Opinion ID: 2979541
Heading Depth: 4
Heading Rank: 1

Heading: Guaranty Ambiguity

Text: Defendants first argue that guaranty section 5(b)(i), supra, which states that a guarantor’s obligations are not affected in the event of a bankruptcy, is ambiguous or conflicts with other provisions. Defendants say that the section is ambiguous because it could be interpreted to mean that defendants, as guarantors, have no additional obligations in the event of a bankruptcy. Defendants’ -6- 111 Debt Acquisitions Holdings, LLC v. Six Ventures Ltd., et al. No. 09-4436 argument is without merit. The clear meaning of the provision is that a guarantor’s obligations under the terms of the loan documents do not change in the event of a bankruptcy, not that guarantors are released from the liability provided therein. To read the provision as defendants suggest is counterintuitive. Instead, the loan agreement and guaranty clearly provide that a bankruptcy filing is a SRE and that a SRE renders the defendants, as guarantors, personally liable for the full debt. In the same argument, defendants assert that the guaranty’s section 10 heading, “Unconditional Character of Obligations of Guarantor,” supra, should not have impacted the district court’s finding related to this issue, and that the district court erred by not giving more weight to Kahn’s affidavit in which he stated that he never intended to be liable for the entire amount of the debt. Defendants’ assertions are without merit as they do not change the clear meaning of the guaranty provision that defendants contest as ambiguous. A guarantor’s obligations under section 5(b)(i) are not ambiguous. Thus, the district court did not err in finding the same. Defendants also argue that the guaranty’s definition of “Guaranteed Obligations,” section 1(b), supra, is ambiguous. Particularly, defendants say that because modifiers are not used in the clause – “and” or “or” – the clause should be read as one sentence and to mean that it is ambiguous whether defendants are liable for the full amount of the debt. Defendants’ claim is without merit. Whether the definition is read as one sentence or as two independent sentences, it is clear that defendants are liable for the full debt in the case of a SRE, which defendants concede converts their debt obligations from non-recourse to recourse. See Appellants’ Brief, at p. 5. Thus, the district court did not err in finding a lack of ambiguity related to the definition of the guaranty’s “Guaranteed Obligations” term. -7- 111 Debt Acquisitions Holdings, LLC v. Six Ventures Ltd., et al. No. 09-4436