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HYSTER CREDIT CORP. v. O'NEILL

December 21, 1983

HYSTER CREDIT CORP.
v.
Dennis S. O'NEILL, and John S. Rittenhouse



The opinion of the court was delivered by: KELLY

 KELLY, District Judge.

 Plaintiff, Hyster Credit Corporation ("HCC") brings the present Motion to Strike Defendants' Insufficient Defenses, pursuant to Fed.R.Civ.P. 12(f). The Court's diversity jurisdiction is invoked pursuant to 28 U.S.C. ┬ž 1332(a)(1).

 The complaint alleges that the defendants, Dennis S. O'Neill ("O'Neill") *fn1" and John S. Rittenhouse ("Rittenhouse"), have breached a contract of guaranty. Plaintiff seeks judgment against defendants, jointly and severally, in the amount of $1,500,000.00 together with interests and costs.

 FACTS

 The relevant facts are not in dispute. Tri-State Rental, Inc. ("Tri-State") and Free State Industries, Inc. ("Free State") are construction equipment dealers. Among other things, Tri-State and Free State purchased personnel lift equipment from Fabtek, Inc. ("Fabtek"), a division of Hyster Company. Plaintiff Hyster Credit Corporation, another division of Hyster Company, finances the sale of Fabtek personnel lift equipment and provided such financing to Tri-State and Free State. Defendant John S. Rittenhouse who is an officer and partial owner of Tri-State and Free State, executed unconditional and continuing guaranties to Fabtek of the dealers' debts and obligations. HCC, by assignment from Fabtek, is the present holder of the guaranties. The Complaint alleges that both Tri-State and Free State have defaulted in payments due for Fabtek personnel lifts. By reason of these defaults, HCC has declared the dealers' indebtedness due in full, and seeks to collect same from Rittenhouse as personal guarantor.

 In his Answer to the Complaint, Defendant Rittenhouse has alleged three defenses based on the rights and/or remedies of Tri-State and Free State. In sum, defendant seeks to avoid liability as guarantor because: (1) Tri-State and Free State have allegedly been harmed by Fabtek's breach of the dealership agreements; (2) Tri-State and Free State were allegedly induced to become dealers by misrepresentations which Fabtek made concerning sales assistance it would provide; and (3) Free State was allegedly induced to become a dealer by misrepresentations which Fabtek made relating to its territory.

 Plaintiff seeks to strike these three defenses from defendant's answer arguing that under the terms of the contract, defendant unequivocally waived his right to raise the dealers' defenses.

 DISCUSSION

 The issue before this Court is whether various defenses raised by the guarantor, in an action on the guaranty, should be stricken as legally insufficient on the basis of a clause in the guaranty purporting to waive the guarantor's right to raise such defenses.

 
The Guarantor waives any defense arising by reason of any disability or other defense of Dealer or by reason of the cessation from any cause whatsoever of the liability of Dealer.

 Preliminarily, we note that neither party disputes that a debtor's defenses against a creditor may be waived by the guarantor. The law recognizes that a contract of guaranty is a separate undertaking and "if the terms and conditions of the contract so state, a guarantor may assume greater liability than that of the principal [debtor]." Paul Revere Protective Life Ins. Co. v. Weis, 535 F. Supp. 379, 386 ...


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