Vidimos, Inc. v. Vidimos

Citations: 456 N.E.2d 455; 1983 Ind. App. LEXIS 3600Docket: 3-982A249

Court: Indiana Court of Appeals; November 23, 1983; Indiana; State Appellate Court

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A certified interlocutory appeal was filed in the case of Vidimos, Inc. v. Robert J. Vidimos, concerning financial disputes within a family-owned corporation and its bank. The case arises from actions taken by Vidimos, Inc., an Indiana corporation owned by Antoinette S. Vidimos and her three sons, with Robert Vidimos serving as president until 1977. The corporation secured a $465,000 loan from First National Bank of East Chicago, backed by a mortgage on its property. In 1974, the Bank required the shareholders to guarantee the corporation's debts to continue financing and later mandated that any debts owed by the corporation to the shareholders be subordinated to the Bank's claims.

The mortgage prohibited selling any part of the mortgaged property without Bank consent and required all income from the property to be used for debt repayment. In 1979, the corporation sold a portion of the property and failed to apply the proceeds to the debt, actions which Robert Vidimos contested. The corporation also violated provisions of the secured note by paying dividends, issuing excessive bonuses, and making high capital expenditures without the Bank's written consent, which Robert also opposed.

In response, Robert filed a complaint in May 1981 seeking a declaratory judgment, damages, a receiver's appointment, and an accounting, claiming the violations terminated the guaranty and subordination agreement he had signed. The trial court dismissed Alfred, Francis, and Antoinette Vidimos from the case and also rejected Robert's requests for an accounting and receiver. However, it granted partial summary judgment, stating that the continuing guaranty lacked a method for revocation and bound the guarantor for life, which was deemed contrary to public policy.

Robert Vidimos initiated a lawsuit on May 15, 1981, effectively revoking his continuing guaranty. The guaranty and subordination agreement applied only to loans made to the Corporation prior to that date; loans issued afterward were not covered. The court denied Vidimos, Inc.'s motion for summary judgment, citing genuine issues of fact regarding the Corporation's potential liability to Vidimos. The court's partial summary judgment was certified for interlocutory appeal, with Vidimos, Inc. claiming it was an error to find the guaranty revocable, arguing that it was intended to be irrevocable due to the context of its execution.

The trial court ruled that the guaranty was a continuing guaranty lacking a specified method of revocation, thus allowing for revocation through Vidimos' lawsuit. The Corporation contended this was incorrect, asserting that the guaranty was meant to be irrevocable given the anticipation of future credit extensions.

The legal principles surrounding continuing guaranties were clarified: a continuing guaranty is not limited to one transaction and remains effective until revoked or extinguished by law. While a continuing guaranty can involve obligations for both past and future transactions, the offer for future liability can be revoked by the guarantor without affecting past obligations. This revocation right exists even in the absence of explicit terms in the guaranty agreement. Ultimately, the court confirmed that Vidimos' continuing guaranty was revocable and that he could withdraw his future liability offer, which did not affect existing binding contracts.

A continuing guaranty offer is revocable without 'continuing consideration' that the guarantor does not renounce. The trial court correctly determined that the guaranty was revocable and was revoked upon the filing of a complaint on May 15, 1981. This revocation does not impact any liability that accrued prior to that date. The Corporation contended the court erred in ruling the guaranty and subordination agreement unenforceable due to public policy concerns; however, the court's decision need not be analyzed further if the summary judgment was correct for any reason. The court affirmed the trial court's judgment, concluding that the continuing guaranty was revocable under Indiana law, thus sidestepping the public policy issue. The guaranty stipulated that the undersigned unconditionally guarantees all debts of the Borrower to the Bank, waiving various notices and rights related to the indebtedness. The guaranty binds the undersigned's heirs and assigns and remains effective regardless of collateral or security arrangements. Additionally, the complaint mentioned an alleged impairment of collateral that could discharge Robert Vidimos from the guaranty under specific Indiana code.