CAN YOU AVOID A PERSONAL GUARANTY BY SIGNING AS AN OFFICER?

Luxury Homes and Estates of Florida

In my practice I am often given the task of collecting delinquent accounts. One of my first priorities is to review any credit application and personal guarantees signed by the debtor corporation and its officers. A common trick is that an officer signs the credit application on behalf of the corporation and then attempts to avoid liability under the personal guaranty by signing as a corporate representative.

In other words, a clear cut personal guaranty will be executed as follows “John Smith-President of XYZ”.

Such a maneuver by a creative debtor is not uncommon. However, the courts do not allow a corporate officer to escape personal liability merely by affixing his title to the signature block on the personal guaranty.

The courts review the document to determine whether or not the guaranty is unambiguous. If the guaranty states that the signer is “personally” liable or guarantees the debt no further interpretation of the document is permitted and the document is a guaranty as a matter of law.

Simply signing the signature block and inserting an officer’s title cannot defeat the purpose of the guaranty. See Central National Bank of Miami v. Muskat Corp. of America, Inc., 430 So.2d 957 (Fla. 3rd DCA 1983); Nelson v. Ameriquest Technologies, Inc., 739 So.2d 161 (Fla. 3rd DCA 1999); Sabin v. Lowe’s of Florida, Inc., 404 So.2d 772 (Fla 5th DCA 1981).

The courts enforce guarantees. To hold otherwise would merely have a corporation guaranteeing its own debt which renders the guaranty a nullity. The law is not a fool!

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Houston Short grew up in the Central Florida area, and continues to reside in Orlando with his family. He provides representation in arbitration actions for the American Arbitration Association and engages in alternative dispute resolutions including mediation both binding and non-binding arbitration, and settlement negotiations. He is an active member of the American Arbitration Association Panel Review Committee, the Orange County Bar Association, and the Florida Bar. He graduated from Florida State University in 1984 with a bachelors of science degree (cum laude) and received his juris doctor from the University of Florida in 1987 (with honors). Houston co-authored, "The Constitutionality of the Legislatures Mandate to Sever Counterclaims in Mortgage Foreclosure Action," the Real Property, Probate and Trust Law Section, The Florida Bar.