Legal Question in Business Law in California

Re: Guarantor

Missing from the other answers is the suggestion that you immediately contact the parent organization and demand help and guidance in this. If they refuse, then hire your own attorney if the amount sought is more than the attorney fees would be. It sounds like a small claims matter from your language, but if it is a Superior Court case, then you NEED an attorney immediately. Contact me if interested in doing so.

Re: Guarantor

Obviously, the vendor has to prove that you're a guarantor. They would do this by showing a document which bears your signature personally guaranteeing the debt. If there is no document, then they could have a hard time proving it. If you haven't been with the organization for six years, that might make it very difficult for them to prove your status as a guarantor.

Re: Guarantor

It appears that you signed on as guarantor of the account rather than of any particular purchase. Since you signed in your individual capacity rather than as the chapter's administrator, you are the person the creditor can pursue. This is what being a guarantor means, and you should have known that when you signed the papers.

That other people served as administrator after you doesn't matter since they probably did not agree to take your place as guarantor. And you won't get far by claiming you signed on the chapter's behalf, since it would make no sense for a debtor to be the guarantor of its own debt. The reason creditors want guarantors is to ensure there is someone else they can pursue if the debtor doesn't pay, so guarantors are always third parties.

Ideally you would have arranged for the next administrator or some other person to become guarantor when you stepped down. It seems you didn't do this, so you remained the guarantor while the account remained active.

The mere passage of time does not relieve you of this obligation; it remains in effect until the statutory limitation period expires. In California there is a four-year limitation period on claims of breach of contract, but the four years starts to run at the time of breach and not at the time of signing.

Assuming the creditor has the document you signed, it will probably win if the case goes to court.

It may be that the parent organization did not separate itself properly from the chapter. If that is the case then the organization owes the money. Proving such a connection is difficult and costly, and the creditor is allowed to go after a guarantor even if the debtor remains solvent. You may, however, be able to seek indemnity from the organization itself.

If the debt exists because the chapter's remaining officers and directors breached some legal duty then you may be able to sue them to pay this debt, but this is probably not what happened.

Even if the chapter went through bankruptcy after it closed, only its own obligations would have been discharged and yours would have remained since bankruptcy protects the borrower but not its guarantors.

As you can see, there may be several avenues worth exploring. If there is a large amount of money at stake you should probably consult with an attorney directly to see which of these options, if any, might help you.

Sorry I can't be more encouraging. Good luck.

Re: Guarantor

In California, the distiction between sureties and guarantors was abolished by statute in 1872, and the statutes relating to both now use the terms "guaranty" "surety" and "suretyship" in the same breath. See Civil Code sections 2787 through 2856.

You probably provided what is called a "continuing guaranty" in which you agreed in advance to be the surety on a series of future transactions. Civil Code section 2814.

A continuing guaranty can be revoked at any time by the guarantor, with certain exceptions, as to future transactions. Civil Code section 2815.

Your best line of defense is probably to assert that, by resignation or otherwise being replaced as Administrator of this chapter, that you revoked your suretyship as to future transactions.

Whether this defense holds water in your particular situation would be fact-driven, and only a careful review of the facts would allow a lawyer to give you an even semi-accurate opinion as to whether the defense would hold up in court.

The factual review would include analysis of the written document creating the continuing guarantee (e.g., whether it expressly or by necessary implication states or suggests that you are guarantor only as and while acting as the chapter administrator, and so forth). It is also important whether the creditor knew or should have known that you were no longer the administrator. It might also be useful to look at how your replacement and the installation of the successor administrators was publicized, and whether your successors conducted business with this creditor.

I would also raise the statute of limitations defense (without a great deal of hope that it will work), and would consider the chapter-to-national relationship to assess whether a cross-complaint against the national organization to assert its liability or duty to indemnify you would be worth while.

Is the debt big enough to warrant a lawsuit? If so, would it be "small claims" size ($7,500 max.) or brought in superior court? Small claims judges produce less predictible results.