Feldstein is the guarantor of a loan of $125,000 made by the Small Business Administration to the now bankrupt Ace Offset Printing Co., Inc. Bankruptcy was a condition maturing the note and the guaranty.

The guaranty was about as unconditional as one could make it. In pertinent part, it reads as follows:

In due time, the government sought judgment against Feldstein, and a motion for summary judgment was granted against him.

Before summary judgment was granted Feldstein sought to amend his answer to assert defenses:

1. Unilateral mistake.

a. In that when Feldstein executed the guaranty of the loan from SBA to Ace he was acting under the mistaken belief that the principal obligation was validly secured by Ace’s fixtures and equipment worth over $200,000;

b. That the SBA knew or should have known that the principal obligation was not validly secured;

c. That the principal obligation was not validly secured and that Feldstein would not have executed the guaranty had he known that the loan was in fact unsecured.

2. Mutual mistake in that both parties thought the machinery and equipment secured the principal obligation when, in fact, the obligation was not so secured.

Leave to file the amended answer was denied. If this was error, the granting of the summary judgment was error and we should reverse. This we do.

If, under the amended answer, Feldstein could have possibly proved a defense, the proposed amendment was timely enough and should have been granted. We do not say he would have prevailed, but it is conceivable.

Further, in his first answer and in the proposed amended answer, Feldstein asserts as a defense that SBA intentionally released some of the collateral and wilfully failed to use due care for the preservation of it.

In connection with the allegations of mistake, we find no copy of the chattel mortgage. Naturally, we wonder why. The Ace Company note and the guaranty of Feldstein are dated February 12, 1959. Wasn’t the chattel mortgage dated and executed contemporaneously with the other documents? Wasn’t the mortgage, as far as it had gone, good so far? Are Feldstein’s allegations of contemporary mistake really something that occurred after execution which prevented the lien from coming into existence?

At the threshold, we are confronted with the question of whether California state law applies or whether the federal court should fashion a body of law on federal loan instruments. But we pass over it, because we think the result should be the same.

Feldstein should recognize that the law of rescission for mistake is always much more favorable when the status quo of the parties can be restored. Here such a thing is improbable.

After reading the affidavits and counter affidavits on the motion for summary judgment, we still find the situation a little fuzzy as to just what were the circumstances surrounding the release from the mortgage of collateral after the execution of the mortgage. We have seen nothing yet to indicate any wilfulness in the release, but we think Feldstein was entitled to try to prove on a trial something on his allegation of wilfulness.

Also, while the facts of the alleged mistake and the law thereon may come to nothing for him, we think he was entitled to develop that. See Restatement of Contracts, Sections 500-510, 480-487.

The judgment is vacated for proceedings consistent with this opinion.