Man-Data, Inc v. B & A Automotive, Inc

Sureties may raise any defense available to the principle obligor, even after a default order against the obligor, in an action against the sureties as individuals.

Defendants appealed the judgment awarding plaintiff, a collection agency, damages and prejudgment interest; and from a supplemental judgment awarding attorney fees and costs. In their individual capacities, defendants guaranteed fee agreements entered into between their former attorney and the corporation with which they were associated. The attorney turned over unpaid fees to plaintiff when defendants failed to pay all of the fees billed. At trail, the court prevented the individual defendants from attacking the validity of the fees charged. Plaintiff argued, and the trial court agreed, that because a default judgment had been entered against the corporation, defendants as guarantors could not admit evidence to contest the validity of the fees, but could dispute how much of the bill had been paid. The Court of Appeals found that the trial court's ruling was in error. The Court held that individual defendants, in their capacities as sureties, may raise any defense available to the principle obligor, even after a default order against the obligor. Reversed and remanded.