Bank of Coral Gables v. Murphy

• Decision Date: 15 November 1988
• Docket Number: No. 87-2953,87-2953
• Citation: 13 Fla. L. Weekly 2508,533 So.2d 902
• Parties: 13 Fla. L. Weekly 2508, 9 UCC Rep.Serv.2d 153 The BANK OF CORAL GABLES, Appellant, v. Eve E. MURPHY, Appellee.
• Court: Florida District Court of Appeals

Page 902

533 So.2d 902

13 Fla. L. Weekly 2508, 9 UCC Rep.Serv.2d 153

The BANK OF CORAL GABLES, Appellant, v. Eve E. MURPHY, Appellee.

No. 87-2953.

District Court of Appeal of Florida,

Third District.

Nov. 15, 1988.

Catlin, Saxon, Tuttle and Evans and H. James Catlin, Jr., Miami, for appellant.

Murphy & Parente and Joseph H. Murphy, Jr., Coral Gables, for appellee.

Before DANIEL S. PEARSON, FERGUSON and JORGENSON, JJ.

JORGENSON, Judge.

This is an appeal from an amended final judgment. The issue presented on appeal is whether the maker of a promissory note can limit liability for her obligation on that note by relying on the terms of her earlier guaranty of a different extension of credit to her husband. For the reasons which follow, we decline to so hold and, therefore, vacate the amended judgment under review.

Eve Murphy, the defendant below, is the widow of Joseph Murphy, a founder and director of The Coral Gables Bank, plaintiff below. In 1982 Mr. Murphy took out an unsecured "director's loan" with the bank for $80,700.00. The bank made the loan on the condition that the indebtedness would be paid off or taken off the bank's books for at least thirty days at the end of each year. The bank arranged for an Indiana bank, The Citizens National Bank of Bedford, to make thirty-day loans to each of the bank's directors so that the directors' loans could be paid off. The bank then made renewal loans to its directors, the proceeds of which were used to pay off Bedford's loans after the thirty days had passed. In this fashion, the directors were able to maintain their unsecured loans, and the bank was able to remove the loans from its books for thirty days each year.

In May, 1983, the bank followed its usual procedure. Mr. Murphy renewed his loan of $80,700.00. Mrs. Murphy fulfilled a condition of that loan and executed a guaranty for the $80,700.00 line of credit. The guaranty limited her liability on the 1983 note to $80,700.00. Mr. and Mrs. Murphy then took out the customary loan with Bedford for thirty days to pay off their indebtedness to the bank.

On July 1, 1983, Mr. Murphy renewed his loan with the bank for $80,700.00 and paid off Bedford. In June, 1984, Mr. Murphy repeated the procedure and paid off his loan from the bank. The bank gave Mr. Murphy a commitment letter for an $80,700.00 line of credit and a $10,000.00 check loan and again required Mrs. Murphy to guarantee the loan up to $80,700.00. After he accepted the commitment letter and borrowed the $80,700.00 from Bedford, but before he signed the renewal note with the bank, Mr. Murphy died.

In an effort to assist Mrs. Murphy after the untimely death of her husband and to preserve its arrangement with Bedford, the bank made its renewal loan to Mrs. Murphy. The bank, on July 23, 1984, issued Mrs. Murphy a new commitment for an $80,700.00 revolving line of credit and a $10,000.00 check loan. This extension of credit was to be used to pay off Mr. and Mrs. Murphy's obligation to Bedford. ¹

Mrs. Murphy accepted the commitment on July 27, 1984, and on August 3, 1984, she executed and delivered to the bank a new master note for $80,700.00. The proceeds of the August 3, 1984, note paid off the Murphys' indebtedness to Bedford.

The following year, Mrs. Murphy executed and delivered to the bank a renewal note dated August 1, 1985, in the principal sum of $78,541.46. Mrs. Murphy made all payments due under the August 3, 1984, note and the August 1, 1985, note up to and including the payment due May 1, 1986.

When the August 1, 1985, note matured on August 1, 1986, Mrs. Murphy defaulted. She made no further payments to the bank. The bank then instituted suit on the note which Mrs. Murphy executed on August 3, 1984, and the renewal note she executed on August 1, 1985.

The trial court entered summary judgment in favor of the bank for a total of $92,417.09. After entry of summary judgment, Mrs. Murphy moved for relief from judgment on the ground that the guaranty she signed in 1983 limited her liability on the 1984 and 1985 notes to a total of $80,700.00. Following a hearing, the court granted the motion.

The trial court erred when it limited Mrs. Murphy's liability on the notes she signed in 1984 and 1985 to the terms of the agreement she had executed to guarantee her late husband's indebtedness to the bank in 1983. Under principles of both common law and the Uniform Commercial Code, the bank is entitled to the full amount due and owing on the judgment originally entered by the trial court, less any amount Mrs. Murphy has paid on that judgment. Mrs. Murphy's liability is controlled by the terms of the note she executed on August 3, 1984, and renewed on August 1, 1985.

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