Guaranty Bank v. Lone Star Life Ins. Co.
| Decision Date | 09 June 1978 |
| Docket Number | No. 19549,19549 |
| Citation | 568 S.W.2d 431 |
| Parties | GUARANTY BANK, Appellant, v. LONE STAR LIFE INSURANCE COMPANY, Appellee. |
| Court | Texas Court of Appeals |
W. Ted Minick, Winstead, McGuire, Sechrest, & Trimble, Dallas, for appellant.
T. Richard Handler, Jenkens & Gilchrist, Dallas, for appellee.
Guaranty Bank sued Lone Star Life Insurance Company to enforce a commitment agreement in the form of a letter to make a loan to Omnia Systems, Inc. The bank alleges that it had made a short-term loan to Omnia in reliance on the commitment letter. Lone Star defended on the ground that the bank was neither a party to the commitment nor a third-party beneficiary entitled to enforce it and also on the ground that certain conditions to its obligation to make the loan had not been met. The trial court rendered summary judgment for defendant, and the bank appealed, contending that Lone Star has failed to show that no fact issues exist. We affirm on the ground that the summary-judgment proof establishes as a matter of law that one of the conditions of Lone Star's commitment had not been met, namely, the personal guaranty of the loan by Omnia's president, John Baird.
The summary-judgment proof shows that no dispute exists concerning the facts. Lone Star's commitment letter provides for a loan of $760,000 "to be made to Omnia Systems, Inc. (Borrower) or its assignee (Guaranty Bank, Dallas, Texas) and it is to be secured by two first-mortgage notes" on certain land in Florida. Among the "terms and conditions" specified is the following: "The loan shall be personally guaranteed by John B. Baird and Ralph Smith."
The bank contends that no personal guaranty was required as a condition to Lone Star's liability on its commitment agreement because, after the bank had advanced the funds to Omnia, Lone Star signed a later "clarification letter" directly promising to purchase the Omnia note from the bank. Alternatively, the bank contends that if this condition was applicable, it was satisfied because the bank tendered to Lone Star an assignment of a guaranty of the Omnia note by Baird and Smith, which was equivalent to a guaranty of the loan to Lone Star.
We conclude that neither of these contentions is correct. The clarification letter is addressed to the bank as well as to Omnia and states that it is "written to clarify our Commitment Letter addressed to Omnia Systems, Inc." The clarification letter continues:
Paragraph six (6) of the Commitment Letter means:
If all other conditions of the Commitment Letter have been met, not prior to April 15, 1976 or later than September 30, 1976, the Lender will pay to Guaranty Bank the sum of $760,000.00 upon Guaranty Bank's tendering and delivering to Lender at its main office in Dallas, Texas the following:
(a) Promissory Note of Omnia Systems, Inc. to Guaranty Bank dated April 25, 1974, in the principal sum of $760,000.00 endorsed without recourse;
(b) The assignment of two First Mortgage Notes and the deeds securing same mentioned in the Commitment Letter, endorsed without recourse, . . .;
(c) Assignment to Lender by Guaranty Bank of its interest in the Mortgagee Policy . . .;
(d) The $50,000.00 or the Promissory Note in a like sum from Omnia Systems, Inc. guaranteed by John B. Baird and Ralph Smith . . . . (Emphasis added)
The bank argues that since Lone Star agrees in the clarification letter to pay the amount of the loan direct to the bank in exchange for endorsement and delivery to it of the Omnia note and the other documents listed, the various conditions specified in the original commitment agreement have no application to a situation in which the bank calls on Lone Star to purchase the existing Omnia note, as distinguished from a situation in which Omnia pays off the bank and calls on Lone Star to make a new loan under the terms of its commitment. We cannot accept this interpretation without disregarding the express language in the clarification letter, "If all other conditions of the Commitment Letter have been met . . .." We find no evidence in the clarification letter of any intention that the conditions of the original commitment should not apply in the event that the bank rather than Omnia, calls on Lone Star to advance the proceeds of the loan. From Lone Star's point of view, a direct assignment of Omnia's pre-existing note to Lone Star would have given Lone Star no greater assurance of repayment than the execution of a new note by Omnia, since the bank's endorsement was to be made without recourse. Under either arrangement the only security, in the absence of the guaranty, would have been the pledge of the two real-estate notes. Consequently, there...
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