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Union Carbide Corp. v. Katz

decided: November 5, 1973.

UNION CARBIDE CORPORATION A CORPORATION, PLAINTIFF-APPELLANT,
v.
SIDNEY KATZ, DEFENDANT-APPELLEE



Appeal from the United States District Court for the Eastern District of Illinois. WILLIAM G. JUERGENS, Judge. Civil 70-70.

Castle, Senior Circuit Judge, Kilkenny, Senior Circuit Judge,*fn* and Fairchild, Circuit Judge.

Author: Fairchild

FAIRCHILD, Circuit Judge.

Plaintiff Union Carbide sought recovery from defendants Harold Rosen and Sidney Katz on a contract of guaranty.*fn1 The district court entered judgment against Rosen, but in favor of Katz. Plaintiff appealed from the latter portion.

Plaintiff sold merchandise on credit to Automotive Warehouses, Inc. In the summer of 1969, plaintiff decided to require a personal guaranty of payment of the corporate indebtedness. Rosen, president of the corporation, and Katz, a stockholder, signed a guaranty prepared by plaintiff.

The guaranty recited that it was in consideration of "merchandise sold or consigned or hereafter sold or consigned and credit given or hereafter given from time to time" to the Warehouse corporation. The signers jointly and severally guaranteed payment to plaintiff of all indebtedness "now existing or hereafter created or arising." The guaranty was to be continuing and to remain in effect until written notice of discontinuance be received by plaintiff, but in no event until any and all indebtedness created or existing before receipt of such notice shall be fully paid. "Notice of the creation and existence of any of said indebtedness, and of . . . . the acceptance of this guaranty, and of any and all extensions of credit and indulgence hereunder, are hereby expressly waived."

Katz added a notation opposite his signature, the notation also being signed by him: "This guaranty is limited to $150,000-; and must be renewed annually; and effective only as long as I remain an officer, director or stockholder." In a note to plaintiff accompanying the guaranty, Katz warranted his net worth to be in excess of $500,000, and added: "Please note the restrictive covenant I place on my personal guarantee."

The signed guaranty was received by plaintiff October 2. On October 10 and thereafter, plaintiff shipped goods to the Warehouse corporation on credit.

On October 28, a representative of plaintiff wrote to the Warehouse corporation enclosing a new form of guaranty, prepared by plaintiff's law department. The new form incorporated the $150,000 limitation, and modified the provisions as to notice of termination. The new form did not provide automatic termination in the event Katz ceased to be an officer, director, a stockholder, nor termination at the end of a year unless renewed. The letter pointed out that Mr. Katz could terminate at any time in compliance with the notice provisions.

This form of guaranty was never signed, and the district court deemed it a counter offer and thus a rejection of the signed guaranty. We think, with respect, that the court overlooked the character of the original guaranty as an offer by Katz (as well as Rosen) which ripened into a contract upon the contemplated extension of credit and needed no return promise or other manifestation of acceptance by plaintiff.

During November, plaintiff shipped additional goods to the Warehouse corporation on credit.

On November 21, plaintiff's representative wrote to Mr. Rosen, saying, among other things:

"Harold, according to my records, we still have not received the personal guaranty form from Mr. Katz. I wish you would talk to him and get this matter resolved since if we do not get this document shortly, I will have no choice but to suspend all further shipments. I am sure we both do not wish to see this happen. If you think it would be more effective, please let me know and I will contact Mr. Katz myself."

Although the Oct. 28 form of guaranty was never signed, plaintiff continued to make shipments on credit and ultimately the ...


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