First Indiana Bank v. Baker

• Decision Date: 19 March 1992
• Docket Number: Nos. 90-3772,91-1426,s. 90-3772
• Citation: 957 F.2d 506
• Parties: FIRST INDIANA BANK, a Federal Savings Bank, Plaintiff-Appellee, v. David J. BAKER, Defendant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 506

957 F.2d 506

FIRST INDIANA BANK, a Federal Savings Bank, Plaintiff-Appellee, v. David J. BAKER, Defendant-Appellant.

Nos. 90-3772, 91-1426.

United States Court of Appeals Seventh Circuit.

Submitted Nov. 5, 1991.

Decided March 19, 1992.

Theodore J. Nowacki, V. Samuel Laurin, III, Bose, McKinney & Evans, Indianapolis, Ind., for plaintiff-appellee.

Michael Yarbrough, Frost & Jacobs, Columbus, Ohio, for defendant-appellant.

Before CUDAHY, POSNER and COFFEY, Circuit Judges.

COFFEY, Circuit Judge.

On January 15, 1991, the district court entered a Rule 54(b) judgment granting First Indiana Bank's motion for summary judgment, holding that David J. Baker was liable for Cardinal Industries, Inc.'s, ¹ default on a loan payment because Baker was a guarantor of the loan. Baker appeals the entry of judgment against him in the amount of $618,475.84. We affirm.

I. FACTS

Cardinal Industries applied for and received a loan from First Indiana Bank in the amount of $501,500 on December 16, 1982. At the time, in exchange for the loan, Cardinal executed a promissory note in favor of First Indiana Bank for $501,500 at 17% interest per annum, and Baker and Austin E. Guirlinger ² agreed in writing to guarantee the promissory note. Referring to consideration, the guarantee stated:

"In consideration of the loans, advances, extensions of credit and financial accommodations to be given, made or afforded by the Lender to Cardinal Industries, Inc. ... the Guarantor, jointly and severally, hereby unconditionally guarantees the full and prompt payment when due of the [liabilities evidenced by the promissory note]."

The guarantors waived:

"Any requirement that the Lender institute suit, or exercise or exhaust its rights or remedies against the Debtor, or against any other person, guarantor, mortgage, or other collateral guaranteeing or securing all or any part of the Liabilities ... prior to enforcing any rights it has under this agreement, or otherwise against the Guarantor."

As a result of a decline in interest rates, in March, 1986 Cardinal Industries began negotiating with First Indiana Bank hoping it would lower its interest rate on the 1982 note. The negotiations were successful, and on November 1, 1986, First Indiana Bank and Cardinal Industries executed a Loan Modification Agreement reducing the interest rate. Under the terms of the original guarantee, the bank possessed the right "to modify or otherwise change the terms or alter any part of the Liabilities, including, but not limited to, changing the rate of interest thereon...." Nonetheless, in an abundance of caution, First Indiana Bank obtained Baker's and Guirlinger's signatures on a "Consent by Guarantors." The "Consent by Guarantors" stated that the guarantors

"are hereby executing this Loan Modification Agreement for the purpose of consenting to the terms thereof, and by such execution, Guarantors hereby agree that the Guarantee shall be and continue in full force and effect until the Note and the Loan together with all interest thereon shall have been paid in full."

Cardinal Industries defaulted on the payment due on February 1, 1989, and has failed to make the payments due thereafter. The district court granted First Indiana Bank's motion for summary judgment against Baker for the outstanding balance on the note, finding that Baker had unconditionally guaranteed the payment of the promissory note.

II. ISSUES

Baker, challenging the grant of summary judgment, raises two issues on appeal: 1) whether the trial court erred in holding that there was no material issue of fact regarding the sufficiency of the consideration to support the guarantee; and 2) whether the district court erred in refusing to require First Indiana Bank to seek recovery through proceeding against the property securing the promissory note prior to requesting payment under the guarantee.

III. CONSIDERATION FOR THE GUARANTEE

Federal Rule of Civil Procedure 56(c) states that summary judgment "shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Baker contends that the district court erred in granting summary judgment on the enforceability of the guarantee because there is a material fact at issue in regard to whether the guarantee was given as consideration for the loan. But "[o]nly disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510 (1986). Under the circumstances of this case, Baker's contention that there was insufficient consideration (that the guarantee was not given as consideration for the loan) to support the guarantee is irrelevant because the guarantee and the contract were executed at the same time:

"It is not necessary for a guarantor to derive any benefit from the principal contract or the guarantee for consideration to exist. If the guarantee is made at the...