Hooper v. Hooper, 81 Md. 155

Hooper v. Hooper

81 Md. 155 | Md. | 1895

McSherry, J.,

delivered the opinion of the Court.

To understand the questions raised in the record now before us, it is necessary, at the threshold, to outline briefly the material facts disclosed by the bill, the answer and the evidence.

The late William E. Hooper was possessed at the time of his death, in eighteen hundred and eighty-five, of an undivided one-half interest in certain lands and mill property, and three of his four sons, viz., Theodore, James E. and Alcaeus, were possessed in equal shares of the remaining undivided one-half interest therein; and the father and those three sons were then, and previously had been, carrying on as co-partners, the business of cotton duck manufacturers, under the firm name of William E. Hooper & Sons. The elder Mr. Hooper, by his last will and testament, authorized his executor's to unite with the other joint-owners of the mill property in forming a corporation, and. in eighteen hundred and eighty-six, a body corporate, known as the Woodberry Manufacturing Company, was duly chartered. One-half of the capital stock of this company was issued to the executors and trustees named in the will of William E. Hooper, in payment for the interest which he, in his lifetime, had held in the mill property, and the other half was issued in equal thirds to the other three joint owners, in payment for their respective interests in the same property. The other son, William J. Hooper, was largely indebted to the firm of William E. Hooper & Sons. His father had guaranteed the payment of that indebtedness to the firm, and after the death of the father, William’s debt to the firm was accordingly charged to the father’s account, thus making William a debtor to the estate for the amount which he had owed the firm; and when William was credited as against this with his part of his father’s estate, it did not extinguish that indebtedness in full, but still left him, as to the surplus, a debtor to the estate. In 1886 William failed in business and conveyed his property to trustees for the benefit of his creditors. In the year *1661889 he was indebted to the Woodberry Manufacturing Company, whose stock was held, as just stated, by his father’s estate and by his three brothers, and he desired to obtain from that company further advances of money and goods. Accordingly his three brothers, two of whom are the plaintiffs in this case, and one of whom is the defendant, executed and delivered to the Woodberry Manufacturing Company the following guaranty: “Baltimore, April, 1889. In consideration of the sum of five dollars, the receipt whereof is hereby acknowledged, we, Theodore Hooper, James E. Hooper and Alcaeus Hooper, jointly and severally agree to pay on thirty days’ notice, to the firm of William E. Hooper & Sons, and to the Woodberry Manufacturing Company of Báltimore County, the latter a body corporate of the State of Maryland, any sum that may now or may hereafter be due said firm and said corporation, not exceeding in the aggregate to both thirty-five thousand dollars, for goods sold and money loaned to William J. Hooper individually or trading as William J. Hooper & Co., each of us reserving to himself the right to withdraw from this agreement by written notice to each of the other signers and to said firm and to said corporation; such notice, however, not to cancel his obligation as to indebtedness existing when it is given.” Then follow other provisions which need not be alluded to. The paper was signed by the three promisors named therein. The advances or loans to which this guaranty relates began October the eighth, 1888, and ran through the month of December of that year, and the months of March, April, May, down to June the fourth, 1889, up to which latter date, exclusive of interest, they aggregated $33,800.00. Interest to September the thirtieth, of the same year, amounting to $1,047.77, was added, making the sum total due on that date $34,847.77. On this sum, William J. Hooper paid, in 1890, to the Woodberry Company three instalments of interest, and on March the sixth, 1891, he paid a fourth instalment, which settled the interest in full to February the first, 1891. No further interest was paid by *167him till February the seventh, 1894, when he gave his note, payable in six months, for a part of the principal and interest then due, and this was credited on the account as a payment. During the whole period of time covering these advances to William J. Hooper, and up to July, 1891, the defendant, Alcaeus Hooper, was treasurer of the Wood-berry Manufacturing Company. On April the fifteenth, 1891, Alcaeus Hooper gave notice in writing to the Wood-berry Company, to William E. Hooper & Sons, to William J. Hooper and Theodore and James E. Hooper, that he declined “ to be responsible for any * * * * indebtedness which shall be incurred on and after the date of this notice, under the guaranty of April, 1889, and that he withdrew from said agreement.” On March the twenty-sixth, 1894, the Woodberry Company demanded payment from William J. Hooper of the amount due by him to it, and on the same day requested the three guarantors to pay to it the amount whose payment was jointly and severally guaranteed by them under the agreement of April, 1889. William J. Hooper made answer that he would be unable to settle during that year, and the evidence shows that such was the fact. On the day following, the plaintiffs addressed a letter to the defendant advising him that they would, on the second day of the ensuing April, meet this obligation to the Woodberry Company, and requesting him to contribute his share or proportion thereof. They received no reply, and on the day designated they paid to the Wood-berry Company, in the manner which will be explained later on, the sum of $41,224.17, being the amount, including interest, due by William J. Hooper. On the same day they notified the defendant that they had paid the money and they thereupon made a formal demand on him for contribution. On the next day, April the third, the plaintiffs filed a bill in equity against the defendant for contribution. On May the fourteenth, the defendant filed a demurrer to that bill and relied, among other things, upon the fact that the suit had been prematurely brought. As under the guaranty, *168according to his construction of it, no action could be instituted thereon until after the expiration of the thirty days’ notice therein provided for, and as the notice actually given bore date March the twenty-sixth, the bill filed on April the second was filed prior to the expiration of the thirty days from the date of the notice, and therefore was filed prematurely. The Court below, adopting that view, dismissed the bill without prejudice, on May the twenty-eighth, and on the next day the bill now before us was filed. The prayer of this bill, as it was of the former one, is for a decree compelling the defendant, one of the. guarantors, to contribute and pay to the plaintiffs, the other guarantors, the amount claimed to be due to them by him on account of the payment made by them for him, to the Woodberry Company, of his proportion of the debt covered by the guaranty of April, 1889. In his answer he relies on the Statute of Limitations, and insists that he is not liable after three years from the date of the guaranty, or at most, not after three years from the date of the last loan by the Woodberry Company to William J. Hooper; and he denies that the plaintiffs have paid any amount under the guaranty at all.

There is no dispute that the guaranty was executed, delivered and accepted, or that the Woodberry Company advanced money and delivered goods to William J. Hooper; nor is there the slightest pretence that Alcaeus Hooper has ever paid a single cent to reimburse his brothers any portion of the amount they paid for him under the guaranty. The defendant seeks to escape all liability to the plaintiffs, and to avoid a compliance with the obligation which he deliberately, and with full knowledge 'of all the facts, assumed, by now taking refuge behind the plea of the Statute of Limitations. Utterly ignoring whatever of equity there is in the claim which they prefer against him, and without venturing to go upon the witness stand or to question under his oath any allegation of the bill, he repudiates the liability which has arisen under his explicit and formal contract; and he repudiates it because more than three *169years have elapsed between the date of that contract and the time when these .proceedings were begun. It is difficult to conjecture, how, under all the circumstances of this case, a less meritorious defence could have been attempted.

Whilst the undertaking of a guarantor technically differs from that of a surety (Kramph v. Hats, 52 Pa. St. 525), still the contract of guaranty is the obligation of a surety. Davis v. Wells, Fargo & Co., 104 U. S. 159. Both are accessory contracts; that of a surety is in some sense conditional ; that of a guarantor is strictly so. A guaranty is a secondary, whilst a suretyship is a primary obligation. A guaranty is a mercantile instrument to be construed according to what is fairly to be presumed to have been the understanding of the parties, without any strict technical accuracy, but in furtherance of its spirit and liberally to promote the use and convenience of commercial intercourse. It should be given'that effect which will best accord with the intention of the parties as manifested by the terms of the guaranty, taken in connection with the subject-matter to which it relates, and neither enlarging the words beyond their natural import in favor of the creditor, nor restricting them in aid of the surety. The circumstances accompanying'the whole transaction may be looked to in ascertaining the understanding of the parties. Lee v. Dick, 10 Pet. 482 ; Mauran v. Bullus, 16 Pet. 528 ; Bell v. Bruen, 1 How. 169; Davis v. Wells, Fargo & Co., 104 U. S. 159; Mussey v. Rayner, 22 Pick. 228. The contract of a surety must have such a construction given to it as will carry out the intention of the parties to it. Englar v. Peoples' Fire Ins. Co. 46 Md. 333 ; McShane & Rogers v. Howard Bank, 73 Md. 135, and the contract of a guarantor ought not to be interpreted by any different rule.

When it is remembered that the three guarantors obviously intended to aid in a substantial manner their less prosperous brother who had but recently before the date of the guaranty assigned his property for the benefit of his creditors and who was, therefore, practically beginning his *170business career anew, and when the terms themselves of the guaranty are considered, and the close kinship and intimate business relations existing between all the parties to the transaction are borne in mind, it may be fairly presumed that the intention of all the parties to the instrument was, not that the guarantors should only be liable for three years from the date of the guaranty, or for three years from the date of the last item in the account due to the Woodberry Company, but that they should remain answerable so long as the liability of the principal debtor continued a subsisting, undischarged indebtedness, and that their conditional liability to pay would become a fixed and enforceable obligation as against them as soon as the thirty-days’ notice should be given and shpuld expire, if the principal debtor were then unable to pay. There is nothing on the face of the guaranty to indicate that the parties to it contemplated that the money loaned by the Woodberry Company was to be repaid by the debtor within three years from its date; and much less is there a single word or phrase which implies that they understood or designed that their liability was unconditionally and absolutely restricted or confined to that period of time. On the contrary, giving to the instrument a perfectly natural and unstrained construction, it discloses a purpose to continue liable without reference to such a limit, and it, in terms, fixes another period for payment by the guarantors, from which date and no other the Statute of Limitations began to run in their favor. Now, the Statute of Limitations commences running in favor of a surety or guarantor from the time he is liable to suit, and this may or may not be the same time the principal becomes so liable, i Brand, on Suty & Gur. sec. 143. When, then, were the guarantors, according to the terms of their contract interpreted in the light of all the surrounding circumstances, bound to pay to the Woodberry Company the amount which they jointly and severally promised to pay ? Was it on demand ? Or, at once, upon the execution and delivery of the paper ? Or, in three years thereafter ? Or, *171at the time the principal debtor was liable to be sued ? They jointly and severally agreed “to pay on thirty days notice.” That is the period of time fixed in the guaranty. Until the notice had been given and the thirty days had expired they were obviously not bound to pay. The notice was a condition precedent to the right of the creditor to sue. Even a negotiable promissory note payable upon a condition, does not mature until the condition has happened. 3 Rand. Com. Paper, sec. 1050; and a guaranty whose words are to be taken as strongly against the guarantor as the sense will admit, Drummond v. Prestman, 12 Wheat. 315, is not, upon principle, subject to a different rule. The guarantors had the undoubted right to stipulate that their liability should not be enforceable until after the expiration of a designated time, and having incorporated that provision in the contract both they • and the creditor were bound thereby. The financial condition of William J. Hooper, his large indebtedness to the estate of his father, which he was unable to pay; the fiduciary relations which the guarantors held towards the estate as executors and trustees, and the evident purpose they personally had in view to help their brother by advances, which though made in the name of the Woodberry Company, were largely in point of fact the money of the estate, because the estate was a holder of much of the company’s capital stock; and their intimate knowledge of all the surrounding circumstances give emphasis to the conclusion that they meant by agreeing “to pay on thirty days’ notice,” to fix that period as the one when their obligation could be enforced. That the defendant understood the contract to signify this is put beyond all cavil or controversy by the defence he took and successfully availed of when the first bill in equity was filed against him. That bill, as we have already stated, was dismissed at his instance solely because, in the language of his demurrer, “neither the Woodberry Manufacturing Company nor the plaintiffs * * * claiming by subrogation, had the right to claim and demand anything under the pretended assumpsit or guar*172anty * * * * nor to bring any suit therefor until after the expiration of the period of thirty days from the date of the service of the notice,” given on March the twenty-sixth, 1894. Having asserted in a most formal and unequivocal manner, this to be the true and correct construction of the contract, he now repudiates his own interpretation and relies upon a totally variant and inconsistent one. He was right in the position he took then, and is wrong in the one he assumes now. The agreement to pay on thirty days notice is not an agreement to pay before thirty days have elapsed; nor is it an agreement to pay though no notice be given; but it is, in legal effect, substantially equivalent to a promise to pay on demand after a designated date. In all such instances it has been held that the statute does not begin to run until the demand has been made. Rhind v. Hyndman, 54 Md. 530. As, then, by the terms of the guaranty the guarantors could not have been required to pay and could not therefore have been sued for a failure to pay, until after the expiration of a thirty days’ notice, it is perfectly manifest that the Statute of Limitations did not begin to run in their favor before that time, however it might have affected the principal debtor. The notice was in fact given on the twenty-sixth day of March, 1894, and expired April the twenty-fifth, and from the latter date the statute began to run. The case of Little v. Edwards, 69 Md. 499, is clearly distinguishable from this. That case involved a guaranty given for the guarantor’s interest in .a judgment long overdue. It was unconditional and absolute, and suit could have been brought upon it immediately after it was given. Because this was so the statute began to run from its date.

But there is still another view of the subject which completely disposes of the Statute of Limitations as a defence. The liability of the guarantor is coextensive with that of the principal, unless it be expressly limited. 2 Pars, on Conts., (6th ed.) star page 5 ; Richardson v. Allen, 74 Ga. 719. This, of course, is subject to the qualifications aris*173ing out of coverture and infancy, where the guarantor is held though the principal debtor is not bound at all. 1 Chitty on Const. 738, 739. Now, William J. Hooper’s liability continued, and the debt due by him to the Woodberry Company was not barred by the Statute of Limitations when the plaintiffs paid it; and it was consequently not barred at that time as respects the guarantors. When the statute has become a bar to the recovery of a debt, for which several are jointly and severally liable, the promise of one will not remove the bar as to the others ; but where one of several so indebted makes a new promise or a payment, either of interest or of a part of the principal before the bar of the statute has attached, this will prevent the statute from running as to the others, even though they be but sureties. Such promise or payment fixes a new date from which the statute begins to run. Ellicott v. Nichols, 7 Gill, 86; Schindel v. Gates, 46 Md. 604; Burgoon v. Bixler, 5 5 Md. 392. William J. Hooper paid on March the sixth, 1891, the interest due up to February the first of that year, and on February the seventh, 1894, less than three years after-wards, he again made a payment by giving his note, which was accepted and subsequently settled. On April the second, 1894, the plaintiffs, two of the guarantors, paid the debt to the Woodberry Company. There was consequently no point of time from the date of the first item in the .account, October the eighth, 1888, till the second of April, 1894, when the Statute of Limitations had become a bar. The debt was during all that period enforceable against the principal debtor, and the liability of the guarantors being co-extensive with his, was equally unaffected by the statute. They had it in their power to guard against a liability lasting so long, had they desired to do so; because it is always competent to a guarantor to limit his liability as to time, amount •or parties by the terms of his contract. Merchants' Nat. B. R. v. Hall, 83 N. Y. 343. They fixed no limit other than the one heretofore alluded to, and that cannot avail •the defendant now. Besides these payments by the prin*174cipal debtor, the plaintiffs, two of the guarantors, who were jointly as well as severally bound with the defendant, continuously recognized and asserted and admitted their liability under the guaranty during the whole period of time covered by it. The debt not having been barred when the plaintiffs paid it, there can be no question of their right to recover contribution from the defendant, because the Statute of Limitations did not begin to run against their demand or claim upon their coguarantor until April the second, 1894. Bullock v. Campbell, 9 Gill, 182 ; Davies v. Humphries, 6 M. & W. 153.

Closely allied to the defence we have just considered, is the one of laches. Little need be said in regard to it. All of the guarantors knew the financial condition of William J. Hooper when they executed and delivered the guaranty. The record does not disclose that he was at any time during the period covered by the guaranty ever able to pay to the Woodberry Company the amount that he owed it; nor does it show that when the demand was made, in March, 1894, he was less able to settle than he had been previously. Under these conditions a mere delay in making a demand upon him could not have resulted in an injury 'to the guarantors, because they were placed, by such delay, in no worse position than if demand had been made earlier. Mere prolongation of the time of payment will not discharge a surety or a guarantor. Benjamin v. Hillard, 23 How. 149, because, as concisely stated by the late Mr. Justice Mathews in Davis v. Wells, Fargo & Co., 104 U. S. 159, “ both the laches of the plaintiff and the loss of the defendant must concur to constitute a defence.” It is therefore incumbent on the party relying on this defence to establish the facts which compose it, and hence he must not only show that there has been an unreasonable delay, but further, that an injury or loss consequent thereon has been sustained by him. Not only has that not been done, but the record contains evidence to the effect that at no time since his assignment, in 1886, has William J. Hooper been in a condition to pay his creditors all that he owed.

*175We now come to the question respecting the payment by the plaintiffs to the Woodberry Company of the amount for which they and the defendant were responsible under the guaranty. William J. Hooper was indebted to the Wood-berry Company. The Woodberry Company was indebted to Theodore Hooper, on April the second, 1894, in a sum amounting to nearly twenty-three thousand dollars, and it was also indebted at the same time to James E. Hooper to an amount exceeding sixty thousand dollars. These sums stood to their credit, respectively, on the books of the company. They could have demanded on that day these amounts in cash. Instead of doing so, they instructed the bookkeeper of the company to debit Theodore’s account with twenty thousand six hundred and twelve dollars and nine cents, and to debit James E. Hooper’s account with the like sum, and the total of these two debits, viz., forty-one thousand two hundred and twenty-four dollars and odd cents, was credited upon William J. Hooper’s account. The result of .these entries was that William’s debt to the Wood-berry Company was extinguished to the extent of forty-one thousand two hundred and twenty-four dollars, and the debts of the Woodberry Company to Theodore and to James E. were reduced each twenty thousand and six hundred and twelve dollars. This process as effectually paid the Wood-berry Company the amount due to it under the guaranty as though Theodore and James E. had demanded and received from the Woodberry Company checks for forty-one thousand two hundred and twenty-four dollars, and had presented those checks, had them cashed and had then taken the cash and paid it to the Woodberry Company in settlement of William’s indebtedness. After these entries had been made, William owed the Woodberry Company nothing on the guaranteed indebtedness, and the Woodberry Company owed Theodore and James each twenty thousand six hundred and twelve dollars less than it had owed them before. Clearly, this transaction resulted in an absolute payment by the plaintiffs of the entire indebtedness covered by the guar*176anty. It was, however, objected that as .no cash was in fact used, no payment was in reality made. But it would have been an utterly idle and useless form had checks been drawn and cashed and had the cash been then paid to the Wood-berry Company. The money was in bank deposited in the name of William E. Hooper & Sons, in which name the Woodberry Company kept its bank accounts, and could have been drawn out and used, but it would have been redeposited at once, and beyond a few additional entries in the books of the concern, the substantial result would have been ultimately identical. We ought to add that there is nothing in the suggestion that money belonging to the estate of William E. Hooper was included in the sums with-which William E. Hooper & Sons were credited in their bank accounts, and on which bank accounts the checks, had they been used at all, would necessarily have been drawn, and the suggestion can be of no avail, because the estate was invariably credited on the books of the Wood-berry Company with whatever sums of money were due to it, and the cash itself was all at the disposal of the Wood-berry Company for uses of its own.

There is one more question to be considered, and that relates to the appellant’s liability to pay to the appellees one-third of the interest paid by them to the Woodberry Company. The sum of forty-one thousand two hundred and twenty-four dollars paid by them includes not only simple but some compound interest. The appellant insists, first, that he is liable, if liable at all, for only one-third oí the sum of thirty-five thousand dollars with interest on that one-third from April the second, 1894, the date his co-guarantors paid his share of the obligation for him; and, secondly, that he cannot be held for any compound interest. He is clearly mistaken in assuming that his liability under the guaranty was absolutely limited by the terms of that instrument, to a sum not exceeding thirty-five thousand dollars altogether. The limitation of thirty-five thousand dollars was not a limitation upon the guarantor’s ulterior liability to the creditor, *177but it was a restriction of the aggregate amount of the loans and advances to be made by the Woodberry Company to William J. Hooper. For goods sold and money loaned to an amount not exceeding the sum of thirty-five thousand dollars they guaranteed payment to the creditor, but as the guaranty did not provide for an immediate payment, and the guarantors did not contemplate one, it is obvious that their undertaking embraced besides the specified maximum capital sum, the same accessories and consequences (connexorum et dependentiwn) which measured the extent of their principal’s liability. Poth. on Obl. 404 ; Curling v. Chalkier, 3 M. & Sel. 502; Benjamin v. Hillard, 23 How. 149. Now, all of the guarantors, including the appellant, who was treasurer of the creditor company when the debt was contracted and the guaranty was given, knew that it was the invariable and uniform practice of the company to charge up interest on all accounts every four months. He knew that interest was an incident, an accessory and a consequence of every debt due to the company; and therefore, that when the limit of thirty-five thousand dollars for loans and sales would be reached, the debtor would be charged upon that sum with interest in the accustomed way. He contracted with reference to that incident or accessory of the principal’s debt, and, like the principal debtor, he is accountable for it. With regard to compound interest there is no difficulty. This is not a proceeding to recover compound interest as a penalty for the breach of a fiduciary duty, as in Ringgold v. Ringgold, 1 Har. & G. 79, and Diffenderffer v. Winder, 3 G. & J. 311 ; nor does it belong to the group of cases of which Rayner v. Bryson, 29 Md. 480, and Dennis v. Dennis, 15 Md. 73, are illustrations ; but it is a proceeding involving the doctrine that where the parties to a transaction amongst themselves, treat accrued interest as an augmentation of the original principal sum, and charge up interest thereon, it is unobjectionable, if subsequent lienors without notice are unaffected thereby. In Fitzhugh v. McPherson, 3 Gill, 40 8 our predecessors said: “ When interest has once accrued, it *178becomes a debt. There is no longer, therefore, any objection to an agreement inter partes, that it shall be considered principal, and therefore carry interest.” S. C. 9 G. & J. 51. This was affirmed in Brown v. Hardcastle, 63 Md. 493, and is fully sanctioned by judicial precedent elsewhere. Eaton et al. v. Bell et al., 5 B. & Ald. 34; Wilcox v. Howland, 23 Pick. 167; Stokely v. Thompson, 34 Pa. St. 210; Calhoun v. Marshall, 61 Ga. 275; 34 Am. Rep.. 101 ; Vaughn v. Kennan, 38 Ark. 114; Wood v. Whisler, 67 Iowa, 676; 5 Lawson, Rights, Rem. and Pr., sec. 2443; Muellor v. McGregor, 28 Oh. St. 265 ; Taliaferro v. King, 9 Dana. 331; Bledsoe v. Nixon. 69 N. C. 89; Pearce v. Hennesy, 10 R. I. 223; Pearce v. Rowe, 1 N. H. 179; Townsend v. Riley, 46 N. H. 300 ; 1 Am. L. Cases, 4th ed. 533, notes to Sellock v. French. That all the parties agree to this compounding admits of no dispute. Every entry of compound interest made up to July, 1891, was made whilst the defendant was treasurer of the Woodberry Company and whilst he had possession, or at least, control of the books. The plaintiffs have proved the unbroken custom to make such charges, and the defendant has uttered no word of denial. It is simply incredible that the defendant did not know, and did not fully approve of this course of dealing. He was a party to it throughout. His failure to testify in the cause must be treated as an admission of his assent thereto ; and his conduct whilst treasurer, in conforming to the uniform custom of making periodical rests, and thus computing interest on interest, not only in respect of this, but with regard to all other accounts, estops him to question its propriety now.

(Decided March 27th, 1895.)

Upon a careful review of the whole record, we have discovered no error whatever, and as a consequence the decree, which required the defendant to make contribution as prayed in the bill, will be affirmed with costs in this 'Court and in the Court below.

Decree affirmed with costs above and below.