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.

The Court in Branch Banking & Trust Co. v. Hamilton Greens, LLC, 942 F. Supp. 2d 1290, 1302 (S.D. Fla. 2013), recently reached a similar result. There, a company executed a promissory note, and its manager executed a continuing and unconditional guaranty.  The company and manager subsequently entered an agreement whereby the manager would transfer his interest in the company in exchange for a release from the guaranty. The bank was notified of the agreement. Later, at the company’s request, the bank extended the maturity date of the original promissory note through a renewal promissory note, which by its terms replaced the original promissory note in its entirety. The maturity date was extended several more times through additional renewal promissory notes, each of which replaced the former promissory note in its entirety. When the company eventually defaulted, the bank argued that the guarantor remained responsible for the full amount due. The Court agreed, holding that the guarantor “remain[ed] liable on the guaranty notwithstanding that he was never contacted about the renewals, never executed new guaranties, and never consented to the loan renewals,” as well as had entered an agreement with the company releasing him as guarantor.

The underlying rationale for the rule espoused by these cases is that where a guaranty agreement provides consent to future renewals, creditors should not be required to either demand immediate payment or lose their security when a guarantor revokes his guaranty. It is important to note, however, that the outcome may differ where a renewal promissory note advances new money or makes signficant structural changes to the loan. In the cases cited above, the renewal promissory notes simply extended the maturity date of the debt.