Court Opinion

ID: 9844294
Source: CourtListenerOpinion
Date Created: 2023-09-24 03:00:22.613276+00
Date Added: 2024-06-11T09:15:31.762250
License: Public Domain

SHEPARD, Justice,
dissenting.
The majority correctly sets forth the facts and to a large extent is correct in its recitation of the applicable law. However, I am convinced that the majority seriously errs in its application of law to the established facts.
I believe the majority correctly characterizes McGill as a guarantor. The majority correctly recites the “well settled rule” that guaranty agreements are to be construed strongly in favor of the guarantor.
Here McGill (S & E) entered into a contract with Nyborg for the sale of a trailer. As security for Nyborg’s performance of the contract, McGill retained a security interest in the trailer. McGill thereafter assigned his rights in that Nyborg contract to I. B. & T., and as the majority correctly points out, thereby became a guarantor of Nyborg’s obligation. Under the usual rule of law, if I. B. & T. had released Nyborg from his liability under the contract, McGill, as guarantor, would also have been discharged from his liability. However, McGill had expressly contracted with I. B. & T. that he would remain liable to I. B. & T. although I. B. & T. had released Nyborg from liability. Following the bank’s release of Nyborg, one Clark was substituted in place of Nyborg, with Clark taking possession of the trailer and becoming responsible for Nyborg’s obligation. Such was accomplished by a “Transfer of Interest Agreement,” which was participated in by McGill and in which he agreed to the transfer, guaranteed Clark’s obligation to the same extent that he had guaranteed Nyborg’s obligation and, of course, consented to Clark’s possession of the trailer which stood as security for the Nyborg-Clark obligations.
Hence, when Clark defaulted on his obligations under the conditional sales contract and redelivered the trailer to I. B. & T., McGill was liable under his guaranty of Clark’s obligation and remained obligated to I. B. & T. for the monies remaining due under the conditional sales contract. Had I. B. & T. demanded those monies from McGill at that point in time, it would and should have been successful in a recovery. However, that I. B. & T. did not do. Rather, without consent or any notification to McGill, it and it alone entered into an agreement with a third party, Shaver, and turned possession of the security, i. e., the trailer, over to Shaver. Insofar as the record demonstrates, McGill was not even aware of the existence of Shaver, much less was he a party to that contract. The record is absolutely devoid of any indication whatsoever that McGill consented to the delivery of the security to Shaver or in any way indicated he intended to be a guarantor of the contract between Shaver and I. B. & T.
It is clear to me at least that “[A] guarantor, like a surety, has been held to be a favorite of the law and his liability is not to be extended by implication beyond the express limits or terms of the instrument, or its plain intent.” Industrial Investment Corp. v. Rocca, 100 Idaho 228, 233, 596 P.2d 100, 105 (1979). Further, I believe it clear that a guarantor will be released from fur*504ther liability by a change in the principal debtor or obligor unless he consents thereto. 38 C.J.S. Guaranty § 71 (1943). See Mountain States Telephone & Telegraph v. Lee, 95 Idaho 134, 504 P.2d 807 (1972). I believe it further clear that a creditor may not permit or participate in the destruction or reduction in value of the security without the consent of the guarantor and then look to the guarantor for the entire amount of the indebtedness. See Industrial Investment Corp. v. Rocca, supra; Universal G.I.T. Credit Corp. v. Whitworth, 77 Idaho 528, 296 P.2d 712 (1956).
As pointed out above, in the instant case there was no showing that McGill intended to nor did he expressly or by implication guaranty Shaver’s performance of the agreement between Shaver and I. B. & T. Further, the value of the security, i. e., the trailer, was seriously diminished as a result of I. B. & T. turning over possession of the trailer to Shaver.
I find nothing in U. S. v. Beardslee, 562 F.2d 1016 (6th Cir. 1977), or Fruehauf Trailer Co. of Canada, Ltd. v. Chandler, 67 Wash.2d 704, 409 P.2d 651 (1966), which furnishes any authority for the case at bar. Although both those cases contained'similar language in the guaranty instrument, such language only continued the liability of the guarantor when defaulting debtors were released from liability. No language nor facts in those cases indicate that a creditor may unilaterally substitute a new debtor unknown to the guarantor and without his consent and still continue the guarantor’s liability.
I would reverse.