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Fannin State Bank v. Grossman

MARCH 1, 1961.

FANNIN STATE BANK, APPELLEE,

v.

JENNIE GROSSMAN, APPELLANT.



Appeal from the Circuit Court of Cook county; the Hon. DANIEL A. ROBERTS, Judge, presiding. Judgment affirmed.

MR. PRESIDING JUSTICE SCHWARTZ DELIVERED THE OPINION OF THE COURT.

Rehearing denied March 23, 1961.

In this case, both parties asked for judgment on the pleadings. The court allowed plaintiff's motion, entered judgment in its favor and defendant appealed.

The suit involves construction of a guaranty given by defendant to plaintiff for the payment of "any and all indebtedness and liability of every kind, nature and character" incurred by one Joseph Gorchoff up to $10,000. Gorchoff endorsed a note to the bank given by the Luran Steel Supply Co., a corporation, of which he was president. When the note was dishonored and Gorchoff failed to pay, plaintiff sued defendant on the guaranty. The question is whether Gorchoff's liability as an endorser is covered by the terms of the guaranty.

It appears from the pleadings that Gorchoff originally did business as an individual under the name of Luran Steel Supply Co. and was so engaged when defendant executed and delivered her guaranty to the bank. At that time she handed an officer of the bank a cancelled guaranty agreement which she had previously signed for another bank and told the officer that she would sign a similar guaranty. Accordingly, a guaranty identical in substance was drafted by plaintiff and was executed by defendant. Sometime thereafter, Luran Steel Supply Co. was incorporated, and the note in question was executed by that company and endorsed by Joseph Gorchoff.

Defendant contends that the guaranty was intended to cover money loaned directly to Gorchoff and not his liability as an endorser. The terms of the instrument, however, clearly contemplate the extension of credit and the incurring of liability beyond that of the narrow limitation placed on it by defendant. It provides that the bank shall give Gorchoff credit as he may desire and the bank may grant from time to time, whether to him alone or to him and others, and defendant guarantees payment in the following terms:

". . . unconditionally guarantees prompt payment when due and at all times thereafter of any and all indebtedness and liability of every kind, nature and character and all renewals, extensions and modifications thereof now existing or which may hereafter exist from the Borrower to said Bank, howsoever and whensoever created, or arising or evidenced, or acquired. . . ." (Emphasis supplied.)

The only limitation on her obligation is that contained in the last paragraph:

"It is understood that while the amount of credit extended to or liability incurred to the Bank by the Borrower is not limited, the liability of the undersigned to the Bank hereunder shall not exceed Ten Thousand And No/one/Hundredths ($10,000) dollars. February 10, 1956. This Guaranty Is A Continuing One Or Unless Revoked in Writing."

The words "indebtedness and liability" are not limited to liability for money owing by Gorchoff individually. The last paragraph of the instrument makes that clear. It refers to "the amount of credit extended to or liability incurred to the Bank" by Gorchoff, and places one limitation on that credit or liability, that is, that it shall not exceed ten thousand dollars.

As the transaction took place in Texas, the laws of that state would govern. The Texas statute (17 Vernon's Texas Civil Statutes, Title 98, Article 5936, Secs. 64, 66, pages 183-84) provide as follows:

"Sec. 64. Where a person, not otherwise a party to an instrument, places thereon his signature in blank before delivery he is liable as an endorser, in accordance with the following rules:

(1) If the instrument is payable to the order of a third person, he is liable to the payee and to all ...


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