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Modern Technologies Group, Inc. v. Danzi

A-5287-08T3 (N.J. Super. App. Div. 2010) (Unpublished)

GUARANTIES; JURISDICTION — Where a personal guaranty is made on a credit agreement for a company and a choice of forum provision is contained in the guaranty, the credit agreement, or both, even if they are not contemporaneous, the person making the guaranty will be subject to personal jurisdiction for disputes arising out of the transaction.

A New Jersey corporation entered into a credit agreement with a California company to provide goods to the California company on credit. The credit agreement was personally guaranteed by the owner of the California company and contained a jurisdictional clause naming New Jersey as the jurisdiction with authority over all issues arising out of the agreement. The agreement did not mention any of the subsidiaries of the New Jersey corporation, but it was explained to the customer that it would be dealing with the seller’s parent corporation as well as its various subsidiaries. The customer did, in fact, receive invoices from the subsidiaries. The California company eventually went out of business and was unable to pay the seller.

The lower court held that the guarantor was liable on the full amount owed and the guarantor’s primary objections on appeal were that New Jersey lacked personal jurisdiction over him personally and that he owed no debts to the subsidiary companies since they were not named in the credit agreement. Specifically, the guarantor claimed that he had no contact with New Jersey, that all transactions took place in California, and that the jurisdiction provision in the credit agreement only applied to his company and not to him. The lower court sided with the seller, and the Appellate Division affirmed, citing an earlier decision it had made in a different case that a credit agreement and a corresponding personal guarantee were considered the same document, and that it would not make sense to require a seller to sue its customer in one place and the guarantor in another. The Court further added that even if the guarantee and the underlying contract contained a choice of forum provision and were not contemporaneous, the guarantor would still be agreeing to litigate in the same forum as the customer.

The lower court and the Appellate Division both disagreed with the debtor’s argument that since the credit agreement only mentioned the parent corporation, and not any of its subsidiaries, he was only liable for the invoices received from the parent corporation. The Court conceded that guaranty agreements are to be strictly construed within the manifest intention of the parties and any ambiguities are to be interpreted against the draftsperson. However, the Court also noted that a guaranty agreement must be interpreted according to its clear terms to effectuate the objective manifestations of the parties and must be read in light of each person’s reasonable business expectations. The Court concluded that it was clear that the parties engaged in a transaction where the New Jersey corporation and its subsidiaries would provide goods on credit to the California company and the California company would fulfill its debts according to the invoices it received.

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