Opinion ID: 1708804
Heading Depth: 1
Heading Rank: 1

Heading: medley's lack of consideration claim

Text: Medley submits that the guaranty agreement sued upon is void for lack of consideration and, thus, that the trial court erred by not granting his motion for summary judgment or, in the alternative, his motion for a directed verdict. Medley contends that there is no consideration because the guaranty sued upon 1) included pre-existing debts, 2) was not made contemporaneously with any loan, and 3) contained no expression of new valuable consideration. SouthTrust, on the other hand, argues that its promise of future advances constitutes sufficient consideration. That portion of the guaranty agreement here contested contains the following language: WHEREAS, the undersigned (if more than one, the undersigned jointly and severally) have requested THE MUSCLE SHOALS NATIONAL BANK (hereinafter referred to as the Bank) to extend credit from time to time to Roy D. Medley d/b/a Medley & Co. (hereinafter referred to as the debtor), and have agreed to guarantee the payment when due of all such credits, and also of all other indebtedness of every kind and character now or at any time hereafter (before revocation hereof) owing by the debtor to the Bank; and WHEREAS, the Bank is willing to extend such credit to the debtor from time to time as, in the Bank's discretion, is prudent and wise, provided this instrument of guaranty is executed to the Bank. NOW, THEREFORE, in consideration of the premises, and in order to induce the Bank to extend to the debtor from time to time in the future as requested by the debtor, such loans, extensions of loans and forbearances as to the Bank may seem prudent and wise, the undersigned (if more than one, the undersigned jointly and severally) guarantee(s) the prompt payment on demand of the principal of and interest on any indebtedness of the debtor now, or at any time hereafter, outstanding, and any and all renewals thereof, together with all costs of collection, including a reasonable attorney's fee, as may be provided for in the face of any and all notes heretofore taken, or hereafter executed by the debtor, evidencing any such indebtedness, or any part thereof. It is true that when someone not a party to the original transaction signs an instrument as guarantor after the original contract has been duly executed and delivered, without agreement at the time of the execution of the original contract that additional security would be furnished, he is entering a new and independent contract; and, to be binding, this agreement must be supported by consideration, independent of the original contract. Clark v. McGinn, 268 Ala. 252, 255, 105 So.2d 668, 671 (1958). When dealing with a guarantee of a pre-existing debt, consideration is essential to sustain the obligation. Zadek v. Forcheimer, 16 Ala.App. 347, 348, 77 So. 941 (1918). In the instant case, however, the guaranty agreement is not limited solely to pre-existing debts. Rather, it covers the indebtedness of debtor now, or at any time hereafter,... and any and all renewals thereof.... In other words, Medley agreed to guarantee all of his son's past and future indebtedness to SouthTrust. This Court has repeatedly held that the promise of extension of credit in the future to the principal debtor is good consideration in a guaranty contract. Colonial Bank of Alabama v. Coker, 482 So.2d 286, 291-92 (Ala.1985); Scharnagel v. Furst, 215 Ala. 528, 531, 112 So. 102 (1927); Lefkovits v. First National Bank of Gadsden, 152 Ala. 521, 530, 44 So. 613 (1907). It is well established that when the terms of a contract are unambiguous, the contract's construction and legal effect become a question of law for the court, and, when appropriate, may be decided by summary judgment. Colonial Bank of Alabama v. Coker, 482 So.2d 286, 291 (Ala.1985). The contract at issue here is not ambiguous insofar as the issue of consideration is concerned, nor has any such allegation been made. The contention that there was no consideration has been disproved by the undisputed fact that SouthTrust subsequently made loans to Medley & Company (from May 1979 through the end of 1979), as contemplated by the guaranty agreement. In reviewing the evidence available to the trial court when the motion for summary judgment was denied ( Ex parte Bagby Elevator & Electric Co., 383 So.2d 173 (Ala.1980)), we cannot say the trial court erred in denying Medley's motion for summary judgment. The promise of future extension of credit is good and valid consideration; thus, the guaranty agreement was not void for lack of consideration.