Court Opinion

ID: 3995321
Source: CourtListenerOpinion
Date Created: 2016-07-06 10:53:53.805716+00
Date Added: 2024-06-11T07:44:27.944665
License: Public Domain

As indicated by the majority opinion, the question for decision relates to whether there was a consideration for the guaranty signed by respondents. The guaranty contract was printed at the bottom of the page which contained the written agreement entered into between appellant and Richard Baker, the distributor. The seventeenth section of that contract provided:
"17. The Distributor will deposit and maintain with the Company a satisfactory bond for the performance of his covenants and obligations hereunder." *Page 744 
It is my contention that the contract of guaranty was valid and founded upon sufficient consideration, though it was signed at a time subsequent to the signing of the contract between appellant and Richard Baker and no promise was made by respondents at the time the original contract was signed.
"A contract of guaranty is a form of commercial obligation which should be construed in furtherance of its spirit, without strict technical nicety, to promote liberally the use and convenience of commercial intercourse. The words of a guaranty should receive a fair and reasonable interpretation to effectuate the intention of the parties, and the circumstances accompanying the transaction may be considered in seeking the intention of the parties. The court should give the instrument that construction which will best accord with the intention, as manifested by the language in the light of all the surrounding circumstances, without stretching the words beyond their import in favor of the creditor or restricting them in aid of the guarantor." Walton v.Hospital Ass'n, 178 Md. 446, 13 A.2d 627, 128 A.L.R. 970.
"Although it may have been executed at a time subsequent to the creation of the principal obligation, a contract of guaranty is founded upon a consideration if its execution is the result of previous arrangement, the principal obligation having been induced by or created on the faith of the guaranty." 24 Am. Jur. 906, Guaranty, § 50.
"Although a contract of guaranty is executed subsequently to the principal contract, it is regarded as being made at the same time so as to constitute a part of the same transaction and be supported by the same consideration, and not to require a new consideration, where it is executed pursuant to an understanding had before and is an inducement to the execution of the principal contract; or where it is delivered before any obligation or liability is incurred under the principal contract; or where it is made pursuant to some provision in the principal contract; or where the principal contract does not become operative until the execution of the guaranty; or where the contract of guaranty expressly refers to a previous agreement between the principal debtor and the creditor which is executory in its character and embraces prospective dealings between the parties." 38 C.J.S. 1164, Guaranty, § 26b. *Page 745 
It is the general rule that the promise of a guarantor to secure the obligation of the principal debtor may be supported by the consideration of the principal contract. Thus in PacificNat. Bank v. Aetna Indemnity Co., 33 Wash. 428, 74 P. 590, in which it was contended that no premium had been paid for a bond, it was stated:
"Ordinarily the consideration of the contract for the performance of which a surety obligation is given, is sufficient to sustain such obligation, as against the surety. A consideration moving to the principal alone, contemporaneous with or subsequent to the promise of the surety or guarantor, is sufficient."
It is also the settled law that, where the guarantor promises that he will secure the obligation, thereby inducing the guarantee to extend credit or suffer some detriment, the subsequently executed contract of guaranty will relate to and be supported by the principal contract. This was clearly recognized by this court in Title Guaranty  Surety Co. v. Packard,75 Wash. 178, 134 P. 812, where it appears that the Packard-Spink Company, appellant, entered into an improvement contract with the city of Seattle, and the plaintiff-respondent supplied the required bond upon the condition, however, that appellant would indemnify it. A bond of indemnity was accordingly delivered to an agent of respondent but was not considered satisfactory at the main office. Three months later, a bond of indemnity was executed and accepted by the respondent. At that time, the work was about one third completed. The Packard-Spink Co. defaulted, and respondent paid the city and then recovered in an action on the second indemnity bond. In affirming the judgment of the superior court, it was said:
"We think there was clearly a consideration for the second agreement. The first agreement was not accepted as a compliance with the original contract to indemnify, and the second was executed in fulfillment of such contract. It is not necessary toits validity that a written agreement to indemnify againstliability under a contract be executed simultaneously with thecontract indemnified. It is enough that it be executed in compliance with the agreement, whether at the time of the agreement or thereafter. `The *Page 746 
general rule in regard to guaranty is that, if the guaranty and contract guaranteed are a part of the same transaction, the consideration for the latter supports the former; while if they are not one transaction the bond must be supported by a consideration independent of the consideration for the original contract.' Considine v. Gallagher, 31 Wash. 669, 72 P. 96
[469]." (Italics mine.)
In Considine v. Gallagher, 31 Wash. 669, 72 P. 469, cited in the above case, action was brought on the bond executed to secure the faithful performance of a building contract. The complaint alleged that the contract was entered into December 12th, and the bond bore the date of December 19th. In passing it was held:
"The contention is that the bond was executed so long subsequent to the original contract that it cannot be presumed to be a part of the same transaction, or supported by the original consideration, and for that reason it was necessary that it be alleged that the bond was made upon sufficient consideration, in order to state a cause of action upon it. The general rule in regard to guaranty is that, if the guaranty and contract guaranteed are a part of the same transaction, the consideration for the latter supports the former; while if they are not one transaction, the bond must be supported by a consideration independent of the consideration for the original contract."
Accord: De Mattos v. Jordan, 15 Wash. 378, 46 P. 402;Tomanovich v. Casey, 106 Wash. 642, 180 P. 919; Thompson v.Moe, 147 Wash. 133, 265 P. 457.
The following cases indicate the conclusion which should be reached in the case at bar:
In Williams v. Perkins, 21 Ark. 18, it appears that the principal obligation was signed by Williams  Parker and O.B. Parker, and by Gideon J. Williams and Wm. T. Williams as sureties. When the writing was signed by the principal obligors, it was agreed that the sureties would sign it also, they then being absent. Perkins, the payee, took the instrument and secured the signatures of the sureties. It was held that the consideration was sufficient to bind the sureties. *Page 747 
In Moies v. Bird, 11 Mass. 436, 6 Am. Dec. 179, a party agreed to give a note as part of the consideration for the purchase of land, with the promise to secure an endorser as surety. Two days later the note was endorsed by the surety. In holding the surety liable the court said:
"If it was a fact that his signature was in consequence of the purchase made by his brother, upon representations made that he would sign the note, although his signing was not until after the delivery of the deed, his act ought to be referred to the date of the transaction; and he must be presumed, when he signed in blank, to have assented to such a reference; so that he would be considered, in law as well as justice, as having placed his name on the note at the time it bears date, if that be necessary to give effect to his engagement."
In Bowen v. Thwing, 56 Minn. 177, 57 N.W. 468, the court, in passing upon the issue presented as to whether or not a surety who signed subsequently to the signature of the maker was liable, stated:
"It is not necessary, of course, that the consideration to sustain a surety's undertaking should run to the surety. It may be, and generally is, paid to the principal. It is enough if the creditor rely on the surety. It is true that the agreement that the surety should sign in this case was not made with her, and until she signed she was in no way bound by it; but, as any one who executes a contract binding on its face must be presumed to do so in order to bind himself, her signing must, if necessary to bind her, be referred to what took place when the note had its inception, — to the agreement then made by the principal that she should sign. In signing, she in fact carried out that agreement, and she must be conclusively presumed to have so intended when she signed, — to have intended to carry out any agreement with respect to her signing which the principal, who requested her to sign, had made."
Deposit Bank of Sulphur v. Peak, 110 Ky. 579, 62 S.W. 268, 96 Am. St. 466, is another case in which it was held that a surety cannot escape liability on the ground that his undertaking was without consideration because he signed the note after its delivery to the payee, the note having been accepted on condition that he should sign it. *Page 748 
An early California case, Winders v. Sperry, 96 Cal. 194,31 P. 6, is interesting from the standpoint of the language used. The payee of a note advanced money to the maker with the understanding that a certain person would endorse it. The supreme court of that state held that, since the transaction was not completed until the endorser signed, the original consideration supported the guaranty. It was said:
"It is true, in general, that one who adds his signature to a promissory note after its execution and delivery is not bound unless there is a new consideration. But this is not that case. The execution and delivery were not complete until it was signed by appellant.
"But if we are bound to conclude that it had been executed and delivered as to one of the makers, there was a consideration for the subsequent signature of the appellant. As the contract was that he should sign the note, and the note was accepted only upon that understanding, the payee could have canceled it or tendered it back if appellant had refused to sign, and maintained a suit at once for his money.
"The note was payable one year after date, and the credit was given on the promise and in consideration of appellant's signature. Had he not signed the note this consideration would have failed.
"But while the general rule as to a signature obtained after the execution and delivery of the note is as above stated, it has been held that where the borrower promises at the time of the loan and the execution and delivery of a note, signed by himself alone, that he will procure another signature, that the person so signing afterwards is bound; that the subsequent signature is not without consideration."
The case of McNaught v. McClaughry, 42 N.Y. 22, 1 Am. Rep. 487, cited by the majority, has an important bearing upon this case. At the time of the making of the note, the original obligor promised to secure the endorsement of his father, should the holder of the note deem himself insecure. Several months later, the plaintiff became dissatisfied with his security, and the maker obtained the signature of his father, the defendant's testator. In holding that the subsequent endorsement was supported by a valuable consideration, the court said:
"Suretyship upon promissory notes may be made in various forms, as by becoming an undersigner, an indorser *Page 749 
or formal guarantor. In every form the existence of a sufficient consideration between the maker and the lender establishes a sufficient consideration also as against the surety. In practice there is usually no communication between the lender and the surety. The business is transacted between the principals alone."
The legal proposition is restated in the opinion by the following illustration:
"If Abram had given his note to the plaintiff, and the same had been accepted in performance of the contract without further condition, and the note was yet unmatured, the obtaining an additional indorser would have been a gratuitous act on the part of Abram, and the indorser would not be bound. He would not be bound, not because there was no direct consideration moving to himself, but because there was no sufficient consideration moving to his principal. On the other hand, if Abram had originally agreed with the lender that he would obtain the new indorser, and had obtained the money upon the faith of that promise, then his finding the additional indorser was based upon a valid consideration, and the indorser was held by his signature."
Accord: Harrington v. Brown, 77 N.Y. 72; Kneisley Lbr. Co. v.Edward B. Stoddard Co., 131 Mo. App. 15, 109 S.W. 840; Pauly v.Murray, 110 Cal. 13, 42 P. 313; Stroud v. Thomas, 139 Cal. 274,72 P. 1008, 96 Am. St. 111.
Respondents were not strangers to contracts such as the one in controversy. They had signed a similar agreement a year previous. In any event, respondents cannot claim that they did not intend to be bound for the reason that paragraph seventeen of the contract was plainly printed upon the page containing the guaranty which they signed. In paragraph seventeen, appellant and the distributor, Baker, definitely agreed that Baker should secure a bond; that in itself proves that there was a consideration sufficient to support the guaranty signed by respondents. The court erred in submitting to the jury the question relative to whether there was a consideration for the guaranty. That was a fact admitted by the contract, undisputed by oral *Page 750 
evidence, and should have been so decided as a matter of law.
Appellant was entitled to recovery, and judgment should have been entered in its favor.
BEALS, C.J., STEINERT, and ROBINSON, JJ., concur with SIMPSON, J.