The Supreme Court of New Jersey recently granted certification in Extech Building Materials, Inc. v. E&N Construction Inc. The case involves when individuals executing business contracts can be held personally liable.
Facts of Extech Building Materials, Inc. v. E&N Construction Inc.
Plaintiff Extech Building Materials, Inc. (Extech) sought sums allegedly due from defendants Joaquim G. Ferreira and Shawn Roney under their purported personal guarantees of payment for approximately $1,016,627.65 in building materials Extech had delivered to defendant E&N Construction, Inc. (E&N).
Extech’s form credit application expresses contractual obligations for what it refers to as the “Buyer” in the first five numbered paragraphs of the document and also sets forth separate contractual obligations of putative personal guarantors in the sixth numbered paragraph. However, the form signature lines do not require that a person executing the application indicate whether they are signing as representatives of the “Buyer” or as the personal guarantors.
In the document completed in March 2012, Roney’s name is printed and his signature is entered on the first line, and Ferreira’s name is printed and his signature is entered on the second line. Both lines include what appear to be the signature of the same witness. The third line on the form is not completed; it does not include a printed name or any signatures.
Following execution of the credit application, Extech delivered building materials to E&N and, as alleged by Extech, E&N failed to pay $1,016,627.65 and additional service charges for those materials. Extech filed a complaint seeking a judgment for the amounts allegedly due from E&N. In the complaint, Extech also sought judgment against Ferreira and Roney, alleging they had unconditionally guaranteed E&N’s obligations “concurrently with the application for revolving credit.”
Appellate Division’s Decision Extech Building Materials, Inc. v. E&N Construction Inc.
The Law Division granted summary judgment to the defendants. In a per curiam opinion, the Appellate Division reversed. It held that there was ambiguity in the signature lines of the contract. Moreover, determining whether the defendants signed the contract as personal guarantors or strictly on behalf of the company was a factual issue to be determined by a jury.
The signature lines follow a set of contractual obligations for both the Buyer and putative guarantors, so there was no definitive basis on which the court could correctly conclude Ferreira and Roney executed the application as either their acceptance of the terms on behalf of E&N or as personal guarantors,” the appeals court wrote. “The ambiguity in the signature lines of the application and determining whether Ferreira or Roney executed the application as personal guarantors or strictly on behalf of E&N, requires the resolution of factual issues that are dependent on further discovery and, if necessary, disposition by a jury.”
Issues Before the NJ Supreme Court
The New Jersey Supreme Court granted certification. The justices agreed to consider the following question: “If an individual signs a contract on behalf of a corporate entity, and the contract has a provision stating that the individual guarantees payment, is the guarantee enforceable against that individual?”
Oral arguments have not yet been scheduled. Please check back for updates.