ARKANSAS COURT OF APPEALS

NOT DESIGNATED FOR PUBLICATION

TERRY CRABTREE, JUDGE

DIVISION III

GEORGE M. STOKES

APPELLANT

V.

DELTA PRODUCTION CREDIT ASSOCIATION

APPELLEE

CA 01-587

JANUARY 9, 2002

APPEAL FROM THE CHICOT COUNTY CIRCUIT COURT

[NO. CIV-99-148-2]

HONORABLE SAMUEL B. POPE,

CIRCUIT JUDGE

AFFIRMED

The appellant, George M. Stokes, appeals from Chicot County Circuit Court's denial of his motions for directed verdict. The court submitted the case to a jury, and the jury returned a verdict in favor of the appellee, Delta Production Credit Association, in the amount of $206,088. The court entered the judgment and added $200 in costs, and $13,330 in attorney's fees. Appellant brings this appeal arguing that the trial court erred in denying his motion for directed verdict. We find no error and affirm.

The appellee, Delta Production Credit Association, sued appellant to collect on two promissory note balances arising out of a 1998 crop loan. The loans were made to James Keith Lewis and Randolph F. Lewis, d/b/a Lewis Farm Partnership. Appellant manages several thousand acres of farmland and James and Randolph Lewis farmed a portion of

appellant's lands. Apparently, the land the Lewises farmed was owned by appellant's son. Appellee made a crop loan to the Lewis partnership for the 1998 crop year. The loan was manifested by several documents signed January 19, 1998, including a Membership Lending Agreement, a Promissory Note, a Security Agreement, and an equipment List. Appellant signed the promissory note as a co-borrower. Additionally, on June 15, 1998, the parties executed a Memorandum of Understanding ("memorandum") in order to clarify each party's understandings of their obligations. On June 15, 1998, the parties executed an additional promissory note, advancing crop loan money to the Lewis Partnership. Appellant did not receive any of the loan proceeds.

The dispute that has arisen in this case is over the meaning of the memorandum. The memorandum was signed by appellant, James and Randolph Lewis, and Ronny Carr, appellee's assistant vice-president. The memorandum states that it "is set forth to clarify each party's responsibility in case of loan default at Delta Production Credit Association." The memorandum consisted of two paragraphs; paragraph one provides that "Borrower, Lewis Farm Partnership agrees to liquidate all assets pledged to Delta Production Association and apply proceeds to the Delta Production Credit Association loan." Paragraph two provides that "In the event that Borrower does not pay his 1998 operating loan after all pledged assets have been sold, then George M. Stokes agrees to pay any remaining principal and interest balance on Borrower's 1998 operating loan."

A disagreement arose as to what was meant by the term "proceeds" as used in paragraph one of the memorandum. Appellant moved for directed verdict arguing thatcertain conditions had to occur for appellee to require him to pay the balance due on the notes, and that the conditions had not occurred. Appellant further argued that he was a guarantor, and as such was entitled to a strict interpretation of his undertaking. Appellee argued that all the conditions had been met and that it was entitled to collect the balance due from appellant. The trial court denied appellant's motions.

To determine if a trial court erred in denying a motion for a directed verdict, we view the evidence in the light most favorable to the appellee. Fred's Stores v. Brooks, 66 Ark. App. 38, 987 S.W.2d 287 (1999). When reviewing a denial of a motion for directed verdict, we determine whether the jury's verdict is supported by substantial evidence. Fayetteville Diagnostic Clinic v. Turner, 344 Ark. 490, 42 S.W.3d 420 (2001). Substantial evidence is evidence of sufficient force and character to compel a conclusion one way or the other with reasonable certainty; it must force the mind beyond mere suspicion or conjecture. Id. We review the evidence and all reasonable inferences arising therefrom in the light most favorable to the party on whose behalf judgment was entered. Id. A motion for directed verdict should be granted only when the evidence viewed is so insubstantial as to require the jury's verdict for the party to be set aside. Id. A motion for directed verdict should be denied when there is a conflict in the evidence or when the evidence is such that fair-minded people might reach different conclusions. Id. Under those circumstances, a jury question is presented, and a directed verdict is not proper. Id. We do not try issues of fact, we simply examine the record to determine if there is substantial evidence to support the jury verdict. Id.

Appellant argues that the memorandum contained at least two conditions precedent to his liability that had not occurred. Specifically, appellant argues that (a) all the partnership assets had not been voluntarily liquidated, and (b) all liquidation proceeds had not been applied to the partnership debt owed to appellee. Appellant further argues that he was a guarantor, and as such was entitled to have any ambiguities in the document strictly construed in his favor.

Appellant argues that the Lewis partnership agreed in the memorandum to voluntarily liquidate the pledged assets in the event of a default. Appellant submits that the equipment was tied up in bankruptcy, and after it was released from bankruptcy, appellee sold it at a farm auction. Appellee argues that paragraph one of the memorandum applied only to the Lewis Partnership, and that it did not state that appellant was relieved of his obligation on the note if his co-borrower, did not do everything he agreed to do. Appellee submits that the only portion of the memorandum that concerns appellant's liability is paragraph two which simply states that appellee would not attempt to collect from appellant until "after all pledged assets have been sold." Appellee sold the equipment at an open farm auction held by Blackmon Auctions. Appellee contended that it sold the assets in a manner that obtained the best price available.

We hold that there is substantial evidence to find that appellee sold the assets in a proper manner. We further hold that the two paragraphs of the memorandum could certainly be found to be independent from each other. Therefore, the trial court did not err in denying appellant's motions for directed verdict.

Appellant argues that the memorandum required all proceeds from the pledged equipment be applied to the loan balance before he could be called upon to pay appellee. Appellant claimed this did not occur because some of the sale of proceeds went to senior lienholders. Appellee argues that the plain meaning of the memorandum was that it would not call upon appellant until it had applied all sale proceeds "that it received" as a result of its legally available collection efforts against the equipment. The trial court did not err in rejecting this argument as it would have been legally impossible for appellee to ever collect anything from appellant since some of the equipment was subject to senior liens.

Appellant submits that he was a guarantor and was thus entitled to a strict interpretation of the memorandum. Lee v. Vaughn, 259 Ark. 424, 534 S.W.2d 221 (1976). The trial court found that appellant was not a guarantor. The trial court found that the memorandum of understanding was not intended to be a secondary or collateral undertaking and that it merely clarified or modified their rights and obligations of the parties under the promissory notes. We cannot say the court erred. Appellant signed several documents including promissory notes, along with the memorandum of understanding. The memorandum states that it was set forth to clarify each party's responsibility. Appellant signed the notes as a co-borrower, received none of the loan proceeds, and none of the other loan documents referred to appellant as a guarantor. As such, the court was correct in finding that appellant was not a guarantor. Thus, appellant was not entitled to a strict interpretation of the memorandum in his favor.

We hold that the trial court did not err in denying appellant's motions for directedverdict, and that the jury's verdict was supported by substantial evidence.

Affirmed.

Bird and Baker, JJ., agree.

SUPPLEMENTAL OPINION on DENIAL of REHEARING

March 13, 2002

ARKANSAS COURT OF APPEALS

NOT DESIGNATED FOR PUBLICATION

TERRY CRABTREE, JUDGE

DIVISIONS III & IV

We delivered our opinion in this appeal on January 9, 2002. Appellant has petitioned for rehearing, asserting that we erred in the following ways: (1) in finding that he was not a guarantor, and thus not applying the rule requiring strict construction of guaranty agreements; (2) failing to apply the "cardinal rule of construction" obligating courts to construe agreements most strongly against the party who drafted them; and (3) in affirming the trial court's decision that the memorandum merely modified appellant's co-borrower status. We deny the petition.

In our January 9, 2002 opinion we stated that "[t]he trial court found that appellant was not a guarantor." Appellant argues that this statement was erroneous and submits that the trial court did find him to be a guarantor. We agree. Even though the trial court found appellant not to be a guarantor in a colloquy between the court and the parties' counsel, it instructed the jury that he was a guarantor. We point out that appellant failed to abstract page 296 of the record, where the court gave this jury instruction. Also, in appellant's initial appeal, he never addressed page 296 of the record in his brief or in his reply brief.

However, we hold that even as a guarantor, appellant was not entitled to have a strict interpretation of any guaranty agreements as he asserted. A guarantor is entitled to a strict construction of his undertaking and cannot be held liable beyond the strict terms of his contract, and guarantor's liability is not to be extended by implication beyond the express limits or terms of the instrument, or its plain intent. Lee v. Vaughn, 259 Ark. 424, 534 S.W.2d 221 (1976); McCaleb v. Nat'l Bank of Commerce, 25 Ark. App. 53, 752 S.W.2d 54 (1988). However, a guaranty contract, like any other contract, must be interpreted according to its language, if clear and unambiguous. McCaleb, supra. In ascertaining the meaning of the language of a contract of guaranty, the same rules of construction control as apply in the case of other contracts. Id. In accordance with such rules it is important, if possible, to determine and give effect to the intention of the parties as ascertained by a fair and reasonable interpretation of the terms used and the language employed, read in the light of the attendant circumstances and the purposes for which the guaranty was made. Id.

The trial court stated, in denying appellant's motion for directed verdict, that "for the rule that you're saying to apply I have to find that there's an ambiguity, and I don't find that, because under the four corners of the document, there is no ambiguity. The meaning is plain." The court further stated that "I don't think there's an ambiguity and I so rule as a matter of law and I deny the motion." As the trial court found there was no ambiguity, appellant was not entitled to have a strict interpretation of his undertaking. Thus, regardless of whether the trial court found appellant to be a guarantor, he was not entitled to a strict interpretation of the memorandum. Further, an error in an opinion that does not affect theoutcome of an appeal is not a ground for rehearing. See Butler Mfg. Co. v. Hughes, 292 Ark. 198, 731 S.W.2d 214 (1987).

We will not address appellant's additional points contained in his petition for rehearing as they are simply re-arguments of his initial arguments on appeal.

Petition denied.

Robbins, Bird, Griffen, and Baker, JJ., agree.

Roaf, J., concurs.