Murphy v. Yale Materials Handling Corp.

Plaintiffs, Robert H. Murphy, M.D. and Shirley S. Murphy, appeal from a judgment after trial to the court in favor of defendants, Yale Materials Handling Corporation and various other related business entities (hereafter collectively Yale), which held personal guaranties executed by the Murphys.

This case arose from the financial decline of a forklift dealership. Although the issues before us on this appeal are relatively uncomplicated, the commercial context and legal posture of the case require some explanation.

I. Background

Dr. and Mrs. Murphy were the majority shareholders of Bay Area Material Handling Inc. (Bay Area), a dealership for Yale brand forklifts. Bay Area entered into various financing agreements to purchase inventory, some with Yale and its parent corporation and some with Yale’s predecessor in interest, Heller Financial, Inc. In March 1987 Bay Area failed to remit some $200,000 owed to Yale and/or Heller for forklifts it had sold; Yale concluded Bay Area had thereby sold out of trust under the financing agreements. On April 16, 1987, Robert Murphy executed a $1 million personal guaranty of Bay Area’s indebtedness in favor of Yale, and his wife…