Upon Reargument.
Dell, Chief Justice.
This is an action to have two promissory notes executed by the plaintiffs and two real estate mortgages securing said notes adjudged null and void. Defendant filed a counterclaim to recover under an alleged guaranty.
In March 1955 the plaintiffs organized a corporation known as Northwest Recapping, Inc., for the purpose of engaging in the business of recapping automobile and truck tires. On March 25, 1955, the plaintiff Melbourne Dahmes was issued 100 shares of the corporation’s stock for which he paid $1,000. No other stock was issued. Subsequently Dahmes loaned personal funds to the corporation totaling $36,297.84, [28]*28receiving the corporation’s notes for part of this amount. At all pertinent times Dahmes was president of the corporation and his wife, Leona J. Dahmes, was the secretary-treasurer.
On May 28, 1956, Northwest Recapping, Inc., (hereinafter referred to as the corporation) and the defendant entered into an Accounts Receivable Financing Agreement under which instrument defendant agreed to make loans to said corporation from time to time, secured by an assignment of the corporation’s accounts receivable. As further security for said loans the corporation, on the same day, executed a chattel mortgage to the defendant on all of its tools and equipment. At the same time plaintiffs individually executed an instrument designated as a “Guaranty,” which provided in part:
“In order to induce Industrial Credit Company, a Minnesota corporation, to enter into financing agreements with and to make loans, secured by accounts receivable, to Northwest Recapping, Inc., a Minnesota corporation, and in consideration thereof and of other good and valuable considerations * * * the undersigned [plaintiffs] and each of them jointly and severally guarantee the due payment and performance by said Northwest Recapping, Inc., of all monies to be paid, and all things to be done, pursuant to each and every condition and covenant contained in said agreement, * * *.
“The undersigned hereby indemnifies the Industrial Credit Company, and agrees to hold it harmless against, all obligations, demand, losses, or liabilities, by whomsoever asserted, suffered, incurred or paid by Industrial Credit Company as a result of, or in any way arising out of, or following, or consequential to, transactions under the foregoing agreement.
“The undersigned * * * defer taking payment from Northwest Recapping, Inc., on its obligations to the undersigned without written approval from Industrial Credit Company.”
In accordance with said instrument, defendant from time to time. advanced money to the corporation equivalent to 80 percent of the latter’s assigned accounts receivable. In each of such transactions the corporation executed a note to defendant for the sum advanced. Defend[29]*29ant concedes that all of said notes provide for interest at a rate in excess of 8 percent per annum.1
On August 30, 1956, pursuant to L. 1947, c. 590, the corporation entered into a Factor’s Lien Agreement with the defendant under which agreement the corporation gave the defendant a continuing lien upon all of its merchandise to secure loans made to it by the defendant.
On March 5, 1957, plaintiffs executed and delivered to the defendant the first of the two notes and mortgages here challenged. The note was for $4,000 and was secured by a mortgage on the plaintiffs’ homestead. It contained the following provision:
“This promissory note is given as additional collateral security to secure to Industrial Credit Company the payment, when due, of all indebtedness or obligations of Northwest Recapping, Inc., a Minnesota corporation, presently owing or hereinafter incurred to Industrial Credit Company. The amount due under this note shall be the amount stated hereinbefore or the total unpaid indebtedness of the Northwest Recapping, Inc. to Industrial Credit Company whichever is less.”
At that time the corporation was indebted to the defendant in the sum of $65,668.15. No money was advanced to plaintiffs on this note.
On August 19, 1957, plaintiffs executed and delivered to defendant the second of the notes and mortgages here involved. This note was in the sum of $35,000 and was likewise secured by mortgage on plaintiffs’ homestead. It contained the same provision as did the March 5, 1957, note. At that time the corporation was indebted to the defendant in the sum of $84,210.55. Both of the mortgages described were subject to a first mortgage in favor of Northwestern Federal Savings & Loan Association.
On September 9, 1957, a new Accounts Receivable Financing Agreement was entered into between the corporation and the defendant. Under this agreement the corporation agreed to assign to the defendant all of its accounts receivable, present and future, as security [30]*30for loans to be made to it by the defendant. On the same day a separate instrument was executed by the plaintiffs designated “Guaranty,” which contained the following provisions:
“In order to induce Industrial Credit Company, a Minnesota corporation hereinafter called Lender, to enter into financing agreements with, and to make loans to Northwest Recapping, Inc. * * * hereinafter called Borrower, and in consideration thereof * * * the undersigned * * * guarantee the due payment and performance by Borrower of all moneys to be paid, and all things to be done, pursuant to each and every condition and covenant contained in any such agreements, * * *.
“The undersigned hereby indemnifies Industrial Credit Company and agrees to hold it harmless against all obligations, demands, losses or liabilities * * * incurred or paid by Industrial Credit Company * * * arising out of or following or consequential to the making of any loans to Borrower and the taking of security therefor.
“The undersigned agree: * * * that their liability hereunder is direct and unconditional and may be enforced without requiring Lender first to resort to any other right, remedy or security, * * *.
“The undersigned waive: notice of the making of loans, the creation of indebtedness or of default and all other notices to which they might be entitled.” (Italics supplied.)
On the date of this agreement the corporation was indebted to the defendant in the sum of $104,838.50.
Subsequent to the agreement of September 9, 1957, the defendant continued to make loans to the corporation and the corporation continued to make payments upon its past indebtedness and also on the new loans. Such payments exceeded the sum of $104,838.50 due on September 9, 1957, so that the indebtedness remaining unpaid, for which the foreclosure proceedings on the two mortgages were later instituted, presumably was incurred after the September 9, 1957, agreement. As the defendant made its various loans to the corporation the corporation on each occasion executed its notes therefor and assigned its accounts receivable to secure the notes. All of the notes provided for interest in excess of 8 percent per annum.
[31]*31On March 4, 1958, the defendant instituted proceedings to foreclose its factor’s lien. At that time there was a remainder due the defendant of $82,757.73. On April 9, 1958, it foreclosed the chattel mortgage and, after the foreclosure sale, there was a remainder owing of $88,510.74. On June 25, 1958, it foreclosed the two real estate mortgages on plaintiffs’ homestead.
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Upon Reargument.
Dell, Chief Justice.
This is an action to have two promissory notes executed by the plaintiffs and two real estate mortgages securing said notes adjudged null and void. Defendant filed a counterclaim to recover under an alleged guaranty.
In March 1955 the plaintiffs organized a corporation known as Northwest Recapping, Inc., for the purpose of engaging in the business of recapping automobile and truck tires. On March 25, 1955, the plaintiff Melbourne Dahmes was issued 100 shares of the corporation’s stock for which he paid $1,000. No other stock was issued. Subsequently Dahmes loaned personal funds to the corporation totaling $36,297.84, [28]*28receiving the corporation’s notes for part of this amount. At all pertinent times Dahmes was president of the corporation and his wife, Leona J. Dahmes, was the secretary-treasurer.
On May 28, 1956, Northwest Recapping, Inc., (hereinafter referred to as the corporation) and the defendant entered into an Accounts Receivable Financing Agreement under which instrument defendant agreed to make loans to said corporation from time to time, secured by an assignment of the corporation’s accounts receivable. As further security for said loans the corporation, on the same day, executed a chattel mortgage to the defendant on all of its tools and equipment. At the same time plaintiffs individually executed an instrument designated as a “Guaranty,” which provided in part:
“In order to induce Industrial Credit Company, a Minnesota corporation, to enter into financing agreements with and to make loans, secured by accounts receivable, to Northwest Recapping, Inc., a Minnesota corporation, and in consideration thereof and of other good and valuable considerations * * * the undersigned [plaintiffs] and each of them jointly and severally guarantee the due payment and performance by said Northwest Recapping, Inc., of all monies to be paid, and all things to be done, pursuant to each and every condition and covenant contained in said agreement, * * *.
“The undersigned hereby indemnifies the Industrial Credit Company, and agrees to hold it harmless against, all obligations, demand, losses, or liabilities, by whomsoever asserted, suffered, incurred or paid by Industrial Credit Company as a result of, or in any way arising out of, or following, or consequential to, transactions under the foregoing agreement.
“The undersigned * * * defer taking payment from Northwest Recapping, Inc., on its obligations to the undersigned without written approval from Industrial Credit Company.”
In accordance with said instrument, defendant from time to time. advanced money to the corporation equivalent to 80 percent of the latter’s assigned accounts receivable. In each of such transactions the corporation executed a note to defendant for the sum advanced. Defend[29]*29ant concedes that all of said notes provide for interest at a rate in excess of 8 percent per annum.1
On August 30, 1956, pursuant to L. 1947, c. 590, the corporation entered into a Factor’s Lien Agreement with the defendant under which agreement the corporation gave the defendant a continuing lien upon all of its merchandise to secure loans made to it by the defendant.
On March 5, 1957, plaintiffs executed and delivered to the defendant the first of the two notes and mortgages here challenged. The note was for $4,000 and was secured by a mortgage on the plaintiffs’ homestead. It contained the following provision:
“This promissory note is given as additional collateral security to secure to Industrial Credit Company the payment, when due, of all indebtedness or obligations of Northwest Recapping, Inc., a Minnesota corporation, presently owing or hereinafter incurred to Industrial Credit Company. The amount due under this note shall be the amount stated hereinbefore or the total unpaid indebtedness of the Northwest Recapping, Inc. to Industrial Credit Company whichever is less.”
At that time the corporation was indebted to the defendant in the sum of $65,668.15. No money was advanced to plaintiffs on this note.
On August 19, 1957, plaintiffs executed and delivered to defendant the second of the notes and mortgages here involved. This note was in the sum of $35,000 and was likewise secured by mortgage on plaintiffs’ homestead. It contained the same provision as did the March 5, 1957, note. At that time the corporation was indebted to the defendant in the sum of $84,210.55. Both of the mortgages described were subject to a first mortgage in favor of Northwestern Federal Savings & Loan Association.
On September 9, 1957, a new Accounts Receivable Financing Agreement was entered into between the corporation and the defendant. Under this agreement the corporation agreed to assign to the defendant all of its accounts receivable, present and future, as security [30]*30for loans to be made to it by the defendant. On the same day a separate instrument was executed by the plaintiffs designated “Guaranty,” which contained the following provisions:
“In order to induce Industrial Credit Company, a Minnesota corporation hereinafter called Lender, to enter into financing agreements with, and to make loans to Northwest Recapping, Inc. * * * hereinafter called Borrower, and in consideration thereof * * * the undersigned * * * guarantee the due payment and performance by Borrower of all moneys to be paid, and all things to be done, pursuant to each and every condition and covenant contained in any such agreements, * * *.
“The undersigned hereby indemnifies Industrial Credit Company and agrees to hold it harmless against all obligations, demands, losses or liabilities * * * incurred or paid by Industrial Credit Company * * * arising out of or following or consequential to the making of any loans to Borrower and the taking of security therefor.
“The undersigned agree: * * * that their liability hereunder is direct and unconditional and may be enforced without requiring Lender first to resort to any other right, remedy or security, * * *.
“The undersigned waive: notice of the making of loans, the creation of indebtedness or of default and all other notices to which they might be entitled.” (Italics supplied.)
On the date of this agreement the corporation was indebted to the defendant in the sum of $104,838.50.
Subsequent to the agreement of September 9, 1957, the defendant continued to make loans to the corporation and the corporation continued to make payments upon its past indebtedness and also on the new loans. Such payments exceeded the sum of $104,838.50 due on September 9, 1957, so that the indebtedness remaining unpaid, for which the foreclosure proceedings on the two mortgages were later instituted, presumably was incurred after the September 9, 1957, agreement. As the defendant made its various loans to the corporation the corporation on each occasion executed its notes therefor and assigned its accounts receivable to secure the notes. All of the notes provided for interest in excess of 8 percent per annum.
[31]*31On March 4, 1958, the defendant instituted proceedings to foreclose its factor’s lien. At that time there was a remainder due the defendant of $82,757.73. On April 9, 1958, it foreclosed the chattel mortgage and, after the foreclosure sale, there was a remainder owing of $88,510.74. On June 25, 1958, it foreclosed the two real estate mortgages on plaintiffs’ homestead. After applying $19,380.32, the net amount received by it under said foreclosure proceedings, to the corporation’s indebtedness, there remained due and owing the defendant the sum of $20,102.11, which sum was included in the counterclaim interposed against the plaintiffs.
The trial court adjudged the notes, mortgages, and foreclosure proceedings commenced thereon to be null and void, and ordered cancellation of the notes and mortgages. It further denied recovery on defendant’s counterclaim for the remainder owing of $20,102.11 and on defendant’s claim for advances made by it upon the first mortgage on said premises. The reason for the trial court’s decision was: (1) The indebtedness for which the notes were given was usurious; (2) the notes were given without consideration; and (3) the note and mortgage dated August 19, 1957, were procured through the fraud of the defendant. Defendant appeals from the order denying its motion for a new trial.
It is conceded that the indebtedness of the corporation to the defendant provided for interest at a rate in excess of that permitted by statute.2 However, under Minn. St. 334.021 a corporation cannot interpose the defense of usury in any action. It is also well settled that this same prohibition applies to individual guarantors of corporate obligations since, as a general rule, the obligation of the guarantor is measured by the obligation of the principal.3 The rationale of the rule is that if an excessive interest rate does not render the principal obligation illegal, it should likewise not affect the undertaking of the guar[32]*32antor which is to assure performance of the principal obligation.4 Plaintiffs, however, contend that they are not precluded from asserting the defense of usury because (a) the loans were actually made to them individually rather than to the corporation; and (b) in any event they were co-obligors with the corporation and primarily rather than secondarily liable.
(a) We can find no evidence to support the finding of the trial court that the loans involved were in truth and in fact loans to the plaintiffs rather than to the corporation. The corporation was formed and in business for a substantial period of time prior to the time the loans were made. There is no showing that the proceeds of the loans went to the plaintiffs individually rather than to the corporation as working capital. To the contrary, the indebtedness of the corporation to the plaintiffs was subordinated to the claim of the defendant against the corporation. The very nature of the transaction, i. e., accounts receivable financing, indicates that the loans were genuine corporate obligations. The factual situation here is substantially different from that in cases where the corporation is specifically formed to act as a conduit for borrowed funds or is otherwise used for the obvious purpose of circumventing the usury laws.5
(b) The notes involved indicate on their face that they were given as collateral security to secure the obligations of the corporation to the defendant. This language falls squarely within the definition of a contract of guaranty as given in Schmidt v. McKenzie, 215 Minn. 1, 6, 9 N. W. (2d) 1,3:
“* * * a collateral contract to answer for the payment of a debt or the performance of a duty in case of the default of another who is primarily liable to pay or perform the same.”6
[33]*33Plaintiffs, however, point out that by the terms of the September 9, 1957, agreement their liability was made “direct and unconditional” and enforceable without requiring the defendant “first to resort to any other right, remedy or security.” They argue that because their undertaking was a primary and unconditional promise, the contract was not in fact one of “guaranty” despite the use of that term.
It is correct, as plaintiffs contend, that the nature of their liability should properly be gathered from the September 9, 1957, agreement since the loans which gave rise to the foreclosure proceedings here involved were made subsequent to that date. It is also true that the mere designation of a document as a “guaranty” does not conclusively establish it as such.7 In our opinion, however, the quoted language of the agreement does not alter the plaintiffs’ status as guarantors. A contract of guaranty may be either conditional or absolute.8 If the guaranty is absolute, the obligor becomes liable merely upon the failure of performance by the debtor.9 A conditional guarantor, on the other hand, is liable only upon the happening of the stated contingency, such as, for example, suit against the principal debtor, exhaustion of security, or the like.10 In the absence of language clearly indicating that the guaranty is conditional, it is usually treated as absolute.11
The language of the September 9 agreement relied upon by the plaintiffs does nothing more than spell out the fact that the guaranty is absolute rather than conditional and is perfectly consistent with the defendant’s contention that a guaranty was involved. There is no language in either the notes or the “guaranty” indicating that the plaintiffs’ obligation was intended to be an original and separate undertaking made without reference to performance by a principal debtor. To the [34]*34contrary, the September 9 agreement repeatedly refers to the principal corporate debtor, called the “Borrower,” and the liability of the plaintiffs is clearly predicated upon the failure of the “Borrower” to perform. The notes, as we have pointed out, specifically make the plaintiffs’ promise a collateral one.
The plaintiffs cite numerous authorities to the effect that the defense of usury is available to an individual who is the primary obligor but not to an individual who is secondarily liable on the corporate debt. The difficulty arises from the failure to ascribe appropriate definitions to the terms “primary” and “secondary.” The plaintiffs here are secondarily liable in the sense that their liability is predicated on the failure of the principal obligor to perform. They are primarily liable in the sense that their guaranty was absolute rather than conditional. The rationale of the rule precluding guarantors from asserting the defense of usury, when it is not available to the principal debtor, relates to the character of the obligation rather than the means of enforcing it, and applies with equal force to both types of guarantees.12 The true and correct issue and question involved is whether the plaintiffs’ promise is an original undertaking or a collateral one. Although the defendant here could proceed directly against the plaintiffs, the plaintiffs’ liability was, nevertheless, dependent upon the failure of the corporation to perform and hence was a collateral undertaking in which the defense of usury, not being available to the principal obligor, was similarly not available to the plaintiffs.
Since past indebtedness as well as future advances actually made are sufficient consideration for a mortgage,13 the trial court’s finding, that the notes and mortgages were given without consideration, is clearly wrong and cannot be sustained.
The trial court found that the note and mortgage executed on August 19, 1957, were fraudulently obtained from the plaintiffs by means of the following misrepresentations: That defendant would con[35]*35tinue to finance the business of the corporation until such time as its inventory could be liquidated in the normal course of business, and at normal wholesale prices; and that the defendant would not foreclose the chattel mortgage and factor’s lien securities it held from the corporation but would continue to finance the business until the indebtedness due and to become due to the defendant was paid in full, with something left over for the corporation. It appears to us that the evidence factually is insufficient to support the findings. But we need not rely on that since, in our opinion, the alleged promises, even if made, do not constitute actionable fraud. The note on its face provides that it is payable on demand. The alleged promises would, in effect, create a situation in which the corporate indebtedness could never be satisfied by use of the note and real estate mortgage. Parol evidence is not admissible to contradict the express terms of a written agreement,14 nor were the plaintiffs entitled to rely upon oral promises which were directly contradictory to the terms of the note.15 As a matter of law plaintiffs’ claim of fraud cannot be sustained.
The order is reversed with directions to dismiss plaintiffs’ causes of action on the merits and to enter judgment in favor of the defendant and against the plaintiffs in the sum of $20,102.11 on its counterclaim, together with interest, costs, and disbursements, subject only to plaintiffs’ right to be .subrogated to the uncollected accounts receivable held by defendant as security.
The opinion in this case, written by another justice and formerly released on October 21, 1960, is withdrawn and this one issued and released in its place.
Reversed with directions.