Enforcing personal guaranty signed together with business customer's credit application

 
ELEMENTS OF CLAIM BASED ON GUARANTY, SUCH AS PERSONAL GUARANTY OF CORPORATE / BUSINESS DEBT BY THE OWNER
 
The elements of a breach of a guaranty claim are: (1) the existence and ownership of the guaranty; (2) performance of the underlying contract by the holder;   See Footnote 2  (3) the occurrence of the conditions upon which liability is based; and (4) the failure or refusal to perform the promise by the guarantor. See Wiman v. Tomaszewicz, 877 S.W.2d 1, 8 (Tex. App.-Dallas 1994, no writ); see also Simpson v. MBank Dallas, N.A., 724 S.W.2d 102, 107 (Tex. App.-Dallas 1987, writ ref'd n.r.e.) (stating that when a guaranty is in writing and signed by the guarantor, the guaranty's existence presumes consideration).
 

SOURCE: DALLAS COURT OF APPEALS - 05-10-01128-CV - 7/17/12

  

COURT OF APPEALS FINDS PERSONAL GUARANTY SIGNED BY OWNER OF SMALL BUSINESS ON CREDIT APPLICATION TO VENDER FOR SALE ON OPEN ACCOUNT BINDING AND ENFORCEABLE    
    

      The summary judgment proof establishes that in exchange for Motheral providing goods and services to Envy on an open account, Long offered to guaranty the payment of all indebtedness within five days of notice that the account was past due. Motheral accepted Long's offer by providing goods and services to Envy on an open account as shown by the invoices. See Cobb v. Tex. Distributors, Inc., 524 S.W.2d 342, 345 (Tex. Civ. App.-Dallas 1975, no writ) (sale of goods on credit to principal debtor in reliance on guaranty is sufficient acceptance). Thus, Motheral proved an offer and acceptance.

        Furthermore, the terms of the personal guaranty are sufficiently certain to be enforceable. Personal guaranties in credit applications with similar language have been enforced by other courts.   See Footnote 3  There is nothing uncertain or indefinite about the terms of the personal guaranty. As in Austin Hardwoods, the credit application “clearly evidences application for credit by a corporation guaranteed by the individual signing the application.” 917 S.W.2d at 323. The language waiving notice of the rearrangement or extension of the terms does not make the guaranty uncertain. This language is designed to prevent the discharge of the guarantor by alteration of the original terms of the debt. See Lenamond, 667 S.W.2d at 287 (guarantor agreed that alteration would not result in discharge by agreeing that terms of debt could be altered without notice).

        Long contends there was no meeting of the minds because he never signed the application in his individual capacity. He stated in his affidavit, “I never intended to personally, individually, guarantee any debts of any corporation, including Envy Publications, Inc.” However, the law presumes a party signing a contract understands and agrees to the contents of the contract. See In re Int'l Profit Associates, Inc., 274 S.W.3d 672, 679 (Tex. 2009) (per curiam). “[P]arties to a contract have an obligation to protect themselves by reading what they sign and, absent a showing of fraud, cannot excuse themselves from the consequences of failing to meet that obligation.” In re Lyon Fin. Services, Inc., 257 S.W.3d 228, 233 (Tex. 2008) (per curiam). The instrument alone will be deemed to express the intention of the parties because it is the objective, not subjective, intent that controls. City of Pinehurst v. Spooner Addition Water Co., 432 S.W.2d 515, 518 (Tex. 1968).

        Long signed the two-page document twice, once indicating that his title was “President & CEO” and the other without indicating a title. The second, untitled, signature was after the personal guarantee paragraph, which includes statements that “I personally guarantee all indebtedness hereunder” and “I will within five (5) days from the date of notice that the account is past due, pay the amount due.” Long did not indicate this signature was in any representative capacity.

        Here, the language of the personal guaranty paragraph creates a personal obligation in addition to the application for credit on behalf of the corporation. Long signed the credit application and guaranty twice, once indicating his title and once without. Even if he had signed the guaranty indicating his corporate office, that would not change his individual liability on the guaranty.   See Footnote 4  The guaranty would be meaningless if the corporation was purporting to guaranty its own open account. Dann v. Team Bank, 788 S.W.2d 182, 184-85 (Tex. App.-Dallas 1990, no writ) (guaranty securing a corporate debt will be rendered meaningless if the primary debtor is found to be the sole party liable thereunder). A corporate designation in this case would be only descriptive of his position; it would not change the capacity in which he signed. Id. (corporate designations appearing after signatures on guaranty are considered to be only descriptio personae, i.e., descriptive of the person intended).

        Long next argues the guaranty was not signed by Motheral and it does not list the address where he may mail a revocation of the guaranty. The guaranty does not indicate the parties intended the guaranty to be conditioned on Motheral's signature. The absence of a party's signature does not necessarily destroy an otherwise valid contract.   See Footnote 5  And the guaranty was a unilateral offer by Long that Motheral accepted by extending credit to Envy.   See Footnote 6  The written guaranty also does not show that the parties intended the address for delivery of a revocation was a vitally important element of their bargain.   See Footnote 7

        Long's final attack on the guaranty is based on a lack of consideration. He contends he received no personal benefit from the contract. As mentioned above, the written guaranty signed by Long creates a presumption of consideration.   See Footnote 8  The burden was on Long to plead and prove the absence of consideration.   See Footnote 9  Lack of consideration is an affirmative defense and Long had the burden to produce summary judgment evidence sufficient to raise an issue of fact on all elements of the defense.   See Footnote 10

        Consideration for a guaranty agreement consists of either a detriment to the creditor or a benefit conferred on the primary debtor. Hargis v. Radio Corp. of Am., Elec. Components, 539 S.W.2d 230, 232 (Tex. Civ. App.-Austin 1976, no writ). “It is not necessary that consideration for the guarantee pass to the guarantor, . . . for it is sufficient consideration if the primary debtor receives some benefit.” Id.; Coleman Furniture, 405 S.W.2d at 648 (actual delivery of goods in return for a promise of guaranty of payment is itself sufficient consideration).

        Here, Motheral conferred a benefit on Envy, the primary debtor, by extending credit to it on an open account. Not only is this sufficient consideration for Long's guaranty, but Long would personally benefit as a majority owner and officer of Envy. We conclude Long failed to produce any summary judgment evidence rebutting the presumption of consideration or raising a material issue of fact on his affirmative defense of no consideration.

        We overrule Subparts D and E of Long's second issue.

        We affirm the trial court's summary judgment.

SOURCE: DALLAS COURT OF APPEALS - 05-10-01128-CV - 7/17/12