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stopped sending financial statements to Chrysler First
consistently. Chrysler First requested and received Northwest's
financial statement and realized that Northwest's liabilities far
exceeded its assets. Chrysler First notified Nicholson and
threatened to close Northwest and take over the remaining assets.
Neither Nicholson nor Northwest had the funds to pay Chrysler
First and, in October 1988, Nicholson contacted Franklin and told
him that Northwest was in trouble because he was "out of trust".
Nicholson used proceeds from sales of consigned coaches, as well
as coaches sent by petitioner, to pay operating expenses instead
of paying the consignee or petitioner. Chrysler First called
Franklin and told him that petitioner, as guarantor, would have
to make good on the lines of credit.
Franklin and Wilcox traveled to Coeur d'Alene, Idaho, to
assess the situation at Northwest. Northwest had no record of
its coach inventory, its parts inventory was overstated and
disorganized, and the administrative offices were in disarray.
After 3 or 4 days in Idaho, Wilcox and Franklin returned to
Nacogdoches, Texas.
Chrysler First demanded $345,000 immediately, and on October
10, 1988, petitioner agreed to lend Northwest $345,000, which
Northwest applied to the Chrysler First loan guaranteed by
petitioner. Moore, in his capacity as vice president of
Northwest, gave petitioner a 1-year, interest-bearing promissory
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