Opinion ID: 2140462
Heading Depth: 1
Heading Rank: 6

Heading: brad and elizabeth met standard of creditworthiness

Text: The guaranty provided that the standard of creditworthiness was to be based on Brad's own assets and income without the addition of a guaranty. There was no further definition of creditworthiness. The Bank's own financial statement showed that Brad and Elizabeth had sufficient net worth to cover the debt owed to the Bank. The Bank also took a deed of trust on the home owned by Brad and Elizabeth. Based on the financial statement prepared by the Bank, Brad and Elizabeth's net worth exceeded the amount of the new loan. The financial statement showed that Brad and Elizabeth had a net worth of $23,568. His annual income was $30,000, and hers was $22,880. According to the financial statement, the home had a fair market value of $77,000 subject to a first mortgage of $63,500. The new note, #9224, included $9,550 of previous debt which was included on the liability side of the financial statement. In effect, the Bank was lending Brad and Elizabeth approximately $10,000 in new money. We conclude that the county court was clearly wrong in finding that Brad and Elizabeth did not meet the Bank's standard of creditworthiness. The guaranty limited its creditworthiness requirement to the assets and income of the borrower, and there is no evidence to support the conclusion that Brad was not creditworthy. The couple's net worth exceeded the amount of the new loan, and about one-half of the existing debt was already listed on the liability side of the financial statement. On appeal, the Bank argues that its determination of creditworthiness is a subjective standard which the Bank can employ. It asserts that late payments and encumbrances are necessary factors in determining a borrower's assets and income. Brief for appellant at 14. However, the guaranty itself did not provide that the Bank could subjectively determine a borrower's creditworthiness. The guaranty specifically stated that the standard of creditworthiness was based on the borrower's own assets and income without the addition of a guaranty. Based on this language, if the assets and income of the borrowers, Brad and Elizabeth, demonstrated creditworthiness, no guaranty would be needed. The Bank prepared a financial statement for Brad and Elizabeth that showed their net worth to be more than the amount of the note. In addition, the note included prior loan amounts that were also listed as liabilities in the financial statement. Thus, Brad and Elizabeth demonstrated their creditworthiness.