First American Nat. Bank v. Coffey-Clifton, Inc., COFFEY-CLIFTO

Decision Date01 June 1982
Docket NumberCOFFEY-CLIFTO,No. 82-65,INC,82-65
Citation276 Ark. 250,633 S.W.2d 704
PartiesFIRST AMERICAN NATIONAL BANK, Appellant, v., Appellee.
CourtArkansas Supreme Court

Blevins & Pierce by Robert E. Marston, North Little Rock, for appellant.

Brazil, Roberts & Clawson by Charles E. Clawson, Jr., Conway, for appellee.

HOLT, Justice.

Appellant brought this action for the collection of a third party's debt which had been guaranteed by the appellee. In March, 1979, Ruth Millien purchased a used mobile home from the appellee and executed a conditional sales security agreement for the balance of the indebtedness. Thereupon, the appellee assigned with recourse its rights in the agreement to the appellant. In conjunction therewith, the appellee executed a guaranty agreement promising payment of any balance due in the event Millien defaulted. Millien became delinquent in her payments and filed for bankruptcy after the effective date of the 1978 Federal Bankruptcy Act. This default triggered an acceleration clause in the security agreement causing the balance of $3,273.61 to become due and payable. The bankruptcy court found the property to have a value of $2,000 and approved a payment plan for Millien as a bankrupt. The appellant then filed this action to enforce the guaranty agreement when the appellee refused to pay the balance due.

Appellee responded that the appellant was estopped to assert its rights pursuant to the appellee's guaranty of the indebtedness, because appellant failed to participate or make any effort to preserve its interest at the bankruptcy hearing. All material facts were stipulated and no testimony was presented. Based upon the pleadings, the interrogatories, exhibits, and the stipulation, appellant moved for a summary judgment which the court denied. The court found that the appellant had complied with the provisions of appellee's guaranty, and appellee had failed to honor it; even so, the trial court held that the Federal Bankruptcy Act is unconstitutional as applied here; that the act deprived the appellee of property without due process of the law and interfered with the contractual relationship of the parties. The court ordered that any losses suffered by the appellant and the appellee be borne equally.

We first consider appellant's contention that the Federal Bankruptcy Act has not unconstitutionally interfered with the contractual relationship existing between appellant and appellee. In other words it is inapplicable. We agree. A guaranty is a collateral undertaking by one person to answer for the payment of a debt of another. Gulf Refining Co. v. Williams Roofing Co., 208 Ark. 362, 186 S.W.2d 790 (1945); 38 Am.Jur.2d Guaranty § 2. A guarantor is one who makes a contract, distinct from the principal obligation, to be collaterally liable to the creditor if the principal fails to perform. Williston on Contracts 3rd, § 1211 (1967). The undertaking of the principal debtor is independent of the promise of the guarantor. Coombs v. Heers, 366 F.Supp. 851 (D.C.Nev.1973). Upon default of the principal debtor and satisfaction of conditions precedent to liability, promise of guarantor becomes absolute. National Bank of Washington v. Equity Investors, 81 Wash.2d 886, 506 P.2d 20 (1973); Ranier Nat. Bank v. Lewis, 30 Wash.App. 419, 635 P.2d 153 (1981). For a guarantor to become liable under a guaranty of payment, there need only be a failure of the primary obligor to make payment. In re Waters, 8 B.R....

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13 cases
  • Henry Law Firm v. Cuker Interactive, LLC
    • United States
    • U.S. Court of Appeals — Eighth Circuit
    • February 12, 2020
    ...under a guaranty of payment, there need only be a failure of the primary obligor to make payment." First Am. Nat. Bank v. Coffey-Clifton, Inc., 276 Ark. 250, 633 S.W.2d 704, 705 (1982). The express terms of the legal services agreement evidence an intent to hold Atalla liable to the same ex......
  • Worthen Bank & Trust Co., N.A. v. Utley
    • United States
    • U.S. Court of Appeals — Eighth Circuit
    • November 28, 1984
    ...During the trial, Worthen argued that Utley was personally liable on all three notes, citing First American National Bank v. Coffey-Clifton, 276 Ark. 250, 633 S.W.2d 704, 705 (1982); Unlaub Co. v. Sexton, 427 F.Supp. 1360, 1368 (W.D.Ark.), aff'd 568 F.2d 72 (8th Cir.1977); and ARK.STAT.ANN.......
  • First Commercial Bank, N.A. v. McGaughey Bros., Inc.
    • United States
    • Arkansas Court of Appeals
    • February 28, 1990
    ...refusing to give its requested instruction No. 7. This instruction, based on language appearing in First American National Bank v. Coffey-Clifton, Inc., 276 Ark. 250, 633 S.W.2d 704 (1982), would have told the jury, in essence, that a guarantor has liability under a guaranty agreement if th......
  • Precision Sawing, Inc. v. Cane Creek Concrete Servs., Inc.
    • United States
    • U.S. District Court — Eastern District of Arkansas
    • March 20, 2014
    ...be a failure of the primary obligor to make payment. In re Waters, 8 B.R. 163 (Bkrtcy. Ga.1981).First Am. Nat. Bank v. Coffey-Clifton, Inc., 276 Ark. 250, 252, 633 S.W.2d 704, 705 (1982). Pro Struck cites Grand Valley Ridge, LLC v. Metropolitan National Bank, 2012 Ark. 121, at 10-11, 388 S.......
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