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Meecorp Capital Markets, LLC v. Brauser

2009 WL 2392893 (U.S. Dist. Ct. D. N.J. 2009) (Unpublished)

GUARANTIES — In order to effect a discharge of a guarantor, an alteration or modification of the underlying agreement must either injure the guarantor or actually increase the guarantor’s risk or liability.

A commercial borrower signed a loan commitment and paid both an application fee and the first installment of a non-refundable commitment fee. In order to obtain the loan, the principal of the borrower signed the commitment and agreed to guaranty payment of the remaining balance of the commitment fee. After the date the guarantor signed the commitment, the lender suggested that the borrower agree to permit alternative collateral to replace the collateral that borrower had originally promised to provide. When the loan did not close, the borrower requested that the lender refund the fees paid by the borrower to that point. The lender responded by sending a letter requesting that the guarantor pay the balance of the loan commitment fee. When the guarantor refused to pay, the lender alleged that both the borrower and guarantor had breached the contract for failing to comply with the terms of the commitment.

The United States District Court held that because: (a) the principal guaranteed the loan; (b) the obligations and terms of the loan were present when the principal executed the loan commitment; (c) the principal defaulted on the loan commitment; (d) the lender relied on the principal in extending the loan commitment; (e) the lender made a written demand for payment; and (f) the principal failed to pay the balance of the commitment fee upon written request to do so, the principal was individually liable for the balance of the loan commitment fee. It also rejected the principal’s contention that the lender modified the underlying agreement which affected a discharge of the guarantor. It noted that in order to discharge such obligation, the modification must either injure the guarantor or increase the guarantor’s risk of liability. Neither was the case in the instant matter. The Court ruled here that the obligations remained largely the same throughout the negotiations between the parties. It found that, although alternative collateral was permitted but not required, the contract remained the same. Thus, it concluded that the principal was individually liable for the balance of the commitment fee.


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