On Aug. 19, the Bankruptcy Court for the Eastern District of Wisconsin issued a decision that serves as a warning and a reminder for business and individuals alike who obtain personal guarantees as part of their business dealings. Indeed, an unconditional, absolute and irrevocable personal guaranty may not be so after all.
The facts of the case are relatively straightforward: David Schlundt was the owner of a restaurant in Antigo, Wisconsin, and, in September 2003, caused the restaurant to enter into a supply agreement with a food service provider. The agreement also included a personal guaranty by Schlundt, guaranteeing prompt payment of any obligation of the restaurant to the provider. Specifically, the guaranty provided that Schlundt “personally guaranteed prompt payment of any obligation of the [restaurant] … whether now existing or hereinafter occurred” and that it was “understood that this guaranty shall be an absolute, continuing and irrevocable guaranty for such indebtedness of the [restaurant].”