COLLECTIONS CASE STUDY:
Can "#2 Guarantor" Wrangle Out
of Making Good on Guaranty?
Published in August 14 edition of Credit Today's Weekly eNews
"We're coming to you to make good on the guaranty you signed with Arnie Johnson," said Frank Zeller of Cladandma Manufacturing.
"Yes, I had heard that Johnson wasn't paying his note as promised," replied Tony Young. "How much money did Johnson come through with before you turned to me?"
"Oh, we haven't contacted Johnson about the guaranty," Zeller corrected. "We decided to come straight to you for the full amount."
"Well, that's not right," Young protested. "I only signed the guaranty to guarantee collection. That means you have to try to collect from Johnson first."
"No, we believe you signed that guaranty to guarantee payment," Zeller countered. "Therefore, we can come to you without turning to Johnson for payment."
"That's not how I understood the arrangement," Young insisted.
"Well, the guaranty clearly says 'We, the undersigned, do hereby personally guarantee the due payment of the within indebtedness.' That doesn't say anything about you only guaranteeing the
collection
of the debt."
"Well, I don't think that language is very clear. I think it could be interpreted either way," Young claimed. "You see what you can collect from Johnson first, and get back to me."
"It's not going to work that way," Zeller insisted. "We've come to you first, and you will pay."
Did Young guarantee payment on this debt?
Make your decision:
then
click here
for the court's decision.
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