Hart, Schaffner & Marx v. Vaughn

JAMISON, J.,

pro

tem.

This action is upon a guaranty executed by defendant in favor of plaintiff. Judgment was given in favor of defendant, from which plaintiff appeals. The case was tried upon an agreed statement of facts and a bill of exceptions.

In 1928 one J. R. Vaughn, a cousin of respondent, established in Berkeley a retail clothing business conducted under the name of “Vaughn-at-Sather Gate”. It was agreed between him and appellant that appellant would provide him with the greater part of the merchandise needed in his business. The said merchandise was to be sold him on credit, and to induce appellant to extend such credit respondent executed a guaranty on November 16, 1928, guaranteeing, up to the sum of $6,000, payment to appellant of all indebtedness which J. R. Vaughn should incur for merchandise purchased from appellant. Early in 1930 the indebtedness of J. R. Vaughn for merchandise purchased from appellant amounted to some $19,000. About that time appellant and J. R. Vaughn concluded to form a corporation to conduct said business. A corporation was thereupon formed, known as “Vaughn-at-Sather Gate Ltd.”, all of its stock being issued to J. R. Vaughn, who placed it as a pledge with appellant. The said corporation assumed all of the indebtedness of J. R. Vaughn, reducing his indebtedness to appellant to the sum of $18,000, for which the corporation executed its note on March 1, 1930. By reason of this change in the business of J. R. Vaughn the form of the said guaranty became inappropriate, since the said guaranty ran to J. R. Vaughn individually and said busi

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ness was thereafter conducted by said corporation. It therefore became necessary to execute a new guaranty which would name the corporation as the debtor. Accordingly respondent on June 17, 1930, executed a new guaranty to replace the other, the old guaranty being returned to respondent. By this new guaranty the respondent obligated himself to pay to the extent of $6,000 for all goods thereafter sold by appellant to said corporation. In the fall of 1933 appellant forced the liquidation of said business, and as a result thereof funds were realized which by direction of the corporation were applied to the payment in full of the merchandise account of said corporation, leaving unpaid the $18,000 note.