Opinion ID: 1807757
Heading Depth: 1
Heading Rank: 4

Heading: scope of the guaranty

Text: A guaranty is a promise to answer for the debt, default or miscarriage of another. Western Petroleum Co. v. First Bank Aberdeen, 367 N.W.2d 773 (S.D. 1985); SDCL 56-1-1. It is a contract on the part of one person which is collateral to the principal obligation of another. Western Petroleum Co., supra . The liability of a guarantor will not be enlarged beyond the plain and certain import of the guaranty contract and any ambiguous or uncertain terms in a guaranty will be interpreted most strictly against the party who prepared it. General Elec. Credit Corp. of Tenn. v. Larson, 387 N.W.2d 734 (N.D. 1986). See e.g., International Multifoods Corp. v. Mardian, 379 N.W.2d 840 (S.D. 1985) (unequivocal language of guaranty controls liability of guarantor). In this instance, Thatcher signed a document in August 1986 guaranteeing payment of all indebtedness incurred by the principal debtor. However, the principal debtor is never identified in the document. Since a guaranty is a promise to answer for the debt of another, it is questionable as a matter of law whether the document is a guaranty when the other or principal debtor is not identified. Even if the document is viewed as a guaranty, there is absolutely no language in the instrument plainly indicating that Thatcher was personally guaranteeing payment on his business account number 88. Accordingly, there is no genuine issue of material fact. The trial court correctly held as a matter of law that the guaranty, if it guaranteed anything, guaranteed only the personal obligation of Thatcher on his personal account number 3829. ADVICE TO R & S THAT IT WAS DEALING WITH A CORPORATE ENTITY. As its second contention, R & S asserts that when Thatcher opened his original business account number 88, he never revealed that he was acting on behalf of a corporate entity. Accordingly, R & S argues that the issue of whether Thatcher did so advise R & S is a genuine issue of material fact precluding summary judgment. The rule that one who acts as agent for another in making a contract is individually liable thereon if, at the time of making the contract, he fails to disclose his agency and the identity of his principal, has been applied to corporate officers and directors acting for corporations the existence of which has not been disclosed. Thus, where directors or officers contract with a third person who is unaware of the existence of the corporation and to whom no disclosure of its existence is made, the director or officer is personally liable on the contract. 18B Am.Jur.2d Corporations § 1833 (1985). See also 3A W. Fletcher, Cyclopedia of the Law of Private Corporations § 1120 (1986) (one who claims he is acting in corporate capacity has duty to disclose he is contracting as agent of corporation and not as individual). This court recognized the foregoing principles in The Collegian v. Hileman, 88 S.D. 601, 226 N.W.2d 163 (1975), wherein a newspaper brought an action on a debt due for advertising services. The defendant contended that the advertising was furnished to a business owned by a corporation in which he was a stockholder and officer. This court found the evidence sufficient to sustain the trial court's determination that the newspaper relied upon the defendant's credit and that the defendant had failed to advise the newspaper of his corporate capacity prior to the time payment for the advertising became due. Therefore, we found the defendant personally liable for the debt due. Accord, Cooper v. Hileman, 88 S.D. 516, 222 N.W.2d 299 (1974) (liability imposed on agent who fails to disclose agency or principal before contract is executed). In this instance, R & S specifically asserted by affidavit that Thatcher never disclosed his corporate capacity or the corporate entity when he opened his original business account number 88. Under The Collegian, and Cooper, this failure could clearly render Thatcher individually liable for any corporate indebtedness to R & S. Thus, there is a genuine issue of material fact which precludes summary judgment. Reversed and remanded. WUEST, C.J., and MORGAN and SABERS, JJ., concur. HENDERSON, J., concurs with writing.