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Unsuccessful Defenses to Enforcement of a Personal Guaranty in Florida: Part Two of a Three Part Series
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Unsuccessful Defenses to Enforcement of a Personal Guaranty in Florida: Part Two of a Three Part Series

November 12, 2013 Banking & Financial Services Industry Legal Blog

Reading Time: 7 minutes


This post is the second part of a three part series examining defenses to enforcement of personal guaranties in Florida. Part one identified successful defense to enforcement of a guaranty and can be found here. Part two seeks to analyze defenses that have been unsuccessfully asserted in defense of personal guaranty enforcement. Part three examines the language that must be included in an enforceable personal guaranty.

A. Guarantor has left the company whose debt he was guaranteeing

Asserting that the guarantor has left the company whose debts he personally guaranteed is not adequate to absolve the guarantor of liability under the debt.  In Sanz v. Professional Underwriters, Inc., 560 So. 2d 1254 (Fla. 3d DCA 1990) a corporate officer executed a personal guaranty  for corporate debt stating that the guaranty  would continue to be in effect until the creditor received written notice from the debtor by registered mail terminating the guaranty as  to future transactions. The officer subsequently resigned from the corporation and informed the holder of the guaranty that he was leaving, but he never specifically rescinded the guaranty, as the guaranty itself called for him to do.  The holder of the guaranty sought enforcement of it and the court granted enforcement against the officer.   In finding that the guaranty was still valid against the director, the court stated, “The termination of an interest in a corporation, in and of itself, does not also terminate liability under a separate personal guaranty agreement unless the termination provisions of the agreement are complied with.” Therefore, it is apparent that one cannot merely resign or withdraw himself from a business for which he has signed a personal guaranty and automatically discharge himself of that guaranty; he must also comply with any cancellation provisions in the guaranty itself. Otherwise the guaranty continues until revoked.

B. Sale of corporate assets subject to personal guaranty does not disavow personal guaranty

Where a corporate executive has signed a personal guaranty, it is not a defense to enforcement that the assets tied to the personal guaranty have been sold to another corporation, and, thus, the guaranty should have been automatically discharged, when the party seeking enforcement is unaware of the sale of the assets and there has been no other action to rescind the guaranty. Nelson v. Ameriquest Technologies, Inc., 739 So. 2d 161 (Fla. 3d DCA 1999). In Nelson, the president of a corporation contracted for the supply of computer parts to one of the corporation’s subsidiary companies, backed by the president’s personal guaranty.  Subsequent to entering into the contract and personal guaranty, the parent corporation sold off the subsidiary company receiving the computer parts under the contract.  The parent corporation did not communicate to the computer parts supplier that it had sold off the subsidiary and did not seek to actively rescind the personal guaranty. Eventually, the former subsidiary, then independently owned and operated, defaulted on the contract and the company supplying the computer parts sued the corporate president who had personally guaranteed the debt related to the contract.

In defending against personal enforcement of the debt, the president asserted that the debt was associated with the former subsidiary and because his corporation no longer owned the former subsidiary his personal liability under the contract was discharged. The court, however, reasoned otherwise and found that the president was still personally liable under the personal guaranty, giving particular weight to the fact that the computer parts supplier was unaware of the change in ownership.  In so finding, the court stated, “[A] mere sale or transfer of the assets of an obligor corporation is insufficient to terminate a guarantor’s liability, where as here, the guarantor participated in the sale of obligor’s assets and neither informed the obligee of the sale or sought to revoke [the] personal guaranty.” The court also further found that, “[A]s a matter of law… the guarantor’s participation in the change of ownership structure of the obligor company thereafter estops the guarantor from using the cloak of the new corporate identity to deny liability to under the guaranty to the obligee who has no knowledge of the change.”

A similar result occurred in Frell v. Dumont-Fia., Inc., 114 So. 2d 311 (Fla. 3d DCA 1959).  The opinion is extremely short on facts, but it is clear that a loan was made to a company and was personally guaranteed by one of the company’s employees or officers, and that the guarantor subsequently sought to escape personal liability under the guaranty.  Though the opinion does not specifically state the defenses asserted by the guarantor, he apparently argued that he was no longer personally liable for the company debt because the company had changed its name subsequent to entering into the contract that was backed by the personal guaranty. The court was unpersuaded by this defense and found that

[T]he guarantor [is] estopped to claim this defense because the guarantor 1) participated in the change of name, 2) participated in the profits (if any) of the original debtor after the change, which business both before and after the name change was dependent upon the purchases made under the continuing guaranty, and 3) the guarantor at no time disclaimed responsibility under the guaranty until suit.

Therefore, based upon both Nelson and Frell, it is apparent that neither selling the assets associated with the personally guaranteed debt nor changing the name of the business that incurred the debt is sufficient to discharge personal liability where the sale or name change is not communicated to the obligor and there is no other action taken to revoke the guaranty by the guarantor.

C.Signing in representative capacity

It is also no defense to personal liability that the signing guarantor never intended the guaranty to be an actual personal guaranty when he signed it, absent any language in the contract supporting that assertion. In Great Lakes Products, Inc. v. Wojciechowski, 878 So. 2d 418 (Fla. 3d DCA 2004), the president of a corporation was found liable for his personal guaranty of corporate debt where he guaranteed a food sales contract and typed in “President” underneath his signature on a line asking for ‘Title’ of the signatory.

The president subsequently tried to argue that in signing the document he was signing for the corporation and never intended to have any personal liability himself.   The court found that the language of the contract, stating that, “I personally guarantee payment on this account and agree to the terms of this credit application which is incorporated into this guarantee,” clearly indicated a personal guaranty and that, further, Florida law is clear that one who executes a personal guaranty as an officer of a corporation by inserting his corporate  title  after  his  name on  a  document cannot  defeat  the  purpose  of  the guaranty, when, by its terms, the document contains provisions for individual liability.

Though similar facts to these were present in Fairway Mortgage Solutions case referenced in Part I, this case is distinguishable from Fairway in that, there, the court found that nowhere in the contract or its supporting documents were there any terms or conditions relating to a personal guaranty. With Great Lakes, however, the signed contract specifically enumerated that it was a personal guaranty; therefore, by its terms, the contract in Great Lakes was clearly a personal guaranty, whereas there was a genuine factual dispute in Fairway Mortgage as to whether the document signed was intended to be a personal guaranty.

In sum, the above referenced scenarios in sections A, B and C are defenses raised by debtors that have fallen on deaf ears in Florida courts.


For more on this topic, consider other articles in this series:

Part One

Part Three

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