Guaranty agreements
Huntington National Bank v. Schneider
Date: Aug. 20, 2025
Issue: Whether a creditor has no duty to disclose facts that materially increase a surety’s risk.
Case Summary: In a 7-1 decision, the Supreme Court of Ohio reversed an Ohio appellate court decision that ruled a creditor has no duty to disclose facts that materially increase a surety’s risk.
Ray Schneider refinanced a $75 million portfolio of senior living facilities for his business partner. Schneider signed a guaranty agreement with Huntington National Bank. After the business partner defaulted, Huntington sued Schneider to enforce the guarantee of the loan. In November 2022, the Court of Common Pleas of Hamilton County Ohio granted Huntington’s motion for summary judgment. The court determined Schneider waived any defenses available to him in the agreements. Additionally, the court found that Huntington might have known important information that increased Schneider’s risk. Still, Schneider could not use this as a defense because he was only a guarantor, not the main borrower.
On appeal, the First Appellate District reversed, interpreting the agreement to create a surety agreement. Unlike a guaranty relationship, a bank owes more duties to the obligor in a surety relationship. According to the First District, Huntington owed a duty to disclose all “red flags” about Schneider’s risks in taking on the debt. Huntington appealed the decision.
ABA filed a coalition amicus brief urging the Ohio Supreme Court to reverse the First Appellate District. ABA emphasized that the district court decision would significantly alter the lending industry by overturning longstanding precedent and industry practice, holding that guarantors who personally guarantee payments when due and payable are sureties.
Reversing the First District, the majority held that, under common law, Ohio does not impose a duty to disclose unknown facts that materially increase a contracting party’s risk unless a “special trust or confidence” exists. The majority underscored that, in ordinary arm’s-length business transactions, each party is presumed to have the opportunity to discover relevant facts available to others in similar positions. Consequently, a bank owes no fiduciary duty to a prospective borrower unless it knows of a special repose or trust.
In this case, the majority ruled that Huntington had no duty to disclose information about his business partner because Schneider could have discovered it on his own. The majority reasoned that Schneider and Huntington dealt at arm’s length, not through a relationship of special trust or confidence, so the bank carried no responsibility for his partner’s undisclosed financial risks.
Judge Jennifer Brunner concurred in part and dissented in part, criticizing the majority opinion as too expansive. While the majority concluded that a creditor never has a duty to disclose facts that materially increase a surety’s risk, Judge Brunner argued that a creditor does have this duty when the transaction involves an unsophisticated investor. She also disagreed with the Supreme Court of Ohio’s decision to reinstate the trial court’s summary judgment in favor of Huntington, stating that she would instead remand the case for further proceedings.
Bottom Line: The First District’s decision threatened to upend financing transactions in Ohio, so the Ohio Supreme Court’s ruling is a win for the banking industry. The Ohio Supreme Court did not rule, however, whether guarantors who guarantee payments “when due and payable” are considered sureties.
Document: Opinion
