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American Furniture Manufacturing, Inc. v. Value Furniture & Mattress Warehouse

A-2614-07T3 (N.J. Super. App. Div. 2008) (Unpublished)

GUARANTIES — Even if a credit application completed on behalf of a company includes a provision that the individual signing the application will personally guarantee the account, absent an actual agreement by the signatory to guarantee the account or some indication that the credit being extended was based on the financial standing of the signatory, the signatory will not be liable for debts of the company.

The sole shareholder and president of a New Jersey corporation attended a trade show in Mississippi where a supplier displayed its furniture. In order to purchase the furniture, the president completed a document called a “Confidential Credit Information.” He gave his company’s name and signed as president. Within the application for credit to the company was a provision stating that the “UNDERSIGNED ... PERSONALLY GUARANTEES THIS ACCOUNT.” No document requested personal references or credit information and the president never provided any personal information. He was never told by the supplier that he was required to personally guarantee his company’s business account. About seven years after this business relationship began, the supplier sued its customer for monies owed. The company filed for bankruptcy after defaulting on the suit. The supplier then sought to hold the president personal liable, but on a summary judgment motion, the lower court dismissed the complaint. The supplier appealed.

The Appellate Division affirmed the lower court’s ruling. It held that ambiguities are construed in favor of an asserted guarantor and a governing agreement must be interpreted according to its clear terms so as to effect the objective expectations of the parties. Here, the Court found that the document signed by the president was insufficient to show that both parties agreed that the president would personally guarantee his company’s debt. It noted that the application was for credit to the company, and no further documents or information existed to prove that the president would be individually liable. The president only included business information on the document and not for him personally, other than his signing the document as president. Additionally, no invoice ever listed the president’s name as an individual to be billed.

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