Court Opinion

ID: 6408254
Source: CourtListenerOpinion
Date Created: 2022-06-25 11:50:38.287312+00
Date Added: 2024-06-11T15:51:17.077256
License: Public Domain

Hubbard, J.
In deciding the questions which have been argued in this case, it is unnecessary to consider whether the agreement between Courtis & Morse, of the one part, and S *516G. Dennis of the other, constituted them copartners; or whether S. G. Dennis was only an agent to transact the business for Courtis & Morse, and was to be paid for his services by a share of the profits, instead of receiving a stipulated salary. Whichever meaning is the true one, the guaranty is to receive the same construction, and having been made simultaneously with the agreement, it is to be considered in connexion with it.
It is admitted that there is a balance due from Dennis ; but it is denied, by the defendant, that it arises from losses which have been sustained in the business. And the question is, whether the guaranty extends to any balance that may be due from S. G. Dennis to Courtis &. Morse, or to Courtis the survivor of them, -at the close of the business, without reference to the manner in which such balance arises ; or whether it is to be confined to losses accruing in the regular course of their transactions.
It has been argued, that if there is any doubt as to the construction of the guaranty, it is to be taken most strongly against the guarantor, as was held in the case of Mason v. Pritchard, 12 East, 227, according to the legal maxim that a man’s grant shall be construed most strongly against himself. Quœlibet concessio fortissime contra donatorem interpretanda est.
As to deeds conveying lands and other interests in real estate, the rule probably originated in the presumption that a party making a grant knows what estate he owns, and what he has a right to convey ; and consequently the use of ambiguous words, and of doubtful expressions, shall rather be explained against him than in his favor. If it were otherwise, vendors of real estate might be induced to use words of description susceptible of different meanings, in the expectation of putting a construction upon them most favorable to their own interests. And to prevent such consequences, this rule has been applied from time to time to other instruments. But in letters of guaranty, which are commercial instruments executory in their character, and where the liability of the makers depends upon the acts or misconduct of third persons, the better opinion, we think, is, that in their construction the language used shall be taken according to its ordinary acceptation and common meaning, without any special *517leaning against the maker of the instrument; and with this substantially agrees the opinion of the court, in the case of Bell v. Bruen, 1 Howard, 186, and in that of Mussey v. Rayner, 22 Pick. 228. In charging a guarantor, his liability is not to be extended by implication, but it must be brought within the strict terms of the guaranty. Glyn v. Hertel, 8 Taunt. 224. Hargreave v. Smee, 6 Bing. 248. Bacon v. Chesney, 1 Stark. R. 19S. Dobbin v. Bradley, 17 Wend. 424.
It has been argued for the plaintiff, that it is absurd to say that a balance due to the partnership was intended to be secured by the guaranty ; the instrument having been given to two partners to guard them against a loss by the third partner; and therefore, it is further urged, if there is a balance due from the third partner to the other two, on the close of their concerns, the guarantor is liable for such balance, whether arising from loss in the business, or from his own misconduct.
This guaranty was not indeed given to secure a debt due from a third person to the copartnership, but to secure two of the parties, Courtis & Morse, against half the loss which might be in curred in the business during its continuance, to be ascertained on its termination. The simple inquiry therefore is, what was the nature of the loss intended to be made up by the defendant, by his instrument of guaranty. The clause in the agreement is this : “ I do therefore guaranty to them ” (Courtis & Morse,) “ the payment of one half of any loss that may accrue in the business of my brother, S. G. Dennis, during such time as he may be connected in business with said Courtis & Morse.” If it had been intended to secure any balance of account which might be due from S. G. Dennis, on the winding up of the concern, why was it not so expressed, in simple terms, “I guaranty to them the amount, or the one half of any amount, which may be due from S. G. Dennis to said Courtis & Morse on the close of the business ? ” But instead of this, the language is, to guaranty the payment of half the loss that may accrue in the business. Now it might well happen that there should be no loss in the business, and yet there might be a large balance of account due from S. G. Dennis; the business might be profitable, and he spend *518the profits and the capital. Or he might refuse to pay over what was justly due from him. It would rather seem that the plaintiffs, Courtis and his deceased partner Morse, had confidence in the integrity and business talents of Dennis; but that they feared, as the times were hazardous, the goods might be sold on credit, and the proceeds not be collected, and so a loss might be incurred; yet, on being made secure against half the loss arising from this cause, or from causes of a like character, they were willing to embark in the enterprise. And the defendant, wishing to assist his brother, in putting him into business, was willing to guaranty against half the loss which might be incurred in carrying on the business, to be ascertained at its close. And the last clause in the agreement between Courtis & Morse and S. G. Dennis strengthens and confirms this view of the intention of the parties. By this it appears, that losses in the business were to be equally borne ; but a loss happening through neglect or misconduct was to be wholly borne by the party guilty of it. And it cannot be reasonably contended that a loss in the business, ac cruing by the misconduct of either Courtis or Morse, and which was stipulated should be borne by the one thus causing it, should be made good, as to one half of it, by the defendant, as a loss accruing in the business. We are therefore of opinion, that, by the terms of the letter of guaranty, taken in connexion with the agreement, there is secured to the plaintiff only the half of any loss that might accrue in the business by misfortunes ; such as bad debts, loss of goods, &c.; and that the guarantor is not responsible for losses occasioned merely by the misconduct of S. G. Dennis.
On the question of notice, which was raised at the trial, many authorities have been cited, which cannot all be reconciled, nor are they all susceptible of distinct classification. The terms sureties and guarantors are often confounded, from the fact that a guarantor is, in common acceptation, a surety for another. The rules, however, of the common law as to sureties, are not strictly applied to guarantors, but rather the rules of the law merchant; and the true distinction seems to be this: That a surety is in the first instance answerable for the debt for which he makes himself resoonsible; and his contracts are often specialties; *519while a guarantor is only liable where default is made by the party whose undertaking is guarantied ; and his agreement is one of simple contract. A surety is not, as a matter of course, entitled to notice, and is not discharged by the insolvency of the principal debtor, for want of notice, although the principal was solvent when the debt became due. But in regard to a guarantor, if the debt is not paid at maturity by the principal, who is solvent at the time, the guarantor will be discharged, if he has not received notice, if the principal shall have become insolvent. And, as a general rule, the guarantor is entitled to notice within a reasonable time; and he will also be discharged, in whole or in part, where he can show a direct injury resulting from want of notice. And we are of opinion, in this case, the guaranty being for a sum uncertain, the time of its limitation not fixed, and the amount of liability to be ascertained only by a settlement of accounts, and the winding up of the affairs of the copartnership, over which accounts and settlements the guarantor had no control, that he was entitled to notice of the amount claimed of him in consequence of losses in the business, before he was liable to an action, and that within a reasonable time after the adjustment of the concerns of the company.
On the agreement of the parties, the plaintiff is entitled to a new trial, in order to let in the proof, if such exists, of a loss resulting from the misfortunes of the business, and of his having given notice to the defendant of such loss.
Another question may also arise in the case, respecting the appropriation of the payments made by Dennis; and it will therefore be important to ascertain, on the next trial, whether there was any rest in the business, at the death of Morse, on account of stock taken and outstanding debts ascertained ; or whether the business went on, after his death, in the same manner as it did before, by Courtis’s furnishing goods to Dennis, and his selling them, and making remittances from his collections, as well growing out of sales made before the death of Morse as afterwards, or from goods on hand at his death, and from those received afterwards, without making any distinction as, in ‘he latter case, we should think the settled cases may lean *520strongly to the conclusion that the guarantor is discharged. Bu< the facts not being stated in detail, as to this part of the case and the point not having been argued, we do not mean to express any fixed opinion in relation to it, but only to call the attention of the parties to the bearing the evidence may have on the point, at the further trial of the cause.
Under this construction of the instrument, and the ruling in regard to notice, the trial of the case is to proceed