Court Opinion

ID: 6737542
Source: CourtListenerOpinion
Date Created: 2022-07-20 23:19:41.477952+00
Date Added: 2024-06-11T16:01:50.813749
License: Public Domain

Cooley, District Judge,
dissenting. It is naturally with some hesitation that I dissent from the majority opinion of the court; but a careful consideration of the facts and the law applicable thereto has convinced me that the plaintiffs should prevail, and this conviction has not *392been shaken by the majority opinion. It is therefore with all due deference to the majority that I presume to set out, somewhat in detail, my views of the law and the facts in this case, with some reference to the reasons assigned by the majority for their adverse conclusion.
The material facts in this case are not disputed. At the time of the commencement and trial of this action, the Citizens State Bank of Rugby, North Dakota, was a banking corporation organized under the laws of this state, and having a capital stock of $10,000. At and prior to the execution of the contract hereinafter mentioned, the defendant J. H. Lockwood was the president, and the defendant A. M. Iverson was the vice president of the said bank. Together they owned and controlled $8,000 of the capital stock. Being desirous of procuring for himself and his associates a controlling'interest in said bank, the plaintiff Harold Thorson entered into negotiations therefor with the defendants, which negotiations culminated in the following written agreement:
‘This agreement, made and entered into this 29th day of September, a. d. 1911, by and between A. M. Iverson and J. H. Lockwood, of Rugby, North Dakota, now owners of the Citizens State Bank of Rugby, parties of the first part, and Harold Thorson, of Drake, North Dale ota, party of the second part,
Witnesseth, That the said parties of the first part, for and in consideration of the sum of eight thousand dollars, to them in hand paid in Bills Receivable of the said bank, such as the party of the second part may select, have bargained and sold unto the said party [of the second part] Eighty (80) shares of capital stock of the said Citizens State Bank of Rugby, North Dakota, hereby agree to deliver to the said party of the second part commission notes and mortgages securing the same to the amount of $10,145.
The said parties of the first part further agree to transfer their good will to. the said bank and not to engage in any banking business in the city of Rugby, North Dakota, for a period of five years, nor to make any real estate loans for sale or on commission.
The said parties of the first part further agree to have all Bills Receivable now in said bank, which are past due or payable on demand, either renewed and secured or paid.
In Testimony Whereof, etc., etc.
*393At the time of the execution of the contract there were in said bank bills receivable that were past due and payable on demand amounting to approximately $25,000. Of these bills receivable, there remained at the time of the trial about $6,600 that had not been renewed and secured or paid.
Basing their cause of action upon the following provision of the contract : “The said parties of the first part further agree to have all bills receivable now in said bank, which are past due or payable on .demand, either renewed and secured or paid,” the plaintiff, in April, 1913, instituted this action against the defendants to recover as damages, for defendants’ failure to comply with this agreement, the amount due on the notes that were past due and payable on demand, held by said bank at the time of the sale, and which, at the commencement of the action, had not been renewed and secured or paid. In their complaint the plaintiffs offered to indorse and deliver all of said notes to the defendants, and to assign and deliver to them any security held in connection with any of said notes upon payment to plaintiffs by defendants of the amount due. The issues were tried to a jury, and at the conclusion of the testimony both sides moved for a directed verdict, whereupon the lower court discharged the jury, and upon findings of fact and conclusions of law subsequently made, judgment was duly entered for defendants.
This appeal involves the interpretation of the following clause of said contract: “The said parties of the first part further agree to have all bills receivable now in said bank, which are past due or payable on demand, either renewed and secured or paid.”
It would seem that the majority of the court have entirely misconceived the nature of the agreement contained in the paragraph under consideration. Now, an alternative obligation is defined as “an obligation stipulating for the doing of one or the other of two things, and discharged by the perform anee of either.” By the terms of this agreement the defendants agreed to have certain bills receivable either renewed and secured or paid. The obligation of the defendants was therefore an alternative obligation, — to effect the performance of either one of two separate and distinct acts, the performance of either one of which would satisfy the terms of the agreement. The situation is not different from what it would be had the defendants, in one part of the contract, *394agreed to have the notes renewed and secured, and in another and subsequent part of the contract, agreed that in the event they did not have the notes renewed and secured, they would have them paid. Nor is it different from what it would be had the agreement been framed so as to read: “The said parties of the first part further agree to have all bills receivable . . . either paid or renewed and secured.” The paragraph in question contains two separate and distinct agreements. They are both principal agreements. Neither is secondary or subordinate to the other. It is therefore by no means a fair test of this question to eliminate-from the clause under consideration the words, “or paid.” As before stated, the obligation assumed by the defendants is in the alternative.
Comp. Laws 1913, § 5778 (Eev. Codes 1905, § 5222) provides: “If nn obligation requires the performance of one of two acts in the alternative, the party required to perform has the right of selection, unless it is otherwise provided by the terms of the obligation.”
Comp. Laws 1913, § 5779 (Eev. Codes 1905, § 5223) provides: “If the party having the right of selection between alternative acts does not give notice of his selection to the other party, within the time, if any, fixed by the obligation, ... or if none is so fixed, before the time at which the obligation ought to be performed, the right of selection passes to the other party.”
Comp. Laws 1913, § 5917 (Eev. Codes 1905, § 5361) provides: '“If no time is specified for the performance of any act required to be performed, a reasonable time is allowed.”
A reasonable time had elapsed between the 29th day of September, 1911, and April, 1913, for the performance by the defendants of any ■obligation assumed by them under the terms of the agreement, and no selection having been made by the defendants during that time, the right ■of selection passed to the plaintiffs. It was therefore optional with the plaintiffs to bring an action for damages for failure to. have the notes renewed and secured, or for failure to have the notes paid. The plaintiffs have chosen the latter alternative.
The contract, therefore, which plaintiffs are seeking to enforce in this action, pursuant to such alternative, is, when reduced to its lowest terms, “We agree to have the designated notes paid within a reasonable time.” It is the agreement to have the notes paid that is the basis of *395this action, and it would seem that in determining the proper interpretation to be given to tbis agreement, it would be a strange process of reasoning that would permit of an elimination of tbe agreement itself from any consideration whatsoever.
What tbe legal liability of defendants would be under an agreement to have tbe notes renewed and secured only, is entirely beside tbe question in tbis case, and tbe solution of that question, whatever it may be, is by no means conclusive of plaintiffs’ rights under tbe agreement to have tbe notes paid.
Tbe majority of tbe court have assumed that tbe only undertaking by tbe defendants was to have tbe notes renewed and secured. They ■say: “Tbe words ‘or paid’ adds nothing to tbe legal import of tbe contract. Tbe omitted words were nevertheless understood as necessarily an implied part of tbe contract. How, then, can tbe situation be changed when tbe parties have but mentioned such alternative, instead •of leaving it to implication ? Tbis fairly tests tbe question, and concludes it against tbe plaintiff.” In other words, tbe court, in effect, says that this contract is to be construed as though it read: “We agree to have tbe designated notes renewed and secured, unless they are paid.” Such is not tbe agreement. Tbe defendants have made two specific .■agreements. One agreement is to have tbe notes renewed and secured, and tbe other is to have tbe notes paid. These two agreements are united by tbe disjunctive “or,” thus indicating an alternative obligation.
Tbe majority of tbe court have not only misconceived tbe nature of tbe agreement, but they seem to have misunderstood tbe contentions of tbe parties. Counsel for both parties have disclaimed that tbis contract is strictly one of guaranty, but plaintiffs claim that tbe paragraph under •consideration constitutes simply a contract on the part of tbe defendants to procure, or causé one of either two things to be done, one of such things being tbe payment of money; that by virtue of their selection to sue for a breach of tbe agreement to have, procure, or cause money to be paid, they are entitled to recover tbe full amount of the indebtedness which tbe defendants agreed to have, procure, or cause to be paid. At no time have plaintiffs claimed that tbe agreement to have tbe notes paid was strictly a guaranty, of payment. Tbe contention of tbe ■defendants is that tbe contract is “intended to be in tbe nature of an *396indemnity against loss,” or a “warranty that the makers of the notes have the cash or resources with which to pay them; in short, that they are solvent;” and that respondents are liable only as upon a guaranty of collection; that appellants’ right of action for any breach of this agreement, is one for damages only, after exhausting all legal remedies against the makers, or upon alleging and proving that the makers are insolvent and the notes uncollectible; and the lower court so held.
In the majority opinion it is stated that “defendants insist that the construction should be that they will have said paper renewed and secured or paid by the makers.” This is not, in any sense, a construction of the contract. It is simply a repetition of the words of the agreement, with the addition of the words, “by the makers,” which words would naturally be implied from the context. It may be conceded that this was the agreement that was made, but it does not follow that the legal effect of the words so used and implied is not as contended for by plaintiffs. The majority of the court concede that if this is the agreement, the defendants would be responsible “to the amount of the actual damage any breach of their contract in failing to procure the makers to pay the notes may have caused plaintiffs.” This is a correct statement of the rule of damages, but I cannot agree that the damages are to “be measured by the difference between the actual value of the notes and the amount due upon them, together with the necessary expense of endeavoring to enforce payment.” If the agreement is strictly, or in effect, a guaranty of collection, the measure of damages would be as stated in the majority opinion. But I am unable to perceive upon what theory this agreement can be construed as a guaranty of collection.
No particular form of expression is a necessary prerequisite to the creation of a contract of guaranty. If the words used evidence an intent on the part of the promisor to answer for the debt of another, the promise constitutes a guaranty, and it may be conditional, or it may be absolute. A guaranty is to be deemed unconditional unless its terms import some condition precedent to the liability of the guarantor. A promise to answer for the debt of another may constitute a guaranty of its collection, or it may constitute a guaranty of its payment. A guaranty of collection imposes upon the guarantee the duty of exhausting his legal remedies against the debtor, or of showing that such legal proceedings would be unavailing, and is therefore termed a conditional *397guaranty. We look in vain for any expression in the contract itself, or any facts or circumstances surrounding the transaction, tending in the slightest degree to show that the parties to this agreement intended the particular clause under consideration to constitute a guaranty of collection, or any form of indemnity against loss importing the performance by plaintiffs of any condition precedent to the liability of the defendants. The defendants, Lockwood and Iverson, in agreeing to have the notes renewed and secured or paid, themselves assumed an unconditional obligation to effect through their own efforts, unaided by the plaintiffs, either the renewal or the payment of the notes by the makers. Under the terms of this agreement, no obligation was assumed by, or imposed upon, the plaintiffs to exert any effort to have the notes either renewed and secured or paid; but the obligation to have one or the other of these two things done was assumed by, and imposed upon, the defendants alone. It is easy to conceive of conditions under which an attempt by the plaintiffs to collect the notes by legal process or otherwise might be such an interference with the performance of the obligation assumed by the defendants as to constitute a complete defense to any attempt on the part of the plaintiffs to recover for any breach of the contract by the defendants. In the majority opinion it is stated that liit is unnecessary to speculate as to what should have been contracted for, to determine what has actually been done.” ' I will go a step further, and say that it is not only unnecessary, but it is highly improper. For this reason it is not only unnecessary, but it is improper, to consider whether, in the making of this agreement, usual banking custom had or had not been followed, or what should have been the form of the contract had there been an intent to exact or give as broad a guaranty as one of payment.
Nor is the consideration agreed to be paid by plaintiffs for the eighty shares of átoek a proper matter to be considered in determining the meaning of this unambiguous agreement. There is no evidence to show that the contract was an improvident one from the point of view of either party, or that either attempted to, or did,, overreach the other. The defendants knew the character of the paper they were selling to the plaintiffs as well as, if not better than, the plaintiffs, and that the extent of the liability assumed by defendants was not as great as it would.appear to be from the amount of past-due and demand paper *398that was on hand at the date of the contract is evidenced by the fact that at the commencement of this action only about one fourth of the paper had not been renewed or paid. Moreover, from all that appears, the defendants, by guarantying the past-due and demand paper, assumed, no greater hazard than that which they escaped by unloading the bank upon the plaintiffs. In other words, the language of the contract itself is to govern its interpretation, and we have no right to indulge in speculation, conjectures, or inferences not supported by any record in the case.
The interpretation to be given to the contract under consideration is important only in determining the measure of damages, and it is. immaterial whether this agreement is termed a guaranty of payment,, or, as urged by the majority opinion, simply a contract by the defendants to have the notes paid by the makers. In either case the damages recoverable must be the same in amount. My one personal opinion is. that the agreement constitutes substantially a guaranty of payment.
The words, “I hereby guarantee the payment of the within note,”' constitute a guaranty of payment. Northern State Bank v. Bellamy, 19 N. D. 509, 31 L.R.A.(N.S.) 149, 125 N. W. 188. It is difficult, to perceive any difference, in legal effect, between these words, and “I hereby agree to have the within note paid.” In either case, the legal' effect of the agreement is that the note shall be paid, either voluntarily,, or through the procurement of the 'promisor, by the maker or by some-other person in his behalf. “Guaranty is an undertaking by one person that another shall perform his contract or fulfil his obligation, and that in case he does not do so, the guarantor will do it for him. A guarantor of a bill or note is one who engages that the note shall be paid.” Ibid. When defendants agreed to have the notes paid, they engaged that the notes “shall be paid.” The obligation is even stronger than the ordinary guaranty of payment; for defendants have not only engaged that the makers shall pay the notes voluntarily, but they have promised that; they will themselves cause the makers to pay.
In the case of Robinson v. Gilman, 43 N. H. 485, the court say: “A brief statement of set-off was, in substance, that in consideration that said Gilman would not bring a suit on two promissory notes due to' him from one Rollins, and summon said Robinson as trustee of said Rollins, he would procure said notes to be settled and paid to saidl *399Gilman. . . . Though not in terms a guaranty of the two promissory notes described in the set-off, it was in substance such guaranty, — a contract to procure the notes to be paid. The rule of damages in such a case can only be the amount due on the notes for principal and interest,. —an amount to be ascertained by simple computation.”
In Wills v. Ross, 77 Ind. 1, 40 Am. Rep. 279, it was held that “Give John a little more time, and I will see you get your money,”- — - was a guaranty of payment.
In Meldrum v. Kenefick, 15 S. D. 370, 89 N. W. 863, it was held that the statement, “I will see that you get your money,” was an original undertaking for the payment of the debt.
In McGowan Commercial Co. v. Midland Coal & Lumber Co. 41 Mont. 211, 108 Pac. 655, it was held that the oral statement, “You let G. have what he requires, — what he needs, — and I will see that it is paid,” — was an original undertaking for the payment of the debt.
Also in Taylor v. Ross, 3 Yerg. 330, the court held the written promise, “We bind ourselves to see the within note paid,” to be a guaranty of payment.
Eliminating the provision for the renewal and securing of the notes, the agreement of the respondents is not materially different from those construed in the foregoing cases.
In the writer’s opinion, the defendants, upon their failure to effect the renewal or payment of the past-due and demand notes within a reasonable time, became absolutely liable, upon a guaranty of payment, for the full amount due on said notes.