In an April 6, 2012 decision, the Alabama Supreme Court ruled that guarantors of a 1st mortgage note (but not the 2nd mortgage note for same property) were not liable for a consolidated mortgage note that combined the first and the second. This was despite the fact that their guarantee agreement included all “extensions, renewals or replacements” and included a waiver of all defenses to the original note. This is a remarkable decision from a court that has historically been very “bank friendly” in its decisions. To read the entire opinion, go to my website at www.deniselevans.com and click on the link in the “News” section of the home page.
To my non-lawyers out there, here’s the point: Most lawyers tell you:
- All bank documents are well written in favor of the bank, and there are no loopholes or escape hatches in there;
- The Alabama Supreme Court will bend over backwards to rule in favor of a bank; and
- No matter how strongly you believe you should not be liable on a promissory note or guaranty, you are just out of luck and will end up having to pay.
Those lawyers might be wrong. Before just giving up, ask your lawyer to read the decision in Eagerton v. Vision Bank, from the link on my website. The all-encompassing language the bank thought would protect them, did not. The Alabama Supreme Court seized on SEVERAL different problems in order to find in favor of the guarantor. I think there might be a new sheriff in town!