Guaranties

"A person signing an instrument is presumed to be an accommodation party and has notice if the signature is an anomalous indorsement or is accompanied by words indicating that the signer is acting as surety or guarantor with respect to the obligation of another party to the instrument. If the instrument unambigiously states that the party is guaranteeing collection rather than payment, then the signer is only obligated to pay the amount due under certain circumstances. If the instrument does not contain such an unambigious statement then the signer is required to pay the amount due. NMSA §55-3-419

The process by which a secondary obligor who is a party to an instrument may be discharged can be found in NMSA §55-3-605.

A contract of indemnity; that is not signed by both spouses does not encumber the community property of either spouse. NMSA §40-3-4

"Guaranties are contracts, subject to the general rules regarding the application and construction of contracts; however, a guarantor is entitled to strict construction of the guaranty contract; the guarantor cannot be held liable beyond the strict terms or intent of the guaranty, and is considered “a favorite of the law.” WXI/Z Southwest Malls v. Mueller, 2005-NMCA-046, ¶¶ 10-12, 137 N.M. 343, 110 P.3d 1080 cert. denied, 137 N.M. 454, 112 P.3d 1111, 2005–NMCERT-004.

Guaranty agreements are classified as either absolute or conditional. When classified as conditional, a condition precedent must be met before the guarantor will be held liable. An absolute guaranty is an unconditional undertaking where the guarantor will be held liable immediately upon default of the principal. 14.

Waivers of suretyship defenses are generally enforced in New Mexico. See, e.g., American Bank of Commerce v. Covolo, 1975 -NMSC- 053, 88 N.M. 405, 410, 540 P.2d 1294, 1299 (1975). However, the defense of breach of the duty of good faith and reasonableness cannot be waived. Cadle Co. v. Wallach Concrete, Inc., 1995 -NMSC- 039, ¶ 17, 120 N.M. 56, 62, 897 P.2d 1104, 1110 (1995)."

Guaranties are subject to the requirements of all contracts, but will be strictly construed. Although the application of the community property statute to ordinary guaranties is not clear, some lenders, out of an abundance of caution, obtain the signatures of both spouses on all guaranties, at least to the extent necessary to encumber the community property and so much of the separate property as is necessary to assure repayment of the loan.