In a decision that will warm the hearts of vendors everywhere, the Court of Appeals for Ohio’s Eighth Appellate District recently upheld the enforceability of personal guaranty language in a credit application. See Wholesale Builders Supply, Inc. v. Green-Source Development, L.L.C., et al., 2013-Ohio-5129. This decision also serves as a reminder to read before signing.
The form of credit application used by Wholesale Builders Supply, Inc. (“Wholesale”) with prospective customers included the following language:
BY SIGNING THIS AGREEMENT YOU ARE BOTH PERSONALLY AND CORPORATELY LIABLE FOR THE TOTAL OF YOUR PURCHASES BY YOU OR ANYONE DESIGNATED TO SIGN FOR YOUR PURCHASES ON YOUR ACCOUNT.
Defendant Green Building Technology, L.L.C. (“Green”), through its principal John A. Pumper (“Pumper”), executed one of Wholesale’s credit applications, and Green thereafter ordered and received goods from Wholesale, along with invoices from Wholesale.
After Green failed to pay some of the invoices, Wholesale predictably sued both Green and Pumper for the balance due. Wholesale prevailed on a motion for summary judgment that was supported by, among other things, the unsigned transcript of Pumper’s deposition in which he acknowledged signing the credit application and by an affidavit of the balance due from Wholesale’s credit manager.
Green and Pumper appealed. Their first assignment of error challenged the sufficiency under Civ.R. 56 of the kind of evidence that Wholesale used to support its summary judgment motion. The Court quickly dispatched appellants’ complaints that Pumper did not sign his deposition transcript and because Wholesale’s credit manager did not authenticate the documents referenced in her affidavit.
Green and Pumper’s second assignment of error involved the Pumper guaranty. The appellants asserted that (i) there was no evidence that Pumper was a guarantor of Green’s obligations to Wholesale and (ii) Pumper never agreed to be a guarantor. However, the Court of Appeals relied on Pumper’s deposition transcript in which he unequivocally admitted to signing the credit application, and rejected Pumper’s testimony that “[i]t’s a typical thing just sign the doggone form there because they want the credit app.”
The bottom line: failing to read what you sign, at least in the commercial context, is no excuse. Therefore, vendors, keep including guaranty language in your credit applications; purchasers, read before you sign.