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PIC, a car dealership, entered into an inventory financing agreement with Bank (P). P lent funds to PIC under an established line of credit on the security of PIC's inventory of automobiles as collateral. This is a common means of financing for all car dealerships and is known as a floor plan financing. Sales to purchasers in the ordinary course of business are made free of P's lien. But P conducts periodic audits to ensure that the cars PIC puts into the plan are owned by PIC and proper payoffs on the loan are made for each sale to a customer. Under a curtailment policy, the loan was proportionately reduced and finally paid in full for inventory remaining unsold over specified periods of time. D had personally guaranteed the loans in writing. In 1978 D sold his interest to Manfred Robl and resigned as an officer and director of PIC. D's guarantee continued, as agreed, during all the relevant periods of time. Under the guarantee, D guaranteed, absolutely and unconditionally, to P the payment of all liabilities of the Borrower to P of whatever nature. In July 1979 P informed D that PIC was 'out of trust.' More than 50% of the inventory was unaccounted for. D arranged for the sale of the remaining inventory, and partial repayment was made. P instituted suit for the balance against PIC, and the individual guarantors, including D. D asserted that the deficiency was caused by the failure of P to conduct regular inspections and to enforce its curtailment policy. P alleged that two of P's employees either negligently or in complicity with Robl submitted incorrect or false inventory reports and approved loans on nonexistent automobiles. D asserts that he was assured, as a condition of his continuing guarantee upon his sale to Robl, that regular inspections and enforcement of the curtailment policy would continue. D asserts that P impaired the value of the collateral, thus relieving him from liability. There is no provision in the inventory financing agreement or in the guarantee obligating P to conduct inspections or to maintain the curtailment policy. P got summary judgment and D appealed.

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