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State Bank of East Moline v. Cirivello

OPINION FILED JANUARY 6, 1978.

STATE BANK OF EAST MOLINE, PLAINTIFF-APPELLANT,

v.

GUS CIRIVELLO ET AL., DEFENDANTS-APPELLEES.



APPEAL from the Circuit Court of Rock Island County; the Hon. JOHN L. POOLE, Judge, presiding. MR. PRESIDING JUSTICE ALLOY DELIVERED THE OPINION OF THE COURT:

Rehearing denied February 14, 1978.

State Bank of East Moline appeals from an order of the Circuit Court of Rock Island County in which the court found a guaranty signed by defendants to be void and unenforceable.

The action in the instant case was initiated by the plaintiff bank to enforce a guaranty agreement executed by defendants, who were 12 limited partners of Lakeview Estates Limited Partnership. The guaranty was asserted to be enforceable by plaintiff bank as a guarantee of payment of a loan of $65,000 by the bank to the partnership. Seven of the defendants defaulted and five defendants contested the action. As we have noted, following a bench trial, the trial court found the guaranty to be void and unenforceable on the theory that only 12 limited partners signed the guaranty and that the defendants had relied on plaintiff's representations that all 13 limited partners of the partnership would be required to sign the guaranty.

On appeal in this court, plaintiff bank argues that (1) the failure of all 13 limited partners to sign the guaranty does not make it void because plaintiff had no notice from defendants that execution by all 13 limited partners was a condition of defendants' undertakings, and (2) the trial court's determination that defendant relied on plaintiff's representation is contrary to law and against the manifest weight of the evidence.

Lakeview Estates Limited Partnership was a limited partnership having one general partner, Lakeview Estates of Iowa, Inc., and 13 limited partners, including the 11 defendants in this cause and one James Patten. In June of 1972, the partnership sought a loan of $65,000 from plaintiff bank, apparently for the purpose of finishing the pads for a mobile home park being developed by the partnership. The representatives of the partnership, for the purposes of the loan negotiations, were Moe Shamsie, president of Lakeview Estates of Iowa, Inc., and a limited partner of the partnership, and Durward Dirks and Archie Roets, also both limited partners of the partnership. During the discussions regarding the loan, Ben H. Ryan, Jr., president of plaintiff and plaintiff's representative in the loan negotiations, informed the partnership's representatives that plaintiff would make the loan to the partnership if all of the limited partners would personally guarantee repayment of the loan. On or about June 20, 1972, 12 limited partners (11 defendants in this action) signed an instrument entitled "Authority of Partnership to Open Deposit Account and to Procure Loans." That instrument authorized Dirks, Shamsie and Roets to act as partnership representatives and to borrow money, incur liabilities, and execute promissory notes on behalf of the partnership in transactions with plaintiff bank. This authorization was not signed by limited partner James Patten, although a signature blank had been prepared for his name. The partnership authorization was acted upon as to the loan request even though Patten did not sign, where the other 12 parties did sign.

In July of 1972, and on or prior to July 13, 1972, Ben Ryan, the bank official, delivered to one or more of the partnerships representatives in the loan negotiations a printed guaranty form commonly used by plaintiff bank. At a meeting held on or about July 13, 1972, some of the limited partners met and signed the guaranty form which had been supplied by plaintiff. Each guaranty form contained eight signature blanks. Two guaranty forms were eventually signed, one containing nine signatures and one containing three signatures. At the meeting, the partners were told, by the partnership representatives, of the condition stated by the bank as to the guaranty, and were apparently advised by their colleagues that each limited partner was guaranteeing a portion (one-thirteenth) of the loan, and that all partners would sign the guaranty. While some of the defendants did not read the guaranty before signing, all defendants had an opportunity to read the guaranty before signing. Ben Ryan, the plaintiff bank's representative, did not attend the meeting among the partners.

The guaranty signed by defendants, provided in part:

"TO STATE BANK OF EAST MOLINE * * *

The undersigned hereby request you to give, and continue to give, LAKEVIEW-ESTATES-LIMITED PARTNERSHIP * * * from time to time, as you see fit, financial accommodations and credit, and * * * the undersigned hereby guarantee and promise and agree to make prompt payment to you, as they severally mature, * * * of all loans made, or which may be made by you to said borrower * * *.

If this guaranty be executed by more than one signer all of the obligations hereby created, and all agreements herein contained shall be the several obligations and agreements of each of the undersigned, but at your option any or all of the same may be enforced against any or all of the undersigned jointly."

The guaranty form also contained a provision permitting any signer to withdraw from the guaranty upon notice to the plaintiff bank.

The signed guaranty forms were subsequently delivered to plaintiff bank by one of the partnership representatives. On July 13, 1972, the bank president made a notation that the personal guarantees of the 12 partners signing were on file and that there was "one more to come."

On or about July 13, 1972, a 180-day note for $65,000, at 7% interest, was executed on behalf of the partnership, and the loan proceeds were disbursed to an escrow account to be drawn upon by the partnership. After two renewals, the loan remained unpaid. Plaintiff bank thereupon brought the instant action to recover the balance unpaid from the defendants as guarantors. After the filing of plaintiff's lawsuit, a payment was made on the loan, and $63,190.52 of principal remains due on the loan. Eleven limited partners, who signed the guaranty forms, were made defendants in the action.

As we have noted, following a bench trial with respect to the liability of the remaining 5 defendants (after 7 of the defendants had defaulted), the trial court found that the guaranty was void and unenforceable because only 12 partners signed the instrument and the defendants had relied on the bank representative Ryan's statement that all 13 limited partners would be required to guarantee the loan. In the order of ...


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