TH Davidson and Company v. Eidola Concrete , 2012 IL App (3d) 110641 ( 2012 )

ILLINOIS OFFICIAL REPORTS
Appellate Court
TH Davidson & Co., Inc. v Eidola Concrete, LLC, 2012 IL App (3d) 110641
Appellate Court TH DAVIDSON AND COMPANY, INCORPORATED, Plaintiff-
Caption Appellee, v. EIDOLA CONCRETE, LLC, and THOMAS E. KILBRIDE,
Defendants-Appellants.
District & No. Third District
Docket No. 3-11-0641
Filed July 2, 2012
Held In the absence of limiting language, the personal guaranty signed by the
(Note: This syllabus co-manager of defendant concrete company as part of an application for
constitutes no part of a line of credit, the guaranty was a continuing guaranty, it was unlimited
the opinion of the court as to duration and amount, and judgment was properly entered for the
but has been prepared vendor in the full amount it sought, even though the amount exceeded the
by the Reporter of limit the co-manager requested.
Decisions for the
convenience of the
reader.)
Decision Under Appeal from the Circuit Court of Kankakee County, No. 09-SC-2349; the
Review Hon. Kenneth Leshen, Judge, presiding.
Judgment Affirmed.
Counsel on Edward S. Glazar, Jr., of Morgan & Glazar, of Kankakee, for appellants.
Appeal
Larry D. Serene, of Kankakee, for appellee.
Panel JUSTICE CARTER delivered the judgment of the court, with opinion.
Presiding Justice Schmidt and Justice McDade concurred in the judgment
and opinion.
OPINION
¶1 The plaintiff, TH Davidson & Co., Inc. (Davidson), sued the defendants, Eidola
Concrete, LLC (Eidola Concrete) and Thomas E. Kilbride, in small claims court to recover
money allegedly owed on a line of credit. The circuit court found in favor of Davidson for
$5,600.80. On appeal, the defendants argue that the court’s decision was erroneous because
Kilbride personally guaranteed only $1,000. We affirm.
¶2 FACTS
¶3 On September 4, 2007, Kilbride, then a co-manager of Eidola Concrete, filled out a
“Credit Application/Sales Contract” whereby Davidson would agree to sell ready-mix
concrete and other materials to Eidola Concrete on a line of credit. Eidola Concrete requested
a $1,000 line of credit.
¶4 After Eidola Concrete failed to pay an amount owed to Davidson under the contract,
Davidson sued Eidola Concrete and Kilbride in his personal capacity. At the September 21,
2010, bench trial, the parties stipulated that Eidola Concrete owed Davidson $5,600.80.
¶5 Testimony elicited at trial indicated that Eidola Concrete’s credit application was
reviewed by Davidson’s chief financial officer (CFO), who approved the application but
crossed out the $1,000 figure on the application and wrote $3,000 in its place. The CFO
testified that it was customary for him to call a customer to let it know the decision on the
application, but he could not recall a specific conversation with Kilbride in that regard.
¶6 Kilbride testified that he never consented to or signed the modified application. He also
said he never talked to anyone about the credit limit being increased to $3,000. He did agree
that he signed a personal guaranty on the “Terms and Conditions” page of the application,
which stated:
“By signing below, the undersigned acknowledges that, as a principal of the
Contractor, the undersigned will benefit financially by Davidson extending credit to the
Contractor and that, in consideration of Davidson’s extending credit to the Contractor
under the terms hereof, and for other good and valuable consideration, the receipt and
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sufficiency of which are hereby acknowledged, and to induce Davidson to extend credit
to the Contractor, the undersigned hereby agrees to guarantee the payment in full of any
amount owing to Davidson by the Contractor at any time.”
Kilbride stated that pursuant to the agreement, he was personally liable for only $1,000 of
the $5,600.80 that Eidola Concrete owed to Davidson.
¶7 At the close of the bench trial, the circuit court found that the personal guaranty was clear
and unambiguous because it was not limited to a specific amount, but was for any amount
owed. Accordingly, the court found in favor of Davidson for $5,600.80 plus costs.1 The
defendants appealed.
¶8 ANALYSIS
¶9 The defendants’ sole argument on appeal is that the circuit court’s decision was
erroneous because Kilbride personally guaranteed only $1,000.
¶ 10 A guaranty contract is construed according to the principles that govern contracts
generally. McLean County Bank v. Brokaw, 119 Ill. 2d 405, 412 (1988); Blackhawk Hotel
Associates v. Kaufman, 85 Ill. 2d 59, 64 (1981) (citing Restatement of Security § 88 (1941));
Restatement (Third) of Suretyship and Guaranty § 14 (1996) (“[t]he standards that apply to
interpretation of contracts in general apply to interpretation of contracts creating secondary
obligations”). “The function of the court is to effectuate, if ascertainable, the intent of the
parties to the contract.” McLean County Bank, 119 Ill. 2d at 412; Lee v. Pioneer State Bank,
97 Ill. App. 3d 97, 99 (1981). If the contract’s language is unambiguous, it must be enforced
as written. McLean County Bank, 119 Ill. 2d at 412; Lee, 97 Ill. App. 3d at 99. The
construction of a contract presents a legal question that we review de novo. Martis v.
Grinnell Mutual Reinsurance Co., 388 Ill. App. 3d 1017, 1020 (2009).
¶ 11 While the parties in this case have not phrased it as such, the dispositive issue in this case
invokes the law on continuing guaranties. “A continuing guaranty is a contract pursuant to
which a person agrees to be a secondary obligor for all future obligations of the principal
obligor to the obligee.” Restatement (Third) of Suretyship and Guaranty § 16 (1996). “Where
by the terms of the written guaranty it appears that the parties look to a future course of
dealing or a succession of credits, it is generally considered a continuing guaranty.” Scovill
Manufacturing Co. v. Cassidy, 275 Ill. 462, 467 (1916); Weger v. Robinson Nash Motor Co.,
340 Ill. 81, 92 (1930).
¶ 12 There can be no question in this case that the parties contemplated a future course of
dealing through the contract. Davidson agreed to supply materials to Eidola Concrete on
credit, and the contract refers to matters such as separate purchase orders. Kilbride signed the
guaranty for “payment in full of any amount owing to Davidson by the Contractor [Eidola
Concrete] at any time.” Thus, Kilbride’s liability was continuing. Accord Heeringa v.
Ortlepp, 167 Ill. App. 586, 588 (1912) (finding a continuing guaranty even when the amount
1
The proofs were later reopened after it was established that Eidola Concrete paid Davidson
$3,000 on the debt in January 2008.
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of the guaranty was expressly limited, as the intention of the parties was to look to a future
course of dealing); Frost v. Standard Metal Co., 116 Ill. App. 642, 645-46 (1904) (same).
¶ 13 Moreover, contrary to Kilbride’s protestations, his liability was not limited to only $1,000
of the debt based on the figure he listed on the first page of the agreement. For over a century
Illinois law has been clear:
“In the absence of an expressed intention in the contract that the maximum amount of
credit specified is to be a limitation on the amount of credit to be extended and an
absolute condition of the guarantor’s undertaking, the extension of credit beyond that
amount does not discharge or release the guarantor of liability on the specified amount.”
McLean County Bank, 119 Ill. 2d at 412 (citing Taussig v. Reid, 145 Ill. 488, 496
(1893)).
There is no such limiting language in this agreement. Under these circumstances, we hold
that the circuit court’s decision was proper.2 See Mamerow v. National Lead Co., 206 Ill.
626, 634 (1903) (“[w]e think the greater weight of authority is agreed that where the guaranty
is a continuing one, and is unlimited as to duration and amount for which the guarantor will
be liable, such time and amount must be reasonable, under the circumstances of the particular
case”).
¶ 14 CONCLUSION
¶ 15 The judgment of the circuit court of Kankakee County is affirmed.
¶ 16 Affirmed.
2
We also note that a continuing guaranty can be terminated by the continuing guarantor
giving notice to the obligee (Restatement (Third) of Suretyship and Guaranty § 16 (1996)), but there
was no evidence in this case that Kilbride ever attempted to terminate the continuing guaranty.
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