It's hard to say, but review the guaranty and the facts of the case with an experienced attorney.

Courts "strictly construe" personal guarantees in Texas.

In a recent 5th Circuit Court of Appeals case, a Mr. Wederquist guaranteed the debts of a company called Border Patrol to a company known as PFS. Wederquist owned 25% of Border Patrol and was its treasurer.

In 1997, PFS sold some of its operations to Ameriserve. In 2000, Ameriserve filed chapter 11, and sold most of its assets to McLane. McLane Foodservice, Inc., v. Table Rock Restaurants, LLC, et al, No. 12-50980, 5th Cir. 2013.

In 2010, McLane contracted with Table Rock to sell food and goods to Table Rock restaurants. Wederquist ows 40% of and is treasurer of Table Rock. Table Rock later went out of business owing McLane almost $450,000.

In 2010, McLane sued Table Rock and Wederquist for the Table Rock debts in Texas state court, which was later removed to federal court.

The court denied relief against Wederquist, holding that he was not personally liable for the Table Rock Debts under the Guaranty Agreement. McLane appealed.

The 5th Circuit Court of Appeals affirmed, holding that Wederquist was not liable for the Table Rock debts. The 5th Circuit held in its court opinion that:

A guarantor under Texas law is a "so-called favorite of the law and as such, a guaranty agreement is construed strictly in [his] favor." Haggard v. Bank of Ozarks, Inc., 668 F.3d 196, 199 (5th Cir. 2012) (internal quotation marks and citation omitted). Thus, "[w]here uncertainty exists as to the meaning of a contract of guaranty, its terms should be given a construction which is most favorable to the guarantor."

The 5th Circuit Court also found that the Guaranty provided that Wedequist guaranteed the payment of indebtedness only to PFS and all affiliates of PFS, and that McLane is not an affiliate of PFS. Therefore, Wederquist was determined to not be liable to McLane under the personal guaranty.

J Thomas Black
Connect with me
Board Certified, Consumer Bankruptcy Law- Texas Board of Legal Specialization