Court Opinion

ID: 6505351
Source: CourtListenerOpinion
Date Created: 2022-07-19 18:17:38.362627+00
Date Added: 2024-06-11T15:54:43.197993
License: Public Domain

CHILTON, C. J. —
This action is upon a guaranty in the following words : “ Messrs. T. & G. Forbes — Gentlemen : If you can sell Mr. J. M. Cogburn any groceries, I am willing to guaranty the ultimate payment of any bill he may make with you, to the amount of five hundred dollars. Yours respectfully, (signed) D. Walker, (dated) New Orleans, April 10 th, 1850.” The ascertainment of the legal effect of this instrument, will enable us better to determine the questions raised upon the judgment overruling the demurrers to the four special counts in the plaintiffs’ declaration.
It is certainly not an absolute undertaking to be primarily responsible for the demand; but to see it ultimately paid — that is, after the plaintiffs had used all means in their power, which were reasonable and proper, to coerce payment out of Cog-burn, who was understood to be the party primarily liable.— If they have failed to do this, or to show that the use of such means would have been unavailing, by reason of his insolvency or from some other cause, they cannot reccrver. Any other construction would, we think, make the guaranty read as though the word “ultimate” had been omitted, and would do violence to the intention of the parties. It is, in effect, a *147guaranty of the goodness of the demand. The principle upon which the cases of Lewis v. Hoblitgill’s Adm’r, 6 Gill & John. 259, Johnson v. Chapman, 3 Penn. 18, Foster v. Barney, 3 Verm. 60, Rudy v. Wolf, 16 Serg. & Rawle 69, and Nesbit v. Bradford, 6 Ala. 746, were decided, fully covers this case; see, also, Story on Contracts, § 871 a, and cases cited by him, n. 1.
Again ; Walker is willing to guaranty the ultimate payment if the plaintiffs will sell groceries to Cogburn. Here was a proposal to become ultimately bound, requiring an acceptance on the part of the plaintiffs before it could be said to be a consummated contract. It is well settled, that in such case the guarantor is entitled to notice of the acceptance of his order in order to bind him; for he has a right to know whether the persons to whom the letter is addressed intend to look to him ultimately for payment, and of the extent of his liability and the terms of the contract. — Edmundson v. Drake, 5 Peters 624; Douglass v. Reynolds, 7 ib. 113; Lee v. Dick, 10 ib. 482; 12 ib. 497; Wildes v. Savage, 1 Story’s Rep. 32; Lawson v. Towns, 2 Ala. 373; Story on Con., § 873. This information is necessary to enable the guarantor to provide for his safety and indemnity as against his principal. Besides, he has the right, where the contract of guaranty does not determine the character and extent of his responsibility, but these are left at the option of the creditor, to know in what manner that option has been exercised, so as to enable him to fulfil his engagement. — See 2 Amer. Leading Cases, p. 81, and Henning’s Case, Cro. Jac. 432.
It is supposed by some of the courts, that this notice must be given immediately upon the acceptance of the guaranty ; but we think the better opinion, and that more consonant with reason, is that the notice of acceptance should be given in a reasonable time. But this doctrine is inapplicable to cases where the agreement to accept is cotemporaneous with the guaranty, or when it constitutes the consideration and basis thereof. So, if in the case before us the plaintiffs refused to credit Cogburn, and he thereupon agreed to give them, as security for his bill to bo made with them, the guaranty of Walker, who, in consideration of their promise to accept it and sell the goods upon the faith of it, executed and *148delivered it, or caused it to be delivered to the plaintiffs, the parties all being in the same city, and the information as to the amount of groceries sold and the terms of credit being accessible to all, we do not think any further notice of the acceptance and action upon the guaranty by the plaintiffs was necessary to charge the guarantor. It was his business to have ascertained the amount and extent of his liability for himself, which he could have done upon inquiry. The whole arrangement having been concluded at the same time, notice of acceptance is implied by the assent of plaintiffs to the guarantor’s offer. — Howe v. Nickels, 22 Maine 175; Wildes v. Savage, 1 Story 22.
But it is insisted, that notice of the default of the principal must be given to the guarantor before he can be held answerable. The rule, in such cases as this, requires that reasonable notice should bo given. The doctrine asserted in Donley v. Camp, 22 Ala. 659, does not apply to cases like the present. That was the guaranty of a specilic, existing demand ; but here no demand existed at the time : it was to be created in future, and the terms of the contract and the amount to be paid within the limit specified in the guaranty, were loft at the option of the guarantee and principal debtor.
If, however, notice has not been given, it does not necessarily follow that Walker is discharged. If Cogburn was insolvent when the debt fell due, and he has sustained no injury from want of notice, his liability remains unaffected by the failure to notify him of the default. If he has sustained an injury for want of such notice, he is released to the extent of that injury. This seems to be the rule deducible from the current of the authorities both English and American. — See them collated in the notes of Messrs. Hare & Wallace, in 2 American Leading Oases, pp. 54 to 98, and a perspicuous and able commentary upon them by those gentlemen.
We have thus far treated this guaranty as though it were to be governed by the laws of this State in which the remedy is sought. It is suggested, however, that it was made in New Orleans, to be executed and consummated in Louisiana, and must be governed by the laws in force in that State, which entered into and formed a part of the contract, We will presently discuss it in this aspect,
*149Upon a slight inspection of the four special counts, it is very clear that each of them is insufficient, in this, that they fail to set out the terms of the contract between the plaintiffs and Cogburn. Credit was given to him for a specified sum : but we are not advised by the counts as to how, or when the debt was to be paid, so that we cannot determine whether the terms agreed upon Avcre lawful or within the scope of the guaranty. Failing- to aver the terms of the contract, the allegation that Cogburn has made default, is but a conclusion of the pleader, and not an averment of a fact upon notice of which the liability of the guarantor is to attach-. It is an elementary rule, that the pleader must aver every fact of which the court will not judicially take notice, which is necessary to entitle him to recover, and that it is not sufficient to allege mere conclusions. — 1 Chitty's PL 214. The declaration is, therefore, bad, and the court erred in overruling the demurrer to the special counts. We are aware, that the form here pursued accords substantially with that given by Mr. Chitty, but the English doctrine is different from our own, as respects notice in such cases. His form, adapted to the English rule, which does not require such notice, is substantially defective with us, in cases where, as we have shown, the guarantor is entitled to notice of the acceptance of the guaranty, and the amount and term of credit extended to the third party under it. As to the common counts, we may lay them out of view, as it is not pretended that upon this collateral agreement any recovery could be had under them. — Douglass et al. v. Reynolds, 7 Peters 113.
The court below also, committed an error, in permitting hearsay evidence to establish the insolvency of Cogburn. After the fact of insolvency is established, such proof is sometimes received to show the notoriety of it, as conducing to bring knowledge of it to particular persons who may be affected thereby ; but it has never been alloyed as evidence to prove the fact itself. The farthest the courts have gone, is to allow proof by reputation of facts from which insolvency may be inferred, but not reputation of insolvency, since that is a legal conclusion from facts. — Lawson v. Orear, 7 Ala. 784-788.
We come next briefly to consider the case under the facts as disclosed by the bill of exceptions.
The guaranty was given in the city of New Orleans, and *150the plaintiffs were merchants residing there. The guarantor resided in this State, and Gogburn, the principal debtor, in Arkansas. The goods were shipped on the vessel of which the guarantor was captain, and delivered to Cogburn in the State of his residence. It thus appears that the contract of guaranty was consummated in the State of Louisiana, and there is nothing apparent from the face of it, or by the oral proof, to show that the payment was to be made, or the execution of it was to be had, elsewhere. Under these circumstances it is clear, we think, that the general rule must apply, that sureties, endorsers and guarantors are liable according to the law of the place of their contract. — Story’s Conflict of Laws, p. 223, § 266; Story on Bills, §§ 391, 399, 177 and notes; Chitty on Bills, 661-881; Lowry’s Adm’r v. The Western Bank of Georgia, 7 Ala. 120; King v. Harman's Heirs, 6 La. 607; Dunn v. Adams, Parminter & Co., 1 ib. 521; Bell v. Brewer, 1 How. U. S. 169.
Upon examining the provisions of the Civil Codo of Louisiana, to which we are referred by the record, we are not, however, prepared to hold that they apply to a contract like the present. Section 3014 defines the obligation of the surety towards the creditor to be, to satisfy the debt if the debtor does not, and prescribes that the property of the debtor is to bo previously discussed or seized, unless the surety should have renounced the plea of discussion, or should be bound in solido jointly with the debtor. By section 3015, the creditor is not bound to discuss the principal debtor’s property, unless required to do so by the surety on the institution of proceedings against the latter ; and the next section (3016) provides, that if the surety requires discussion, he is bound to point out property of the principal debtor, and furnish a sufficient sum to have the discussion carried into effect; this property must not be out of the State, nor in litigation, nor out of the possession of the debtor under a mortgage.
These sections, we think, apply to ordinary contracts of suretyship, or simple guaranties ; but not to cases where the terms of the contract expressly provide, or necessarily imply, a diligence on the part of the creditor beyond that required by them. The contract of the parties, if lawful, must be carried out; and we have seen that the meaning of this engage*151ment is, that the creditor will use all lawful and proper means to collect the demand of the debtor where he resides, or show that the use of such means would hare been fruitless. As, therefore, in order to fix the liability of the guarantor, the contract contemplated the exercise of diligence, and the pursuit of legal remedies, if need bo, without the State of Louisiana, the doctrine of discussion could not have been applied, we apprehend, even had the action been brought in Louisiana. The case, we think, would not, and does not, fall within the influence of these provisions.
As to the draft taken by the plaintiffs of Cogburn on Walker, which he refused to accept, being for this bill of goods, and remaining unpaid, we do not perceive how it can affect the relation of the parties in respect of the original demand. It does not appear to have been received in payment, and cannot therefore have the effect of discharging the guarantor.
The statement made by Cogburn, as deposed to by the witness Deming, viz., “ that he had been unfortunate and was without means,” was properly received in evidence. It was made pending the negotiation for the goods, and tended to show a material fact, namely, that the credit was given to Walker and not to Cogburn.
Neither do we think there was any error in allowing the draft and protest to be given in evidence, in connection with the letter of Walker, which relates to them, and the evidence of the notary. They served to show that Walker was advised that his letter of guaranty had been acted upon, and of the amount of the credit given to Cogburn, as also, that he then considered himself •ultimately bound for the demand due from Cogburn.
The charge, however, was not warranted by-the proof, as it failed to show Cogburn’s insolvency ; and as there was no proof of any legal proceedings against the debtor, nor any agreement waiving such diligence, it must be shown that such diligence would have been fruitless, or a recovery cannot be had.
Eor these errors, the judgment of the City Court is reversed, and the cause must be remanded.