G&W Warren, Inc. v. Dabney

Substantial evidence supported the trial court’s finding that the principal for a corporation that bought a motorcycle dealership from the plaintiffs knew about the transactions in which the corporation engaged and tacitly approved two 6-month deferrals of monthly payments of the purchase price, so he was not exonerated from his guarantee of the corporation’s obligations under the purchase agreement.  The principal for a corporation that bought a motorcycle dealership from the plaintiffs was not exonerated from his guarantee of the corporation’s obligations under the purchase agreement when the plaintiffs twice granted the corporation 6-month deferrals of its monthly payments of the purchase price.  Substantial evidence supported the trial court’s finding that the principal knew about the transactions in which the corporation engaged and tacitly approved the deferrals.  Substantial evidence also supported the trial court’s finding that the principal had waived the exoneration defense in the guarantee.  Even that that instrument did not use the word “waive,” it said the guarantee would continue in full force and effect despite any modifications agreed to in writing by the purchaser.  However, the trial court erred in holding that the guarantee extended to the buyer’s obligations under non-compete and consulting agreements entered into at the same time as the purchase agreement.  The guarantee clearly referenced only the buyer’s obligations under the purchase agreement and could not be stretched to reach the other agreements which it did not mention even if as plaintiffs testified, the other agreements existed simply as means of paying the purchase price in a manner to secure more favorable tax treatment.

California Court of Appeal, Sixth District (Rushing, P.J.); May 4, 2017; 2017 WL 1737668

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