Gensco, Inc. v. Johnson

GENSCO, INC., a Washington corporation, Respondent, v. JASON JOHNSON and TRICIA JOHNSON, husband and wife and their marital community, Appellants,PRECISE CONSTRUCTION GROUP, LLC, a Wyoming limited liability company, Defendant.

No. 75478-5-I

COURT OF APPEALS OF THE STATE OF WASHINGTON DIVISION ONE

August 21, 2017

UNPUBLISHED OPINION

SCHINDLER, J. — Don Rock and Jason Johnson owned Precise Construction Group LLC (Precise), a heating, ventilation, and air-conditioning (HVAC) contractor in Spokane and the Tri-Cities. In 2011, Rock and Johnson entered into a credit account agreement with HVAC supplier Gensco Incorporated. Johnson signed a continuing personal guaranty. The personal guaranty "covers all existing and future indebtedness" of Precise and "unconditionally guarantees . . . every indebtedness or obligation . . . of any kind whatsoever." Johnson rescinded the personal guaranty in 2014. In 2015, Gensco filed a lawsuit against Johnson to collect the amount Precise owed before rescission of his personal guaranty. The court granted summary judgment for Precise. Johnson appeals the summary judgment order and entry of the judgment for $32,285.42 plus interest of $3,497.14 and attorney fees and costs. We affirm.

FACTS

The facts are undisputed. Don Rock and Jason Johnson owned Precise Construction Group LLC (Precise). Precise is a heating, ventilation, and air-conditioning (HVAC) contractor. Gensco Incorporated is located in Tacoma. Gensco manufactures and distributes HVAC products.

On October 18, 2011, Rock and Johnson applied for a credit account with Gensco. The application identified the address of Precise as 509 North Sullivan Road, Spokane, Washington. The application states Precise is a licensed HVAC, electrical, and general contractor. The application states Rock and Johnson have owned Precise for nine years. The application identifies Rock as the manager and "Purchasing Contact" and Johnson as the chief executive officer and "Accounts Payable Contact." The application identifies the "Desired Credit Limit" as $10,000.

The "Terms and Conditions" of the credit account agreement state the "Applicant affirms that all Information made in this application is true and correct" and the "Applicant hereby agrees that all purchases are subject to the following terms and conditions as well as the terms and conditions on the Invoices." The agreement states Gensco issues monthly statements for purchases made on credit and the "balance due for each account is payable by the 25th of the following month." The agreement also states Gensco "may apply payments at its own discretion unless instructions or remittance information as to how funds are to be applied is provided."

On October 18, Johnson also signed a "Continuing Personal Guaranty." Theguaranty identifies Precise as the "Applicant" and Johnson as the "Guarantor (Individual)." The Continuing Personal Guaranty states that in consideration for extending credit to Precise, Johnson "unconditionally guarantees . . . all existing and future indebtedness" for "every indebtedness or obligation" of Precise to Gensco.

In consideration of GENSCO, INC extending credit to the APPLICANT, the Guarantor(s) agree as follows.

A. OBLIGATION. THE GUARANTOR(S) UNCONDITIONALLY GUARANTEES PROMPT PAYMENT WHEN DUE OR UPON DEMAND THEREAFTER OF EVERY INDEBTEDNESS OR OBLIGATION THE APPLICANT HAS TO GENSCO, INC OF ANY KIND WHATSOEVER. This guaranty covers all existing and future indebtedness of the APPLICANT to GENSCO, INC.

The guaranty states it is "a continuing guaranty and shall be revocable only upon GENSCO, INC's receipt of written notice of revocation," and a revocation "shall only be effective with respect to extensions of credit by GENSCO, INC to the APPLICANT, which arise after receipt of the notice of revocation."

B. TERM OF GUARANTY. This is a continuing guaranty and shall be revocable only upon GENSCO, INC's receipt of written notice of revocation from Guarantor(s). Notice of revocation from the Guarantor(s) must be given by registered or certified mail to the GENSCO, INC address shown on this guaranty. The Guarantor(s)'s revocation shall only be effective with respect to extensions of credit by GENSCO, INC to the APPLICANT, which arise after receipt of the notice of revocation. The revocation shall not be effective if there are any unpaid debts of the APPLICANT to GENSCO, INC at the time the notice of revocation is received.

Gensco Regional Credit Manager Sherry Roseboom sent a letter to Johnson on October 18, 2011 establishing "an initial credit limit of $5,000 for your company." The letter identifies the account number as "Account #44301."

By August 2012, approximately 10 months after opening the account, Gensco had increased the credit limit to $100,000 and in September 2012, Gensco increasedPrecise's credit limit to $150,000.

On March 4, 2014, Rock and Johnson sent an e-mail to Roseboom to rescind the personal guaranty. The e-mail states, in pertinent part:

Precise Construction Group L.L.C. requests that Jason Johnson and Don Rock be removed from personal guarantors on the Gensco Account. We have discussed this several times and have agreed that the size of Precise Construction Group L.L.C. has outgrown any one individual or individuals [sic] financial means.

We would like to work with Gensco as the coming season approaches at a full capacity.

On March 4, 2014, Precise owed Gensco $56,956.61.

On March 14, Gensco sent a letter acknowledging rescission of the personal guaranty of Johnson. The letter states Rock never signed a personal guaranty. The letter confirms that as of March 4, 2014, Johnson would no longer be liable for purchases made by Precise.

Gensco recognizes that Jason Johnson has requested to have his Personal Guaranty removed from the account of Precise Construction Group as of March 4, 2014. Gensco recognizes that Jason will not be personally liable for purchases on the Precise Construction account with Gensco after that date. Don Rock had never signed a Personal Guaranty and therefore it is not necessary for removal of that name.

Between March 5 and May 22, 2014, Precise "made additional purchases on credit of about $78,000.[00]." Precise made payments of $22,671.19 from March 5 until June 27, 2014. Because Gensco applied the payments to the oldest outstanding invoices, the amount owed for purchases made before Johnson rescinded the personal guaranty was reduced to $34,285.42.

By late June, Gensco no longer allowed Precise to use credit and required payment of "cash on delivery." By August, Precise owed Gensco $118,100.25. On September 2, Precise signed an "Installment Note" and security agreement. Precisepromised to pay Gensco the past-due principal of $118,100.25 in monthly payments of $2,000.00 with interest computed at six percent per annum. The Installment Note states, in pertinent part:

1.For Value Received, Precise Construction Group, LLC DBA Access Electric & Heating promises to pay to the order of GENSCO INC, the sum of ONE HUNDRED EIGHTEEN THOUSAND, ONE HUNDRED DOLLARS AND 25/100 CENTS ($118,100.25) together with interest thereon at the rate of Six percent (6%) per annum from September 25, 2014 until paid.

2.Payment. This note is payable at any office of GENSCO INC in monthly installments of principal and interest of $2,000.00 per month commencing on September 25th, 2014 and on or before the 25th of each month thereafter until the whole sum, principal and interest has been paid.

The security agreement gives Gensco a security interest in vehicles owned by Precise. The agreement states that in the event of default, under the Installment Note, Gensco is entitled to the remedies as a secured creditor.

On September 2, Precise made a $2,000.00 payment. Gensco applied the $2,000.00 payment to the oldest outstanding debt, reducing the amount Precise owed to $116,100.25 and liability under the personal guaranty to $32,285.42.

Between October 2014 and May 2015, Precise paid $10,300.00. Gensco allocated $6,003.60 to the debts Precise incurred after Johnson rescinded the Continuing Personal Guaranty and $4,877.75 to accrued interest. Precise made no payments after May 2015.

Gensco took possession of the vehicles subject to the security agreement. Gensco sold the vehicles for $6,392.20. Gensco applied the proceeds to the debts Precise incurred after Johnson rescinded the Continuing Personal Guaranty, reducing the amount Precise owed to $110,095.01.

On July 24, 2015, Gensco filed a breach of contract lawsuit against Precise andJohnson. Gensco requested entry of a judgment against Precise for $110,095.01 plus $2,078.06 in accrued interest and attorney fees and costs. Gensco alleged Johnson was liable under the Continuing Personal Guaranty for outstanding amounts incurred before rescission of the personal guaranty on March 4, 2014. Gensco requested entry of a judgment against Johnson for $32,285.42 plus $609.39 in accrued interest and attorney fees and costs.

Johnson asserted as an affirmative defense that he was not liable for any debts Precise incurred after he rescinded the personal guaranty and Gensco did not "properly apply and disclose payments made on the account." Johnson also asserted the debt "was converted to an Installment Note on September 2, 2014" and that note "is solely between Precise" and Gensco. Johnson requested the court dismiss "all claims in the Plaintiff's Complaint."

On September 29, 2015, the court entered a judgment against Precise for $110,000 plus interest and attorney fees and costs.

Gensco filed a motion for summary judgment on the liability of Johnson under the personal guaranty. The court continued the motion to allow additional discovery. Following discovery, Gensco renewed the motion for summary judgment.

Gensco agreed Johnson "can only be liable for purchases made prior to the rescission" of the personal guaranty on March 4, 2014. Gensco argued that under the plain and unambiguous language of the Continuing Personal Guaranty, Johnson was...