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SOUTHERN INDUS. OF CLOVER v. HARDICK

October 26, 1998

SOUTHERN INDUSTRIES OF CLOVER, LTD., Plaintiff,
v.
RUDI HARDICK AND ATLANTIC AND PACIFIC MILLS, INC., Defendant.



The opinion of the court was delivered by: NEWMAN

FINDINGS OF FACT AND CONCLUSIONS OF LAW

 BERNARD NEWMAN, Senior Judge of the United States Court of International Trade, sitting as a United States District Court Judge by designation:

 Introduction

 Plaintiff, Southern Industries of Clover, Ltd. (plaintiff or "Southern"), located in Bronx County, New York is a wholesaler of yarn. Southern brings this diversity action under 28 U.S.C. § 1332(a)(1) to recover the sum of $ 688,237.61, plus interest, representing an alleged unpaid balance due Southern for the purchase of yarn by defendant Atlantic and Pacific Mills, Inc. ("Atlantic"), a Florida corporation and manufacturer of clothing.

 Southern also seeks recovery against defendant Rudi Hardick (also known as Rudy or Rudolph Hardick), a Florida resident, under a personal payment guaranty dated November 21, 1989 and executed on December 1, 1989 (the "subject guaranty" or exhibit 13).

 The outstanding indebtedness of $ 688,237.61 covers only the so-called "new" shipments to Atlantic made after Southern's receipt of Hardick's guaranty executed on December 1, 1989 and the amount itself is not in dispute. Atlantic, which is out of business and insolvent, has by letter of its counsel dated June 14, 1993 consented to the entry of judgment against it for the outstanding balance of $ 688,237.61. Accordingly, the court addresses only the issues relevant to the personal liability of Hardick under the subject guaranty.

 Hardick strenuously maintains that since the subject guaranty constitutes a promise to answer for the debt of another, it falls within the purview of the statute of frauds (New York General Obligations Law, § 5-701(2)); and since he did not actually sign the guaranty, he cannot be held personally liable as a guarantor of Atlantic's debt.

 Southern, on the other hand, insists that the evidence, including the subject guaranty itself, shows the guaranty was signed by Hardick. Nonetheless, Southern urges, even if the court should find that Hardick did not actually sign the guaranty, based on the facts of this case Hardick should be held equitably estopped from denying he signed it and thereby precluded from relying on the statute of frauds to shield him from personal liability as Atlantic's guarantor.

 Accordingly, in light of the fact that the corporate defendant has consented to the entry of judgment against it, the only remaining issues revolve around: (1) whether or not Hardick actually signed the guaranty, and (2) if not, whether the doctrine of equitable estoppel precludes Hardick's denial that he signed the guaranty and his reliance on the statute of frauds.

 At a bench trial held on May 21, 1998, *fn1" plaintiff adduced the testimony of Hardick, Lawrence S. Kryger (plaintiff's president), the deposition dated July 29, 1994 of Dick Stuart (Hardick's "partner" and "production man" at Atlantic), the deposition of July 29, 1994 of Stephanie Watson (an employee of Atlantic who signed the guaranty as a witness to Hardick's signature), and various documentary exhibits. Defendant Hardick testified on his own behalf and submitted copies of cancelled checks purporting to bear his signature and show the signature purporting to be his on the guaranty is not authentic.

 Based upon the following findings of fact and conclusions of law, the court finds in favor of plaintiff against both defendants.

 Findings of fact

 Southern is a wholesale distributor of yarn to the knitting industry. Lawrence S. Kryger and David Novick are the principals of Southern. Atlantic is a clothing manufacturer which purchased its yarn principally from Southern. A predecessor company of Atlantic, known as Indian River Knitting Mills ("Indiana River"), had also purchased yarn from Southern.

 Hardick, doing business as Florida Mortgage and Investment Corp., factored the accounts receivable of both Indian River and then Atlantic. Together with Stuart, Hardick founded Indian River and then Atlantic. As Atlantic's sole factor of its accounts receivable, Hardick (personally and through his corporation) acted as the financial backer of Atlantic (Tr. 82); both Atlantic and Indian River were operated on a day to day basis by ...


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