Court Opinion

ID: 8914922
Source: CourtListenerOpinion
Date Created: 2022-11-27 04:36:43.760142+00
Date Added: 2024-06-11T17:08:53.298791
License: Public Domain

MURNAGHAN, Circuit Judge,
dissenting:
Agreeing in all other respects with my panel colleagues, I find myself in dissent as to the denial to FDIC of a full recovery in the amount of $600,000 on the guaranty executed by Wylie Fagan. In my view, the pertinent distinction has not been observed between (a) the presumed intent of termination where language is silent or ambiguous as to whether the guaranty continues against the guarantor’s estate for new advances made after notice of the guarantor’s death, and (b) the effect to be accorded an altogether unambiguous contract expressing clearly an intent that new advances following the guarantor’s death will be binding on his estate unless and until there is notice to the lender of termination of the guaranty.
The language here is unambiguous, rendering irrelevant the authorities cited by the majority for the proposition that there is a strong presumption that notice to the lender of a guarantor’s death operates to terminate the guaranty insofar as future advances are concerned. Guaranty agreements, like other contracts, are interpreted in accordance with the intent of the parties. 4 S. Williston, Contracts § 625 at 828 (3d ed 1961) (“[I]n their interpretation we are to seek for the true intent of the parties who executed them.”). Absent clear intervening and countervailing public policy which would absolutely prohibit a guaranty from continuing against a guarantor’s estate, however clear the guarantor had made it that he wished such a continuation, we should enforce, not disregard, the contractual undertaking. See, e.g., Warren v. Pilgrim Health & Life Ins. Co., 217 S.C. 453, 456, 60 S.E.2d 891, 893 (1950) (“A sound public policy requires the enforcement of contracts deliberately made, which do not clearly contravene some positive law or rule of public morals.”), quoting Crosswell v. Conn. Indemnity Association, 51 S.C. 103, 116, 28 S.E. 200, 205 (1896); Lipps v. First American Service Corp., Va., 286 S.E.2d 215, 222 V.R.R. 920, 924 (1982), quoting with approval Wallihan v. Hughes, 196 Va. 117, 125, 82 S.E.2d 553, 558 (1954).1
An undertaking made by Fagan clearly binding his estate to become a guarantor even as to advances made after his death and notice thereof to the lender was one which he surely could legally impose upon his estate and personal representatives.
Thus Jordan v. Dobbins, 122 Mass. 168, 169, 23 Am.Rep. 305 (1877) relied upon by the majority, is inapposite. There the guaranty agreement provided as follows:
For value received . .. the undersigned does hereby guaranty to Jordan, Marsh & Co. the prompt payment by George E. Moore to Jordan, Marsh & Co., at maturity, of all sums of money and debts which he may hereafter owe Jordan, Marsh & Co. ... [T]his guaranty shall be a continuing guaranty, and apply to and be available to said Jordan, Marsh & Co., for all sales of merchandise they may make to said George E. Moore until written notice shall have been given by the undersigned to said Jordan, Marsh & Co. and received by them, that it shall not apply to future purchases.
There was no provision in the contract regarding the guarantor’s death, and conse*308quently there was room for construction consistent with the proposition that the parties to the contract did not intend the guaranty to remain valid as to future advances following death of the guarantor and notice of the death to the lender.
The majority takes note of Knotts v. Butler, 31 S.C.Eq. (10 Rich.Eq.) 143 (1858), a South Carolina case which held that a guarantor’s estate was liable in accordance with the agreement for debts incurred after the guarantor’s death, since the guaranty had not been revoked by written notice, as the agreement required. The majority contends that, notwithstanding Knotts, the South Carolina courts would today reach a different result when notice of death, but not notice of revocation, was provided. Such a reversal of the law of South Carolina, however, would at most merely reflect a determination that the language was in fact ambiguous, permitting an interpretation to the effect that the parties did not intend the guaranty to apply to new advances even after notice to the lender of the guarantor’s death. Hence, a refusal to follow Knotts does not require, or even support, the result reached by the majority.
Moreover, I submit that the reading for Knotts favored by the majority is simply not sustainable. To the contrary, Knotts implies that the clear terms of the contract govern, even with respect to obligations not yet incurred at the time of death. The Chancellor, in language deemed dispositive by the appellate court, there first stated that the guaranty did not merely constitute the guarantor a principal with the agency of the borrower revoked by the guarantor’s death. Instead:
The guaranty ... is a contract to indemnify against certain acts of third persons, and to assume a future contingent liability, if these acts be done. What obstructs one from indemnifying against the consequences of an event which may not happen for more than four years after his death, more than giving his promissory note, which may not reach maturity for more than four years from his death? It is asked, how long shall such a guaranty continue in force? and the answer is, until it be ended according to its terms. The administrator on whom the liability devolved, might have given the written notice to the President or cashier, prescribed by the instrument.2
31 S.C.Eq. at 146 (emphasis added).
A contrary view would conflict with the general rule. “If the guaranty is properly classified as a contract (or an irrevocable offer), death of the guarantor does not terminate the contract.” 38 Am.Jur.2d § 65 at 1066 (emphasis added). See also Annotation, 42 A.L.R. 926, 927 (“If the consideration is entire and has already passed, then the guarantor’s estate should not be released by reason of his death, even-though the guarantee has knowledge thereof... . ”). That the terms of the guaranty agreement govern was made clear in Bennett v. Checotah State Bank of Checotah, 176 Okla. 518, 56 P.2d 848 (1936), where the court held that a guarantor’s estate was liable, in accordance with the terms of the contract, for debts for which extensions were granted after the death of the guarantor. “In view of the rule that death of the guarantor does not revoke the guaranty in cases such as the instant one, it follows that death did not revoke any part of said guaranty.” 176 Okla. at 519, 56 P.2d at 850 (emphasis in original).
In the present case, the language leaves no room for interpretation. It reads:
This guaranty shall be binding upon the undersigned, his personal representatives, successors and assigns unless and until (and then only with respect to future transactions or commitments) terminated by notice to that effect received by the Bank, by registered mail, addressed to the Bank at the office of the Bank extending credit under this guaranty agreement.
*309That language explicitly states that notice of termination of the guaranty, not notice of the guarantor’s death, shall be the operative event. It further extends the obligation to personal representatives, successors and assigns.
It should not be overlooked that there could well be reasons why, from the standpoint of the guarantor who has died, he might desire a continuation of the guaranty even as to future transactions. Past commitments made to the borrower may have appeared to the guarantor a creator of substantial potential for gain. The loss in midstream of future credit because of the termination of the guaranty might threaten the loss of all previous investment. The guarantor offends no public policy in preferring to throw in further investment sums to guard against such a probability of loss.
The question is not whether he may do so. He clearly may. Rather, it is simply whether, as a matter of construction, he has indeed done so. Here the guarantor, Fagan, has explicitly provided that the guaranty should continue until notice of its revocation. The party signing the contract with him had the right to rely on the undertaking he made. Fagan was an experienced businessman under no incapacity and his estate should be bound by the terms to which he agreed.
Accordingly, I would reverse to the extent required to direct recovery of a judgment in the full amount of $600,000 in favor of the FDIC.

. The law looks with favor upon the making of contracts between competent parties upon valid consideration and for lawful purposes. Public policy has its place in the law of contracts — yet that will-o’-the-wisp of the law varies and changes with the interests, habits, need, sentiments and fashions of the day, and courts are averse to holding contracts unenforceable on the grounds of public policy unless their illegality is clear and certain.

. The guaranty provided:
we declare this to be a continuing guaranty, and that it is to remain of force till revoked by written notice to the President or Cashier of said bank.
31 S.C.Eq. at 143 (emphasis added).