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system to the lender, who then pays the manufacturer. The lender
retains title to the coach. The dealership owes interest on the
amount financed by the lender until the coach is sold. When the
dealership sells the coach, the dealership pays the lender the
amount financed, and the difference between the dealership's cost
and the sale price is the dealership's profit.
In March 1988, Northwest arranged to have Chrysler First
Wholesale Credit, Inc. (Chrysler First), finance its floorplan.
Chrysler First no longer required petitioner's officers
personally to guarantee the financing arrangement, and it did not
require petitioner to pledge the $150,000 certificate of deposit
as additional collateral. Petitioner remained the sole guarantor
of Northwest's floorplan financing. The Chrysler First guarantee
agreement provided that the obligation of the guarantor,
petitioner, was primary and was a guarantee of payment, not of
collection. Therefore, Chrysler First could proceed against the
guarantor jointly or severally without having commenced any
action against or having obtained any judgment against the
obligor, Northwest.
In the spring of 1988, Northwest's sales began to slow down.
Other high-quality coach manufacturers began to offer deep
discounts on their new coaches, selling at cost or below cost in
an attempt to move inventory. This competition affected
Northwest's sales of new coaches. Northwest also had a large
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