Belden v. Thorkildsen

Margot Belden and Sean O’Brien owned an interior-design firm called Fish Creek Interiors and Gifts (the partnership). The partnership employed John Thorkildsen as an interior designer. Thorkildsen and his wife agreed to buy O’Brien’s ownership interest in the partnership. The partnership obtained a loan to finance this purchase. As security, the partnership executed a note (Note 1), which Belden and Thorkildsen signed in their capacity as partners. Belden and Thorkildsen also signed personal guarantees for the loan. The partnership made some payments on Note 1 but did not seek reimbursement from Thorkildsen and continued to pay Thorkildsen his salary. Approximately one year later, Belden, Thorkildsen, and two other persons formed Fish Creek Design, LLC (the LLC). The LLC executed another note (Note 2) to obtain a loan to pay off Note 1 and agreed to make monthly payments. The four LLC members signed Note 2 in their capacity as members and signed personal guarantees for the loan. The LLC made some payments on Note 2 but did not seek reimbursement from Thorkildsen. Subsequently, the LLC terminated Thorkildsen’s employment but continued to make the monthly payments on Note 2. The LLC eventually failed, and Belden personally paid off the remaining Note-2 balance. Belden and the LLC (plaintiffs) sued Thorkildsen and his wife (defendants) and sought reimbursement for the amounts paid on Note 2. Belden argued that she had signed Note 2 as an accommodation party for Thorkildsen and was, therefore, entitled to reimbursement for paying the remaining Note-2 balance after the LLC failed. The district court ruled that Belden was not an accommodation party to Note 2 because she benefited from the loan through expected stability and increased profits. Belden appealed.