New Holland, Inc. v. Trunk

• Decision Date: 25 April 1991
• Docket Number: No. 90-501,90-501
• Citation: 579 So.2d 215,16 Fla. L. Weekly 1120
• Parties: 16 Fla. L. Weekly 1120 NEW HOLLAND, INC., Appellant/Cross-Appellee, v. James J. TRUNK, etc., et al., Appellees/Cross-Appellants.
• Court: Florida District Court of Appeals

Page 215

579 So.2d 215

16 Fla. L. Weekly 1120

NEW HOLLAND, INC., Appellant/Cross-Appellee, v. James J. TRUNK, etc., et al., Appellees/Cross-Appellants.

No. 90-501.

District Court of Appeal of Florida,

Fifth District.

April 25, 1991.

Rehearing Denied May 30, 1991.

Steven L. Brannock of Holland & Knight, Tampa, for appellant/cross-appellee.

William H. Lefkowitz of Sherr, Tiballi, Fayne, Schneider, Sheptow, Kopelman & Byrd, Ft. Lauderdale, for appellees/cross-appellants.

COWART, Judge.

In 1974, a manufacturer (Sperry-New Holland) began selling equipment on credit to a dealership (Trunkline Equipment Company) under a dealership agreement. In 1984, appellee Carol Trunk, as guarantor, executed a guaranty agreement guaranteeing and becoming surety for all sums of money owing to the creditor (Sperry-New Holland) by the debtor (Trunkline Equipment Company) from time to time. Following execution of this guaranty agreement, the creditor extended credit on a continuing basis to the debtor under a wholesale financing agreement providing for full payment within 12 months from the debtor's receipt of equipment from the creditor.

The dealership agreement and the financing agreement each provided for assignment by the manufacturer-creditor. On March 27, 1986, the manufacturer sold its business and assigned both agreements, and its accounts receivables and the guaranty agreement, to its successor in business, appellant New Holland, Inc. The assignee (New Holland, Inc.) continued to extend credit to the debtor while making an audit of the debtor's account. In late 1986, the assignee found the debtor in default in payment of its account, terminated the dealership agreement, repossessed and sold such equipment as it could, and brought this action against the guarantor for payment of the balance due for credit extended to the debtor.

The trial court entered judgment for the guarantor finding that the guaranty was a "special guaranty" and that the debtor was not in default on the guaranteed obligations prior to the assignment of the guaranty agreement to the assignee and held that the assignee of a special guaranty could not recover from the guarantor for debt owing but not due at the time of the assignment. The assignee appeals.

A guaranty is a promise to pay some debt (or to perform some obligation) of another on the default of the person primarily liable for payment or performance. A "general" guaranty is one addressed to all persons generally and may generally be enforced by anyone to whom it is presented who acts upon it. A "special" guaranty is one addressed to a particular entity and under it ordinarily only the named or specifically described promisee acquires rights. Brunswick Corp. v. Creel, 471 So.2d 617 (Fla. 5th DCA 1985); Lee v. Rubin, 117 So.2d 230 (Fla. 3d DCA 1960). The trial court was correct in finding the guaranty in this case was a special guaranty being addressed solely to the original creditor (Sperry-New Holland).

Generally, contract rights can be assigned unless they involve obligations of a personal nature or there is some public policy against the assignment or such assignment is specifically prohibited by the contract. Brunswick, 471 So.2d at 618. In Brunswick, this court explained that special rules govern the assignability of guaranties and depend upon characterization of the guaranty as special or general. Id. Under the common law which Florida follows, a general guaranty is assignable while a special guaranty is generally not assignable because extending credit constitutes the exercise of discretion and a guaranty agreement naming a particular creditor as promisee implies special trust and confidence placed by the guarantor in the named creditor and the assignment of the guaranty to another prospective creditor materially alters the guarantor's undertaking. Id.; see generally, Annotation, Who May Enforce Guaranty, 41 A.L.R.2d 1213, 1244 (1955) (recognizing a split of opinion among jurisdictions concerning assignability of special guaranties). ¹ An exception, however, has been recognized in Florida and other states, that a named creditor may, following breach of a special guaranty, assign his cause of action against the guarantor. Brunswick, 471 So.2d at 618, citing Tobin v. Iowa Home Mutual Casualty Co., 209 So.2d 485 (Fla. 3d DCA 1968) (upholding assignment made after breach giving rise to liability, after cause of action had accrued and legal action had been instituted); Burkhardt v. Bank of American National Trust & Savings Assoc., 127 Col. 251, 256 P.2d 234 (1953); In re Klink's Estate, 310 Ill.App. 609, 35 N.E.2d 684 (1941). As explained in Brunswick, this is because the policy behind non-assignability of a special guaranty is absent where credit has been extended by the named creditor and the guarantor has yet to pay the debt as it agreed to do. 471 So.2d at 618. ²

In Brunswick, the guaranty was special in nature but the court held that the assignment was valid and that the assignee could enforce the guaranty. This court noted that the named creditor extended credit to the debtor and it was only after default that the named creditor made the assignment to Brunswick. Brunswick, as assignee, was not seeking to recover from the guarantor for any credit the assignee extended to the creditor. The court noted that the case involved assignment of a debt rather than assignment of a guaranty. Id. at 619. In Brunswick the court distinguished Lee v. Rubin, wherein the assignee suffered an adverse judgment, as involving credit to the named creditor by the assignee, i.e., the credit was extended after the assignment of the guaranty. See also FinanceAmerica Private Brands, Inc. v. Harvey E. Hall, Inc., 380 A.2d 1377 (Del.1977) (debts sued on arose after the assignment). The Brunswick court held that under Florida law, an original named creditor, following breach of a special guaranty, may assign its cause of action against the guarantor.

In this case the guarantor argues that Brunswick holds that the assignee of a special guaranty may enforce the guaranty against the guarantor only when there has been a default giving rise to a cause of action for breach of the special guaranty prior to the assignment. The Brunswick court did note that the debtor had defaulted prior to the assignment, explaining that "a cause of action for breach of a guaranty agreement arises upon default and a subsequent refusal to pay by the guarantor." 471 So.2d at 619.

In the instant case, there was no default by the debtor (primary obligor) prior to the March 27, 1986, assignment. Therefore in this case, unlike in Brunswick and Tobin, no cause of action for breach in favor of the original creditor had matured or accrued at the time of the assignment of the guaranty. The assignee of the debt and of the guaranty in this case argues that the issue of the moment of default is immaterial and that it is an illogical and inequitable principle of law which extinguishes a guarantor's...