Investment Service Co., an Oregon Corporation v. Allied Equities Corporation, a Nevada Corporation

This is a diversity action to recover $250,000 and interest from the guarantor of a loan. The loan was taken out by Gem Building Components, Ltd., and following Gem’s default on the note, the appellee, assignee of the note, filed suit against the appellant, guarantor. The note was dated November 30, 1970 and carried interest at 8% until April 3rd, 1972 and 10% thereafter “until paid.” Appellant pled an affirmative defense to the claim, alleging that the guarantee was void by reason of appellee’s failure to advise appellant of facts known by appellee and not known by appellant concerning Gem’s adverse financial condition when the guarantees were made.

At trial the parties stipulated that the jury could assume that plaintiff (appel-lee) had made out a prima facie case and could then go on to consider defendant’s (appellant’s) affirmative defense.

The parties have agreed that Oregon law governs in this case and that Oregon law defers to the Restatement of the Law of Security, Section 124(1) of which provides:

Special interrogatories were submitted to the jury and it returned the following answers:

1. Did the United States National Bank of Oregon have knowledge of facts…