Precision Sawing Inc v. Cane Creek Concrete Services Inc
5:13-cv-00054
E.D. Ark.Mar 20, 2014Background
- Cane Creek was the subcontractor on a Walmart project and hired Pro Struck to perform laser-screeding; Cane Creek failed to pay when work finished.
- Cane Creek executed a promissory note to Pro Struck for $93,764 plus 6% interest; Steven Crain personally guaranteed payment.
- After the work, Pro Struck’s mistakes allegedly caused excess concrete, tear-out, and warranty repairs; Cane Creek incurred repair costs and stopped scheduled payments.
- Pro Struck sued on the note and guaranty seeking $101,463.23; Cane Creek and Crain counterclaimed for breach of contract and setoff seeking $303,535 in damages.
- Pro Struck moved for summary judgment on Crain’s counterclaim arguing Crain (as guarantor) lacked standing to assert contract-based claims.
- The court considered whether a guarantor can assert offensive claims on the underlying contract or only defensive claims that reduce guarantor liability.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether guarantor (Crain) has standing to assert claims/defenses based on the underlying service contract | Guarantor lacks standing to assert contract-based claims against creditor | Crain may assert that Pro Struck’s failure of performance discharges Cane Creek’s liability, which should reduce Crain’s guaranty exposure | Guarantor cannot bring offensive contract claims, but may assert defensive claims (failure of consideration) to the extent Cane Creek’s liability is discharged |
| Whether failure of consideration defense is properly before the court | Pro Struck argues Crain has no standing so summary judgment should dispose of counterclaim | Crain says failure of consideration defeats Plaintiff’s claim and reduces guarantor liability | Court treats Crain’s defensive counterclaim as an affirmative defense of failure of consideration and declines to resolve it on summary judgment |
| Whether Crain may recover or assert the full amount of Cane Creek’s claimed damages offensively | Pro Struck: guarantor cannot assert offensive counterclaim for breach | Crain: seeks offset equal to full damages claimed by Cane Creek | Held: Crain may not assert offensive claims; defensive relief is limited to the extent Cane Creek’s liability is discharged, not the full amount of Cane Creek’s affirmative claim |
| Procedural disposition of summary judgment motion | Pro Struck seeks full summary judgment on Crain’s counterclaim | Crain seeks denial to preserve defenses and offsets | Court grants summary judgment in part (bars offensive counterclaim) and denies in part (permits defensive failure-of-consideration defense to proceed) |
Key Cases Cited
- First Am. Nat. Bank v. Coffey-Clifton, 276 Ark. 250 (guarantor lacks standing to assert offensive breach-of-contract claims on loan documents)
- Grand Valley Ridge, LLC v. Metropolitan Nat’l Bank, 2012 Ark. 121 (Ark. Sup. Ct. reaffirming that guarantors lack standing to sue on underlying loan documents)
- Dean Leasing, Inc. v. Van Buren County, 27 Ark. App. 134 (guarantor discharged when principal obligation void; defensive benefits to guarantor)
- Nat’l Bank of East Ark. v. Collins, 236 Ark. 822 (guarantor liability coextensive with principal; guarantor discharged when principal released)
- Little Rock Crate & Basket Co. v. Young, 284 Ark. 295 (permitting adjudication of defensive setoffs)
- First Union Nat. Bank v. Pictet Overseas Trust Corp., Ltd., 477 F.3d 616 (affirmative-defense characterization governed by law; discussion of treating misdesignated defenses/claims)