State Board of Equalization v. Carleton

Opinion

LOW, P. J.

Appellant California State Board of Equalization appeals from a judgment entered in favor of respondent Curtis Carleton in an action to enforce a guaranty of indebtedness executed by respondent. We reverse. Respondent expressly consented to be responsible for any sales or use tax assessed against the taxpayer even if the principal obligation was materially altered without respondent’s knowledge or consent.

Pursuant to Revenue and Taxation Code section 6701, respondent executed and delivered to appellant a written guaranty of the sales and use tax liability of the Curtis Surgical Supply company, later known as Vista Medical Supply, Inc. (hereafter taxpayer). During the period between April 1, 1983, and October 31, 1986, taxpayer incurred a sales tax liability of $14,735.88. When the liability was not paid, appellant commenced this

[1609]

action against respondent for the full amount of the guaranty, $10,000. After a trial by the court, sitting without a jury, judgment was entered for respondent based on the court’s conclusion that Civil Code section 2819 (hereafter section 2819) absolved respondent of any obligation undertaken by executing the guaranty. “Since there is no conflict in the extrinsic evidence in this case, the trial court’s construction of the guaranty is not binding, and we must make an independent determination of its meaning.”

(Southern Cal. First Nat. Bank

v.

Olsen

(1974) 41 Cal.App.3d 234, 241 [116 Cal.Rptr. 4].)

Section 2819 provides a complete defense for the surety when the principal obligation is materially altered without the consent of the surety.

1

“The theory underlying the rule is that a surety ‘cannot be held beyond the express terms of his contract . . . .’ [Citation.]”

(ITT Diversified Credit Corp.

v.