This summary was computer-generated without any editorial revision. It is not official, has not been checked for accuracy, and is NOT citable.
Facts
The Defendants guaranteed a loan made by New Mexico National Bank to a corporation. After discovering improper liquidation of assets by the corporation, the Defendants revoked their guaranty and instructed the Bank to call the note due. Despite this, the Bank extended the loan without the Defendants' consent. The Bank later became insolvent, and the FDIC, as the Bank's liquidator, sought to enforce the guaranty against the Defendants (paras 1-5).
Procedural History
- District Court of Bernalillo County: Granted summary judgment in favor of the FDIC, holding the Defendants liable under the guaranty.
Parties' Submissions
- Defendants-Appellants: Argued they signed the guaranty in their corporate, not personal, capacities and that they were discharged from liability because the Bank extended the loan after their revocation of the guaranty. They cited case law supporting the discharge of guarantors when material changes are made without their consent (paras 6-7).
- Plaintiff-Appellee (FDIC): Contended the Defendants signed the guaranty in their personal capacities and that the guaranty allowed extensions without their consent. The FDIC argued that the Defendants remained liable for pre-existing debt despite the revocation (para 8).
Legal Issues
- Did the Defendants sign the guaranty in their personal or corporate capacities?
- Does a guarantor's revocation of a continuing guaranty discharge liability for extensions made without the guarantor's consent?
- Did the Bank's extension of the loan after the Defendants' revocation release the Defendants from liability under the guaranty?
Disposition
- The Supreme Court of New Mexico reversed the District Court's decision and remanded the case for entry of judgment in favor of the Defendants (paras 1, 14).
Reasons
Per Franchini J. (Baca and Frost JJ. concurring):
- The Court held that the Defendants signed the guaranty in their personal capacities because their signatures lacked qualifying language indicating corporate capacity. The acknowledgment form referencing the corporation was insufficient to create a genuine issue of material fact (para 9).
- The Court determined that a guarantor's revocation of a continuing guaranty terminates all powers granted under the guaranty, including the ability to extend the loan without the guarantor's consent. The Bank's extension of the loan after the Defendants' revocation materially altered the obligation and released the Defendants from liability (paras 10-12).
- The Court emphasized that the guaranty contract explicitly stated that it would not apply to indebtedness created after revocation. The extension of the loan constituted new indebtedness under the contract's terms, further supporting the Defendants' release from liability (para 11).
- The Court rejected the FDIC's argument that the Defendants' revocation left the Bank with no viable options, noting that the Bank could have pursued collection at the time of revocation. The Bank's decision to extend the loan without consent was the cause of the Defendants' release, not the revocation itself (para 13).