Kim v. Peoples Federal Sav. & Loan Ass'n of Tarentum, Pennsylvania

• Decision Date: 13 January 1989
• Docket Number: No. 87-1445,87-1445
• Court: Florida District Court of Appeals
• Parties: 14 Fla. L. Weekly 187 Jong-In KIM, Harlan L. Hanson, Philip E. Searcy, Roy C. Mallady, Jr., and W.R. Bean, Appellants/Cross-Appellees, v. PEOPLES FEDERAL SAVINGS & LOAN ASSOCIATION OF TARENTUM, PENNSYLVANIA, a Pennsylvania corporation, Appellee/Cross-Appellant.

Page 867

538 So.2d 867

14 Fla. L. Weekly 187

Jong-In KIM, Harlan L. Hanson, Philip E. Searcy, Roy C. Mallady, Jr., and W.R. Bean, Appellants/Cross-Appellees, v. PEOPLES FEDERAL SAVINGS & LOAN ASSOCIATION OF TARENTUM, PENNSYLVANIA, a Pennsylvania corporation, Appellee/Cross-Appellant.

No. 87-1445.

District Court of Appeal of Florida,

First District.

Jan. 13, 1989.

Denis L. Durkin and Beth J. Willard, of Baker & Hostetler, Orlando, for appellants/cross-appellees.

W. Wade Wallace, of Bartlett & Wallace, Destin, and Christine Rieger Milton and William S. Graessle, of Mahoney Adams Milam Surface & Grimsley, P.A., Jacksonville, for appellee/cross-appellant.

ON MOTION FOR REHEARING

SHIVERS, Judge.

Appellee's Motion for Rehearing or Clarification is granted. We withdraw our opinion filed November 10, 1988, and substitute the following opinion therefor.

Appellants Jong-In Kim, Harlan L. Hanson, Philip E. Searcy, Roy C. Mallady, Jr., and W.R. Bean, defendants in an action brought by appellee Peoples Federal Savings & Loan Association (Peoples) to enforce guaranty agreements, appeal a final judgment entered in appellee's favor, and raise three issues on appeal: (1) whether the trial court erred in ruling that it had personal jurisdiction over appellants/defendants Kim, Mallady, and Bean; (2) whether the trial court erred in failing to find the guaranty agreements void for breach of condition; and (3) whether the trial court erred in awarding the appellee/plaintiff attorney's fees, interest, insurance, taxes, escrow, and prejudgment interest. Peoples cross-appeals, arguing that the trial court erred in calculating the amount of appellants' liability on the guaranty agreements. Since the facts and issues involved in this appeal are identical with regard to appellants Kim, Mallady, and Bean to those in companion case number 87-1362, Renda v. Peoples Federal Savings & Loan Association, we reverse the judgment entered against those three appellants on the basis of the trial court's lack of personal jurisdiction, in accordance with our written opinion in Renda v. Peoples Federal Savings & Loan Association, 538 So.2d 860 (Fla. 1st DCA 1988). In light of our ruling, we find it unnecessary to address the remaining issues on appeal, or the issue on cross appeal, as they apply to Kim, Mallady, and Bean. Since appellants Hanson and Searcy were Florida residents and, therefore, did not raise the issue of lack of personal jurisdiction before either the trial court or this court, we must address the two remaining issues on appeal and the issue on cross appeal as it applies to those two appellants. The facts involved in this case have been set out fully in our opinion in Renda and Joe-Lin Investments, Ltd. v. Peoples Federal Savings & Loan Association, and will not be repeated herein.

First, we find that the trial court did not err in failing to find the guaranty agreements entered into by appellants Hanson and Searcy void for breach of condition. The loan guaranty signed by each of the eleven guarantors reads, in pertinent part:

The undersigned hereby guarantees to the lender, its successors and assigns, the payment of every note ... which borrower may execute in favor of lender ... provided, however, as follows:

(1) borrower's indebtedness to lender shall not exceed $3,800,000....

Since the principal amount of the loan did exceed $3,800,000 sometime in 1983 or 1984, appellants argue that the guaranties are void and the guarantors released from all liability, citing Schluderberg v. Trice, 198 Va. 85, 92 S.E.2d 374 (1956).

The general rule with regard to this issue is that the specification of the amount of credit to be extended or the maximum amount of the guaranty, in the absence of expression of a contrary intent, indicates an intent only to limit the amount of the guarantor's liability, and not to constitute a condition, the breach of which would relieve the guarantor of all liability. 57 A.L.R.2d 1209. Although we agree with appellants that the Schluderberg case is directly on point, the Virginia Supreme Court's holding in Schluderberg is in the minority position, the majority of states holding that such language is not conditional but merely limits the guarantor's liability. We adopt the majority view on this issue and interpret the language in the guaranty as merely constituting a $3,800,000 limit on the guarantor's aggregate liability. Despite the language of the guaranty, there is no indication in the instrument itself that the parties intended the agreement to be completely without effect if the partnership's indebtedness should exceed $3,800,000. Only if the guarantors' liability rose along with the increased indebtedness would the guarantors be left unprotected. Construing the language as a limitation on the guarantors' liability protects the guarantors from the consequences of the increased indebtedness and confers upon them no more than what they agreed to do in the instrument--guarantee up to $3,800,000 of the partnership's debts.

Second, we agree with appellants Hanson and Searcy that the trial court erred both in awarding attorney's fees, costs, interest, and escrow in connection with the suit under the guaranty, and in awarding prejudgment interest. Under the terms of the guaranties involved in the instant case, the limited partners agreed to guarantee the payment of every note under the terms and conditions of the notes. The terms of the notes provided only for the payment of attorney's fees incurred in enforcing the notes, but did not provide for payment of insurance, taxes, escrow, prejudgment interest, or attorney's fees in enforcing the guaranties against the guarantors. As a general rule, the guarantor is not liable for attorney's fees and costs in connection with an action to enforce a guaranty where there is no express provision in the guaranty for such liability, but where the contract provides only for payment of attorney's fees and costs in connection with proceedings to collect on the note. See Servaites v. Lowden, 99 Nev. 240, 660 P.2d 1008 (1983); Securites Investment Company of St. Louis v. Donnelly, 89 Nev. 341, 513 P.2d 1238 (1973); Taylor v. Ross, 736 S.W.2d 614 (Ct.App.Tex.1987). The only Florida case addressing this issue appears to be ...