Lothridge v. First Nat. Bank of Gainesville
| Decision Date | 05 July 1995 |
| Docket Number | No. A95A0563,A95A0563 |
| Citation | 217 Ga.App. 711,458 S.E.2d 887 |
| Parties | LOTHRIDGE v. FIRST NATIONAL BANK OF GAINESVILLE. |
| Court | Georgia Court of Appeals |
Webb, Tanner & Powell, A. Louise Tanner, Anthony O. L. Powell, Ralph L. Taylor III, Lawrenceville, for appellant.
Stewart, Melvin & Frost, J. Douglas Stewart, Gainesville, Davis, Matthews & Quigley, Ron L. Quigley, Atlanta, for appellee.
Jerry Lothridge appeals from the trial court's order granting partial summary judgment to First National Bank of Gainesville ("the bank"). The trial court ruled that Lothridge is liable to the bank for debts secured by a personal guaranty he signed, but that the amount of the debts had not been determined. On appeal, Lothridge contends that genuine issues of material fact remain as to whether he is liable under the guaranty. Because we find the court correctly determined that Lothridge is liable to the bank under the guaranty, we affirm.
In 1987, Lothridge and Joe Vandegriff formed Mountain Lakes Resort, Inc. ("Mountain Lakes"), to purchase a resort known as Mountain Shadows. Mountain Lakes obtained financing of approximately $1,800,000 from the bank to purchase the resort and provide operating capital. In connection with the loan, Lothridge signed a personal continuing guaranty for repayment of 26.7 percent of "all present and future liabilities of [Mountain Lakes] to the Bank...." The guaranty further provided that "termination [of the guaranty] shall not release [Lothridge] from liability for payment of (i) any and all liabilities ... then in existence...." Lothridge also executed a security deed to the bank on farm land he owned to serve as additional collateral for the bank's loans to Mountain Lakes.
On October 6, 1988, after disputes arose between Lothridge and other owners of Mountain Lakes, Lothridge filed a lawsuit. On February 23, 1989, Lothridge sent a letter to the bank notifying it that he would "not act as guarantor of any further indebtedness incurred by Mountain Lakes...." Thereafter, the parties to that suit entered into settlement negotiations, and on January 3, 1990, the court ("1990 court") entered judgment based on the parties' settlement agreement ("1990 consent judgment"). Although the bank was not a party to that lawsuit, it agreed to the terms of the consent judgment because it was affected by some of the terms. When Mountain Lakes later defaulted on loan payments to the bank, the bank filed the instant action against Lothridge on the guaranty. Lothridge answered the complaint raising several affirmative defenses in the nature of release and discharge and filed a counterclaim against the bank.
1. Lothridge contends there remain genuine issues of material fact as to whether his termination of the guaranty affected his liability on loans made before termination. Because the guaranty contemplated a future course of dealing between the parties, the guaranty in this case was a continuing guaranty. See 38 CJS 1142, Guaranty, § 7. As such, it was not limited to a single transaction, but contemplated a series of divisible loans to Mountain Lakes and corresponding guaranties by Lothridge. See id. See also 1 Williston, The Law of Contracts § 5:11 (4th ed. 1990). Both parties agree that Lothridge properly terminated the guaranty by written notice to the bank. But contrary to Lothridge's contentions, when he terminated the guaranty, that termination was effective only as to future loans made under the guaranty; the guaranty was not terminated as to loans and guarantees already extended. See Fidelity Nat. Bank v. Reid, 180 Ga.App. 428(1), 348 S.E.2d 913 (1986). See also 38 AmJur 1062, Guaranty, § 60. Accordingly, the termination did not relieve Lothridge of liability to the bank for debts incurred by Mountain Lakes before termination. See W.E. Heller & Co. v. Aetna Business Credit, 158 Ga.App. 249, 280 S.E.2d 144 (1981). Similarly, because the guarantee was not terminated as to loans and guaranties already made, Lothridge is bound by the terms of the guaranty as to those transactions and is not entitled to assert any defenses he waived in the guaranty. See Davis v. Concord Commercial Corp., 209 Ga.App. 595(2), 434 S.E.2d 571 (1993).
2. Lothridge also contends there are facts showing he was discharged from liability under the doctrine of increased risk. Lothridge argues he was discharged because the bank increased his risk by (a) increasing the amount of the loans to Mountain Lakes, (b) releasing other guarantors, and (c) releasing other collateral it held as security for the loans. We disagree.
(a) Although the bank continued to loan money to Mountain Lakes, it is uncontroverted that the bank was attempting only to recover unpaid loans made to Mountain Lakes prior to the time Lothridge terminated the guaranty. The extension of additional loans to Mountain Lakes after that time does not affect Lothridge's risk under the guaranty. See Evans v. Merrill Lynch etc., 213 Ga.App. 808(1), 446 S.E.2d 215 (1994).
(b) Neither is Lothridge discharged due to the bank releasing other guarantors. The guaranty provides that the bank may release any other obligor, guarantor or surety "without in any way affecting the obligation of [Lothridge]...." Accordingly, Lothridge consented in advance to the bank releasing any other guarantors, which consent operates as a waiver of his right to assert that the release resulted in his discharge. See Smith v. Great Southern etc., 184 Ga.App. 433(1), 361 S.E.2d 847 (1987).
(c) Likewise, because Lothridge consented in the guaranty to the bank releasing other collateral, he waived his right to assert that the release of collateral resulted in his discharge. See Panasonic Indus. Co. v. Hall, 197 Ga.App. 860, 399 S.E.2d 733 (1990).
3. Lothridge contends that even if he was not discharged from liability under the guaranty, a jury issue remains as to whether it was the parties' intention in settling the earlier lawsuit to reduce the amount of his guaranty to $450,000. Paragraph 2 of the 1990 consent judgment provides in part that the farm land
(a) Lothridge first argues this language clearly evidenced the bank's intention to reduce the amount of his personal guaranty to $450,000. In support of his argument, Lothridge points to the language contained in the introductory recitals of the 1990 consent judgment generally providing that it was the intention of the parties to resolve all claims between them. Lothridge argues that to the extent this language is ambiguous, he is entitled to have a jury decide its meaning.
The meaning of the settlement terms incorporated into the 1990 consent judgment must be determined in accordance with the usual rules of contract construction. Hortman v. Childress, 162 Ga.App. 536, 292 S.E.2d 200 (1982). Under these rules, if the language is clear and unambiguous, no construction is required or even permissible by the trial court. If construction is required, then the first rule is to determine the intentions of the parties. Darby v. Mathis, 212 Ga.App. 444(1), 441 S.E.2d 905 (1994). In making such a determination, it is proper to consider correspondence between the parties leading up to the contract. Romine, Inc. v. Savannah Steel Co., 117 Ga.App. 353(1), 160 S.E.2d 659 (1968). If the intentions of the parties differ and the meaning placed on the contract by one party is known to the other party at the time of execution, such construction will control. OCGA § 13-2-4. See also Florence v. State Highway Bd., 57 Ga.App. 752, 196 S.E. 86 (1938).
Applying these rules to the 1990 consent judgment, we find no error in the trial court's construction. First, the plain and unambiguous language of Paragraph 2 of the 1990 consent judgment refers only to reducing the amount of Mountain Lakes' indebtedness secured by the deed on Lothridge's farm land; there is nothing...
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