Gulf & Basco Co. v. Buchanan

Citations: 707 S.W.2d 655; 1986 Tex. App. LEXIS 12015Docket: 01-85-0189-CV

Court: Court of Appeals of Texas; January 29, 1986; Texas; State Appellate Court

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In the case 707 S.W.2d 655 (1986), The Gulf, Basco Company appealed a take-nothing judgment in a suit based on a guaranty agreement involving Alan B. Buchanan, who was sued as an alleged guarantor for the debts of Alan Buchanan Builders, Inc. Gulf, Basco had supplied materials to the builders under an open account since 1975, with a guaranty agreement signed on August 17, 1975. Between October 1980 and February 1982, the builders purchased goods totaling $42,398.94. An involuntary Chapter 7 bankruptcy petition was filed against the builders prior to the lawsuit. Buchanan denied liability in his individual capacity, asserting he signed the agreement solely as president of the corporation.

The trial court found the guaranty agreement ambiguous, permitting the introduction of oral evidence to clarify whether Buchanan signed in a corporate or individual capacity. Gulf, Basco contended that the trial court erred by declaring the agreement ambiguous without adequate pleadings, as required by Texas civil procedure rules. The court highlighted that ambiguity must be specifically pled, and Gulf, Basco's petition claimed Buchanan personally guaranteed the corporation's debts. At trial, testimony was presented, including Buchanan's deposition where he indicated he signed without corporate designation, although he later noted he had written the corporation's name above his signature.

The court addressed the issue of ambiguity in a contractual agreement, noting that although 'ambiguity' was not explicitly mentioned in the pleadings, the relevant agreement and its potential interpretations were presented through both pleadings and testimony. Under Texas Rule of Civil Procedure 67, issues not explicitly raised can still be considered if the parties consented to them being tried. The court found that the ambiguity question was adequately brought forward with the assistance of both parties, and failure to amend pleadings to match the evidence did not affect the trial's outcome. The appellant's first point of error was rejected. Gulf, Basco argued that a finding of ambiguity contradicted established rules of contract construction and asserted that the agreement was clear. The determination of ambiguity is a legal question. A contract is deemed ambiguous if it can be interpreted in multiple reasonable ways; otherwise, it is not. Courts aim to discern and uphold the true intentions of the parties by reviewing the entire contract to ensure all provisions are harmonized. The excerpt also discussed the implications of signatures on liability, indicating that a signature with a corporate title may lead to personal liability if the individual is clearly identified as a personal surety. However, if the contract is expressly corporate and other parties are aware of this relationship, the absence of a corporate designation does not alter its nature. Additionally, Texas Business and Commerce Code Section 3.403(b) allows for parol evidence to clarify the capacity in which a signature was made. The case involved a continuing guaranty form that guaranteed payment for goods sold to an identified purchaser.

The document examines the use of pronouns in a guaranty agreement, where "you" refers to The Gulf, Basco Co. and "I" refers to the guarantor, Alan B. Buchanan. It highlights the ambiguity in the capacity of the signatory, as the signatures could bind either a corporation or an individual. The execution of the agreement shows Alan Buchanan Builders, Inc. as the signatory, but does not clearly indicate whether Buchanan is personally liable. The court found this ambiguity, upholding the trial court's conclusion.

Gulf, Basco contests the trial court's allowance of Buchanan's testimony regarding his intent when signing, citing the parol evidence rule, which generally excludes extrinsic evidence to alter a clear written agreement. However, since the document lacked clear expression of intent, the court permitted testimony regarding the parties' understanding of the agreement.

Gulf, Basco further challenges the evidence supporting the finding that Buchanan did not sign in his personal capacity. The court emphasized that when assessing a "no evidence" challenge, all evidence must be viewed favorably to support the findings, while weighing evidence when addressing factual sufficiency. The court ultimately overruled Gulf, Basco's objections, affirming the trial court's findings on all points raised.

Buchanan testified he signed documents in a corporate capacity and did not intend to personally guarantee the corporation's debt. The corporate account was established based on a credit bureau's financial statement that did not provide personal information about Buchanan, only corporate data. Gulf, Basco sought a personal guarantee for corporate debts but initially opened the account on corporate credit. Over five years, the corporation's payments were satisfactory despite some invoice disputes, and Gulf, Basco did not pursue Buchanan personally for debts during a two-year period of difficulties. Instead, Gulf, Basco engaged in arrangements with other creditors and did not file liens until after bankruptcy proceedings began. It was noted that Gulf, Basco was the only business creditor among 300 to obtain a personal guarantee form before account establishment. The trial court's findings that Buchanan was not personally liable and that he did not sign as a guarantor in a personal capacity were upheld, as Gulf, Basco had consistently sought payment from the corporation. The appellant's arguments regarding Buchanan's liability and alleged alterations to the account arrangement were overruled, with the court affirming that the guaranty agreement was ambiguous. The trial court's judgment was ultimately affirmed.