Bledsoe v. Cargill, Inc.

• Decision Date: 29 February 1984
• Citation: 452 So.2d 1334
• Parties: Sidney B. BLEDSOE v. CARGILL, INCORPORATED. Civ. 4014.
• Court: Alabama Court of Civil Appeals

Page 1334

452 So.2d 1334

Sidney B. BLEDSOE v. CARGILL, INCORPORATED.

Civ. 4014.

Court of Civil Appeals of Alabama.

Feb. 29, 1984.

Rehearing Denied April 11, 1984.

Certiorari Denied June 22, 1984

Alabama Supreme Court 83-760.

Harry D. Raymon of Raymon, Nathanson & Raymon, Tuskegee, for appellant.

Dennis R. Bailey of Rushton, Stakely, Johnston & Garrett, Montgomery, for appellee.

BRADLEY, Judge.

This is an action on a guaranty agreement.

Cargill, Inc., sued Sidney B. Bledsoe upon a written guaranty. Bledsoe had entered into a written agreement personally obligating himself for the debts of Roadside Milling Company to Cargill, Inc. up to the amount of $10,000. Bledsoe filed a general denial and the special defenses of accord and satisfaction and novation.

Cargill moved for and was awarded summary judgment. This court reversed the granting of summary judgment, Bledsoe v. Cargill, Inc., 376 So.2d 735 (Ala.Civ.App.1979), and remanded the case to the Circuit Court of Macon County for a trial. A jury trial was had on August 5, 1983 and a verdict in the amount of $9,000 in favor of plaintiff and against defendant was rendered. Judgment entered accordingly.

Defendant filed a motion for judgment n.o.v. or, in the alternative, for a new trial. Motion denied. Defendant appeals.

Bledsoe argues here that his guaranty to plaintiff had been satisfied, or that there had been a novation of the guaranty, thus releasing him from liability, that the trial court erred in admitting into evidence certain ledger sheets and testimony concerning them, in refusing two of his requested jury charges, and in denying his motions for directed verdict and judgment n.o.v. or new trial.

The record reveals the following facts: Cargill was in the business of selling and financing the sale of feeds and supplies for use in livestock production. Bledsoe was one of four incorporators and stockholders of Roadside Milling Co., a Georgia corporation. In order to enable the corporation to buy merchandise on credit from Cargill, Bledsoe, on January 18, 1969, signed a guaranty agreement with Cargill for $10,000. The three other shareholders also executed $10,000 bonds guaranteeing payment of purchases made by the corporation from Cargill.

In March 1970 Bledsoe sold his stock to the corporation. In May 1971 Gibson, a new shareholder, and the remaining three shareholders met with representatives of Cargill and, in order to obtain more credit for Roadside, signed $50,000 personal guaranties. It was understood that the $50,000 guaranties were to supersede and replace the $10,000 guaranties and that the $10,000 guaranties would be returned to the shareholders. In January 1972 the shareholders executed additional guaranty bonds in the amount of $50,000 to Cargill which included additional security by way of real estate liens. There were no discussions between the shareholders and Cargill about the $10,000 guaranty signed by Bledsoe at the time of these transactions. Bledsoe was not present when these transactions took place and he did not sign a $50,000 guaranty. In fact, he did not have any contact with Cargill after he sold his interest in Roadside Milling in 1970 until March 1973.

On March 2, 1973 Bledsoe received a letter from Cargill stating he owed Cargill $10,000 on his guaranty. There was evidence that as of March 1973 Roadside owed Cargill some $417,000 on its account. On March 7, 1973 Bledsoe notified Cargill in writing that he had sold his interest in Roadside. Bledsoe also testified at trial that this was the first time that he had informed Cargill in writing or otherwise that he did not intend to be bound by the guaranty.

In Bledsoe v. Cargill, Inc., supra, we said that "Novation is the substitution of one contract for another, the effect of which is to release or discharge from liability him who is bound by the original contract of which novation is asserted; i.e., the new independent contract extinguishes the old." Whether there has been a novation depends on the intention of the parties, which may be determined from the facts and circumstances. American National Bank & Trust Co. v. Powell, 235 Ala. 236, 178 So.21 (1937).

Also, a guarantor is deemed discharged from his guaranty if the principal debt is paid or satisfied. Shur-Gain Feed Division William Davies Co. v. Huntsville Production Credit Association, 372 So.2d 1317 (Ala.Civ.App.1979).

Bledsoe contends that once he sold his interest in the corporation and once the shareholders of the corporation executed the $50,000 guaranties, there was, in effect, a substitution of the $50,000 bonds for the earlier $10,000 bonds. Moreover, once the shareholders paid on their individual guaranties, there was a satisfaction of the debt due. Thus, Bledsoe argues, he was released from any and all liability under his personal guaranty.

The evidence shows that the guaranty agreement entered into between Bledsoe and Cargill provided that Cargill could take, extend, or renew collateral from other persons "without changing or releasing or discharging" Bledsoe from his obligation under the guaranty. More importantly, it stated it was "an absolute continuing guarantee which shall remain in full force and effect until the delivery to Cargill of a notice in writing signed by [Bledsoe] terminating the said guarantee." (Emphasis added.) Bledsoe did not notify Cargill of his intention to terminate the contract until March 7, 1973. ...