Court: Court of Appeals of Arizona; September 11, 1968; Arizona; State Appellate Court
The Court of Appeals of Arizona considered the appeal of Gerald Thornton and five others against Southwest Flour & Feed Company regarding a judgment that held the appellants liable under a "Continuing Guaranty" they signed, which guaranteed a loan of $21,000 for Garden City Farms, Inc. The appellants, all shareholders and directors of the corporation, had executed the guaranty as a condition for obtaining financing to cultivate safflower. The guaranty covered all current and future debts of Garden City to Southwest, and the appellants did not argue that it was ever canceled or revoked.
During the relevant period, Southwest made several cash payments to Garden City and the corporation used fertilizer provided by Arizona Pest Control, raising the question of whether the fertilizer was supplied on credit extended by Southwest. A meeting on August 9, 1963, revealed that Garden City owed Southwest $10,152.17, which included a significant charge for the fertilizer. If that charge was excluded, Garden City would have appeared to owe Southwest a small debt instead. The appellants' claims of forgetting the guaranty did not absolve their liability under its terms.
DeMore signed a $10,152.17 note on behalf of Garden City to Southwest, securing it with a crop mortgage on sudan grass. Southwest filed a two-count complaint against Garden City for the note, plus interest, and against the appellants for their guaranty. The trial court found in favor of Southwest, and Garden City did not appeal. The court reviewed the evidence favorably towards sustaining the judgment and affirmed it based on the records. Appellants argued that there was no net balance owed by Garden City to Southwest, claiming that debts to Arizona Pest Control were mistakenly included in the calculations. However, DeMore's acknowledgment of the debt during his corporate duties was deemed valid, and the trial judge found consideration for the note. Despite the appellants' claims regarding the complexity of the accounting, the court maintained that DeMore, as an experienced businessman, should have been aware of the debts included. The relationship between Southwest and Arizona Pest Control, both connected by Mr. Bonsall, suggested reliance on Southwest's credit. The court concluded that the note constituted a renewal of existing indebtedness, falling under the terms of the appellants' guaranty. The judgment was thus affirmed.
