RCA Corp. v. Hunt

Opinion

REED, J.* RCA Corporation,plaintiff, appeals a summary judgment denying its action against Paul T. Hunt, Maureen H. Hunt and Robert Charlesworth, defendants, to enforce guaranties.

The facts as presented by RCA:

In 1977, Dodd-Conn became a distributor of RCA Autosound equipment. Dodd-Conn, a new company, sought a line of credit to buy RCA products on a deferred payment plan. The viability and extent of a credit line was repeatedly discussed by Charlesworth, a shareholder and Chief Executive Officer of Dodd-Conn, and M. L. Meehan, the manager of Credit and Collection for RCA. Meehan informed Charlesworth that any large line of credit be secured by some form of guaranty, preferably a personal guaranty of the principals of the corporation.

[905]As Dodd-Conn ordered more RCA products, its payments became increasingly erratic. Meehan insisted the principals of Dodd-Conn execute personal guaranties before RCA would continue to ship products. Meehan emphasized the guaranties would cover the full amount of the Dodd-Conn debt to RCA and would be unlimited in amount. In June 1978, Charlesworth agreed to execute a personal guaranty. Meehan told Charlesworth he left the amount of the guaranty blank because the guaranty was to be unlimited. Charlesworth signed the guaranty and mailed it to RCA. After the guaranty, Dodd-Conn’s demands for merchandise increased. RCA sought further personal guaranties. RCA then learned Paul Hunt had become a principal in Dodd-Conn. Hunt and his wife also agreed to execute a guaranty with the same terms as Charles-worth’s in exchange for increased shipments from RCA.

In November 1978, Charlesworth called Meehan and asked RCA to release $750,000 worth of autosound equipment ordered by Dodd-Conn. Meehan had concerns the net worth of all the individual guaranties was not sufficient to warrant such a large shipment. Charlesworth insisted he and the Hunts had enough assets to cover the shipment if DoddConn defaulted on its payments.

In August 1979, RCA met with Charlesworth and the Hunts. RCA was concerned about the increasing financial problems of Dodd-Conn. An RCA representative reaffirmed the personal guaranties would be enforced against the individual defendants in the event of a corporate default. In October 1979, Charlesworth tried to revoke his personal guaranty.