John Nagle Company v. Gokey

Supreme Judicial Court of Maine · 2002 · Corporations

799 A.2d 1225 (2002)

Updated August 22, 2026

CorporationsPartnershipJoint VentureGuarantycontinuing guarantyrevocation by noticeco-ownershipcontrol of business

Facts

Gokey operated Badger Island Shellfish and Lobster and in 1995 signed a credit application personally guaranteeing payment of all obligations incurred by Badger Island. In 1999, he agreed to sell the business to Sean Goodrich, who would pay him $1000 per week for six years, while Gokey would assist with day-to-day operations for six months and retain the right to control all business decisions during the six-year payment period. Gokey kept access to the business's books and accounts, loaned money to the business several times, and the trial court found that he remained the controlling force behind the business. The trial court also found that Gokey never explicitly revoked his guaranty.

Issue

Whether competent evidence supported the trial court's findings that Gokey had not revoked his continuing guaranty to Nagle and that his post-sale relationship to the business was sufficient to treat him as a partner or joint venturer liable for the business debt.

Rule

A guaranty is construed like any other contract. A continuing guaranty is a contract under which a person agrees to be a secondary obligor for all future obligations of the principal obligor, and it is terminable by notice to the obligee. Whether a continuing guaranty has been revoked is ordinarily a question of fact. A partnership is an association of two or more persons carrying on as co-owners a business for profit, and the right to participate in control of the business is the essence of co-ownership; whether a partnership exists is a fact-intensive inquiry in which no one factor is determinative. A joint venture exists when persons pool efforts and resources to seek profits or engage in a common enterprise for mutual benefit, and its existence likewise depends on the surrounding circumstances.

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In Portland, Maine, Avery Sloan signed a supplier credit agreement personally guaranteeing all present and future debts of Harbor Crest Produce, a sole proprietorship. Two years later, Avery sold the business to Lena Ortiz and told Lena, but not the supplier, that Avery was "off the hook" for future purchases; the supplier later extended more credit.

Is Avery most likely liable on the later debt?

Explanation. A continuing guaranty covers future obligations and is terminable by notice to the obligee. Under the majority rule, a change in the guarantor's relationship to the business does not itself revoke the guaranty; notice must be given to the creditor. Because Avery told only Lena and not the supplier, the guaranty most likely remained in force for later debts. (Derived from John Nagle Company v. Gokey (2002).)