Court Opinion

ID: 6243790
Source: CourtListenerOpinion
Date Created: 2022-02-17 20:52:13.327326+00
Date Added: 2024-06-11T08:59:14.226218
License: Public Domain

Opinion by
Mr. Justice Mitchell,
Tbe learned judge below gave too narrow and strict a construction to the word “ payment ” in the agreement of the plaintiffs with the debtor, the Watch Company, Limited. According to this construction all that the guaranty of defendants amounts to is that when the Watch Company, Limited, should buy a bill of goods they should give a note for it, and that should end the guarantor’s liability. The futility of such an immaterial guaranty is manifest, and tbe whole tenor of both writings shows that such was not the intent of the parties. The first agreement for giving the credit does state that plaintiffs agree “ to accept a note or notes of the said company in payment of our statement rendered about the first of each month,” etc., but that this should be construed to mean “ in temporary and conditional settlement ” is not only in accordance with the presumption of law when notes are given for a debt, but is also shown to be the meaning of the parties by the further provision for a renewal or extension of such notes, and the specific agreement as to how much the actual payment shall be when they fall due.
But a conclusive reason against the view of the court below is that the defendant’s guaranty is not of the notes at all but of the debt. The language is, “ Having carefully read above contract we guarantee to protect any bill the Watch Company may buy ” etc. To “ protect a bill ” for the seller means in any reasonable business construction to be answerable for its payment, not merely that a note should be given by the debtor for it, or that such note or its renewal should be paid, but that the bill should be paid.
The notes not being the thing guaranteed, but only evidence or in a certain sense security for the thing guaranteed i. e. the debt, a change of notes either by renewal or extension by the same makers, or by acceptance of notes of other makers, whether the new corporation, or the “ trade paper ” so called, cannot of itself as a purely legal consequence, discharge the guarantors. Two rules on this subject are well established, first that any material variation of the contract between the *347creditor and the debtor will discharge the latter’s surety whether he is injured thereby or not, he has a right to stand on his own contract strictly as he made it; secondly that a release or loss of mere securities by the creditor will only discharge the surety to the extent he is injured thereby.
The contract between the plaintiffs as vendors and the Watch Company, Limited, as purchasers, was for a credit of $40,000 for a period of four years, beginning in September, 1890, with the agreement that the debt should be reduced $10,000 each year. This is the contract which the defendants state that they had “ carefully read ” and the bills to be bought under which they agreed to guarantee. It does not appear that any change was made in the contract. The purchases now sued for, were made, as we understand, by the Watch Company, Limited, under this contract, and within the time named, in fact, within three months after the date of the guaranty. Nothing therefore appears so far to make the first rule above quoted applicable to the case.
Notes were given by the Watch Company, Limited, and were renewed from time to time. The ordinary rule that a creditor who gives a binding extension of time to his debtor thereby discharges the surety, does not apply to this case because the agreement specifically provides for such renewals. But in July, 1892, the Watch Company, Limited, seems to have suspended operations, turning over its entire assets and business to a new corporation, which assumed its liabilities including the notes due to plaintiffs, and when these notes came due they were apparently renewed in the name of the new corporation as if in pursuance of the prior contract with the Watch Company, Limited. The two companies were of course legally distinct, but the assets of the first were transferred bodily to the second, the same persons to a large extent were concerned in both, and the business seems to have gone on with very little apparent change. How far these appellees were parties to this course of dealing, and to what extent if at all their interests were prejudiced by it is not sufficiently clear to be determined as a matter of law. Under the circumstances these are questions for the jury.
The same reply must be made to the argument that the ac+ of the plaintiffs in giving up the notes of the Watch Company, Limited, and taking those of the Watch Company, Incorporated, *348was a novation and discharged the defendants. That depends on the facts, whether the plaintiffs gave up their original debtor and accepted its successor in its place, or merely treated the notes of the new company as evidences and means of payment, without intending to discharge the first company, and without doing any act which would discharge the guarantors by prejudicing their interests. This so far as appears depends on a number of circumstances and a course of conduct which make it a question for the jury.
There remains one question which is not without difficulty. The Watch Company, Limited, was formed under the act of June 2, 1874, P. L. 271, the amendment of May 10, 1889, P. L. 188, to which provides that no liability greater than -$500 shall bind the association unless reduced to writing and signed by at least two managers. Whether the orders for goods which created the debt in the present case were signed by two managers or not, does not appear in the evidence, but it is argued for the appellees that the notes not having been shown to have been so signed there was no legal liability of the Watch Company proved, and therefore no such liability on the part of the sureties. Very important questions might arise in view of the purpose of that requirement of the statute being for the protection of the members of the limited partnership, whether it could be treated as mandatory if all the managers did in fact authorize the debt though not in writing', and further whether any one but the association itself could raise the objection, which it has not done in the present case. But it is not necessary to decide either of these questions, as even conceding them to the appellees the latter would not necessarily be relieved of liability.
As already said, the guaranty of the defendants was not of the notes but of “any bill the Watch Company may buy,” and its fair meaning is that if the Watch Company should not pay the guarantors would. The plaintiffs showed that the Watch Company did buy, did receive the goods, and had not paid. This made out a prima facie case of breach of the warranty, and called upon the guarantors to show a defense if any they had. It was not essential that the debtor should be legally bound. If the proposed sale had been to an infant, or a married woman prior to the recent enabling acts, and on a guaranty of any bill which either might buy, the vendors had parted *349with tbeir goods, the liability of tbe guarantors would be clear tliougb there was no legal liability of the principal debtor. It is a question of the intention of the parties, and the language of the present guaranty, “to protect any bill the Watch Company may buy,” is broad enough to cover any failure of the Watch Company to pay, no matter what the reason, unless it went to the merits of the plaintiffs’ claim.
Judgment reversed and procedendo awarded.