By: E. Carson Lange & Gabriel Crafton
Promissory notes are often renewed and extended without the express written consent of, or even notice to, the guarantors of the note. A guarantor, faced with changing circumstances and wishing to cut off his liability under a promissory note that has been renewed and extended beyond its initial maturity date, may decide to revoke or terminate his guaranty by notice to the bank. Under Florida law, however, where the terms of the guaranty contemplate renewals and extensions, a guarantor remains responsible for renewal notes entered even years after revocation. Renewal notes do not create “new” obligations or otherwise cut off liability.
In Broward Bank v. Southeastern X-Ray Corp., 463 So. 2d 440 (Fla.4th DCA 1985), the Court held that a guarantor was liable for indebtedness under a renewal note entered after he had terminated his guaranty. In that case, a company executed a promissory note, and it president personally guaranteed the note. Subsequently, the bank and company entered three renewal notes to extend the time for payment of the original obligation. Before the third renewal note was executed, the guarantor notified the bank that he was no longer president of the company and requested that his name be removed as guarantor. The company later defaulted, and the bank sought to enforce the guaranty. The guarantor argued that each renewal note should be construed as evidencing payment in full of the prior loan and the making of a new loan, meaning that he was not party to, or responsible for, the new loan executed after his revocation letter. The Court adopted the reasoning of the Utah Supreme Court in Marking Systems, Inc. v. Interwest Film Corp., 567 P.2d 176 (Utah 1977), and held, “When a new bill or note is given in renewal of another bill or note, and the original is retained, the new bill or note operates as a suspension of the debt evidenced by the original, and is not a satisfaction of it until paid.” The Court noted that the guaranty contemplated future extensions, as well as that the renewals did not advance any new money.