OPINION
In this appeal, the United States asks us to overturn the District Court’s decision and thereby enforce the promissory note executed by defendant Little Joe Trawlers, Inc. and guaranteed by defendants Enrique and Concha Salinas (Guarantors). After agreed proceedings before a magistrate, the District Court, adopting the magistrate’s recommendation, granted Guarantors summаry judgment. This was done on the ground that the United States failed to give Guarantors notice of intent to accelerate the maturity of the note. The judgment of the District Court was further grounded on the magistrate’s ruling that the waiver of rights in the guaranty contract was not sufficiently specific to effect a waiver of the right to receive notice of intent to acceleratе. We reverse the judgment of the District Court and hold that notice of intent to accelerate is not required to be given to a guarantor as opposed to a maker of an installment note. We further hold that the terms of the guaranty contract were so broad that Guarantors should be required to make good on their guarantee even if the right to notice did exist, аnd even if there was no specific waiver of this right in the contract. We therefore reverse the judgment of the District Court and remand for further proceedings consistent with this opinion.
MONEY TO LEND
In 1977, with the help of the United States government (acting through the National Oceanic and Atmospheric Administration), Little Joe Trawlers, Inc. obtained a loan from the First State Bank of Aransas Pass, Texаs (Bank). The money was used to purchase a fishing vessel. A lot of papers were executed. Little Joe executed a promissory note (“note one”) to the Bank, which was guaranteed by the United States pursuant to Title 11 of the Merchant Marine Act. 46 U.S.C. §§ 1271 et seq. Little Joe then signed an additional promissory note (“note two”) to the United States, agreeing to repay the government for any sums which the government would be required to pay the Bank on the loan (note one). 1 In response to the government’s demand that Little Joe obtain guarantors for the payment of “note two” in case Little Joe failed to honor its obligation, Enrique and Concha Salinas executed a contract of guaranty, thereby agreeing to serve as guarantors for “note two” which was held by the government.
Little Joe eventually defaulted on its loan from the Bank and the Bank called on the government to make good on its guarantee. The government paid off the loan in full to the Bank and demanded payment of “note two” by Little Joe and Guarantors. It is undisputed that the government, prior to acceleration of “note two”, did not give Little Joe or Guarantors notice of its intention to accelerate if the overdue payments were not made, and hence did not afford the opportunity for Little Joe or Guarantors to pay the past due installments.
THE GUARANTY AGREEMENT
In paragraph 1 of the guaranty agreement, the Salinases unconditionally guaranteed the payment of all sums stated in “note two” to bе payable to the government “regardless of whether [the Bank or the government] shall have taken any steps *1251 to enforce any rights against [Little Joe] or any other person to collect such sums, or any part thereof, and regardless of any other condition or contingency.”
The extremely broad agreement goes on to waive a number of rights, guaranteеing payment in virtually every conceivable situation. Paragraph 3 provided as follows:
3. The obligations, covenants, agreements and duties of the Guarantor under this Guaranty Agreement shall in no way be affected or impaired by reason of the happening from time to time of any of the following with respect to the Note or the Mortgage, although without notice or the further consent of the Guarantor:
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(c) the modification or amendment (whether material or otherwise) of any of the obligations of [Little Joe] or any of the Guarantor as set forth in either of such instruments;
(d) the doing or the omission of any of the acts referred to in either of such instruments;
(e) any failure, omission, or delay of [the Bank or the government] to enforce, assеrt, or exercise any right, power or remedy conferred on [the Bank or the government] in each of such instruments, or any action on the part of [the Bank or the government] granting indulgence or extension in any form whatsoever;
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(g) the release of [Little Joe] or the Guarantor or any of them from the performance or observance of any of the agreеments, covenants, terms or conditions contained in either of such instruments by the operation of the law.
The Salinases also agreed in paragraph 8 to be endorsers of the note. Paragraph 8 provided:
8. The signature of the Guarantor is, in addition to and not in limitation of the foregoing, intended as and to have the effect of an endorsement of the Note by thе Guarantor, who hereby waives presentment, demand of payment, protest and notice of nonpayment or dishon- or, and of protest of the Note and any and all other notices and demands whatsoever.
The trial court focused on this latter paragraph in determining that the guarantors had not “waived” their right to receive notice of intent to accеlerate because this right was not specifically mentioned in paragraph 8’s waiver language.
THE RIGHTS OF A GUARANTOR
The magistrate correctly found that the Salinases, as guarantors, occupied the status of primary obligors with respect to the note.
Hopkins v. First Nat. Bank at Brownsville,
The magistrate’s reasoning, adopted by the District Court, is at first glance appealing, but suffers from a faulty premise— that is, that guarantors, by virtue of their status as primary obligors, enjoy all the rights and privileges of the maker of a note. Texas law does not so provide and the proposition is simply not correct. Our analysis of guaranty law indicates that one of the maker’s rights which does not also belong to a guarantor is the right to receive notice of intent to accelerate.
Although the Texas Supreme Court stated in
Hopkins
that a guarantor of payment is primarily liable,
An analysis of the liability of the guarantor
vis-a-vis
the liability of the maker clearly indicates that a guarantor does
not
step into the maker’s shoes and thereby acquire all his rights and privileges.
See generally
Conner,
Enforcing Commercial Guaranties in Texas: Vanishing Limitations, Remaining Questions,
12 Tex.Tech.L.Rev. 785, 817-827 (1981). While the
extent
of a guarantor’s liability certainly does not exceed the maker’s underlying obligation, the actual
liability
of the guarantor may exist even when the maker himself is not liable on the note.
Hopkins,
A long line of Texas cases supplies the rule governing the liability of a guarantor
vis-a-vis
the liability of the maker. Generally, an unconditional guarantor is liable for payment even through the holder of the note cannot enforce the claim against the principal obligor (the maker),
unless
the claim against the principal obligor is void for illegality.
See, e.g., Houston Sash & Door Co. v. Heaner,
These cases demonstrate that a guarantor does not have the same rights and privileges as the maker of a note. It is a shоrt step, if indeed any step at all, from the principle that a guarantor may be liable even when the maker is not to our finding that a guarantor does not have all the rights and privileges of the maker. It is this finding, which is exactly the opposite to the premise on which the magistrate relied, that leads us to our ultimate conclusion that Texas law does not require that noticе of intent to accelerate be given to a guarantor. 3
*1253
Upon concluding that a guarantor does not have all the rights of a maker, it becomes necessary to examine exactly what rights a guarantor does or does not have. The Uniform Commercial Code expressly provides that a guarantor automatically waives presentment, notice of dishonor, and protest. Tex.Bus. & Com.Code Ann. § 3.416(e) (Vernon 1976).
See also
9 Tex. Jur.3d, Bills and Notes, § 242. Furthermore, it is settled Texas law that, as a condition precedent to a guarantor’s liability, notice of the maker’s default must be given to a
conditional
guarantor but not to an
absolute
guarantor.
Ray v. Spencer,
The parties in their briefs did not cite to any Texas case law dealing directly with the right of a guarantor to receive notice of intent to accelerate, and we were unable to find any. Howеver, we believe that the current status of Texas law regarding notice of dishonor and notice of default supports our conclusion that a guarantor is not entitled to notice of intent to accelerate. While the three notices are different, they are at least similar with respect to the benefits conferred on someone who has guaranteеd the payment of an installment note. Specifically, notice of the maker’s default on an installment would allow the guarantor an opportunity to cure the default. 4 This “opportunity to cure” is what Guarantors claim they should have been given in this case.
Because notice of default serves essentially the same purpose with regard to a guarantor as notice of intent to accelerate, and because Texas law does not require a guarantor to receive notice of default, a similar conclusion is justified with respect to a guarantor’s right to receive notice of intent to accelerate. The most recent commentary on Texas guaranty law is in accordance with our decision as it specifically states that a guarantor does not have the right to receive notice of intent to accelerate. See Conner, supra, 12 Tex.Tech.L. Rev. at 840. In our Erie role, we make no value judgments as to what Texas law ought to be; we hold only that Texas law as it currently exists does not require a guarantor to receive notice of intent to accelerate before he can be held liable for payment on the note. Therefore, the United States was under no obligation to notify Guarantors of its intent to accelerate the maturity of “note two”. If Guarantors desired to receive notice of intent to accelerate and an opportunity to cure the maker’s default, the contract of guaranty should have so provided.
WAIVING ALL RIGHTS GOODBYE
Even if Texаs law required a guarantor to receive notice of intent to accelerate, the guaranty contract in this case was so broad that Guarantors should *1254 be required to make good on their guarantee even in the absence of such notice. The decision below is faulty because its focus on the waiver clause in paragraph 8 of the guaranty is much too narrow — it completely neglects the other provisions in the guaranty. The guaranty contract, when read in its entirety, renders it unnecessary to go into a lengthy analysis of waiver law; Guarantors have bound themselves on the face of the instrument to pay the United States even in the absence of a specific waiver. In other words, the guaranty instrument is so broad that it swallows up any right Guarantors may have to escape liability because of insufficient notice of intent to accelerate, even if they had a right to such notice, and even if they did not technically “waive” their right to this notice.
We emphasize first that the rights of guarantors must be determined from the language of the contract.
United States v. R & D One Stop Records, Inc.,
In a nutshell, we hold that Texas law does not require a guarantor to receive notice of intent to accelerate as a precondition to his liability on an installment note. In addition, we conclude that the terms of the guaranty instrument here are so sweeping that Guarantors are obligated to make good on their guarantee regardless of our outcome on the first issue. Therefore, we reverse the judgment of the District Court and remand for further proceedings not inconsistent with this opiniоn.
REVERSED.
Notes
. The government argues in its brief that note two "sprang into life” when Little Joe defaulted on note one. However, an examination of the terms of note two indicates that Little Joe was to pay off note two by making the payments to the Bank on note one. Thus, note two was a “live” note from the start.
. We sound a warning to future litigants in contract suits where the United States is a party that federal law governs the rights and duties of the United States on commercial paper.
Clearfield Trust Co. v. United States,
. The guaranty contract also contained an endorsement provision. Endorsers are only sec *1253 ondarily liable and as such have even less of an argument for receiving notice of intent to accelerate. However, in the event that an endorser also guarantees payment, his liability becomes primary, like that of a guarantor. Official Comment to Tex.Bus. & Com.Code Ann. § 3.416 (Vernon 1976); 9 Tex.Jur.3d, Bills and Notes, § 242. Thus, our discussion focuses on whether a guarantor has the right to receive notice of intent to accelerate. However, the fact that Guarantors also endorsed the note is some indication that the pаrties to the contract did not envision a situation where Guarantors would have all the rights of a maker.
. This is the reason given by one court for requiring that notice of the maker’s default on an installment note should be given to an endorser (as opposed to a guarantor) — i.e, so he can assume the periodic payments instead of being confronted with the entire unрaid obligation.
First National Bank of Ceredo
v.
Linn,
. Although we focus on paragraph 3(g) because we believe it constitutes Guarantors’ broadest undertaking, a glance at a few of the other provisions in paragraph 3 reveals the sweeping nature of the guaranty contract. Subsection (c) allows the government to materially modify or amend any of Guarantors' obligations without notice to or further consent of Guarantors. Subsection (d) and (e) of paragraph 3 essentially constitute an undertaking by Guarantor to perform no matter what the government fails to do. This guaranty is as absolute and unconditional as a guaranty can be. The United States sought a guarantor who, no matter what the circumstances, would pay off “note two” if the United States was callеd on to pay "note one". The government found such a guarantor in the Salinases.
. In O
'Haver,
the guarantors consented to liability notwithstanding "the release of the Borrower from performance or observance of any of the agreements, covenants, terms or conditions contained in [the Agreement and the Mortgage] by operation of law ...”