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Federal Deposit Insurance Corp. v. Manion

decided: July 14, 1983.

FEDERAL DEPOSIT INSURANCE CORPORATION, IN ITS CORPORATE CAPACITY, PLAINTIFF-APPELLANT,
v.
DAVID R. MANION, MARY D. MANION, JOANNE MANION, INDIVIDUALLY AND AS THE PERSONAL REPRESENTATIVES OF THE ESTATE OF JAMES R. MANION, MERVIN H. EDWARDSEN, BARBARA EDWARDSEN, EARL R. LENGER, RELOCATION DEVELOPMENT CORP. AND RELOCATION LEASING CORP. A/K/A RELO LEASING CORP., DEFENDANTS-APPELLEES



Appeal from the United States District Court for the Eastern District of Wisconsin. No. 81 C 749 -- Terence T. Evans, Judge.

Pell and Cudahy, Circuit Judges, and Gibson, Senior Circuit Judge.*fn*

Author: Per Curiam

Federal Deposit Insurance Corporation (FDIC), an appointed receiver of the American Bank and Trust Co. (Bank), brought this diversity contract action against Christian Zillig and the other defendants, claiming in part that Zillig was a continuing guarantor on a Mortgage Note executed by Relocation Development Corp. ("Relo") in favor of the Bank and later extended for one year pursuant to an extension agreement between Relo and the Bank. The district court*fn1 on mutual motions for summary judgment ruled that Zillig could not be held as a guarantor on the extended Mortgage Note because the extension materially altered Zillig's rights and obligations, Zillig was not a signatory to the extension agreement, and Zillig had revoked his continuing guaranty a year prior to the extension; and thus granted Zillig's motion for summary judgment. FDIC duly appealed. For the reasons set forth herein, we affirm.

I.

On September 15, 1971, Zillig, along with four other individuals, signed a "Joint and Several Guaranty (Unlimited)" guarantying the obligations of Relo to the Bank. On March 19, 1973, the Bank loaned $450,000 to Relo pursuant to a Mortgage Note. The Note bore interest at four percent (4%) above the prime rate, interest was payable monthly, and the principal was to be paid in full on or before March 18, 1975. The Note was secured by a Mortgage on real estate located in Calumet County, Wisconsin. In connection with the Note transaction, Zillig and four other individuals each executed a document entitled "Individual Guaranty (Unlimited)," which was identical to the earlier executed "Joint and Several Guaranty." Both guaranties signed by Zillig contained the following language:

The undersigned hereby promises and agrees to pay or cause to be paid to said Bank all loans, drafts, overdrafts, endorsements, accounts, checks, notes, interest and all other indebtedness, obligations and liabilities of every kind and description, whether of the same of a different nature, now existing or owing or which may hereafter exist or become due or owing (hereinafter referred to as indebtedness, obligations and liabilities) by Relocation Development Corp. (hereinafter designated "debtor"), whenever the same, or any part thereof, shall be due, including interest thereon and all costs, expenses and reasonable attorney's fees at any time paid or incurred in endeavoring to collect such indebtedness, liabilities or obligations, or any part thereof.

Said Bank need take no steps whatsoever to realize on any securities for said indebtedness, obligations and liabilities, and from time to time and without notice may surrender or release all or any such securities, and grant extensions of time to said principal debtor, and renew or extend any of said indebtedness, obligations or liabilities or any security or collateral therefor.

This is a continuing guaranty and shall not be revoked by death, and shall be binding upon the heirs, executors, administrators and assigns of the undersigned and shall continue in force under any and all circumstances as to all indebtedness, obligations and liabilities contracted or incurred prior to the receipt by said Bank of written notice of the revocation hereof.

On April 8, 1974, Zillig mailed a letter to the Bank, which stated, in part:

Please be advised that I am herewith rescinding all guaranties executed by myself as they may pertain to any new or additional loans as may be executed to any of the aforementioned Companies, and Corporation.

Included in "aforementioned Companies, and Corporation" was Relocation Development Corporation.

When the Mortgage Note became due approximately one year later, on March 18, 1975, Relo and the Bank executed an extension agreement, entitled "Extension of Mortgage." Under the terms of the extension agreement, Relo promised to pay the principal sum of $450,000 to the Bank on March 18, 1976. The extension agreement further provided that the interest on the face amount would accrue at 10 1/2% (instead of the former rate of 4% above the prime rate), payable semi-annually.

The extension agreement was effected pursuant to a restructuring of several loans from the Bank to Relo. Interest on the original $450,000 Note, which was secured by a mortgage and the guaranties of Zillig and four other individuals, was brought current and the principal on the Note was reduced by $100,000 and the obligation was recast as a $350,000 debt, which was secured by a mortgage and the guaranties of the four individuals other than Zillig who had executed the earlier guaranties. Unlike Zillig, these four other individuals were given notice of the new extension agreement and they each executed new guaranties.

On October 21, 1975, the Bank was declared insolvent and the FDIC was appointed receiver. Relo defaulted on the Note as extended by the extension agreement. FDIC brought this contract action against Zillig as a guarantor on the Note. The district court ruled that Zillig was not bound by the extension of the Note because it materially altered his obligation as a guarantor and was executed nearly a year after he revoked his continuing guaranty as to "new and additional ...


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