Ferdinand E. Scharff and Isabel Q. Scharff, Husband and Wife v. Bank of Hawaii, a Corporation

This appeal presents a unique set of circumstances. The appellants Scharff signed two instruments in favor of the appellee bank under which they guaranteed the repayment of loans made by the *162 bank to one Williams and his wife. 1 At the time the Scharffs signed the guaranties, the Williamses had applied for a loan in the amount of $2500. The Scharffs visited the bank, were shown a copy of the application for the $2500 loan, and were told by one Salas, the bank official concerned with the transaction, that the limit of their liability would be only $2500. The written agreements actually signed by the Scharffs, however, set no limit on their liability. Thereafter, without the knowledge of the Scharffs, the bank loaned additional money to the Williams-es. When the Williamses defaulted, the bank sued both the Williamses and the Scharffs for the full amount of the loans and prevailed. Only the Scharffs have pursued an appeal.

Appellants argue that the trial court erred in refusing to consider whether the written agreements, because of mutual mistake, 2 failed to express the real intention of the parties. The Guam Civil Code supports this contention, its section 1640, entitled…

(dissenting) :

The issues revolve around continuing guaranties signed by the Scharffs to assist Dora Williams and her husband, Richard R. Williams, get a loan or loans at the Bank of Hawaii in Guam. (Mrs. Williams is a sister of Mr. Scharff.) The Williamses later defaulted.

Unless there be some defense, the documents signed would clearly impale the Scharffs. But the answer of the Scharffs pleads deceit. It may be taken as a pleading of fraudulent representations by the bank as to the contents of the written documents. There is no basis in the pleadings or in the evidence received or tendered for mutual mistake and reformation.

I am confident Guam law would permit with parol evidence a defense, if proved, that one had been fraudulently misled as to the contents of a document that one signed. See Stock v. Meek, 35 Cal.2d 809 , 221 P.2d 15 (1950). The elements of fraud in a defense of fraud are the same as in an action for fraud and the standard is strict. Clar v. Board of Trade, 164 Cal.App.2d 636 , 331 P.2d 89 ; Maslow v. Maslow, 117 Cal.App.2d 237 , 255 P.2d 65 .

However, we have underlying here a short pre-trial order that creates confusion. First, it says, “The sole issue…

432 F.2d 160 Ferdinand E. SCHARFF and Isabel Q. Scharff, husband and wife, Appellants, v. BANK OF HAWAII, a corporation, Appellee. No. 22796. United States Court of Appeals, Ninth Circuit. Aug. 3, 1970. John J. Carniato (argued), Walnut Creek, Cal., Arriola, Bohn & Dierking, Agana, Guam, for appellants. David M. Shapiro (argued), Agana, Guam, for appellee. Before CHAMBERS and ELY, Circuit Judges, and LEVIN, District Judge. * ELY, Circuit Judge: 1 This appeal presents a unique set of circumstances. The appellants Scharff signed two instruments in favor of the appellee bank under which they guaranteed the repayment of loans made by the bank to one Williams and his wife. 1 At the time the Scharffs signed the guaranties, the Williamses had applied for a loan in the amount of $2500. The Scharffs visited the bank, were shown a copy of the application for the $2500 loan, and were told by one Salas, the bank official concerned with the transaction, that the limit of their liability would be only $2500. The written agreements actually signed by the Scharffs, however, set no limit on their liability. Thereafter, without the knowledge of the Scharffs, the bank loaned additional money to…