New-Haven County Bank v. Mitchell

| Conn. | Jul 15, 1842

Storrs, J.

The defendants move for a new trial on several grounds.

1. That the writing, on which the suit was brought, did not become obligatory on the defendants until the plaintiff accepted it, and gave notice of such acceptance to the defendants; and that the evidence offered by the plaintiff was inadmissible to prove such acceptance and notice.

2. That the defendants were entitled to notice of the credits given under the guaranty in question, within a reasonable time after such credits were given.

3. That said guaranty did not embrace the indorsements of the firm of Street, Mitchells & Gilbert, made after the dissolution of that firm.

4. That the evidence adduced by the plaintiff, to prove notice of the non-payment of the notes of Tilton & Lynde and Aikin & Glass, should have been rejected.

1. The defendants, in support of the first ground, rely on those cases which have arisen on contracts of guaranty, contained in what are usually termed letters of credit, addressed by one person to another, engaging to be answerable to the latter for a credit to be given by him to a third person, in case of the failure of payment by such third person. In these cases, it has been settled, by a uniform series of decisions, that, in order to make these letters obligatory, it is necessary that notice of their acceptance should be given to the writer, within a reasonable time thereafter, by the persons to whom they are addressed. It is not intended to impugn these decisions ; the reasons on which they are founded, are most satisfactory ; and it is proper to advert to them, in order to ascertain whether they are applicable to this case. In Douglas & al. v. Reynolds & al. 7 Peters’ Rep 113., Story, J., says: “ A party giving a letter of guaranty has a right to know whether it is accepted ; and whether the person to whom it is addressed, means to give credit, on the footing of it, or not. It may be most material, not only as to his responsibility, but as to future rights and proceedings. It may regulate, in a great measure, his course of conduct, and his exercise of vigilance in regard to the party in whose service it is given. Especially is it important, in the case of a continuing guaranty, since it may guide his judgment in recalling or suspending it.” In Craft v. Isham, 13 Conn. Rep. 33., Bissell, J., after giving substantially the same reasons, adds : “ He (the writer of the letter) cannot know before-hand whether his offer of guaranty will be accepted, and if accepted, to what extent, within certain limits, he is to be held ultimately liable. He ought, therefore, to have reasonable notice, in order to charge him. In the absence of all notice, he would have a right, in the language of Spencer, J., (Buchanan v. Hale, 17 Johns. Rep. 134.) to believe that his offer had not been accepted. He would be completely thrown off his guard; and at a distant period, when the insolvency of the principal debtor had intervened, and all hopes of indemnity were gone, he would find himself unexpectedly called on to pay a debt, which he never knew that he was liable for. Good faith and na^urc °f ⅛® negotiation alike require it of the party acting on and accepting a proffered guaranty, to apprise the other party of what is done, and what he is liable for.” In the case cited from Johnson’s Rep., it appears to be considered, that, until notice was given by the plaintiff, that the letter was accepted and regarded as a guaranty, it was only to be viewed as an overture, or proposition leading to a guaranty, which, of course, while it remained such, would not be obligatory. Now, it is very obvious, that these reasons, which, as applicable to those cases, recommend themselves at once to our approbation, have no place with reference to the contract in the present suit. This is not the case of a communication, in the form of a letter, sent, without any previous negotiation, by the writer, to a person, perhaps at a distance, containing what in fact is a mere offer or proposition, which will not form an agreement between the parties, until it is accepted afs such, and of which, when it is so sent, it is wholly uncertain whether it will be accepted or not. In such a case, the mere reception of the letter, by the person to whom it is addressed, does not, of itself, constitute an acceptance of the promise contained in it, without some subsequent act on his part, evincing that he accedes to the proposition. Its reception is unavoidable — its acceptance, as a promise, optional: its delivery is with a view to its acceptance, and must, therefore, necessarily precede it. Until such acceptance, it is not consummated into a contract, but remains a mere proposition, and there has been no meeting of the minds of the parties. It is the acceptance which constitutes such meeting and consummation. In such a case, where it is entirely uncertain whether an agreement will be thus consummated, and where, particularly, the contract is one of suretyship, requiring emphatically, exactness and precision, it has very justly been considered, that good faith and the rights and interests of the party to be bound, require that the acceptance of the contract should be notified to him, by the other party, and that within a reasonable time, in order that he may fully understand and exercise all his various rights and duties growing out of his obligation. Nor is this case like those which have been cited, in this respect, that there the consideration was wholly executory, and the liability of the promiser depended altogether on the doing of certain acts by the promi-see ; and which acts could not be foreseen, or in any measure J provided for, by the promiser, unless he was apprised of the J 1 ■ -r> ,11 • existence and extent of his obligation. Eut the present is a contract executed and delivered, formally, and in the ordinary manner. The promise of the defendants imports, on the face of the instrument, to be for a valuable consideration received by them of the plaintiff. The instrument was delivered to the plaintiff, by one of the defendants, being thereunto expressly authorized for and on behalf of both, and simultaneously accepted by the plaintiff. The delivery of the instrument, under these circumstances, was not an incipient step in the formation of the contract, but the result of previous negotiation and agreement, and constituted the very consummation of the contract. It was delivered and received as the evidence of the promise of the defendants, induced by their previous reception of the consideration on which it was founded. The knowledge of the defendant, by whose hands it was delivered, was, under the circumstances, the knowledge of both. A formal notice of acceptance, in addition to this, would be an act of supererogation. McIver & al. v. Richardson & al. 1 Mau. & Sel. 557. Symmons v. Want, 2 Stark. Ca. 371. Gaunt v. Hill, 1 Stark. Ca. 10. Mactier’s admrs. v. Frith, 6 Wend. 103.

No such notice being necessary, the question respecting the admissibility of the evidence offered on the subject, becomes immaterial.

2. Although, if there were not in the contract in question, any particular stipulation on the subject, it might be necessary to prove notice to the defendants of the credits given under the guaranty, such notice is here expressly dispensed with, by the contract, and is, therefore, unnecessary. The defendants agree to save the plaintiff harmless on the indorsed paper therein mentioned, “ without demand or notice to be given to [the defendants] by said [plaintiff.]” This could not refer to notice to which the defendants might be entitled as indorsers of the notes held by the plaintiff; because it was not contemplated that they would become such endorsers ; and must refer to the notice to which, but for this stipulation, they would be entitled to, in the capacity which they had then assumed, of guarantors. It was intended as a qualification of the duty imposed on the plaintiff under this contract. The whole scope of the instrument shews that to be the inf . . . . . °* the parties ; and it is the most rational one, when it is considered, that the plaintiff might well object to discount notes for the firm of S. M. & G., if he was to be put to the frequent trouble and hazard of giving notice thereof to the defendants.

3. The next question is, as to the effect of the dissolution of the partnership of S. M. & G. on this guaranty.

It is established, as a rule, applicable, in general, to contracts of suretyship, that although they are not to be construed with any strict technical nicety, they cannot be extended by any implication, but must take effect according to their terms. Dance & al. v. Capel's exrs. 1 New Rep. 34. Wright v. Johnson, 8 Wend. 512. Straton v. Rastall, 2 Term Rep. 366. 370. Miller v. Stewart & al. 9 Wheat. 680. Contracts of this description, when founded on a valuable consideration, are not subject to the same strict and rigid rules of construction, and are to be interpreted by the same rules that apply to other contracts. Mauran v. Bullas, 16 Peters’ Rep. 528. The promise of the defendants, in this case, imports on its face to be for a valuable’ consideration, received of the plaintiff. Hence, there is nothing which requires a construction more favourable for the defendants than in ordinary cases ; and the contract is to be construed according to what may fairly be presumed to have been the intention of the parties. In ascertaining that intention, it is necessary to look at the subject matter, the general usage of the business about which it is conversant, and the views and objects of the parties in making it, in connexion with the terms in which the contract is expressed.

It is conceded, that the indorsements were made by the same persons for whose indorsements the defendants agreed to be responsible ; but it is claimed, that they were not made by those persons in the capacity for which the defendants became holden for them. The cases cited by counsel, which turned on the question whether one executing a guaranty is liable, when it is sought to be enforced, by a greater or less number of persons than those to whom it was given, or for the default of a greater or less number than those on whose behalf it was given, do not, therefore, particularly apply here, except so far as they serve to illustrate the general principles of construction, which prevail in such contracts.

It is manifest, from the language of the instrument in question, that the parties contemplated only such paper as should be endorsed by the persons composing the firm of & M. & G., as a firm or partnership, and during the continuance of that partnership. The engagement is on behalf of those persons collectively, and in the capacity of partners. The terms used are wholly different from what they would have been, if paper indorsed by those four persons, without regard to any particular relation subsisting between them, had been intended. The paper is described, not as paper to be indorsed by those individuals, but by the partners nominatim. The incidents and qualities of paper indorsed by them as partners, would be entirely different, in several respects, from those which would attach to that indorsed by them in their individual capacity; and if it had been the intention of the defendants to assist them in any other relation than that in which they are described, it is not rational to believe, that they would not have used language clearly indicating such intention. The terms used are certainiy inappropriate to that object. It would scarcely be claimed, that the contract was intended to embrace both paper indorsed by them in their partnership, and also in their individual capacity ; and yet such must be the construction, if it is not limited to the former, which is embraced in terms. This view is much strengthened, by the following authorities, a detailed examination of which is unnecessary, as this point has not been strongly contested. Simson v. Cooke, J. B. Moore, 588. S. C. 1 Bing. 452. Myers v. Edge, 7 T. R. 254. 4 B. & P. 34. Theobald on Prin. and Su. ch. 4. 2 Pick. 235. 5 B. & P. 175. 8 Mass. Rep. 275. 2 B. & A. 431. 2 Saund. 412. 4 Taunt. 593.

We are, therefore, brought to the question, whether the in-dorsements of Street, Mitchells & Gilbert, in the present case, were made during the continuance of the partnership between them, within the fair meaning of this guaranty.

The defendants claim, that the dissolution of the partnership put an end to its continuance, and to the powers of the partners, by virtue of said relation ; and that neither of them could thereafter bind the co-partners, as such, by his indorse-ments in their name: that the endorsements were madfe, in this case, by virtue of a special authority, subsequently con-not of the power which E. A. Mitchell had, as a partner : that it is as if he had then been empowered to do any other act not in any manner connected with the former partnership affairs : and that said endorsements should be considered to be made, not by the firm of S. M. & G., but by the persons who had composed that firm, unconnected by any partnership relation ; and that, therefore, they are not embraced by the guaranty in question.

Considering, in the first place, the dissolution in this case to have been general and unqualified in its terms, it is not true, that it would entirely end the continuance of the partnership, or the powers and authorities of the partners, as such : it could not be correctly said, that the partnership then ceased to exist. Neither of the partners could, indeed, after-wards employ the property or credit of the partnership in any transaction or enterprize newly commenced or undertaken, nor originate or make any new contract or obligation, which would be binding on the partnership. But, for certain purposes, the partnership relation between the parties, and their powers and authorities, would continue to exist. It would be necessary that the affairs of the partnership should be arranged and settled ; and, for that purpose, that the debts due to the partnership should be collected, and its property obtained and secured; the unliquidated debts of the partnership adjusted; the partnership funds and effects applied to the payment of the partnership debts ; and such discharges, receipts and instruments given, as would be necessary for these purposes : and it is very clear, that the dissolution of the partnership would, in the language of Judge Story, “ leave every partner in possession of the full power to do these acts.” Story on Part. c. 14. For these purposes, the connexion between the partners subsists, and the partnership continues between them ; and until these objects are accomplished, it cannot be said, that the partnership is terminated. Gow on Part. c. 5. §2. p. 231. Story on Part. §325., and authorities cited 2 Conn. Rep. 677. It is undoubtedly true, that one of the partners would not, after the dissolution, continue to have power to indorse, in the name of the firm, a note or bill, which should be binding on his co-partners, unless by the terms of the dissolution, they should specially confer such power on him. But it is obvious, that, after such dissolution, it may be discovered to be necessary, or, gt highly desirable, for the purposes of settling the partnership concerns speedily and advantageously, to have the partners, or some of them, invested with the power of indorsing and negotiating bills or notes, which are held by the firm ; and we are of the opinion, that an indorsement by one of the partners, by virtue of a power executed after a dissolution, under such circumstances, would fairly be embraced within the scope and true meaning of the guaranty in question. The indorsement would be authorized by the partners — in the proper business of the partnership — before its final termination — to accomplish the same objects for which such paper was endorsed by the firm before the dissolution ; and it confers the same power which each partner previously possessed. This appears to us to be properly a partnership transaction, and occurring before the partnership had terminated, in that sense which must have been contemplated by the parties to the guaranty in this suit. The partnership still continuing to exist, although to a more limited extent, there seems to us to be no substantia], and we know of no technical, objection, to the conferring upon the partners, or either of them, a power to act for them, which they had not before possessed, or which had become merely suspended by circumstances, so long as a new partnership could not be fairly said to be created. This surely could not be termed the formation of a new partnership, but was only a continuance of the former one. If the power of either partner to endorse notes for the firm had, after the execution of the guaranty, been, for any cause, suspended by the partners, (and such power is not indispensable to the existence of a partnership, Gow, ch. 2. §2. p. 48. 49.) and had been subsequently revived before the dissolution, would it admit of a doubt, whether indorsements afterwards made would be covered by the defendants’ guaranty ? The power of the partners to indorse is an implied power, which is held to be revoked, by the dissolution ; but when expressly conferred, subsequently, and before the termination of the partnership, for the partnership purposes, it would seem to savour too much of refinement, and indeed to view it in a false light, to consider it the act of the partners as mere insulated individuals, and not knit together by their partnership connexion. This view corresponds with the acts of all the parties .concerned, as presented on the motion, and appears to be the construction which they themselves put on the transaction, and the light in which they considered it; while it protects the defendants from the imputation of fraud, for which, otherwise, there might be a strong colour.

If the power to E. A. Mitchell to endorse on behalf of the partners, was conferred by them, when the dissolution took place, there is no doubt that all the partners would be held by his endorsements, made in pursuance of it; and on no principle, in our opinion, could it be claimed, that such indorse-ments would not be within the fair meaning of this guaranty. Newsome v. Coles & al. 2 Campb. 617. Burton & al. v. Issitt, 5 B. & Ald. 267. Coll. Part. b. 3. c. 1. s. 3. Kilgour v. Finlyson & al. 1 H. Bla. 155. Heath v. Sansom & al. 4 B. & Adol. 172. We think, therefore, that, on the facts admitted, and claimed to be proved, in this case, whether the power was conferred, when the dissolution took place, or subsequently, there is no error in the charge of the court below, on this point, that requires a new trial.

4. Beach, the teller of the plaintiff, testified, that two notices of non-payment of the note of Tilton & Lynde were received from the holder of the note, one for the firm of S. & M., and the other for the firm of £'. M. & G., (the indorsers,) and that although he had no recollection of having delivered said notices to E. A. Mitchell, excepting from the fact that said notices were so received, and also from the memorandum produced, made at the time it purports, which states, that, on the day therein mentioned, he delivered like notices to that recited in the memorandum ; yet, from these circumstances, he had no doubt that he delivered said notices to said E. A. Mitchell, on said day. According to the cases below cited, this was competent evidence to prove such notice of non-payment to S. M. & G. 2 Phill. Ev. 752. by Coucn & Hill. Miller v. Hackley, 5 Johns. Rep. 375. Bank of Monroe v. Culver & al. 2 Hill, 531.

As to the post-mark of the 22nd of May, on the letter containing notice, it is evidence that the letter was mailed and sent, rather than that it was merely put into the post-office, on that day ; the object of the post-mark being to indicate the ,. i 1 ° former, and not the fatter.

With regard to the evidence offered by the plaintiff, to shew that the notice of protest on the Aikin & Glass note had been forwarded in due season, it does not appear, that it was objected to, by the defendants ; and therefore, we must infer, that it was permitted to go to the jury, by consent of the parties. Whatever we might think, as to the admissibility of the evidence, if it had been resisted, the defendants, in order to have the benefit of the question, ought to have made an objection to the evidence, and raised distinctly the point of its admissibility or effect. After the parties have voluntarily left it to the jury to infer from the circumstances, which, perhaps, if objected to, would be considered insufficient for that, purpose, whether a particular fact existed, they cannot properly call on this court to interfere with the result.

The superior court, therefore, should be advised, that a new trial ought not to be granted.

In this opinion the other Judges concurred, except Hinman, J., who gave no opinion, ^(a)

New trial not to be granted.