Opinion ID: 880534
Heading Depth: 1
Heading Rank: 2

Heading: surety agreements

Text: For a valuable consideration, Borrower [the corporation] and surety [Keith Meyers] jointly, severally, and unconditionally are bound to pay to the Bank, its successors or assigns, on demand, in lawful money of the United States of America, any and all indebtedness of the Borrower to Bank, as follows: ..... 3. Nature of Surety's Undertaking. The liability of Surety shall be open and continuous for so long as this surety agreement is in force. Surety intends to be responsible at all times for the performance of all obligations of Borrower to Bank within the limits of Section 1. Thus, no payments made upon Borrower's indebtedness will discharge or diminish the liability of Surety for any and all remaining and succeeding indebtedness of Borrower to Bank. The liability of Surety will be enforceable against both the separate and community property of Surety whether now owned or hereafter acquired. ..... 5. Duration of Surety Agreement. This surety agreement will take effect when received by Bank, without the necessity of any acceptance by Bank, and will continue in full force until such time as Surety notifies Bank in writing, at the branch or office of Bank to which this surety agreement is delivered in the first instance, of Surety's election to terminate the same. [Emphasis added.] GUARANTY ... The undersigned hereby absolutely and unconditionally guarantees prompt payment when due and at all times thereafter of any and all existing and future indebtedness and liability of every kind, nature and character (including all renewals, extensions and modifications thereof) from the Borrower to the Bank, howsoever and whensoever created, or arising, or evidenced, or acquired; and the undersigned waives notice of the acceptance of this Guaranty and of any and all such indebtedness and liability. ..... This Guaranty is made and shall continue as to any and all such indebtedness and liability of the Borrower to the Bank incurred or arising prior to receipt by the Bank of written notice of the termination hereof from the undersigned ... [Emphasis added.] Meyers relies on § 28-11-413, MCA, which reads: Effect of performance or offer of performance on surety's liability. Performance of the principal obligation or an offer of such performance, duly made as provided in this code, exonerates a surety. Meyers argues that performance of the principal obligation means payment of each note. Thus, he argues that each surety obligation was exonerated as he repaid each outstanding loan, contrary to the express language in the contract. Bank argues that when the contract is silent as to termination, the statute will apply to terminate the suretyship for the debts of the principal which have been repaid. However, the statute would not supply the date or method of termination when the unambiguous written contract expresses that termination may only be effected by written notice. We affirm the lower court's finding that the sureties were not exonerated by operation of law under § 28-11-413, MCA. Meyers raises exoneration as defined under XX-XX-XXX, MCA, as his third affirmative defense in his amended answer and counterclaim dated February 18, 1988. However, the contracts which he signed expressly waive his right to exoneration in that manner: Paragraph # 3 ... Thus, no payments made upon Borrower's indebtedness will discharge surety's obligation ... (Emphasis added.) We conclude that this is a valid waiver of rights. Because it is not a constitutional right, nor a waiver in violation of public policy, Meyers was entirely free to contract away his right to the statutory exoneration of his suretyship, which he did. See, Kelly v. Lovejoy (1977), 172 Mont. 516, 565 P.2d 321 (waiver may be proved by a course of acts or conduct so as to induce the belief that the intention and purpose was to waive); and Thiel v. Johnson (Mont. 1985), 711 P.2d 829, 42 St.Rep. 2010 (waiver may be express or implied). A similar waiver under a guaranty contract occurred in Riverside Nat. Bank v. Manolakis (Okla. 1980), 613 P.2d 438. We find the analysis in Manolakis persuasive. In that case, the guarantor argued that his obligations were satisfied by operation of law because the creditor bank had failed to seek a deficiency judgment against the principal within ninety days as per Oklahoma statutory law. Such failure released the principal. However, the court concluded that the guarantor was still liable, saying: What defenses remain available to a guarantor under [the statute] ... must be determined by the terms of the guaranty contract, i.e., by the breadth of the guarantor's promise. In the case before us, the guarantor, by the clear provisions of his promise, expressly waived all of the available [statutory] defenses. Manolakis, 613 P.2d at 439. Meyers likewise waived his statutory defenses available to him as a surety and no exoneration is effected in this case under § 28-11-413, MCA. However, this Court finds the central question here is not merely one of exoneration, but more realistically, what was the nature of the relationship between the parties. Meyers, Corporation and Bank began a course of dealing, based on a series of written contracts, to establish a line of credit for the benefit of Corporation. As is standard banking practice in Montana, Bank would not loan such large amounts of money to a closely-held family corporation without a personal guaranty or surety from the major individual stockholder. The intent of the parties to aid corporation by lending money but to protect Bank with personal guaranties is entirely clear from the written documents which establish this relationship. Based on this relationship, we find no alternative but to affirm the lower court's findings that the surety agreements are in effect and Meyers is in fact personally liable for the default of Corporation. We affirm that the sureties dated October 30, 1984 for $100,000; November 20, 1984 for $150,000; and June 6, 1985 for $120,000 were in effect and cumulatively cover the $293,000 default. However, the surety dated June 11, 1984, for $500,000 fails as a matter of law because Meyers did not sign it in his individual capacity on the line designated for the surety. It was not duly executed. Thus, that contract fails. As noted above, Paragraph 3 of the agreement outlining the nature of surety's undertaking states, The liability of surety shall be open and continuous for so long as this agreement is in force ... Thus, no payments upon Borrower's indebtedness will discharge the liability of surety for any and all remaining and succeeding indebtedness of Borrower to Bank. This express language must be given effect until terminated. Paragraph # 5 states termination is only effected when surety notifies Bank in writing. Additionally telling is the fact that in triple size, bold face, capital letters directly above Meyers' signature it reads, EFFECTIVE UNTIL TERMINATED IN THE MANNER SET FORTH ... ABOVE, negating any possibility that the termination clause was merely adhesive language. Meyers admits he gave no such written termination to Bank. To have Meyers be individually liable for the line of credit established by Corporation and evidenced by the guaranty and four sureties is the obvious and expressed intent of the parties. Meyers sought to introduce parol evidence as to his contrary intent to have each surety agreement be note specific, i.e., for the suretyship to be released and start anew as each debt was repaid. Although his counsel admitted at the hearing on summary judgment that each document is clear and unambiguous on its own, he argued that when taken as a series of transactions, they create an ambiguity as to Meyers' intent regarding the continuing nature of his liability. Thus, he argues that ambiguity should either be resolved against the Bank as makers of the documents, or by allowing him to introduce parol evidence. The lower court found no ambiguity in the documents, the same was admitted by both counsel, and refused all parol evidence of contrary intent. We agree. The rule has long been that where no ambiguity exists in the written documents, no parol evidence may be taken, Nordlund v. School District (Mont. 1987), 738 P.2d 1299, 44 St.Rep. 1183, and the duty of the court is simply to apply the language as written. The lower court also enforced the express language of the guaranty which held Meyers individually liable to the extent of $200,000. We agree. The operative language is substantially the same as the sureties discussed above. A guarantor differs from a surety in that a surety holds primary liability equal with that of the original borrower. However, a guarantor does not become liable until an intervening act occurs, such as a default of the original borrower. Compare §§ 28-11-401 and 28-11-101, MCA; see also, Stensvad v. Miners & Merchants Bank of Roundup (1979), 183 Mont. 160, 598 P.2d 1083. In the instant case, Bank exhausted its remedies against Corporation and the collateral. Thus, it was ripe to proceed against Meyers as both a surety and a guarantor. We note here that had the abovementioned surety documents failed legally as per Meyers' argument that they were exonerated, their language still would have effected a guaranty against Meyers individually under the facts of this case. Because Montana has no comparable exoneration statute for guaranties as it does for sureties, and because Bank had already sought recovery against the Corporation, and the collateral after a default, at the very least Meyers would be a guarantor under all of the duly-executed documents. In its broadest sense, every suretyship includes a guaranty. Suretyship, Simpson (1977). Thus, the operative language in these surety agreements also effectuated a guaranty. The District Court is affirmed on that issue.