borrowers sued the defendants. The latter two suits were ultimately resolved through a settlement reached in May 1989. As part of that settlement, the defendants forfeited any right of subrogation they might have against the borrowers under the Guaranty Agreement. The defendants assert that the Trustbank was made aware of the terms of their settlement with the borrowers in later settlement discussions between the defendants and the Trustbank.
On June 22, 1990, the Trustbank entered into a settlement agreement with the new borrowers (the "Settlement Agreement"). The Settlement Agreement includes a confessed judgment promissory note and release of the new borrowers. However, the agreement also states "Trustbank expressly reserves. . . any and all claims it has against Bildman" and "nothing contained herein shall affect in any way whatsoever Bildman's obligations to Trustbank under the Guaranty." Defs. Ex. J, at 2-3.
The Bildmans have raised several defenses to this action for breach of the Guaranty Agreement, but their arguments all stem from their assertion that the Settlement Agreement between the Trustbank and the borrowers constituted an accord and satisfaction which discharged their obligation as guarantors. Even assuming that the Settlement Agreement represents an accord and satisfaction of the underlying loan, the Bildmans are precluded from raising the defense of accord and satisfaction by the terms of the guaranty agreement. See United States v. Krochmal, 318 F. Supp. 148, 151 (D. Md. 1970) ("The language of the 'Guaranty' amounted to a consent by the guarantors that the release of the principal debtor did not discharge the guarantors."). As part of that agreement, the defendants agreed to remain obligated as guarantors until the full amount of the loan had been repaid, "notwithstanding any act, omission or thing which might otherwise operate as a legal or equitable discharge of the Guarantor." Generally an accord and satisfaction of the underlying contract will discharge a guarantor. Woods-Tucker Leasing Corp. v. Kellum, 641 F.2d 210, 213 (5th Cir. 1981). Thus, this provision in the agreement specifically preserves the Bildmans' guaranty obligation even in the event that the borrowers should execute an accord and satisfaction with the lender.
The Court also rejects the defendants' assertion that the Settlement Agreement in this case constitutes an accord and satisfaction. "In order to effect an accord and satisfaction, . . . the parties must intend that the payments constitute an accord and satisfaction." Kellum, 641 F.2d at 214. In the Kellum case, the Fifth Circuit held that a settlement between the lender and borrower did not amount to an accord and satisfaction discharging the guarantor's obligations where the lender expressly reserved its rights against the guarantor in the settlement agreement. Id. The Court found that, in reserving its rights against the guarantor, the lender could not have intended its settlement with the borrower as an accord and satisfaction of the loan. This Court finds the Kellum decision controlling and, thus, holds that the Settlement Agreement in this case between the Trustbank and the borrowers did not constitute an accord and satisfaction.
The defendants also argue that the Trustbank breached its duty of good faith by entering into the Settlement Agreement with the borrowers with knowledge that the defendants would have no right of subrogation against the borrowers for amounts paid on the original obligation. Although, as discussed next, issue has been raised as to whether this and other affirmative defenses are available to the defendants, the Court nonetheless is unpersuaded by this argument. The defendants waived their rights of subrogation after the borrowers had defaulted and after the collateral for the loan had been foreclosed. If anyone acted to prejudice the defendants' rights against the borrowers, it was the defendants. The Court sees no reason why the Trustbank's ability to negotiate the collection of the loan according to the terms of its loan and guaranty agreements should be prejudiced by the defendants' voluntary waiver of their right to subrogation.
The plaintiff asserts that the other affirmative defenses raised by the defendants are insufficient to overcome the defendants' absolute and unconditional guaranty of the underlying loan. The Court agrees and, therefore, does not reach the question of whether the defenses are also barred by the D'Oench Duhme doctrine or 12 U.S.C. § 1823(e).
For the foregoing reasons, the Court denies the defendants' Motion for Summary Judgment and grants summary judgment in favor of the plaintiff.
JUDGMENT ORDER - June 25, 1991, Filed
In accordance with the Memorandum and Opinion filed in the above-captioned matter, judgment is entered in favor of the plaintiff, Resolution Trust Corporation.
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