Title: Weale v. Lund

State: vermont

Issuer: Vermont Supreme Court

Document:

ENTRY_ORDER.93-384; 162 Vt. 622; 649 A.2d 247

[Filed:  06-Sep-1994]


                                 ENTRY ORDER

                       SUPREME COURT DOCKET NO. 93-384

                              MARCH TERM, 1994


 William W. Weale, III             }          APPEALED FROM:
                                   }
                                   }
      v.                           }          Orange Superior Court
                                   }
                                   }
 David R. Lund, Isabel R. Lund     }
 and Nikao Concepts, Inc.          }          DOCKET NO. S241-91 OeC





              In the above entitled cause the Clerk will enter:

      Upon consideration of appellants' motion to reargue, filed May 13, 
 1994, the original entry order dated April 29, 1994, is withdrawn, and the 
 following revised entry is substituted in its place.

      Appellee's motion for collection costs incurred on appeal is granted. 
 The Clerk of the Supreme Court shall tax costs pursuant to V.R.A.P. 39.  
 The cause is remanded to the trial court for determination of reasonable 
 attorney's fees on appeal.

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              In the above entitled cause the Clerk will enter:

      In 1987, defendants David and Isabel Lund incorporated a construction
 company, defendant Nikao Concepts, Inc.  The Lunds were the sole directors
 and shareholders until 1991 when they sold their stock.  Nikao declared
 bankruptcy in January 1992.

      On June 19, 1988, Nikao applied for credit with Connval, Inc., a
 hardware and building supplies business then owned by plaintiff William
 Weale.  The document, entitled "Confidential Credit Application and Credit
 Agreement," was signed by the Lunds under the following language:

           The undersigned hereby agree to pay all bills according
           to the terms of the sale.  We further agree to pay
           interest charges, to the extent allowed by law, for past
           due accounts, and to pay if applicable, all costs of
           collection, including, but not limited to, attorney's
           fees.

           Elsewhere in the agreement, a paragraph provided:

           Please briefly state the intended use for the materials
           purchased from Connval, Inc. and the approximate amount
           of the monthly credit you need.  I.E. "Building
           materials for my remodeling business--$2,000." or
           "Materials for our new addition--$2,000."

 In response, the Lunds wrote they were "looking for a line of $2,000."  The
 agreement authorized three named individuals to charge to the account.

      From June 1988 to August 1989, Nikao's monthly purchases from Connval
 on the account ranged from $5,900 to $31,600 and averaged over $11,000.  In
 connection with these transactions, Connval issued signed invoices and

 

 monthly statements to Nikao showing the status of the account.  These
 invoices and statements set forth the terms of service charges as follows:
 "A maximum service charge of 2% per month will be added to all accounts over
 30 days.  Annual rate of 24%."  The invoices also restated the terms of
 collection costs as set forth in the credit agreement.

       Although individuals other than those named on the agreement were
 charging goods on the account in amounts above $2,000 a month, Nikao never
 complained to Connval.  During this period, Nikao paid Connval on a regular
 basis for goods purchased and service charges, when applicable.  In the
 summer of 1989, Nikao stopped making payments to Connval, and by February
 14, 1990, Nikao owed Connval $37,132.77.  This sum included service charges
 and interest computed according to the terms set in forth in the invoices.
 At that time, the Lunds executed a promissory note in favor of Connval in
 exchange for a cancellation of the accounts receivable.  The note specified
 the principal sum as $37,132.77 "or as much as may be finally determined to
 be due and owing under the Credit Application and Credit Agreement referred
 to herein."

      Under the terms of the note, the Lunds agreed to pay interest on the
 unpaid balance of the note as specified in the agreement.  Beginning March
 14, 1990, interest payments only were to be made monthly to the holder with
 a final payment of all principal and unpaid interest due on February 14,
 1993, or upon the sale of the property secured by the note.  On February 23,
 Connval transferred and assigned this note to Weale, who notified the Lunds
 of the transfer.  Weale received regular monthly payments from March 1990 to
 May 1991, after which no further payments were made.

      Weale brought suit on the note.  The superior court determined the
 amount due and owing under the terms of the Credit Application and Credit
 Agreement, which had been incorporated into the note, and awarded Weale the
 principal sum of $37,132.77; $19,066 in accrued interest at an annual rate
 of 24%; $779.73 in accrued late charges; and $9,196.14 in collection costs,
 for a total of $66,174.64.  The Lunds appeal this award.

      First, the Lunds claim they signed the credit agreement as guarantors,
 not principals, and are therefore only secondarily liable for the
 outstanding debt of Nikao.  On the basis of this claimed guarantor status,
 the Lunds also assert that any modifications in the credit agreement with
 respect to a credit limit or authorized individuals are rendered
 unenforceable by the statute of frauds because they were not in writing.
 See 12 V.S.A. { 181(2) (a special promise to answer for the debt or default
 of another must be in writing to be enforceable); Chomicky v. Buttolph, 147
 Vt. 128, 130,