Court Opinion

ID: 6870552
Source: CourtListenerOpinion
Date Created: 2022-07-23 21:00:26.219149+00
Date Added: 2024-06-11T16:05:23.935030
License: Public Domain

THOMPSON, Circuit Judge
(dissenting)-
The appellee brought suit upon a contract of guaranty alleging that the appellants were liable as guarantors upon four promissory notes. The pertinent clause of the contract of guaranty is as follows:
“The bank hereby agrees that any loan made under this agreement shall be renewable at maturity for consecutive periods of three months each, up to a total of one year, upon payment to the bank of ten per centum *305of the amount of said loan and interest thereon. And the parties hereto mutually agree that such renewals and renewals of renewals shall continue under the terms and conditions of this agreement until the last outstanding note be fully paid.”
“ * * * any such partial loan shall not be extended or the said amount again reloaued after payment, except upon the certification to the bank, in writing, by Louis V. Aronson, to the effect that all of the guarantors herein named assent to said extension or re-loaning.”
The appellants, guarantors, contend that the batik failed to comply with either of the conditions set out in the contract of guaranty. I think the following notations amounted to a certification by Aronson in writing to the effect that all of the guarantors named assented to the extension or re-loaning. The notations are:
“Approved: O. K. — Louis V. Aronson”
“Approved by: Louis V. Aronson”
“Approved: Louis V. Aronson”
“O. K. approved — Louis V. Aronson”
I find no error in the ruling of the District Judge that that was not a valid defence.
The other two requirements were that no renewal should be made by the bank unless the debtor reduced the amount of the note by 10 per cent, and unless the total renewals were limited to one year. The exhibits of the notes in suit disclose that in at least four cases the notes were renewed without any reduction in the principal amount of the debt and that the total renewals were for a period of more than one yean. It was the right of the guarantors to insist that their contract of guaranty be strictly construed. The failure on the part of the bank to insist upon part payment prior to renewal was prejudicial to the guarantor's. - That is also true of the failure of the bank to require that the notes be not renewed for more than a year, since at that time the guarantors might conceivably have recouped their losses by proceeding against the principal debtor. I am of the opinion that the failure of the bank to comply with the requirements of the contract of guaranty was a valid defense and that the judgment of the District Court should be reversed.