Kingsberry Homes, a Division of Boise Cascade Corporation v. Maurice E. Corey and Luke M. Hebble

457 F.2d 181, 1972 U.S. App. LEXIS 10488

• Court: Court of Appeals for the Seventh Circuit
• Decided: March 27, 1972
• Docket: 71-1429
• Status: Published

Opinions

DUFFY, Senior Circuit Judge.

This is an appeal of an order of the District Court granting plaintiff’s motion for a summary judgment against defendants Maurice E. Corey and Luke M. Hebble, on Count II of the complaint. (Rodney Francis was a third partner and co-defendant but did not appeal herein).

Defendants were joined in a partnership for the purpose of building homes and erecting pre-fabricated home packages. The defendants who were customers of Kingsberry Homes (Kingsberry) desired, in early 1967, to have an open account status. Kingsberry insisted that Maurice E. Corey, Luke M. Hebble and Rodney Francis execute a request for credit clearance and submit personal financial statements and sign a personal guarantee.

The financial statements submitted showed a substantial net worth. The request for credit was approved. The guarantee was signed by all three partners on March 9,1967.

The testimony of plaintiff showed that thereafter all shipments to Hebble & Associates were made in reliance upon the guarantee and the personal credit of the individual guarantors.

Sometime later, the three guarantors who had been operating under the name of Hebble & Associates, decided to do business as a corporation under the name of Hebble & Associates, Inc. The former partners were the sole stockholders and officers of the new corporation. No formal notice of the incorporation on November 16, 1967 was given to plaintiff. Furthermore, the guarantee never was revoked or terminated (as provided for by its terms).¹ The guarantors, at no time, informed Kingsberry that they no longer intended to be bound by their obligation. Shipments continued to be made to Hebble & Associates.

On or about October 29, 1968, a pre-built home package of the value of $16,118.90 was shipped by Kingsberry to Hebble & Associates. When the payment on this home was not made, plaintiff sued on the guarantee. Summary judgment was entered against the defendants. This appeal followed.

It is clear in this case that it was the intent of the parties to exchange an open account status in return for a pledge of individual responsibility. That intention did not change after the formation of a corporation eight months later. Business transactions between the parties continued after the corporation was formed just as they had prior to that development.²

The guarantee signed by defendants was an Illinois contract. Illinois courts have held that contracts of guarantee must be construed so as to make them enforceable where it can be done without violence to the intent of the parties. Castle v. Powell, 261 Ill.App. 132 (1931).

In Scovill Manufacturing Company v. Cassidy, 275 Ill. 462, 114 N.E. 181 (1916), a corporation changed its name but the Court held guarantor remained obligated on his promise. See also Claude Southern Corporation v. Henry’s Drive-In, Inc., 51 Ill.App.2d 289, 300, 201 N.E.2d 127, 132, 133 (1964), where the Court in discussing a guarantee agreement stated it should be construed " . . . according to what is fairly to be presumed to have been the understanding of the parties.”

Illinois courts frequently have invoked the doctrine of estoppel in situations where guarantors attempt to avoid the terms of such an agreement. See Phoenix Mfg. Co. v. Bogardus, 231 Ill. 528, 83 N.E. 284 (1907); McCasland v. O’Brien, Green & Co., 57 Ill.App. 636 (1894). It should be noted that in the guarantee which we are considering, it was stated “Each of the undersigned [guarantors] further agrees that this guarantee shall remain in full force and effect until revoked or terminated in writing signed and delivered to Kings-berry Holmes. . . . ”

The guarantors furnished personal credit and financial information to obtain credit. They continued to do business under an almost identical name after incorporation. They accepted shipments (including the one in question), reaped the benefits of the guarantee and then attempted to avoid liability when called upon to honor their commitment. This is an appropriate case for invoking the doctrine of estoppel.

On the basis of the decisions of Illinois courts which construe guarantees liberally, and because the doctrine of es-toppel is herein applicable, the action of the trial court in granting summary judgment to the plaintiff must be and is

Affirmed.

1 . The guarantee reads in pertinent part: “Each of the undersigned further agrees that this guarantee shall remain in full force and effect until revoked or terminated in writing signed and delivered to Kingsberry Homes, Division of Boise Cascade Corporation, and acknowledged by Kingsberry Homes, Division of Boise Cascade Corporation, and even after any sucli revocation or termination sliall be and remain effective as to all obligations of Purchaser then outstanding; . . . .”

2 . Significant is the fact that the standard order form for the house package delivered to defendants for which they did not pay, indicated the order was from “Hebble and Associates.” No indication of the incorporation was noted. Furthermore, it is evident from the order form that the defendants enjoyed “open account” status. (Appendix, page 30).