Court Opinion

ID: 9794594
Source: CourtListenerOpinion
Date Created: 2023-08-31 03:08:18.448739+00
Date Added: 2024-06-11T08:18:01.717970
License: Public Domain

BISTLINE, Justice,
dissenting.
I join in that which Justice Shepard has written adding thereto my own views.
If I correctly read the majority opinion, it is to be deduced therefrom, as the majority applies the waiver provision of Louis Larson’s guaranty, that there was actually no legal obligation upon the part of Valley Bank to obtain Louis Larson’s written permission to renew the second note involved at an interest rate of 12 percent (see paragraph of majority opinion) and the Bank was merely being courteous. This is consistent with McGill v. Idaho Bank & Trust Co., 102 Idaho 494, 632 P.2d 683 (1981), which precedent the majority is obviously satisfied with and follows today. Unable to concur in McGill, which I thought then and continue to believe is an aberration, I am unable to concur in today’s sequel to McGill.
Much of that written by Justice Shepard in McGill is applicable here. There the majority approved the unauthorized substitution of a new debtor, a person the guarantor had never heard of, and approved holding the guarantor liable on the terms of a guaranty much like the one here.
If, as the bank impliedly concedes, it was required to obtain Louis Larson’s permission to extend and/or alter the underlying obligation, it was equally required to pursue its right to a deficiency against its debtor, Dale Larson, who was not even made a party to this action.
Here the guarantor, and so designated on the document which he signed, is held liable to the same extent as though he had been an original borrower on the notes in question. He was not such. He was a guarantor, and as such was entitled to rely on long-established and well-known principles attendant to the law of guaranty and suretyship.
*781A well-known principle of guaranty or suretyship is the right of subrogation in a guarantor to recover from his principal if the guarantor is required to satisfy the guarantied obligation. The guarantor is entitled to succeed to the creditor’s position. Mack Financial Corp. v. Scott, 100 Idaho 889, 606 P.2d 993 (1980).
In Smith v. Steele Motor Co., 53 Idaho 238, 243, 22 P.2d 1070, 1071 (1933), this Court set forth the rule that:
“ ‘A guarantor is exonerated, except so far as he may be indemnified by the principal, if by any act of the creditor, without consent of the guarantor, the original obligation of the principal is altered in any respect, or the remedies or rights of the creditor against the principal, in respect thereto, [are] in any way impaired or suspended.’ ” (Quoting from California Civil Code, sec. 2819.)
The rule was applied just a few short years ago by this Court in Mack Financial Credit Corp. v. Scott, supra:
“ ‘ “Whatever * * * amounts to a good defense to the original liability of the principal, is a good defense for the sureties when sued * * *.
“ ‘ “Otherwise, the principal would be indirectly deprived of the benefit of a valid defense against the creditor, by being compelled, in effect, to respond through his sureties; or the sureties would be deprived of their right to reimbursement from the principal, and thus one or the other be compelled to lose the rights which the law had secured to them.” ’ Mutual Finance Co. v. Politzer, 21 Ohio St.2d 177, 256 N.E.2d 606, 610-11 (1970).” Mack Financial Corp. v. Scott, 100 Idaho at 895, 606 P.2d at 999 (1980) (emphasis added).
Here the creditor either carelessly, or callously, or carelessly and callously, allowed the right to a deficiency judgment to evaporate, and yet would hold Louis Larson liable as though he were a principal obligor, and not a mere guarantor with the rights of a guarantor, including subrogation. It is said that the waiver contained in the agreement of guarantor allows this unjust result. Yet the guaranty contains language which recognizes that a guarantor is possessed of subrogation rights. “Until you are fully paid by debtor we shall have no right of subrogation nor right to share in the security of the debtor.” (Emphasis added.)
If the majority is correct in its view that the guarantor can be sued independently of any action being taken against the actual debtor, the law of guaranty is virtually destroyed. In the commercial world guaranties have forever served as necessary, in fact vital, functions. But, the waiver in this case, and in McGill, can only serve to destroy the further use of guaranties. Whát is left after the majority’s smoke clears away is not suretyship or guaranty, but co-obligation disguised as suretyship. Only the legislature may now step in to prevent the most obvious examples of overreaching which have surfaced and are now sanctioned by this Court. Surely there is an obligation to warn the signer in unmistakable language that a guarantor beguiled with this type of waiver language is not a guarantor, as was formerly forever so under the law of guaranty as it existed for many years.
For my part, I would not, as a matter of public policy, apply the waiver to the extent which the majority today does. Certainly, there has always been and should be a requirement that a creditor cannot do, or omit doing, that which is irreconcilable with the interests of an unsuspecting and unwarned guarantor.