FNB Financial Co. v. Superior Court

Opinion

FLEMING, Acting P. J. Petitioner FNB Financial Company (Finance Company) brought an action for breach of contract against Kawai Piano [929](America) Corporation (Kawai), and sought to attach Kawai’s inventory and business equipment. The trial court denied the attachment, concluding that because Finance Company was a secured creditor it had failed to establish its eligibility to attach. We issued an alternative writ of mandate.

Finance and Kawai were parties to a 1974 Floor Plan Financing Agreement (the Agreement), whose terms provided that on sales by Kawai of its pianos and organs to approved dealers, Finance Company would purchase from Kawai the resulting accounts receivable together with the purchase money security interests on the items sold. Kawai guaranteed payment of any defaulting account, and Kawai further agreed to repurchase the defaulting account from Finance Company on demand. On dealer default Kawai, “without notice or demand, shall become immediately liable to [Finance Company] for the full debit balance of the Dealer’s Advance Account of the Dealer in default, and the amount thereof shall be paid to FNB Financial forthwith by [Kawai] . .. The guarantee and liability of [Kawai] hereunder is absolute and unconditional ... .” (Italics added.) The present action was instituted when Kawai refused Finance Company’s demand to repurchase some $66,000 of accounts receivable previously sold to Finance Company.

Finance Company concedes it holds security interests executed by the dealers on the various pianos and organs bought from Kawai. It contends, however, that Kawai’s liability to repurchase defaulting accounts constitutes an obligation separate and apart from Kawai’s guarantee of payment by the dealers and constitutes an unsecured obligation. In opposition Kawai argues that we are dealing with a single obligation, viz. accounts owed by the dealers and guaranteed by Kawai; that because the accounts are secured by the various security interests now held by Finance Company, attachment may not issue against any property of Kawai prior to exhaustion of the underlying security.

The 1939 amendment to Civil Code section 2787 abolished the distinction between sureties and guarantors. The obligation of the surety on default is now viewed as coterminous with that of the principal debtor. (Civ. Code, §§ 2806, 2807; Wiener v. Van Winkle (1969) 273 Cal.App.2d 774 [78 Cal.Rptr. 761]; American Guaranty Corp. v. Stoody (1964) 230 Cal.App.2d 390 [41 Cal.Rptr. 69].) However, a surety may require the creditor to proceed against the principal (Civ. Code, § 2845), and, if the underlying claim is secured, the surety may remain exempt from attachment. (Code Civ. Proc., § 483.010.)