Text Box: January 2007 Text Box: Page # Text Box: What can be learned from this case is that Nike could have avoided the challenge of lack of personal jurisdiction if it had included a forum selection clause in its credit agreement. The Court noted that forum selection clauses are prima facie enforceable and will only be disregarded if the enforcement is unfair and unreasonable. In this case, the forum selection provision was only included in customer invoices, which are not signed by the debtor or guarantor. This case is cited as Nike USA v. Pro Sports Wear, Inc. 145 P.3rd 321 (2006). Guaranty Does Not Extend To Certain Changes Made By Bank Without The Guarantor’s Consent The Ohio Court of Appeals recently decided that a personal guaranty of a promissory note does not extend to certain changes or alterations made without the consent of the guarantor, despite a general provision allowing the lender to alter or modify the note without the guarantor’s consent. In 1999, Bank One, N.A. extended a $35,000 line of credit to PIC Photo Finish, Inc. PIC executed a promissory note in 1999 guaranteed by Mark and Georgiann Smith. The Smiths signed the note individually as guarantors. The 1999 Promissory Note contained a provision that each guarantor authorized Bank One “to alter, compromise, renew, extend, accelerate, or otherwise change at one or more times the time for payment or other terms of the Note, including increases and decreases in the rate of interest of the Note, and to grant repeated extensions which may be for longer than the original Note term…without notice or demand and without releasing Guarantor’s liability under the guaranty.” In 2003, PIC executed a second promissory note in the amount of $65,000 that expressly declared that it was a renewal of the 1999 Promissory Note. The 2003 Promissory Note was not signed by the Smiths individually as guarantors. PIC subsequently defaulted on both notes and Bank One filed suit. The trial court held that the Smiths were liable as to the extent of money owed under the 1999 Promissory Note but not the additional obligations evidenced by the 2003 Promissory Note. Bank One appealed the decision that the Smiths did not guaranty the 2003 Promissory Note. The Court of Appeals noted that while the 2003 Promissory Note was a renewal of the 1999 Promissory Note, the declaration contained in the 2003 Promissory Note was not binding upon the Smiths because they did not sign it as guarantors. Accordingly, the issue on appeal was whether an increase in the principal obligation of the 1999 Promissory Note was included in the scope of the alterations that the Bank could unilaterally make without the Smith’s consent. The Court held that an increase in the principal obligation was not something the Bank could do without the express consent of the Smiths as guarantors, even with the guarantor’s consent to modifications set forth in the 1999 Promissory Note. Thus, the Smith’s guaranty was limited to the original principal amount of $35,000. This case highlights the importance of ensuring that all guarantors expressly reaffirm their obligations arising under their guaranty and that they consent to any modification of a promissory note, even where there is a general provision in the loan documents to allow for modification without the guarantor’s consent. This case is cited as Bank One, N.A. v. PIC Photo Finish, Inc., 2006-Ohio-5308.