Seyfert

Defendants John and Doris Seyfert, principals and sole shareholders of Village Pantry, Inc., appeal from a judgment holding them personally liable on their guaranty of their corporation’s promissory note. We conclude the court’s incorrect determination that the presumption of consideration under Civil Code section 1614 affects the burden of proof instead of the burden of producing evidence resulted in erroneous jury instructions leading to prejudicial error. We therefore reverse the judgment.

Factual and Procedural Background

In June 1981 plaintiff Rancho Santa Fe Pharmacy, Inc. (RSF Pharmacy), sold its successful liquor store to Village Pantry, Inc., for $170,000. Of the total purchase price $120,000 was in the form of a corporate promissory note. Although the escrow instructions containing the sale terms did not require the Seyferts to personally guaranty Village Pantry’s promissory note, they nonetheless signed a guarantee before close of escrow.

For a number of reasons the business failed and Village Pantry went into bankruptcy. RSF Pharmacy successfully sued the Seyferts on their guaranty, obtaining a jury verdict of $266,749.08, representing the note’s unpaid…