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STATE OF MICHIGAN
COURT OF APPEALS


ERB LUMBER, INC., Plaintiff-Appellant/Cross-Appellee, v MAURICE MORTIER and PAULINE MORTIER, Defendants-Appellees/Cross-Appellants, and JASON MORTIER, JASON MORTIER d/b/a THE FITTING OUT COMPANY, SUSAN PASHUKEWICH, EDWARD J. PASHUKEWICH, WILFRED N. BRUNK, DEBRA LEE SCHOU, MICHIGAN DEPARTMENT OF COMMERCE and HOMEOWNERS CONSTRUCTION LIEN RECOVERY FUND, Defendants.

UNPUBLISHED January 5, 1999

No. 204207 Washtenaw Circuit Court LC No. 96-006670 CH

Before: Holbrook, Jr., P.J., and O'Connell and Whitbeck, JJ. PER CURIAM. Plaintiff Erb Lumber, Inc. filed suit against defendants Maurice and Pauline Mortier to recover on their personal guaranty for amounts due on the account of The Fitting Out Company ("the Company"). The trial court granted plaintiff's motion for summary disposition pursuant to MCR 2.116(C)(10), but limited the recovery to $3,000. We affirm in part and reverse in part. I. Basic Facts and Procedural History Defendants, doing business as the Company, executed a document with plaintiff entitled "30 Day Confidential Credit Application and Sales Agreement." This document contained three separate

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items: a credit application; a sales agreement authorizing a monthly account with interest to accrue at an annual rate of 20.4%; and a "Personal Guarantee [sic]" The following statement appears near the top of the document: This agreement and guaranty hereunder cover purchases made from any division or subsidiary of seller. [Emphasis supplied]. Jason M. Mortier, a codefendant who is apparently defendants' son but who is not a party to this appeal, and the Company are identified as the purchaser at the top portion of the document. Jason Mortier is identified as an individual, while the Company is identified as a business. Defendants identified the Company as a "Co-Partnership," that had been in existence for over seventeen years. Defendants also identified themselves and Jason Mortier as the "principal owners, stockholders, or general partners" of the business. Defendants signed the "terms of payment" portion of the credit agreement as president and vice-president.1 Jason Mortier also signed the terms of payment section. The credit agreement also contains a proposed credit limit: WE EXPECT OUR MONTHLY CREDIT REQUIREMENTS FROM ERB LUMBER CO. TO BE APPROXIMATELY: $1000.00 - 3000 [sic]. In addition, the following handwritten notation appears near the upper right hand corner of the credit agreement: "LIMIT 1000.00 [unintelligible initials] 9/15/89." The parties dispute the effect of both the monthly credit requirements and the handwritten notation. The document also included a separate "Personal Guarantee [sic]": THE UNDERSIGNED, JOINTLY AND SEVERALLY, PERSONALLY GUARANTEES THE PAYMENTS, WHEN DUE, OF ANY PURCHASES BY SAID APPLICANT AND/OR CORPORATION, THIS BEING DONE IN CONSIDERATION OF, AND AS AN INDUCEMENT FOR, THE EXTENSION OF CREDIT TO SAID APPLICANT AND/OR CORPORATION. SHOULD THE WIFE SIGN AS GUARANTOR HEREIN SHE DOES SO BECAUSE SHE IS PERSONALLY INTERESTED IN THE SUCCESS OF THE APPLICANT HEREIN. Both defendants signed as personal guarantors for the Company and plaintiff subsequently sold lumber supplies to the company on credit under the credit agreement. Defendants stated that they transferred ownership of the company to Jason Mortier, in August of 1990. Defendants contend that they advised plaintiff of the sale of the business to Jason Mortier and revoked their personal guaranty in a letter dated August 23, 1990. This letter stated: Please be advised as of this date, August 23, 1990, the business known as THE FITTING-OUT COMPANY, a co-partnership, has been sold to JASON M. MORTIER and has been registered as a sole-proprietorship, THE FITTING-OUT COMPANY. Jason will be responsible for all assets and liabilities of the company. -2

While we will have no further business interest in The Fitting-Out Company we will continue to regard Erb Lumber as our personal building materials supplier, and continue to recommend Erb Lumber to our friends and business associates. We believe The Fitting-Out Company, with Jason at the helm and with Erb Lumber as the principal building materials supplier, has a good future of growth and profit. We wish you both continued success. Thank you again for your cooperation. [2] After the transfer of the Company to Jason Mortier, defendant Maurice Mortier remained active in the business by earning sales commissions, writing checks for the Company, bidding jobs for the Company and interacting with plaintiff on behalf of the Company. Plaintiff sold supplies to the Company under the credit agreement until April 1995, at which time the Company was in several months' arrears. Plaintiff sent letters to defendants in November, 1995, to enforce the personal guaranty. Defendant Maurice Mortier admits receiving the letters but claims he did not read them. In February of 1996, plaintiff filed a two-count complaint to collect the debt. Count I was to foreclose a claim of lien against property owned by defendants Susan Pashukewich, Edward J. Pashukewich, Wilfred N. Brunk and Debra Lee Schou in the amount of $4,362.92 for pole barn supplies provided by plaintiff and installed on the property by the Company. Count I also included a claim against the Michigan Department of Commerce Homeowners Construction Lien Recovery Fund pursuant to MCL 570.1201 et seq.; MSA 26.316(201) et seq. Count II was to collect the underlying debt of $51,409.96 and was directed at defendants Jason Mortier, individually and doing business as the Company, and at defendants Maurice Mortier and Pauline Mortier. The trial court entered an order dismissing Count I in April of 1996 with prejudice and without costs. The trial court entered a second order that dismissed Count I as to defendants Brunk and Schou only on May 6, 1996.3 Plaintiff obtained a consent judgment against Jason Mortier and the Company in September of 1996 in the amount of $52,819.95. Jason Mortier subsequently filed bankruptcy. Plaintiff filed a motion for summary disposition pursuant to MCR 2.116(C)(10). Defendants responded by requesting summary disposition pursuant to MCR 2.116(I)(2) and (C)(10). At the motion hearing, the trial court concluded: THE COURT. All right. The document which is claimed to be a revocation and guarantee indicates that Jason, the son would be responsible for all the assets and liabilities of the company. And that may well have put Erb on notice that the liabilities of the company were primarily going to be Jason's but it is the liabilities of the guarantors which are not mentioned here as distinct

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