Case Title: Fruehauf Trailer Co. v. Chandler

Citation: 409 P.2d 651, 67 Wash. 2d 704

Docket Number: 

State: washington

Court: Washington Supreme Court

Date: 1966-01-06T00:00:00Z

Document:
67 Wn.2d 704 (1966) 409 P.2d 651 FRUEHAUF TRAILER COMPANY OF CANADA LIMITED, Appellant, v. ALVORD LEROY CHANDLER et al., Respondents.[*] No. 37874. The Supreme Court of Washington, Department One. January 6, 1966. Skeel, McKelvy, Henke, Evenson & Uhlmann and W. Paul Uhlmann, for appellant. Torbenson, Thatcher, Stevenson & Burns, by Richard M. Thatcher, for respondents. OTT, J. April 28, 1960, Fruehauf Trailer Company of Canada Limited (hereinafter referred to as Fruehauf) sold *705 upon conditional sale contract 12 trailer units to Pacific Inland Express Ltd. (hereinafter referred to as PIX) for $130,397.58. This contract resulted from the refinancing of a former agreement executed in 1959. May 10, 1960, Alvord Leroy Chandler, Frank Howard Whiting, Robert Timothy Whiting, and W.D. Chandler (hereinafter referred to as the guarantors), being the principal stockholders of PIX, executed a separate instrument with Fruehauf partially guaranteeing the PIX obligation. The guaranty agreement contained, inter alia, the following provisions: May 20, 1960, PIX paid the first monthly installment in the sum of $2,414.77, and thereafter defaulted. August 29, 1960, Fruehauf made written demand to the guarantors for the payment of $12,798.28, the amount allegedly due in accordance with the terms of the guaranty agreement. Neither the guarantors nor PIX made any payment. November 4, 1960, Fruehauf repossessed the 12 units from PIX, and thereafter discharged PIX from its liability on the conditional sale contract as having "been fully paid and satisfied." Fruehauf commenced this action against the guarantors in the Superior Court for King County to recover the sum *707 of $12,758.28,[1] being 10 per cent of the alleged unpaid balance of the PIX contract at the time of PIX' default and Fruehauf's repossession of the 12 units. Fruehauf contended that the instrument of guaranty was an independent agreement to pay 10 per cent of the total contract price due it at the time of default by PIX. The guarantors answered the complaint, contending, inter alia, that the agreement was one of guaranty only, and that a discharge of the principal obligation released the guarantors from their liability. During the trial, Fruehauf made an offer of proof to show that, by repossession and resale, it had suffered a loss of approximately $12,000. The offer of proof was rejected. From a judgment of dismissal sustaining the contention of the guarantors, Fruehauf appeals. [1] There is no dispute as to the material facts, which are substantially as above indicated. Fruehauf concedes the general law in the state of Washington to be that, when the principal debt has been discharged, the guarantor is likewise relieved of liability. Duke v. Benson, 134 Wash. 495, 236 Pac. 77 (1925); Jordan v. Peek, 103 Wash. 94, 173 Pac. 726 (1918). Fruehauf contends, inter alia, that the guarantors contracted away the defense of the discharge of the principal obligation, and that the agreement expressly provided that, in the event of discharge or release of PIX' obligation to Fruehauf, the guarantors would pay up to 10 per cent of the Fruehauf loss. We agree with this contention. The guaranty agreement was a legal and binding contract, based upon a valid consideration. The agreement, by its terms, expressly provided that the guarantors would pay 10 per cent of any unpaid balance due from PIX, and that this guaranty "shall not be affected by any ... compromise, settlement, ... or by the discharge or release of any obligation of PIX." (Italics ours.) In Coughlin v. Smith, 163 Wash. 290, 1 P.2d 215 (1931), *708 the guarantor had guaranteed to pay a maximum of $1,000 in the event of default. The agreement was predicated upon a valuable consideration to the guarantor. At the time of default, the amount due was $835.97. The creditor had repossessed the property and the same defense was asserted there as is asserted here. In the cited case, we held: The Coughlin case announces the rule that repossession and discharge of the original obligation is not a defense available to a third person who has expressly guaranteed to pay the creditor a fixed or determinable amount in the event of loss. The guarantors concede that Coughlin v. Smith, supra, is the law in the state of Washington. They distinguish it from the case at bar by contending that the court, in the cited case, "made particular note of the necessity of clear language [in the guaranty agreement] to hold a guarantor of a conditional sale contract to payment of money when there had been repossession." (Italics ours.) The guarantors contend that "No such clear language appears" in the guaranty agreement in the case at bar. We do not agree. In clear and unambiguous terms, the guaranty agreement waived the defense of release or discharge by providing that "The liability of the undersigned ... shall not be affected ... by the discharge or release of any obligation of PIX." We hold that the quoted provision of the agreement constituted a full and complete waiver by the guarantors of the defense that the principal obligation had been discharged. *710 The agreement provided that the maximum guarantee was $13,000, "in the event the transfer of equity is declared void by a court of competent jurisdiction and the guarantee herein is thereby rendered ineffective." In the absence of such an adjudication, the liability of the guarantors was fixed in an amount equal to 10 per cent of any unpaid balance resulting from any breach. The rejected offer of proof was "that the unpaid contract balance was approximately $12,000.00." Ten per cent of this amount is $1,200. The judgment is reversed, and the cause remanded with instructions to grant a new trial limited to a determination of the unpaid balance of PIX' obligation to Fruehauf, and to enter judgment in accordance with the views herein expressed. Appellant will recover costs. ROSELLINI, C.J., HUNTER and HALE, JJ., and COCHRAN, J. Pro. Tem., concur. [*] Reported in 409 P.2d 651. [1] The discrepancy of $40 between the amount pleaded in the complaint and the amount stated in the written demand is not explained.