaranty agreement signed by Howell was void for lack of consideration. The supreme court has stated that the

defense of want of consideration for a promise made by one party to pay the just debt of another is not looked upon with much favor by the courts, yet the established rule of law that every executory promise must have a consideration to support it must be observed.

American Multigraph Sales Co. v. Grant, 135 Minn. 208, 209, 160 N.W. 676, 676 (1916).

In Baker v. Citizens State Bank, 349 N.W.2d 552, 557 (Minn. 1984) the court explained that a guaranty is

an undertaking or promise to pay on the part of one person that is collateral to a primary obligation and that binds the guarantor to performance in the case of the default of the one primarily bound.

We have further clarified that:

A personal guaranty is a significant business transaction. A person signing as guarantor is agreeing to pay, if need be, the debt of another, never an agreeable task for the person signing but a prudent business precaution for the financing party. In these circumstances the law requires guarantors to abide by what they have agreed to.

Bartley v. BTL Enterprises, Inc., 490 N.W.2d 664, 667-68 (Minn. App. 1992) (quoting Borg Warner Acceptance Corp. v. Shakopee Sports Center, Inc., 431 N.W.2d 539, 541 (Minn. 1988)).

Howell argues that the contract is unenforceable because she received no value, even though the agreement recites otherwise. In so arguing, Howell misreads the law of suretyship, and the contract itself. Case law is clear that value was in fact received by Howell. Like any other contract, a guaranty agreement "must be supported by a valid consideration" but "unlike other contracts there need be nothing moving from the promisee to the promisor." O’Neil v. Dux, 257 Minn. 383, 391, 101 N.W.2d 588, 594 (1960). The consideration which supports the principal obligation "supports the guaranty." Id.

The guarantor’s consideration is created by the value of the bond, and the readiness to pay, extended on behalf of the principal. The district court concluded that the fact that Howell was living with Yanke, the principal, was not enough consideration to validate the agreement. However, absent something akin to fraud, case law does not delve into "why" or under "what" circumstances the guarantor signed the document, only "if" the guarantor so signed.

People who sign documents which are plainly written must expect to be held liable thereon. Otherwise written documents would be entirely worthless and chaos would prevail in our business relations.

Watkins Products, Inc. v. Butterfield, 274 Minn. 378, 380, 144 N.W.2d 56, 58 (1966).

Howell challenges the construction of the document itself, arguing that the agreement is invalid because (1) the document first refers to her as the "principal," although it later designates her as a co-guarantor; and (2) the surety bond itself failed to include Howell as a co-guarantor which she reads as a condition of the guaranty.

"The cardinal purpose of construing a contract is to give effect to the intention of the parties as expressed in the language they used in drafting the whole contract." Art Goebel, Inc. v. North Suburban Agencies, Inc., 567 N.W.2d 511, 515 (Minn. 1997) (citation omitted). When interpreting a contract, "the language found in a contract is to be given its plain and ordinary meaning." Turner, 276 N.W.2d at 67 (citations omitted). The contract is unambiguous and there is no question as to the intent: Howell was agreeing to be bound as a guarantor for any claims that may be made against the bond. The contract signed by Howell specifically provided that she was the "co-guarantor" and the consideration supporting the principal obligation supported her guaranty. The district court erred in ruling that the guaranty was unsupported by consideration.

Howell asserted defenses of misrepresentation, estoppel, and mistake, arguing that the representatives’ alleged statements create a fact issue precluding summary judgment for Minnesota Trust. Minnesota Trust, on the other hand, alleges Howell failed to demonstrate an agency relationship making Minnesota Trust liable for the alleged statements. Minnesota Trust argues that, absent an agency relationship with the representatives, it is not liable under any of the theories raised by Howell unless it authorized the statements.

It appears, from the limited record available to this court, that, if Howell is to make a successful agency claim against Minnesota Trust, it will be based on apparent authority, rather than actual authority. There is no evidence in the record establishing that Minnesota Trust had any direct contact with Howell and Yanke. While there is support in Minnesota case law for protection of third parties from acts which the principal has apparently authorized the agent to make, see Duluth Herald & News Tribune v. Plymouth Optical Co., 286 Minn. 495, 498-99, 176 N.W.2d 552, 555-56 (1970), there are severe limitations on the applicability of this doctrine. Truck Crane Serv. Co. v. Barr-Nelson, Inc., 329 N.W.2d 824, 826 (Minn. 1983) (authority has limited effect and must be based on affirmative act of principal); Semrad v. Edina Realty, Inc., 493 N.W.2d 528, 535 (Minn. 1992) (a principal is not liable for unauthorized intentional tort of its agent).

While the parties submitted some evidence to the district court that at least touched on the issue of agency, apparent or otherwise, the district court’s memorandum was entirely silent on the subject. A reviewing court considers only issues presented to and considered by the trial court. Thiele v. Stich, 425 N.W.2d 580, 582 (Minn. 1988). In view of the limited record on agency and the absence of any ruling by the district court on this issue, we remand to the district court for further proceedings.

Reversed and remanded.

* Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant to Minn. Const. Art. VI, § 10.