Springs Industries, Inc., a South Carolina Corporation v. Kris Knit, Inc., a California Corporation, and Jack Chambers, an Individual

880 F.2d 1129 SPRINGS INDUSTRIES, INC., a South Carolina corporation, Plaintiff-Appellee, v. KRIS KNIT, INC., a California corporation, Defendant, and Jack Chambers, an individual, Defendant-Appellant. No. 88-6326. United States Court of Appeals, Ninth Circuit. Argued and Submitted May 1, 1989. Decided July 26, 1989. Anthony Young, Santa Monica, Cal., for defendant-appellant. John L. Flowers, Darling, Hall, & Rae, Los Angeles, Cal., for plaintiff-appellee. Appeal from the United States District Court for the Central District of California. Before POOLE, BEEZER and TROTT, Circuit Judges. POOLE, Circuit Judge: 1 Appellee Springs Industries, Inc. ("Springs") manufactured "ultra-suede" fabric which it sold to Kris Knit, Inc. ("Kris Knit") for use in Kris Knit's manufacturing operation. In March 1977, appellant Jack Chambers, the director and principal shareholder of Kris Knit, signed an agreement to personally guarantee Kris Knit's commercial account with Springs. Chambers signed the agreement to enable Kris Knit to purchase ultra-suede on credit from Springs. 2 The guarantee agreement provided, in relevant part: 3 I the undersigned agree to be ... jointly and severally primarily…

Appellee Springs Industries, Inc. (“Springs”) manufactured “ultra-suede” fabric which it sold to Kris Knit, Inc. (“Kris Knit”) for use in Kris Knit’s manufacturing operation. In March 1977, appellant Jack Chambers, the director and principal shareholder of Kris Knit, signed an agreement to personally guarantee Kris Knit’s commercial account with Springs. Chambers signed the agreement to enable Kris Knit to purchase ultra-suede on credit from Springs.

The guarantee agreement provided, in relevant part:

Springs’ Opposition Brief at 42.

In November 1977, Chambers withdrew from participation in Kris Knit and sold his interest therein to Lianne Von Fricht. Chambers contends that, upon selling his interest in Kris Knit, he orally informed a representative of Springs that he wished to terminate his guarantee agreement. After Chambers’s departure, Springs continued to sell its products to Kris Knit. Springs and Kris Knit eventually modified their sales arrangement such that Kris Knit also purchased ultra-suede from Springs on a wholesale basis. Kris Knit’s commercial indebtedness to Springs increased substantially as a result of the wholesale sales.

*1131 In 1986, Kris Knit became…

dissenting:

In March 1977, Jack Chambers executed in favor of Springs Industries, Inc. (“Springs”) a personal guarantee which provided that “[i]n consideration of ... accepting orders from, entering into contracts and agreements with or extending credit or making sales of goods and merchandise to Kris Knit,” Chambers would unconditionally guarantee payment of all existing or future extensions of credit by Springs to Kris Knit. In addition, the guarantee stated that it could not be terminated without written notice to Springs.

*1133 Subsequently, but only for a very short time, Springs proceeded to conduct business with Kris Knit on a credit basis. Periodically, Chambers was required to submit personal financial statements to Springs in order to maintain the viability of his personal guarantee.

In mid-1977, Chambers suffered a major heart attack, and, based upon medical advice, he withdrew from any active role in the operation of Kris Knit, selling his entire interest in the corporation to Lianne Yon Frieht. During his hospitalization and recuperation, Chambers was contacted by agents of Springs, including its president, Abe Waters, and credit manager, Jay Smith. They were made…