Opinion
No. 70-109
Decided August 24, 1971.
Action on promissory note. Defendants, asserted as guarantors of note, appealed entry of judgment against them.
Affirmed
1. JUDGMENT — Prior Agreement — Releasing Guarantors — Declared Void — Res Judicata — Present Action. Where, in prior action, settlement agreement which would have released guarantors from their obligation on promissory notes was declared null and void, the trial court, in present action, was correct in determining that this earlier determination of invalidity of that agreement rendered that question res judicata in present action.
2. GUARANTY — Consideration — Detriment of Promisee — Reliance on Contract — Knowledge of Guarantor. Legal consideration which will support enforcement of guaranty contract may be in the form of a legal detriment incurred by promisee by reason of its reliance on a guaranty contract where guarantor knew or had reason to know that such detriment would result from the guaranty.
Error to the District Court of Logan County, Honorable William A. Black, Judge.
Francis A. Benedetti, for plaintiffs in error.
Sandhouse, Sandhouse and Wilson, Charles H. Sandhouse, for defendant in error.
The parties are before us in reverse of their trial court positions. We shall refer to Farmers Elevator Company as "Farmers"; to the other individual trial court defendants as the "guarantors"; and to the First National Bank of Fleming, Colorado, as the "Bank."
The Bank instituted this suit to recover principal and interest due on a promissory note executed by Farmers on March 8, 1966, in favor of the Bank. Judgment was entered against Farmers for the amount so claimed and the correctness of that judgment is admitted here.
Challenged in this appeal is the validity of the judgment which was entered against those of the defendants who are asserted to be guarantors of Farmers' obligation on the note. Their asserted liability rests upon a continuing guaranty agreement which they executed in 1963. Under the terms of that agreement, all the guarantors agreed with the Bank to repay any monies which the Bank had theretofore or might thereafter loan to Farmers. In October of 1965, two of the guarantors executed a second guaranty agreement identical in its terms to the 1963 guaranty. At trial and in this appeal, the guarantors deny liability under the 1963 guaranty agreement on the principal grounds: (1) that their liability had been compromised and superseded by a written settlement agreement which was entered into on April 26, 1968, between the Bank and some of the guarantors, as well as other parties; (2) that the guaranty was invalid for want of consideration; and (3) that evidence as to the 1965 guaranty agreement precluded the Bank's right to pursue its rights under the 1963 guaranty. On these points we rule as follows:
I.
The compromise and settlement agreement of April 26, 1968, which was entered into in connection with prior litigation involving the Bank and some of the guarantors, as well as other parties, could not be raised as a bar to the obligations of the guarantors in this action.
[1] In a civil action prior to this suit, involving all of the parties to this action, the settlement agreement in question was expressly declared null and void by the District Court in and for Logan County. In the prior civil action, the guarantors were, in effect, released from the compromise obligations which they had incurred in lieu of their obligations under the guaranty involved in this suit. In the present action, the trial court ruled that it was bound by the prior judicial determination as to the legal effect of the settlement agreement. The trial court was correct in determining that the earlier judicial determination as the invalidity of the settlement agreement rendered that question res judicata in this proceeding. Newby v. Bock, 120 Colo. 454, 210 P.2d 985. Its ruling on this question is accordingly affirmed.
We do not agree with the guarantors' contention that the validity of the settlement agreement of April 26, 1968, was sustained by a decision in a prior action in the Logan County District Court different from the action referred to above, or with their contention that the validity of the agreement had been impliedly affirmed by opinion of the Colorado Supreme Court in the case of Farmers Elevator Co. v. Morgan, 172 Colo. 545, 474 P.2d 617, which opinion was rendered upon appeal of the previous action. It is obvious from the decision of the Supreme Court in that case that the only question reached was related to the effect of the settlement agreement upon joint tort-feasors, and that the validity or invalidity of the agreement was never at issue in that case.
II.
[2] We reject as well the guarantors' contentions that their guaranty agreement was unenforceable because there was no evidence that it was executed in exchange for a valid consideration. It is uncontroverted in this case that, following execution of the guaranty agreement, and in reliance upon it, the Bank did in fact loan funds to Farmers. As we have previously held, legal consideration may be in the form of a legal detriment incurred by the promissee by reason of its reliance on a guaranty contract where the guarantor knew or had reason to know that such detriment would result from the guaranty. Colorado State Bank v. Rothberg, 28 Colo. App. 422, 474 P.2d 634.
III.
We also hold that there is no support in the record for the guarantors' contention that the guaranty agreement of 1965, which was executed by only two of the guarantors, was given for the purpose of superseding the 1963 guaranty agreement. In their testimony, the two guarantors who executed the 1965 guaranty agreement expressly denied that they had any recollection of the 1965 agreement and the reasons or purposes for which it was executed.
IV.
As to the remaining matters raised in this appeal, which consist of a contention by the guarantors that the trial court should have heard evidence concerning obligations of Farmers to parties which were not the subject of this action, and a contention by the Bank that the trial court should have awarded attorneys' fees although the extension note which was sued had no provision for such fees, we find that they are without merit.
The judgment is affirmed.
CHIEF JUDGE SILVERSTEIN and JUDGE ENOCH concur.