Bash v. BashBash v. Bash
In this сase the question is whether the allegations of the petition are sufficient to state a cause of action in favor of the plaintiff. Certain of the defendants demurred to the second amended petition in the district court, the demurrer was sustained and, the plaintiff electing to stand on the petition, the case was dismissed, and this appeal presents for review the matter of the suffiсiency of the petition as against the demurrer.
The following facts appear in the allegations of the petition: The Parks Equity Exchange was in financial difficulties and, desiring to raise money and еstablish credit for the continuance of its business, at a stockholders’ meeting held April 5, 1919, a resolution was adopted which was entered in the minutes of the meeting and individually signed therein by the defendants in the following words:
“Motion made and carried this 5th day of April, 1919, that we the stockholders of the Parks Equity Exchange do hereby empower the board of directors to borrow money, to renew notes and get mоney to do business to the extent of sixty thousand dollars ($60,000) if necessary and we severally and individually guarantee the security of the same.”
That the board of directors acting under the authority of said guarаnty did borrow money, renew notes and secure credit to enable the exchange to continue doing business, and such action was necessary to enable the exchange to continue аs a going concern.
That at that time James O. Bash, one of the stockholders and a signer of said resolution, was a creditor of the exchange to the amount of $6,000, represented by a promissory note as to which he refused to extend the time of payment thereof unless additional security was furnished, and thereupon, upon the signing of the resolution and furnishing to him of a copy thereof, he did renew the note and loaned an additional sum of $5,694, which was also represented by a note, both notes maturing in 18 months from their date or on November 12, 1920.
It further appears from the petition that the Parks Equity Exchange was adjudged bankrupt in November, 1927, and that certain dividends were received from the bankrupt estate in 1928 of $872, in 1929 of $938, аnd in 1930 a final dividend of $255, all of which were applied on the note and that nothing further may be derived from that source.
The plaintiff prays judgment for the sum of $14,432 with interest from October 1, 1930, as the amount due on the note.
The action was commenced October 4, 1930.
It is also alleged that the intent and purpose of the defendant signers of- the guaranty in giving the same was to empower the board of directors to borrow money and to guarantee the payment of all notes given by the board under the authority of the guaranty, and in addition there is an allegation in respect to the particular wording of the guaranty whereby it is claimed that inadvertently thе word “individually” was used therein in lieu of the word “jointly,” and that the word “security” was also used in lieu of the word “payment,” and a reformation of the instrument is asked in those particulars.
The proposition raised and principally relied upon by the defendants under the demurrer is that it appears on the face of the petition that the action at the time of its commencement was barred by the stаtute of limitations. There is the further proposition that it is necessary there should be pleaded a notice to them of the
It is to be noted that the first notes made pursuant to and at approximatеly the time of the execution of the contract of guaranty matured and remained unpaid and unrenewed for a period of six months. There can be no doubt of the accrual of a cause of action upon the guaranty at that time, or that the statute of limitations commenced to run thereon; and the question to be determined would, therefore, be whether by any later act of the parties the running of the statute was suspended.
It does not appear from the petition that the defendants who signed the guaranty had any part in, or notice or knowledge of, the later trаnsactions involving the renewals and extensions of the note, and no act of the defendants or any of them after the execution of the contract of guaranty in recognition of the obligation thereof such as would toll the running of the statute of limitations is pleaded. The question must therefore be determined upon construction of the contract itself. The exchange continued in businеss until it was adjudged bankrupt in November, 1927, two and a half years after the maturity of the last renewal note and seven years after the accrual of the cause of action on the guaranty by the mаturity of the notes first given thereunder. This action was commenced approximately three years after the adjudication of bankruptcy.
The appellant contends that the instrument under cоnsideration is a “continuing guaranty,” and would apply this term to the time and manner of its enforcement, leaving the right of action thereon to be governed, so far as the matter of limitations is concerned, by the right of action upon the original note or any renewal thereof.
In this construction respecting a continuing guaranty, we think there is error in that such term ordinarily contemplates a .sеries of transactions which give rise to the
“Where there is no limit in time or amount the courts hesitate to classify the guaranty as a continuing one. Some courts even take the view that a contract will not be construed as a continuing guaranty unless its language reasonably so requires. On the other hand, it is held that a liberal construction is to be given in favor of one claiming rights under a guaranty and that it is the duty of the guarantor to limit his liability to a single transaction if he wishes to avoid further responsibility. Between these extreme views is a middle ground, that the proper construction of the instrument is such as best accords with the intention of the parties, as manifested by the terms of the guaranty, in connection with its subject-matter and surrounding circumstances, neither enlarging the words beyond their natural import in favor of the creditor nor restricting them in aid оf the surety.”
This court has adopted the rule of strict construction as to such contracts and in the case of Hunter v. Huffman,
“The rule of strictissimi juris applies in determining the effect of a contract of guaranty. When the meаning of the contract is ascertained, or its terms are clearly defined, the liability of the guarantor is controlled absolutely by such meaning and limited to the precise terms.”
It is further held in the case lаst cited and in the case of Rushton v. Dierks Lumber Co.,
In the case of Hall v. Rogers,
“The payment of interest or a part of the principal on a note by a principal debtor, without the authority or consent of the surety, will not stop the running of the statute of limitations as to the surety.”
“A payment by one of several joint debtors on a note, without authority or consent of the others, will not toll the statute of limitations as to them.”
It is held in the case of Cummins v. Tibbetts,
Upon a continuing guaranty a right of action arises with each freshly incurred liability. In the present case the right of aсtion could be single only. Appellant’s argument that the guaranty was one of payment, and that the successive renewals were not payments of the preexisting debt, may be sound, but it does not helр appellant’s situation in the case.
“The promise to guarantee a renewal of the same obligation is meant to define the liability with respect to that obligation rather than to crеate an added or new liability in the future. The guarantor agrees to be held liable for the particular debt whether evidenced by the original note or by a renewal. Regardless of the number of times the debt is renewed, the cause of action is essentially single and is upon the1 original guaranty, and it must be brought within the period of limitation prescribed for such a cause.” Baird v. Foss Investment Co., 58 N. Dak. 345.
In view of these adjudicatiоns and their application to the petition presented, further discussion seems unnecessary, and it clearly appears that the bar of the statute
The judgment of the district court was right and it is
Affirmed.