CASE 14.2 Guaranty Contract:Page v. Gulf Coast Motors
903 So.2d 148, Web 2004 Ala. Civ. App. Lexis 982 (2004) Court of Civil Appeal of Alabama
"A promise to pay the debt of another is barred by the Statute of Frauds unless it is in writing." - Judge Murdock
Facts:
Glenn A. Page (Glenn) had a long-term friendship with Jerry Sellers, an owner of Gulf Coast Motors. Glenn began borrowing money from Gulf Coast Motors on a recurring basis during a two-year period. The loan process was informal: Gulf Coast Motors set up a ledger account and recorded each loan made to Glenn, and Glenn would sign the ledger "I agree to pay Jerry Sellers as above." At various times, Glenn would make small payments toward his account, but he would thereafter borrow more money. At the times the loans were made, Glenn was not working and had no assets in his own name. There was no evidence as to what Glenn used the loan proceeds for, but evidence showed that he had a gambling problem.
Sellers testified that toward the end of the two-year period of making loans to Glenn, he telephoned Mary R. Page, Glenn's wife, and Mary orally guaranteed to repay Glenn's loans. Mary had significant assets of her own. Mary denied that she had promised to pay any of Glenn's debt, and she denied that Sellers had asked her to pay Glenn's debt. Gulf Coast Motors sued Glenn and Mary to recover payment for the unpaid loans. The trial court entered judgment in the amount of $23,020 in favor of Gulf Coast Motors. Mary appealed.
Issue:
Was Mary's alleged oral promise to guarantee her husband's debts an enforceable guaranty contract?
Language of the Court:
A promise to pay the debt of another is barred by the Statute of Frauds unless it is in writing. It is not disputed that Mary did not sign a note, guaranty, or any other writing promising to pay any part of Glenn's debts. Therefore, if the purported agreement to pay Glenn's debt is within the Statute of Frauds, Mary is not liable even if the trial court found Seller's testimony to be credible. Mary's alleged oral promises are not enforceable under the Statute of Frauds. We conclude that Mary's alleged promises to guaranty or repay Glenn's debts were within the Statute of Frauds and, therefore, were not enforceable.
Decision:
The court of civil appeals held that Mary's alleged oral promises to guarantee her husband's debts were not in writing, as required by the Statute of Frauds. The court remanded the case to the trial court to enter judgment in Mary's favor.
Case Questions:
Critical Legal Thinking: What is a guaranty contract? Explain.
Business Ethics: Did Glenn act ethically in this case? Would Mary have acted unethically if she had actually orally guaranteed to repay her husband's debts and then raised the Statute of Frauds to prevent enforcement of the oral promises?
Contemporary Business: Are guaranty contracts often used in business? Can you think of a situation in which a guaranty contract would be required?
INSTRUCTIONS:
Read and understand the case. Show your Analysis and Reasoning and make it clear you understand the material. Be sure to use the concepts of the course to show your reasoning. Summarize the situation. Dedicate at least one heading to each following outline topic:
Parties [Identify the plaintiff and the defendant and tell something about them.]
Facts [Summarize those facts critical to the outcome of the case.]
Procedure [Who brought the appeal? What was the outcome in the lower court(s)?]
Issue [Note the central question or questions on which the case turns.]
Holding [How did the court resolve the issue(s)? Who won?]
Reasoning [Explain the logic that supported the court's decision.]
Case Questions [Be sure to address and thoroughly answer each and every case question and each part of each question.]
Conclusion [This should summarize the key aspects of the decision and also your recommendations on the court's ruling.]
Include citations on the slides and a reference page with your sources. Use APA style citations and references.
Do significant research outside of the book and demonstrate that you have in a very obvious way. This refers to research beyond the legal research. This involves something about the parties or other interesting related area. Show something you have discovered about the case, parties, or other important element from your own research. Be sure this is obvious and adds value beyond the legal reasoning of the case.
Pay strict attention to quality in terms of substance, form, grammar, and context.