2 Mich. 504 | Mich. | 1853
The first question presented for our consideration, is, whether the bond was intended as a continuing guaranty to the amount of $3000 for the period of three years, commencing on the 1st of January 1837, and ending on the 1st of January, 1840. The plaintiffs insist that this is the only reasonable construction to be given to the bond; on the other hand, while it is admitted by the defendant, that successive advances, to the amount of $3000 might be made during the period covered by the guaranty, yet it is contended that when advances- to that amount are actually made, the thing contemplated in the recital has occurred, and that upon the payment by Pease, Chester & Go. of such advances, the condition of the bond was ñilfílled. Dming the argument, adjudged cases were referred to by counsel on both sides, -which, in their facts and circumstances were supposed to bear a close analogy to the case under consideration. These cases have been carefully examined. To analyze them and show their application to the question I am now discussing, would extend this opinion to an unreasonable length, without attaining any valuable end. Guaranties of this description have assumed every imaginable form, and while some aid may be derived in expounding them, from adjudged cases to be found scattered in the English and American Reports, it may be confidently affirmed that the safest guide to follow, is the application to the facts of each case, of those rules of interpretation peculiar to this class of contracts, and which rest on the solid foundation of good sense, and the uniform opinion of the most enlightened jurists. It is proper to observe that commercial guaranties are frequently written without that care usually bestowed
The case does not disclose the precise nature of the business in which Pease, Chester & Co., were engaged, but' enough is exhibited to show that it was of a character which rendered frequent transactions with the "bank necessary, during the existence of the co-partnership, which continued three years. Keeping in view the principles and facts to which I hare adverted, the question reverts, whether the guaranty contained in the bond is a continuing guaranty, or whether it was intended to cover advances to the extent of $3000, and ended when payment of that amount was made. After a careful consideration, I am of- opinion that the more enlarged construction contended for by the plaintiffs, is correct^ and that the guaranty was intended to cover successive advances made to the firm during the entire period specified in the bond, and that the defendant rendered himself liable to the extent specified in the condition of the bond, for any balance that might be found due the hank bn the 1st of January, 1840. This conclusion seems to flow necessarily, from the language and manifest object of the bond. A contrary construction is utterly irreconcilable with the intention of the parties, to be gathered from a survey of the whole instrument. The recital
Upon the assumption that the liability of Kercheval was continuous, it is further contended on his behalf, that when all the transactions between the bank and Pease, Chester & Co., under the guaranty, were closed, notice of the amount for which the guarantor was held responsible, should have been communicated to him within a reasonable time. It is not to he disguised, that in respect to this question, there has been a wide diversity of opinion among American jurists. It is asserted by counsel to be a general principle of the law of guaranties of universal obligation, irrespective of the form in which they are given. As notice is not expressly required by the terms of the bond, it becomes necessary for the defendant to establish the principle for which he contends, Is it then, true, that notice in all cases, and under all circumstances, is an incident of the contract of guaranty?
The ease most strongly relied on by the defendant’s counsel to support the legal theory they have advanced, is reported in (7 Pet, 113;) Douglass et al. vs. Reynolds et al. This action was on a letter of credit written by Douglass & Co., authorizing Reynolds & Co. from time to time to aid one Haring by advances of cash, acceptances, or indorsements, and that they would be responsible for a sum not exceeding $8,000. This was held by the Supreme Court of the United States to be a continuing guaranty, and intended to cover successive advances, acceptances, and indorsements, to the amount of $8,000, at any subsequent times, toties quoties,. whenever the antecedent transactions wore discharged. This decision confirms, very strongly, the views I have taken respectingRhe construction of the bond in question. It was further held, that in order to entitle the plaintiffs to recover, they must prove that notice had been given to the defendant of that fact in a reasonable time after the guaranty had been accepted. Some general reasons are given in support of this proposition, but no cases are cited to confirm its accuracy. Whatever views we may be inclined to take of this question upon a ease presenting the same state of facts, it is unnecessary to determine, but we think that no notice of acceptance, other than that which the law implies, was necessary in the case before us.. The bond is an original collateral agreement, absolute in its terms, limiting the liability ot the defendant, and the time within which credit was to be given. The delivery of the bond by the defendant, and its acceptance by the bank, were contemporaneous acts; this is all the notice of acceptance the law exacts. In the present ease,, as in the one cited, it is also clear- that notice of each successive advance was not required. But the Court further held, “that when the transactions between the plaintiffs and Haring under the guaranty were closed, notice
I have given to this question a very careful and extended examina- ' tion, and confess' myself unable to extract from the English cases on 'this subject, a principle co-extensive with that laid down by the Supreme ■Court of the United States. That it is not supported by the subsequent decisions of that learned tribunal, and is restricted in an important sense, by the eminent Judge who pronounced the opinion, in cases involving the same principle, it will now be my endeavor to show. Thecate of Reynolds et al., vs. Douglass et al., was again brought before the Supreme Court of the United States, and is reported in (12 Pet, 497.) It will be remembered that the action was founded on a guaranty, the terms of which have been stated. On the trial, eight bills of exchange drawn by Haring on the plaintiffs, amounting to $8000, and which were accepted and paid by the plaintiffs, were given in evidence. " In delivering the opinion of the Court, Mr. Justice McLean says: “The question is fairly raised whether the insolvency of Haring, either prior to, or at the time of payment, wiE excuse the plaintiffs from making a demand on him, and giving notice to the guarantors.” After an examination of cases, English and American, on the subject of notice, the learned Judge proceeds to remark, that “the rule is well settled, that the guarantor of a promissory note is bound, without notice, where the maker of the note was insolvent at its maturity. That his liability •continues, unless he can show that he has sustained some prejudice by
if The opinion pronounced by Mi. Justice Story, in the case of Wildes et al. vs. Savage, (1 Story R., 22;) -contains a full vindication of the
Upon principle, I am unable to perceive how this ground of the defense can be sustained. The necessity of demand and notice must, I think, depend upon the nature of the contract, and the intention of the parties. When the intention cannot be clearly ascertained on the face of the contract, in consequence of -some obscurity in the language, resort must be had to legal construction, for the purpose of supplying defects of expression. As contracts of guaranty may be infinitely varied, it would seem that no general rule can be laid down, in respect to demand and notice. If there is an absolute guaranty, that a third person shall pay a certain sum, at a specified time, or that the guarantor will undertake the performance himself, it is difficult to comprehend upon what principle dih'gence can be exacted of the creditor. Where, however, the guarantor restricts his undertakings, a different rule should be applied: if for instance, his undertaking is, that the debt of a third person is good, or can be collected, it is equally clear that diligence is required. Without devoting further time to this feature of the defense, I think it may he regarded as settled, both upon principle and authority, that if á demand and notice is required, upon the facts disclosed in the record, it cannot be made available as a defense, unless the defendant can also show that he has suffered loss or damage.
The next question presented for our consideration is, whether the liability of Kercheval, under the bond, could be extended beyond the period of three years from the 1st day of January, 1837; or whether, in other words, it was competent for the bank to extend the credit to be given to Pease, Chester & Go., beyond the period of three years. The solution of this question must depend upon the intention of the palies as manifested in the bond. It is not to be disguised that there is a good deal of intrinsic difficulty in determining what that intention was, in consequence of the loose and artificial manner in which the bond is drawn. If it was intended to cast obscurity upon this question, the parties could not have selected language more appropriate to accomplish that purpose. What, then, was the extent of the obligation of Kercheval, to be fairly deduced from a-careful survey of the whole instrument?
If I have succeeded in stating in a simple form, the true meaning of the parties to the bond, it now becomes necessary to determine, whether it was contemplated by them that credit should be extended by the bank to Pease, Chester & Co., beyond the specified period, although advances by way of discounts, were actually made within that period.
I have said that the bond contemplated advances by the bank to Pease, Chester <fc Co., from time to time, in either of the forms therein specified; and that to. secure the bank against eventual loss, Kereheval agreed to stand in the relation of surety for the firm, for an amount not exceeding $3,000. The reason for adopting this form of security is obvious. It was foreseen by the parties, that the firm would, in the prosecution of their business, require frequent advances, either by way of discounts or over-drafts, and that it would be more convenient that some person, in whose responsibility the bank had confidence, should, by some instrument stand as security for the stipulated amount, during the entire period for which such advances were to be made, rather than adopt the usual mode of procuring an indorser for each separate transaction. Es
Another fact may he referred to, as by no means unimportant in giving a construction to the bond. While it does not appear affirmatively from the case that the co-partnership of Pease, Chester & Co., commenced on the 1st of January, 1837, and was to terminate by its own limitation on the 1st of January, 1840, yet it may reasonably be inferred that such was the agreement, as the co-partnership was in fact dissolved on that day, This may account for the insertion of that
There is another aspect in which the case may be viewed, equally decisive of the claim set up by the bank. It cannot, with any show of reason, be contended, that Kercheval’s liability could be indefinitely extended; but it might be argued, that as advances by way of discounts were to be made by the bank to Pease, Chester & Co., if notes were discounted previous to the 1st of January, 1840, although made payable after that period, Kercheval would be liable upon his bond, provided the notes were discounted according to the well known usages of the bank. This construction of the bond, it may be said, is justified, because the usages of the bank, in respect to the time usually given on discounted paper entered into the contemplation of the parties when the bond was executed and delivered. Assuming, then, that this position is well founded, and that the usage of the bank in the particular’ stated was supported by proof, and that the notes were discounted pursuant to such usage, the question would arise, whether Kercheval has not been released by some act or default of the bank. From the case, it appears, that after the dissolution of the co-partnership, notes in renewal of those discounted previous to 1st of January, 1840, were executed by Pease, for and in behalf of the late film of Pease, Chester & Co. When these notes were executed, the fact of dissolution was well known to the bank; the notes, themselves, furnished on their face the evidence of the fact. The authority of Pease thus to execute, in the name of the firm, nego
In any view, therefore, that can he taken of this case, it appears to us that upon the facts reported, judgment should be entered for the defendant, and it must so'be certified.