In July, Monarch Taverns Inc Borrowed $100 000 from the Bank

In July, Monarch Taverns Inc borrowed $100 000 from the Bank of Commerce to finance its acquisition of a tavern. As security for Monarch's obligation to repay the loan, it gave the Bank a security interest in the tavern's inventory of spirits, then worth an estimated $50 000. Guillermo is an experienced businessman who has run several taverns. He is also the sole shareholder in Monarch. He signed a guarantee of Monarch's obligation to repay the Bank of Commerce. The corporation was represented by legal counsel in dealing with the Bank and Guillermo obtained the advice of an independent lawyer with respect to his obligations under the guarantee. After Monarch has operated the tavern business for six months, the value of the inventory has fallen to $20 000. Monarch has advised the Bank of this. Which of the following statements best describes Guillermo's obligation to the Bank of Commerce?

A) Guillermo is still liable under the guarantee.
B) Guillermo is not liable under the guarantee because, as the sole shareholder of Monarch, he is not a separate legal person from the corporation.
C) Guillermo is not liable under the guarantee because the guarantee exposed him to risk.
D) Guillermo is relieved of his obligation under the guarantee because his risk is increased as a result of the decline in value of the collateral.
E) Guillermo is not liable under the guarantee because the Bank was aware of the decline in value of the collateral.