Court Opinion

ID: 9558509
Source: CourtListenerOpinion
Date Created: 2023-08-21 17:11:06.124775+00
Date Added: 2024-06-11T09:09:20.567935
License: Public Domain

ELLETT, Chief Justice:
In November, 1971, the First Security Bank of Utah agreed to extend credit to Interwest Film Corporation in the amount of $100,000, and as a condition therefor, required and received a general continuing guaranty executed by the individual defendants. The date of the guaranty was November 4, 1971. Thereafter, on January 4,1972, another loan was made by the bank to Interwest Film Corporation in the amount of $100,000. This loan was renewed several times, viz: April 12, 1972; November 11, 1972; and March 14, 1973. The debt has never been paid unless, as claimed by the defendants, a renewal of the original note by other notes constituted payment of the debt.
After the loan was made but before the last renewal note was signed, the individual guarantors notified the bank that they were revoking their guaranty. When suit was commenced on the note dated March 14, 1973, the guarantors defended on the ground that they had revoked their guaranty before the note in question was signed and, therefore, they were not liable. The trial court granted summary judgments in their favor, and this appeal followed.
The plaintiff is the holder of the note and guaranty by assignment from the bank. By the terms of the guaranty, the respondents jointly and severally guaranteed “payment when due of any and all amounts which the debtor may now owe, or may hereafter owe,” not exceeding $100,000. The instrument further provided that notice of revocation would not in anywise release a guarantor from liability contracted prior to the receipt of the notice of revocation. It also provided that the bank could, from time to time, extend the time of payment and renew or modify any of the obligations of the debtor without prior notice to or consent of the guarantors.
*178The trial judge in his summary judgment misinstructed himself in the law when he stated:
That the renewal of the obligation by new Notes subsequent to the date of revocation of the Guarantee constituted new contracts and new obligations.
There is some split in the authorities as to whether or not the giving of a new note extinguishes the old. The law is stated in 11 Am.Jur.2d, Bills & Notes, as follows:
Section 914 ... To constitute a novation, there must be, among other elements, a mutual agreement between the creditor and his debtor which is intended to extinguish the old obligation by substituting a new one therefor. For the giving of a new note for an obligation under a prior note to have the effect of discharging liability on the prior note, the new note must be given with that understanding on the part of both the maker of the new note and the holder of the prior note. .
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Section 915. Much diversity of opinion has been expressed as to the effect upon the original note or the debt represented thereby of the giving of a renewal note. In many jurisdictions it has been held that the execution, or the mere execution, of a renewal note does not constitute a payment or discharge of the original note, but operates only as an extension of the time of payment, or in other words, that the giving of a renewal note is but a continuation of the debt. Similarly, it has been held that successive notes for the same debt, when not differing in legal effect, may be deemed cumulative securities for the debt. Under these views an instrument given in renewal of a previous one may suspend the right of action on the debt, during its currency, or until it is dishonored by nonacceptance or nonpayment, but if it is not paid at maturity, the creditor may sue on the original instrument, .
This Court long ago aligned itself with the weight of authority. In the case of Deseret National Bank v. Dinwoodey,1 we said:
. The note of January 18, 1892 (Exhibit B), matured April 17, 1892, and on that day said note was renewed by a new note for like amount (Exhibit F); the note dated February 16,1892 (Exhibit D), matured May 16, 1892, and was on that day renewed by a new note for a like amount (Exhibit G); and so on, from time to time, as these notes matured, they were renewed by other notes of like amounts. There was no further advancement of money or any new loans at the time of such renewals. The question, therefore, presented for our consideration is, were the renewals of these notes new loans or advances, so as to be included within the terms of the written guaranty (Exhibit A)? . . .
The Court then quoted from and adopted the following statement from 2 Daniel, Neg.Inst. Sec. 1266:
. ‘When a new bill or note is given in renewal of another bill or note, and the original is retained, the new bill or note operates only as a suspension of the debt evidenced by the original, and is not a satisfaction of it until paid. Such, at least, is the weight of authority.’ Section 1266. Continuing, at section 1266a, he says: ‘The delivery or surrender to the maker of the old note, upon its being renewed, does not in itself raise the presumption of its extinguishment by the new, it being considered as a conditional surrender, and that its obligation is restored and renewed if the new note be not duly paid; and the same rule applies when the new note has been carried to judgment, but without satisfaction.’ Numerous other authorities hold to the same effect.
There is no claim in the instant case that there was any money advanced to *179Interwest Film Corporation after the notice of revocation of the guaranty was given. The claim is only made that the giving of new notes after revocation constituted new contracts. Such is not the law.
The judgments should be, and it is, reversed and the case remanded for such further proceedings as may be meet and proper, not inconsistent with this opinion.
Costs are awarded to the appellant.
MAUGHAN, J., concurs.

. 17 Utah 43, 62, 53 P. 215, 221 (1898); See also First Security Bank of Utah v. Proudfit Sporting Goods Co., Utah, 552 P.2d 123 (1976); and Gray v. Kappos, 90 Utah 300, 61 P.2d 613 (1936).