Case ID: nys_6/html/0206-01.html
Source: Caselaw Access Project
Author: {"author": "Barrett, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Birch et al. v. De Rivera.
    
      (Supreme Court, General Term, First Department.
    
    July 9, 1889.
    1. Guaranty—Liability op Guarantor—Continuance.
    Defendant guarantied to plaintiffs the repayment of certain credits to be advanced by them to R. & Co., “my said guaranty to hold good until canceled. ” After the guaranty was given a change was made in the firm of R. & Co. without the knowledge of either plaintiff or defendant. Held that, though the guaranty was a continuing one, defendant was not liable thereunder for advances made to R. & Co. after a change in the firm.
    2. Same—Change in Firm.
    Where there is no evidence that the guarantor knew of the change in the firm, or was under obligation to inform plaintiffs, it is immaterial whether or not they were notified of that fact.
    ,3. Same—For What Liable.
    A guarantor is not liable on a judgment against the original members of a firm, obtained in collateral transactions, but only for the repayment of moneys actually advanced for them while in business together, and constituting the particular firm.
    Motion for new trial on exceptions.
    Action by John W. Birch and another, doing business in London as Mildred, Goyenneche & Co., against Jose de Rivera, as guarantor of J. de Rivera & Co., upon his guaranty to them for £5,000. From an order denying a motion for a new trial on exceptions defendant appeals.
    Argued before Van Brunt, P. J., and Daniels and Barrett, JJ.
    
      Stern <fe Myers, for appellant. David Milliken, Jr., for respondents.
   Barrett, J.

This is an action upon a guaranty, which reads as follows:

“Heidelberg, Germany, 28 October, 1874.
“Messrs. Mildred, Goyenneche & Co., London—Gentlemen: The house ■of J. de Rivera & Co., of Hew York, have informed me of your suggestion that I might guaranty to you an open credit of (5,000 pounds) in addition ■to the (£5,000) that they already enjoy from you in the shape of an open .credit. I am so well satisfied with the manner in which the said house is working that I have still left in their hands not only the one hundred and odd ■thousand dollars that I left with them when I withdrew from the firm, but I have increased the loan to some extent. Still I know that they must have credits in England to obtain consignments from the West Indies and South America, and accordingly I cheerfully hereby guaranty to you the repayment of the before mentioned additional credit of five thousand pounds sterling, my said guaranty to hold good until canceled.
“Yours, very truly, o
[Signed] “J. de Rivera, Damstadter Hof, Heidelberg.”

The plaintiffs carry on business in London under the firm name of Mildred, Goyenneche & Co. The testimony shows prima facie that they are the same persons to whom the guaranty was given. At the time they received the guaranty the house of J. de Rivera & Co. was composed of Henry C. de Rivera and Antonio M. Ros. It so continued until the year 1877, when Antonio M. Ros went out of the firm and Salvador Ros came in. From that time until 1886 the firm remained unchanged. In 1886 the firm failed, owing the plaintiffs the full £5,000 specified in the guaranty. This was entirely for moneys paid by the plaintiffs under the credit, after the change of partners in 1877, and the question is whether the defendant is responsible therefor under this guaranty. There is no doubt that this is a continuing guaranty. The entire instrument so indicates, and the concluding expression, “my said guaranty to hold good until canceled, ” is conclusive. That, however, only refers to the duration of the credit, not to firm succession. The rule in England has always been that a guaranty does not continue in force after a change in the principal debtor’s firm, unless so expressed in the instrument either directly or by clear implication. The principle is plain. A man may be willing to guaranty A. and B. but be unwilling to guaranty A. and 0. So he may be willing to guaranty a firm composed of A. and B., but not a firm composed of A. and C. He may guaranty solely on the strength of B.’s ability or caution. At all events his contract is to guaranty a copartnership firm composed of certain persons, and that contract cannot be altered or extended without his consent. The case of Backhouse v. Hall, 6 Best & S. 507, 118 E. C. L. 505, is directly in point. Lord Blackburn said it was a hard case, as the plaintiffs did not know of the change of membership for some years, whereas it was known to the guarantor. But the rule was deemed inflexible, and the court ■observed that “if the parties to a guaranty, given to a firm, mean that it is to continue in force, though there be a change, of parties, it is very easy to express that.” See, also, Strange v. Lee, 3 East, 490; Weston v. Barton, 4 Taunt. 673; Simson v. Cooke, 8 Moore, 588; Myers v. Edge, 7 Term. R. 254; Dry v. Davy, 10 Adol. & E. 30; Guarantee Co. v. Freeman, 7 Hurl. & N. 17; Pemberton v. Oakes, 4 Russ. 154. The present' guaranty is not withdrawn from the general rule because of the expression “the house of J. de Bivera.” That signified nothing more than the firm or partnership of J. de Bivera & Co.

That the guarantor used the words “house” and “firm” as equivalent expressions is evidenced by this language: “I am so well satisfied with the manner in which the said house is working that I have still left in their hands not only the one hundred and odd thousand dollars that I left with them when I withdrew from the firm, but I have increased the loan to some extent.” Thus the house is not treated as an institution, or collective body, or joint stock company, with fluctuating membership, as in Metcalf v. Bruin, 12 East, 400. On the contrary, the writer evidently refers to the particular individuals whom he left in the firm, and with whose business qualifications, experience, character, and judgment he was acquainted. These characteristics, it may fairly be presumed, he relied on, and for individuals possessing these qualifications he was willing to assume responsibility. The eases where peculiar or added force is given to the expression “the house of” so and so are those of indemnity bonds for personal service, such as Barclay v. Lucas, 3 Doug. 321, (and see note to Lord Arlington v. Merricke, 2 Wms. Saund. 414a.) That was a case of security to the house for the fidelity of a clerk, and Lord Mansfield held that a continuous and successive indemnity was intended. As was said in the note above cited, “for the fidelity of a clerk in the shop and counting-house * * * a change of partners is said to make no difference, but the surety still continues.” This case of Barclay v. Lucas has been repeatedly criticised and doubted. Dance v. Girdler, 1 Bos. & P. (N. R.) 42; Weston v. Barton, 4 Taunt. 681. In the latter case Lord Mansfield himself, in following the general and settled rule, observed: “This being the construction of the instrument from almost all the cases, in truth we may say from all, for though there is one adverse case of Barclay v. Lucas, the propriety of that •decision has been very much questioned, ” etc. And in Strange v. Lee, supra, Lord Ellenborough suggested a possible view upon which Barclay v. Lucas might be maintained: “In Barclay v. Lucas the words were different from the present case: the clerk was to be taken into the service of the obligees as a clerk in their shop and counting-house, which might be supposed to mean the same house, however the individual partners might change.” The wide difference between such a case and that of a guaranty for the house of a principal debtor is apparent. In the latter case “the house” could not, without an express stipulation to that effect, well be supposed to mean the same house, however .the individual partners might change, and the guarantor’s responsibility must have been understood to end when the persons for whom he agreed <to be responsible ceased to constitute the house. The fact that the plaintiffs were not notified of the change is immaterial. They may have an action against the firm as it existed before the change because of failure to notify them of such change, or to publish the dissolution. That proceeds upon another principle, namely, the presumption attached to continuous firm dealings without notice. The guarantor, however, is not responsible for the state of facts which might justify a recovery against the original members. There is no evidence here that he was aware of the change. He seems to have been as much without notice as the plaintiffs themselves; but, were it otherwise, we may say, in the language of Lord Blackburn in Backhouse v. Hall, supra: “Nothing is stated to show either that the defendant was under any obligation to inform the banking-house of that fact, or that he took any steps to conceal it.”

The defendant’s obligation is not to guaranty any judgment which, owing to collateral circumstances, the original members of the firm may have become liable to; but the repayment of moneys actually advanced for them while they are in business together, and together constitute the particular firm. We find no cases in this country where this precise question has been considered. Bank v. Phelps, 97 N. Y. 50, is cited, but in that case the change was in the guarantor’s firm. It is, of course, entirely inapplicable. It seems that since the failure the plaintiffs have received some $2,000 upon account of Rivera & Co.’s indebtedness. The evidence falls short of showing that this sum was paid by the defendant; but, even if that had clearly appeared, it would not have affected the question of his liability. This depends wholly upon a proper construction of the contract, and the defendant’s notions upon the subject, as was said by Lord Blackburn in Backhouse v. Hall, supra, are of no moment. The exceptions should therefore be sustained, and a new trial ordered, with costs to defendant, to abide the event. All concur.