By: Erin, Senior Attorney, De Novo Review
If a borrower defaults on a loan, and a demand letter is served on a guarantor to the loan, can the guarantor raise the same defenses as the borrower?
Yes. See Scarborough Assocs. v. Fin. Fed. Sav & Loan Ass’n of Dade Cnty., 647 So. 2d 1001 (Fla. 3d DCA 1994) (although the court ultimately found borrower and guarantor’s arguments devoid of merit, they were able to raise the same defenses); Tropical Jewelers, Inc. v. NationsBank, N.A., 781 So. 2d 381, 383 (Fla. 3d DCA 2000) (borrower and guarantors asserted counterclaim of wrongful repossession, failure to handle liquidation of collateral in commercially reasonable fashion, and gross mishandling of borrower’s property); Metro Bldg. Materials Corp. v. Rep. Nat’l Bank of Miami, 919 So. 2d 595, 598-99 (Fla. 3d DCA 2006) (discussing borrower and guarantor could bring same claim but attempt to assert their claims as affirmative defense or setoff to amounts claimed by lender was prohibited by statute of frauds); Fla. Pottery Stores of Panama City, Inc. v. Am. Nat’l Bank, 578 So. 2d 801 (Fla. 1st DCA 1991) (borrower and guarantors asserted counterclaims for lender’s alleged failure to obtain and fund business loan).
Also, based on the principle that [“g]enerally, a guarantor steps into the shoes of the original debtor and has all the same obligations and defenses of the original debtor,” Diaz v. Bell MicroProds.-Future Tech, Inc., 43 So. 3d 138, 140 (Fla. 3d DCA 2010), so long as the contract terms do not provide for any waiver of defenses the principal can bring, it seems a guarantor can raise the same defenses/claims as a borrower.
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Tag Words: loan, lender, borrower, guarantor, agreement, defenses, claims, release, novation, modification