Shamburger v. Union Bank of Benton, CA

Decision Date25 May 1983
Docket NumberNo. CA,CA
Citation8 Ark.App. 259,650 S.W.2d 596
PartiesB.F. SHAMBURGER, Appellant, v. The UNION BANK OF BENTON, Appellee. 82-356.
CourtArkansas Court of Appeals

R.J. Brown, P.A. by Lisa A. Kelly, Little Rock, for appellant.

Boswell & Smith by Floyd Clardy, Bryant, for appellee.

CLONINGER, Judge.

This case involves the construction of a guaranty agreement. Appellee, The Union Bank of Benton, made a loan to Mr. and Mrs. James A. Croom, the principal obligors. The promissory note was dated June 30, 1973, in the amount of $10,000 and was due December 17, 1973. The loan was secured by a buy-back agreement with appellant, B.F. Shamburger and W.A. Northern. When the buy-back agreement expired, an extension of the promissory note was entered into on September 5, 1974. On the same date, Union Bank sought and obtained from Mr. Shamburger a guaranty agreement. This guaranty agreement was entered into on the same day that the extension of the promissory note was signed.

The Crooms made several payments on the note after the extension and guaranty were signed but eventually defaulted. Suit was brought against the Crooms and after execution and garnishment proceedings were unsuccessful, this present lawsuit was filed against Shamburger as guarantor of the note. From a judgment in favor of Union Bank, Shamburger now brings this appeal.

His first point for reversal is that the trial court erred in granting judgment against Mr. Shamburger because the guaranty agreement was invalid for lack of consideration. Mr. Shamburger argues that at the time he entered into the guaranty agreement, he had sold all of his interest in King's Enterprises. The underlying obligation created by Mr. Croom in 1973 was to finance the purchase of 5,000 shares of stock in King's Enterprises. At that time, Mr. Shamburger was one of the shareholders in King's Enterprises. The $10,000 promissory note executed by Mr. and Mrs. Croom was secured originally by Croom's 5,000 shares of stock and by a re-purchase agreement entered into by Mr. Shamburger and Mr. Northern. The re-purchase agreement expired after six months. The bank then approached Mr. Shamburger about entering into the guaranty agreement. Appellant argues that the record fails to show any legitimate consideration or benefit derived by Mr. Shamburger in exchange for his signature on the Union Bank guaranty.

A guaranty contract may be supported by sufficient consideration so long as there is a benefit to a principal debtor or guarantor, or of a detriment to the guarantee. Wilson Brothers Lumber Company v. Furqueron, 204 Ark. 1064, 166 S.W.2d 1026 (1942). A promise to forbear a suit or an agreement to extend the time of a payment of a debt is a sufficient consideration. Wilson Brothers Lumber Company, supra.

In this case, the guaranty agreement and the agreement to extend the note bear the same date. There was testimony to indicate that the note was based on the guaranty agreement signed by Mr. Shamburger. Hence, we find evidence to support a finding that there was sufficient consideration to support the guaranty agreement.

Secondly, appellant argues that the principal obligors have not exhausted all their legal efforts as required in the guaranty agreement. Appellant sought to have his liability limited by expressly stating in the guaranty agreement that Union Bank should exhaust all legal remedies before seeking judgment against the guarantor. Union Bank still had possession of the 5,000 shares of stock in King's Enterprises as collateral for the note. Appellant argues that since Union Bank never attempted to sell the stock which it had possession of, it has not exhausted all the legal remedies available to it.

The rule in Arkansas with respect to an interpretation of a guaranty agreement is that the guarantor is entitled to have his undertaking strictly construed and he cannot be held liable beyond the strict terms of his contract. Lee v. Vaughn, 259 Ark. 424, 534 S.W.2d 221 (1976); National Bank of Eastern Arkansas v. Collins, 236 Ark. 822, 370 S.W.2d 91 (1963). Further, where a guarantor attaches a certain condition or conditions to his agreement, the failure of a creditor to strictly comply with any condition invalidates the guaranty. Lee v. Vaughn, supra.

Mr. Joe D. Powers, president of Union Bank of Benton, testified at the hearing that when the buy-back agreement expired, he talked with appellant and Mr. Northern at which time they wanted to substitute a new corporate buy-back agreement rather than an individual buy-back agreement. Mr. Powers testified he wouldn't accept the corporate buy-back agreement because he felt that the corporation had little net worth. Further he testified that, in the meantime, Mr. Croom's attorney paid approximately $3,000 on the loan. The attorney had received this money on behalf...

To continue reading

Request your trial
7 cases
  • First Nat. Bank of Crossett v. Griffin
    • United States
    • Arkansas Supreme Court
    • June 29, 1992
    ...drafted them. Barton v. Perryman, 265 Ark. 228, 577 S.W.2d 596 (1979). The Court of Appeals stated in B.F. Shamburger v. The Union Bank of Benton, 8 Ark.App. 259, 650 S.W.2d 596 (1983) that the rule in Arkansas with respect to an interpretation of a guaranty agreement is that the guarantor ......
  • Marsh v. National Bank of Commerce of El Dorado
    • United States
    • Arkansas Court of Appeals
    • January 29, 1992
    ...so long as there is a benefit to a principal debtor or guarantor, or a detriment to the guarantee. Shamburger v. Union Bank of Benton, 8 Ark.App. 259, 650 S.W.2d 596 (1983). A promise to forebear bringing suit or an agreement to extend the time for payment of a debt is sufficient considerat......
  • Montwood Corp. v. Hot Springs Theme Park Corp., 84-2008
    • United States
    • U.S. Court of Appeals — Eighth Circuit
    • June 28, 1985
    ...the release, continued to be obliged to pay. In the presence of such ambiguity, parol evidence is admissible. Shamburger v. Union Bank, 8 Ark.App. 259, 650 S.W.2d 596, 598 (1983). To expressly provide for the release of future rents does not equate with or create a non-release of back rents......
  • McCaleb v. National Bank of Commerce of Pine Bluff, CA
    • United States
    • Arkansas Court of Appeals
    • June 22, 1988
    ...study it and even have it examined by their attorney. Appellants rely heavily on the dissenting opinion in Shamburger v. Union Bank of Benton, 8 Ark.App. 259, 650 S.W.2d 596 (1983), in support of their position that when a guaranty contract is ambiguous, parol evidence is not admissible to ......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT