Robert S. McDaniel, Jr. and W. Jane McDaniel - Page 32




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          alternative financing for Second Street from Northern Trust.  On            
          October 18, 1994, Northern Trust acquired the 1989 note from                
          NationsBank/Amresco for $595,252.65, which amount was the sum of            
          (1) the outstanding principal balance of $590,850 and (2) the               
          accrued, unpaid interest of $4,402.65, which were due under that            
          note.  On the same date, a replacement note payable to Northern             
          Trust in the amount of $590,850 was executed on behalf of Second            
          Street by Mr. Palermo as a general partner and by Mr. Palermo as            
          president of George Palermo Architects, Inc., the other general             
          partner of Second Street.  The replacement note replaced the 1989           
          note of Second Street to the Bank.  The collateral for the                  
          replacement note was the Second Street real property, Mr.                   
          Palermo's unconditional guaranty, and Mr. Palermo's pledge of               
          certificates of deposit in the amount of $230,000.  Northern                
          Trust did not solicit or obtain from Mr. McDaniel any guaranty or           
          other agreement by him to be liable, contingently or otherwise,             
          with respect to the replacement note issued by Second Street to             
          Northern Trust.                                                             
               Based on our examination of the entire record in this case,            
          we find that petitioners have failed to show that Mr. McDaniel              
          was discharged in 1993 from his guaranty of the Second Street               
          loan.  We further find on that record that petitioners have                 








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