*1 Natl. Ark. Collins. 5-2994 370 S. W. 2d
Opinion 3, 1963. delivered June [Rehearing September 9, 1963.] denied appellant. Butler, E. ap-
Brockman Brockman, db Levine Williams, & pellee. appellee brought Associate Justice. The Holt, Frank adjudi- action as foreclosure and, suit also, have Guaranty Agreement. Septem-
cated the terms of their On appellees, 1, 1960, ber M. Herbert Collins, Trustee, Paul Leird, C. Hamilton John Moses, Collins and John Col- Galloway, lins, Executor of the Estate of H. G. deceased, hereinafter rеferred to as Guarantors, filed a foreclosure suit on two Deeds of Trust executed D.W. Dorothy May, May. E. his wife, hereinafter referred to as These Deeds Trust secured two notes might for which sums the Guarantors become liаble on Guaranty May’s note of $29,662.36 to the Na- tional Bank of Eastern Arkansas, hereinafter referred party to as Bank. The Guarantors made the Bank a de- fendant and asked determine their any, as Guarantors, if to the Bаnk under the terms of Guaranty Agreement. The Bank filed answer and complaint seeking the Guaran- cross deficiency severally, *2 as a $2,265.52 and for tors, jointly Guaranty Agreement. it under terms of the owed admitting original May indebtedness аn filed an answer alleged indebted- that said of Bank and $29,662.36 the fully paid 29, record June ness was and satisfied of any May and in a indebtedness to Guarantors denied damages alleged complaint collusion claimed crоss the Guarantors and Bank. between Upon entered the Chancellor a trial of these issues against May and the a decree favor of Guarantors complaints. respective and cross Bank From this dismissed brings appeal and for re- Bank decree the finding urges (1) in that the Court erred versal incurred of fees and court costs reasonableness May debt was not the Bank in its foreclosure of entering (2) in not and the Court erred before Court against for the defi- the Bank Guarantors judgment ciency requiring of and $2,265.52 in the amount proceeds of of the fore- said amount out securing of Trust to Guarantors closure of Deed Guaranty. contemplated dеficiency under the con- We points together. these sider May Bank executed note to the 23, 1954,
On June mortgage of to secure his loan $29,662.36. and a chattel July Guarantors executed and delivered 5, On Guaranty Agreemеnt Bank a to the effect to the severally, Guarantors, and jointly May prompt to the Bank. note Guaranty (4) follows: reads as recourse HOWEVER, before “PROVIDED to them Guarantors, the shall first have mailed days preceding than ten notice at Little Rock less good, not made shall and, if the default be default, pledge mortgage(s) and the said foreclose the thereafter assignment Television, Inc., Radio and of American any, shall the life insurаnce if indebtedness, proceeds, apply all reasonable costs the net hereby guaran- expenses, indebtedness which thereupon pay upon teed, shall de- Guarantors remaining.” mand balance Mаy protracted defaulted on his liti note and after gation, beginning in on was decreed liable upheld by which was in the case note, Arkansas, National Bank 231 Ark. S. W. 2d 697. On 29, 1960, June the Bank collected its judgment in full. This consisted the sum of judgment represented original $20,055.21which the balance of the plus indebtedness the accrued interest to the date of collection. judgment also included $1,745.52, plus which was when first rendered 10% *3 interest until collection, thereon the dаte of as an attor ney’s fee. The in judgment decree that case was, accordingly, paid by marked in full the Bank on June 29, attorney the the
Thereafter for Bank his rendered legal statement to the Bank for $4,011.04 services litigation against May. in this extended and successful paid Bank The fee. The Bank now contends that applying $1,745.52 the as a credit to $4,011.04 the deficiency payment left a fee, there is in of the the in- May debtedness of Bank thе in amount the of $2,265.52 and that is it entitled to recover this as amount a defi- ciency from its Guarantors since Bank the had recovered May permit express from all the law would under the terms of note to the Bank. The Bank made demand upon the Guarantors for this sum on the basis such deficiency should be construed as reasonable costs meaning and within (4). the of We agree with the observation the Trial Court in its opinion charges by attorney that written the made the to his the fair client, was and reasonable. We agree with Court that must also the the balance the attorney’s by to him fee the Bank in the sum of Guaranty not enforceable item of $2,262.52 parties Agreement. do not think We intended such a deficiency agreement. in agree to be included We following pertinent language with in the learned opinion: written Trial Court’s “It is the of the Court by deficiency in mind the arise reason that would bring at amount assets to sufficient failure pay and costs of the interest debt, foreclosure sale to up guarantors such make defi- Bank and that the should deficiency ciency. alleged case at bar However, guarantors did made nor was demand arise had been sat- thereof until after appear in this record It does not isfied the Bank. was [which but in of the case of No. 31765 the record May appealed v. Nationаl to this and affirmed supra] Arkansas, the Bank had Bank whereby supplemental agreement D. with W. pay eight per Bank and
would Bank cent. Both the May recognized that the per in that case Bank However,
more six cent. еight per foreclosed but did not ask for cent on the note per with six interest. Had the contented itself cent eight per per annum interest asserted claim of cent its period years its for the ings and eleven months оf deal- five May, right it do, had a would have with as it considerably than the $2,265.52 amounted to more precedent claimed here. excess fees prepared No. 31765-—-whichwas the Bank’s cause *4 opposing being cоunsel and counsel before submitted — eight signed by specifically per waived its the Court only per per asked cent cent annum interest and six interest.” determining think it is
In the intent of the we significant note to the which Guar- Agreement sрecifically provided anty for attor- secured, ney’s by law the services fee as authorized the event attorney necessary to collect note. The an became provision expressly include this in the fit to saw dealing May. If with the Bank had intended in its note expected attor- or to hold the Guarantors liable ney’s by other than fee, excess fee or Guaranty Agreement, think we note, the terms so note, within two weeks havе executed provided using sweep- expressly instead the broad and Paragraph (4). ing language of guarantor
A
is
entitled
a strict construction of
undertaking
beyond
Ms
and cannot be held liable
City
strict terms of his contraсt.
Helena v. Arkansas
Co.,
Utilities
“ guaranty A has been defined as a collateral undertaking person one to answer for aof Guaranty, p. guar- C.J.S., another. 38 § 1, debt of 1129. A undertaking strictly is to have his antor entitled con- Guaranty, pp. guar- 1182,1183. A C.J.S., § strued. 38 beyond antor cannot be held liable the strict terms of ’’ contract. Guaranty, p. (Supp. 1962) Jur., § In 24 Am. we find: surety, guarantor,
“A is a like favorite of the law, liability by implication is not to be and Ms extended beyond express limits оr terms or instrument, plain its intent.” p. § 73, 922, reads as follows:
Further, * * “* surety, guarantor Like is liable principal and to the extent that event Ms is liable.” on indebtedness to the Bank was satisfied record the Bank in these words: Judgment having and decrеe “This been in full it hereby Upon pay- and cancelled satisfied 6-29-60.” discharge this judgment ment in full of we think the May, debtor, relieved the Guarantors from any further case. In 24 Am. Jur., Guar- anty, p. language: find this 923, we § 74, principal obligation pay-
“If is nо there debt guaranteed, ment of which is there can be no contract of obligation guaranty; hence, if the of the debtor has *5 guarantor’s obliga- or satisfied, otherwise the been tion is terminated.” liability
We hold the of the Guarantors in this case is co-extensive with and does not exceed that of the principal principal and when fully the debtor was re- discharged the from his indebtedness leased thereupon, was ex- the the Guаrantors tinguished also. refusing in to erred that the contends charged premiums him insurance
allow credit various Upon record of the him review to the Guarantors. agree- we that under terms are right the insurance had a to advance the Guarantors ment premiums mortgaged property. we find Therefore, on the in no merit this contention. all
Finding re- decree is affirmed error, no spects. JJ., dissent. Bose Smith
George Johnson, (dissenting). seem to Thеre George Smith, Bose appeal. questions the bank’s two real obligation guarantors more of the First, was principal I think it than that of the debtors? extensive preamble agreement guaranty recites was. The to guar- undersigned [guarantors] that “the are desirous anteeing against as a of such indebt- the Bank loss result give compels bank to edness.” days filing guarantors notice foreclosure ten before existing good within that If the defаult is made suit. necessary it foreclose, becomes for the to time, for all the costs and themselves liable reasonable make principal of the suit. The debtors did against to bank loss undertake either expenses (other costs) liable for the than to become guarantor’s obligation unques- litigation. was Hence the tionably greater wife. reasoning suggestion that the
This also answers fully discharged duty Mays paid guarantors was when the In a them. foreclosure expense apt greater part suit the of the creditor’s obtaining a judgment in the mere but be incurred not until It was not judgment. collection of that mortga- from the debt bank collected gоrs position determine the full amount it that was *6 expenses
of the for which were liable under their contract.
Secondly, Paragraph guaranty agreement phrase expenses” was the costs and in- “reasonable attorney’s parties tended to include I think fees? so. The talking сertainly litigation were about knew attorney’s expense in- fees are an to unavoidable bringing curred guarantors a bank in a foreclosure suit. The indulgence they sought obtained promising to the bank loss. speciаl phrase,
In
the absence
circumstances this
expenses,
uniformly interpreted
costs and
been
has
pointed
include counsel fees. As the
Utah court
out
Munsey,
Davidson v.
29 Utah
80 Pac.
181,
743, the term
meaning;
“costs” has a wеll-understood
so the use of the
“expenses”
something
additional word
must mean
other
Attorney’s
court
recoverable
costs.
un
are an
fees
incident to a
avoidable
lawsuit and
fall
therefore
within
litigation
being
costs
the
contemplated
provided
Among many
for.
other cases
holding
expenses”
that “costs and
include
Keystone
Holding
Realty
are In
fees
re
Co., 3rd Cir.,
Security-First
F.
1003;
2d
Fumiko Mitsuuchi v.
Natl.
App.
Bank, 103 Cal.
2d
229 P.
214,
376;
2d
State
use Mills Birkins,
32 Del.
39,
Ch.