delivered the opinion of the court.
The appellant is a trading corporation in the city of Owensboro, in this State, and the appellee is engaged in business at Terre Haute, Ind. This action was instituted by the appellee against appellant to recover judgment for the amounts of sundry notes which were executed by the Belle of Nelson Distillery Company to the M. V. Monarch Company, payable at certain banks in the city.of Louisville, Ky.; on certain drafts drawn by the appellant company on the Belle of Nelson Distillery Company, accepted by it, and made payable at certain banks in the city of Louisville; on certain drafts drawn by the appellant company on Straus & Aronson, and accepted by them; on a promissory note executed by them; and on certain sundry promissory notes executed to E. A. Fargo & Co., of San Francisco, California — all of which were indorsed by the appellant, and delivered to the appellee for discount at its banking house in Terre Haute, which was done by it, and the proceeds placed to the credit of the appellant. None of the notes or drafts were indorsed to and discounted at any bank in this Commonwealth. There was no evidence offered to
The plaintiff sought a recovery on the above state of facts and alleged that the letters constitute a guaranty to the effect that the Monarch Company will pay the drafts and notes at maturity, if the acceptors of the drafts and payors of the notes do not do it. It is not a guaranty of solvency of the acceptors and payors, but a guaranty of payment. It is a continuing guaranty, as the parties looked to a future course of dealing for an indefinite time, and a series of credits to be given, and the amount for which the appellant was to become liable thereon depended upon the amount of paper it desired to have appellee discount, and appellee’s willingness to do so. The appellant knew from time to time the extent of its liability on its guaranty to appellee, and in its letter to the appellee, said: “The paper that toe may discount with you that may he returned unpaid toe desire charged to our account, and, should same not cover it at the time, wire ns immediately, and we will cover it hy wire or New York draft, as you may desireP
Counsel for appellant insists that the first letter was a proposition, and the response to it closed the entire arrangement. To this we can not agree. The first letter was in the nature of an inquiry as to whether the appellant could make arrangements to' have paper discounted by appellee. At the close qf the letter, it said: “If rate is satisfactory, we will be pleased to open an account with you.” This shows that it did not suppose it had made any definite proposition to the appellee. Appellee’s response stated the rate of discount, and amount of paper it would carry for it, and the appellant then wrote the letter which counsel says -was not necessary to complete the arrangement; but appellant very properly supposed it was, because it said, “We accept your proposition,” and then, as an inducement and consideration for the “approval” and discount of paper (all was to be sent subject to appellee’s approval) which appellant should offer, the language to which we have referred as amounting to a guaranty of payment was used, and it is part of the contract between the parties.
The salutary rule for the interpretation of guaranties is given by Beach on the Modern Law of Contracts, sec. 34, which is as follows: “Thus, a guaranty is a mercantile instrument, to be construed according to what is fairly to be
After the Belle of Nelson Distillery Company failed, the appellant, by letter, acknowledged its obligation to pay its paper which had been discounted by the appellee. It will be noticed, from the letter which it wrote the appellee, that it sold to the jobbing trade “from Boston to ’Frisco, from St. Paul to Galveston,” and we can not believe that the appellee, a banking institution, would have entered into a contract with the appellant by which it was to take paper executed by persons in various parts of this country, and be compelled to incur the delay and expense that would result in prosecuting to insolvency such persons as failed to pay the paper which it had discounted for appellant. All the paper it discounted for the appellant was done upon the strength of the agreement to which we have just referred. Having reached the conclusion that
After reviewing the authorities, in Lowe v. Beckwith, 14 B. Mon., 193, [58 Am. Dec., 659] the court said: “Where the meaning of a guaranty is assumed to be that a third person shall pay a debt, or where it is that, in case of a default on the part of the latter, the guarantor will undertake the performance himself — and the guaranty sued upon in this case imports, undeniably, one or the other of these undertakings — then there does not seem to-be, according to the well-established principles of the common law, any obligation upon the creditor to demand payment of the debtor primarily liable, but it is the duty of the guarantor, by inquiring of his principal, to ascertain whether payment has been made, and, if not, to make it himself, in pursuance of his contract to that effect. Douglass v. Howland, 24 Wend., 35; Oxley v. Young, 2 H. Black, 613.....And if he has undertaken that the debt shall be paid by the debtor when it falls due, its nonpayment by him nécessarilv involves a breach of his undertaking; or, if his contract be that he will pay it himself in the event of its nonpayment by the debtor, the default of the latter renders his undertaking absolute, and he becqmes immediately liable to an action, inasmuch as it is his duty, according to the very terms of his contract, to pay the debt without demand or notice.” This action is not upon an assignment of a promissory note; therefore it was unnecessary to aver, as required by section 475 Kentucky Statutes, the consideration for the indorsement and delivery of the paper to the appellee. Under the written contract between the parties, the rate of discount was to be 6 per cent., which was the
The judgment is affirmed.