Case ID: tenn_33/html/0158-01.html
Source: Caselaw Access Project
Author: {"author": "CaeutheRS, J.,", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

John W. Bright vs. William McKnight et al.
    
    J. Guaranty. Notice to guarantor. An absolute present guaranty, complete in its terms, and fixing the liability of the guarantor, takes effect from the moment it is acted on by the guarantee ; and no notice to the guarantor of the acceptance on the part of the guarantee is necessary to fix the liability.' Thus, where on a written contract of general agency for the sale of books, the agent contracts for a consideration stated therein, to sell said books and pay to the principal his proportion of .the proceeds of such sale, and the guarantors execute thereon their guaranty in these words : “ We guaranty to ——— [the principal ] that the above named-[the agent] ■will well and truly perform all his above and foregoing undertakings pursuant to the tenor and effect of the said contract;” such guarantor’s are not entitled to notice of the acceptance of.sáid guaranty, but were bound, in default of said agent, for all the books delivered to Mm under said contract according to the tenor thereof, from the time said principal begun to act upon such guaranty, and continued so bound until notice to said prinr cipal that they would be no longer bound.
    
      2. Same. Buie of construction and reason of the rule. The rule of law govern-, ing the construction of undertakings in the nature of a guaranty, is, that the words of the guaranty aré to be taken as strongly against the guarantor as the sense will admit. The observance of this rule is important to the trade and enterprise of the country, which in the main, depend upon a combination of the labor and energy of those who have not means, with the credit of those who have; and the more difficult it is rendered by complicated rules to make these instruments available, the less confidence will be reposed in them, and the credit and encouragement they afford to enterprise and industry, will be, in a great degree, withdrawn. There is no hardship in such a doctrine, as it is in the power of the guarantors to make their obligation dependant upon any'condition they see proper.
    FROM LAWRENCE.
    The plaintiff in error, a citizen of the city of Louisville, Ky., entered into a written contract with one Las. H. Moore, by which, said Moore became the general traveling agent of the plaintiff in error, for the sale of certain boohs described in said contract, which were to be shipped to said Moore in North Carolina, and sold there or wherever else said Moore might be able to sell them. Under the contract, Moore was to receive a portion of the proceeds of the sales, and to remit the balance to the plaintiff in error at Louisville. It was understood also between the parties, that Moore was to procure guarantors for the faithful performance of- said agency, and to that end the plaintiff in error wrote upon the paper containing the contract, the following instrument, to which Moore agreed to procure the required, signatures, and forward the same to the plaintiff in error at Louisville: “We guarantee to John W. Bright that 'the above named James H. Moore will well and truly perform all his above and foregoing undertaking, pursuant to the tenor and effect of said contract.” This was signed by the defendants and enclosed in a letter to the plaintiff in error, in which Moore uses these words: “ Enclosed you will find our contract, signed as requested.” Upon receipt of the instrument the plaintiff in error commenced shipping to Moore the books mentioned in the contract, and which Moore appears to have received to the amount of near $1,000, many of which appear to have been sold by him, but none paid for. It does not appear that any notice was given to the defendants of the acceptance of the guaranty by the plaintiff in error. After waiting for several years in vain for remittances from Moore, the plaintiff in error came down to the county of Lawrence where the guarantors resided, and demanded payment of them, which being refused, he instituted in the circuit court of said county, this action on the case upon the guaranty. At the October Term, 1853, of said court,' the cause was submitted to a jury, when there was a verdict and judgment for the defendants, from which the plaintiff appealed in error to this court. The part of the charge of the Court, (Judge WauKER,) to which exception was taken, sufficiently appears in the opinion.
    Hose and TiNNON, for defendants in error:
    The right of the plaintiff to recover fails him upon the following grounds:
    
      It will be observed that this guaranty is collateral in its character, that being the force of the words, “we guaranty,” as well as the intention of the parties. To make this conclusive it need only be borne in mind that the contract is entirely, prospective in its operation, depending altogether upon future. contingencies, unlimited as to the time when, and the amount of books, were to be sent to Moore. In fact, other contracts are contemplated, and books are to be sent and sold in other States as Bright and Moore may agree. "We think this guaranty cannot be regarded in any other light than as merely a general letter of credit to Bright. The courts constantly draw a very clear distinction between guaranties of this kind, and those upon fixed and certain liabilities already incurred, where the guarantors know precisely what they agree to pay. The cases cited by plaintiff’s counsel will be found to be of this character.
    Then, we contend, first, that to entitle the plaintiff to recover he must aver and' prove notice to the guarantors, in a reasonable time, of his acceptance of their guaranty, and his intention to aet upon it. That this notice of acceptance on the part of the plaintiff is an absolute condition antecedent to any legal operation of the guaranty; and it must appear that the same was given before any responsibility can attach to the guarantors under the guaranty.
    This point is well settled in many adjudications by the highest authority. The doctrine is discussed in the case (of Douglass vs. Reynolds, 7 Peters, 113-127, and again in the same case in 12 Peters, in which Mr. Justice Story declares the law in substance, as above set forth. The same point is affirmed in Bradley vs. Garay, in 8 Greenl., 231, S. P. Adeoek vs. Fleming, 2 Dev. & Battle, 225. Clark vs. Bussell, 7 Cranch, 69-92. Marshall O. J., in Edmonson vs. Brake, 5 Peters, 624, and Wilds vs. Savage, 1 Story, 22. In the case of Lee vs. Biek, which went up to the United States Supreme Court from West Tennessee, the Court says: “ When the guaranty is prospective and to attach upon future transactions, and the guarantor uninformed whether his guaranty has been accepted and acted upon or not, the fitness and justice of the rule requiring notice is supported by considerations that are unanswerable.” 10 Peters, 48-452.
    We are aware there may be cases where the guaranty is of a specific existing demand by a promissory note, or other evidence of debt, where the guarantor knows precisely what he guaranties, and the exact extent of his liability, that no notice is necessary, because it would be useless; Lee vs. Biek, 10 Peters. But the Court says that doctrine was not applicable to that case, neither can it apply to this by any sort of construction of that contract.
    Second: To entitle the plaintiff to recover, this being a continuing or standing guaranty, and prospective in its intention, under which an indefinite number of shipments were to be made to Moore, in the future, the plaintiff, Bright, must aver and prove notice to the guarantors, of the fact, when the transactions between him and Moore were closed, and of the nature and amount of their liability under the guaranty.
    This doctrine is declared in several of the cases before. referred to, both by Story and Marshall; but the case of Douglass vs. Reynolds, 7 Peters, 113-127, may suffice, under tbe third instruction asked for in that case in the court below.
    These are the cases relied on in the court below, and we think there can be no error in the charge of his Honor, the circuit judge. That being so,- the finding of the jury is correct.
    M. S. FeieesoN, for the plaintiff in error,
    said:
    
      1.We admit there is a class of cases which decide, and decide correctly, that a mere letter of credit, or „ offer, or proposition to guaranty the performance of a contract thereafter to be made and entered into, is not binding upon the guarantor until accepted, and notice of the acceptance given. 10 Peters, Lee vs. Dick, 482, 474-5. 15 Con. R., 206 to 17. Douglass et al. vs. Reynolds et ah, 7 Peters’ Rep., 113. Wilds vs. Swage, 1 Story’s R., 22. Adams vs. Jones, 12 Peters’ R., 207. 4 Greenl., R., 526. Story 'on Con., § 873.
    2. If the proposition comes from the guarantee, as in this case, and the same, is accepted and entered into by the guarantor, it constitutes a good and binding guaranty, without any notice' of acceptance from the guarantee, because there is in such a case, a meeting of minds, and a perfect agreement and contract is entered into. PMllon vs. Vm Mevrass, Burrow’s Rep., 1663. Hoi. L. C., 194, 195. CWioim et al. vs. Damson. 4 Eng. L. and Ecp R., 378. Story on Con., § 384, et seq.
    
    3. A guaranty of a contract, the terms of which are all agreed upon between the parties at the time of executing the same, is binding as an actual present guaranty, and requires no notice of acceptance. Zee vs. Diclt, 10 Peters’ R., 482-495. 15 Con. R., 406, 414. Wilds vs. Smage, 1 Story’s R., 22. Brud vs. IlilTboon, 7 Con. R., 523. Whitney vs. Grool, 24 Wend. R., 82. Jaolcson vs. loudes, 7 Blackf. R., 526. 2 Bouv’s. Inst., p. 56. Vamleer vs. Gra/wford, 2 Swan.
    4. But suppose tbe Court should be of opinion that this guaranty belongs to that class of cases which require notice to be given to the defendants before they are bound by it, still, in this case, it is clear that the defendants knew it was accepted and acted upon by the plaintiff. The principal, Moore, and these guarantors, lived in the same town. Moore was also living in the house of one of the guarantors at the time, and continued to live there until after the first lot of books was delivered. They furnished him a carryall' to take them off; and. McKnight’s letter to Garvin shows they knew all about the plaintiff’s acting under this guaranty; and Moore’s letter to Bright says, “you will .find our contract enclosed, signed as requested.” And an acceptance and notice thereof, may be established as well from circumstances as direct. proof, and so the court told the jury, and their finding for the defendants is against both the law and evidence in the case. 15 Conn., 206, 457. 2 Am. L. O., 70-2.
   CaeutheRS, J.,

delivered the opinion of the court.

This is an action on the case upon a written guaranty.

In 1847 James M. Moore entered into a written contract with the plaintiff, to act as general agent in selling “Bright’s Family Practice” and “Parley’s Annuals,” in the State of ETorth Carolina or any other part of the country. He "bound Mmself to pay to the plaintiff three dollars for each volume of the first named work, and seventy-five cents for the second, that might he furnished him, and not to sell the said works higher than five dollars for the .former, and one dollar and twenty-five cents for the latter, per volume. The difference between the two sums was to he his profit and-compensation. The plaintiff was not willing to trust Moore, hut required of him responsible sureties, and wrote upon the back of the contract between them the following guaranty, which was to be signed by solvent men and returned to him by Moore: “"We guaranty to John "W". Bright that the above named James H. Moore will well and truly perform all his above and foregoing undertakings, pursuant to the tenor and effect of said contract.” This was signed by the defendants and enclosed by Moore in a letter to the plaintiff at Louisville, Ky., in which he says, “enclosed you will find our contract, signed as requested.”

Whereupon the plaintiff commenced delivering- books to Moore at Lawrenceburg, Tenn., where the defendants resided, of which they had knowledge. Upon- the failure of Moore to pay for the boobs, being irresponsible himself on account of insolvency, this- action was brought upon the guaranty.

The question of law, made in- the argument, is whether the undertaking of the defendants was of such a character as to bind them, without notice of acceptance by the plaintiff?

Upon this point the circuit judge charged the jury, “ that the paper read in evidence as the foundation of the action, did not, on its face, purport to be an original or absolute undertaking, but that it was a co-lateral or conditional undertaking on the part of the defendants, that they have bound themselves as guarantors that Moore would perform his contract with the plaintiff,” and that, in such case, the liability of the guarantors could only be fixed by notice from the plaintiff, “ that he had accepted the guaranty and would act upon it. ”

He gives cases in which acceptance and notice might be presumed. But the case must turn upon the correctness of the legal proposition so distinctly announced to the jury, and which must have controlled their verdict.

We cannot concur in the construction and effect given by his Honor to the instrument in question, from which the necessity of notice of acceptance to the guarantors, in order to bind them, is made to result as a consequence.

This branch of the law came up and was considered by us at last term, in the case of Vanleer vs. Crawford, 2 Swan, 117. That case was elaborately discussed, and involved, as it was argued, the whole doctrine on this subject. But, inasmuch as we considered that notice of acceptance was in effect, if not in fact, given to the guarantor, thei’e was no express decision of the exact point now presented, and on which this case must turn.

In that case, however, it is said, “that if the case depended alone upon the original guaranty of the 26th of January, 1849, which was enclosed in a letter from the plaintiff in error to Lanier, it might be very plausibly maintained, upon the construction of that instrument, that any person who hired slaves to Lanier, pursuant to its terms, and upon its faith, might support an action against the guarantor, without showing any thing more than simply that he had acted upon it.”

That instrument was in these words: I do hereby guaranty the payment of any contract that Sam Lanier may make for the hire of negroes during the year 1849, to be used at his iron works or any iron works in which he may be interested in Decatur or Perry county, Tennessee.”

If that would have been held to be obligatory without notice of acceptance, as was clearly intimated, if the case had required it, there can surely be no doubt about the case now before us. We are aware, as stated in that case, of the great and irreconcilable conflict of the most respectable authorities upon this question. Some of them, both English and American, and among others, the Supreme Court of the United States, in Douglass vs. Reynolds, 7 Peters, 113, seem to have established the doctrine, that the liability of guarantors, depends upon principles analogous to those which apply to endorsers; and that the principles of commercial law so far apply as that notice, or at least, knowledge of the acceptance of the guaranty, and the demand upon, and failure of the principal to pay, are' conditions necessary to fix the liability of the guarantor. On the other hand, there is a strong current of authorities, both here and in England, holding the true doctrine to be, that “ an absolute present guaranty, complete in its terms, and fixing the liability of the guarantor, takes effect as soon as it is acted upon. 2 Bouv. Inst., 56. Amer. Leading Cases, with Hare & Wallace’s notes, 2 vol., 33 to 100; where the cases are collected.

We think this latter doctrine is based upon sounder reason, and better calculated to effectuate the true meaning and understanding of the parties, and accomplish the ends of justice.

These instruments are extensively used in the commercial world, and large credits and advances are made upon the faith reposed in them, in the various forms which they assume, as letters of credit, guaranties, &c.

It is important to trade and enterprise, which very often, if not- most generally, depends upon a combination of the labor and energy of those without means with the credit of those who have them. The more difficult it is rendered to make these undertakings available, by complicated rules of notice, demand, &c., the less confidence will be reposed in them, and the credit and encouragement they afford to the enterprising and industrious, will be in a great measure withdrawn.

In pursuance of this view, it was decided by the Supreme Court of the United States in Drummond vs. Prutman, 12 Wheaton, 515, that a guarantor shall be held bound to the full extent of what appears to be his engagements, and the rule in expounding these undertakings is, that the words of the guaranty are to be taken as strongly against the guarantor as the sense will admit. Fell on Guaranty, ch. 5, p. 121. 12 East, 227.

No injury can result from this doctrine, as it is in the power of guarantors to make their obligation dependent upon notice, demand, or any other condition they see proper, for their own protection and safety.

It would he difficult to select words, more direct, positive and unconditional, than those used in the present case. The contract of Moore was before them, set out in all its terms, and their undertaking written upon it with express reference to its contents.

It is then, an absolute present guaranty, complete in its terms, and took effect as soon as it was acted upon by the plaintiff, to the extent of all the books delivered and not accounted for by Moore. It was not limited to any particular number of books, or books to be delivered in any specified time, so as to make it a limited guaranty, but it exténded to all that might be delivered under that contract, and was therefore, what is called a continuing guaranty. In such a case, the defendants would be bound until they gave notice to the plaintiff that they would be no longer liable.

¥e held at the present term, in the case of White vs. Stacker, that the defendant was bound without any notice, upon this instrument: “High Point, Ky., Jan. 22, 1848. To all whom this may concern. This is to certify that I have agreed to go Dr. J. B. ’Williams’ security for the hire of all the negroes he may be able to obtain by this letter of credit, for the year 1848. Said hands to be employed at West Point Furnace, Decatur county, Tenn. . John Stacker.”

Upon the faith of this guaranty, or letter of credit, Williams hired negroes of Jonathan White, and executed his note with John Stacker, guarantor. Ho notice was given to Stacker by White of the acceptance of the guaranty. Williams failed, and Stacker was sued by White. We held him liable by his guaranty. The case before us must be governed by the same principle.

The instructions then, given by his Honor to the jury, in the interpretation and construction of the instrument sued upon in this case, -were erroneous; and for this the judgment will be reversed, and a new trial be granted.