95 Ala. 362 | Ala. | 1891
Tbe contract sued on is not a guaranty, but one of suretyship. Crossthwaite and tbe other defendants, who undertake that Saint shall faithfully perform bis contract with tbe company, are sureties of Saint, and not guarantors. Tbe distinction between tbe two classes of undertakings is often shadowy, and often not observed by judges and text-writers; but that there is a substantive distinction, involving not infrequently important consequences, is, of course, not to be doubted. It seems to lie in this: that when tbe sponsors for another assume a primary and direct liability, whether conditional or not in the sense of being immediate or postponed till some subsequent occurrence, to tbe creditor, they are sureties; but when this responsibility is secondary and collateral to that of tbe principal, they are guarantors. Or, as otherwise stated,-if they undertake to pay money, or do any other act, in tbe event their principal fails therein, they are sureties ; but, if they assume tbe performance only in the event tbe principal is unable to perform, they are guarantors. Or, yet another and more concise statement, a surety is one who undertakes to pay if tbe debtor do not; a guarantor, if tbe debtor can not; tbe first is sponsor, absolutely and directly, for tbe principal’s acts, the latter only for tbe principal’s ability
. Applying these principles to the bond sued on, the conclusion must be that it is not a guaranty but a suretyship on the part of Crossthwaite, Wright, Hall and Spraggins. It is not their separate undertaking, but the principal also executes it. While they employ the word “guarantee,” they directly obligate themselves along with Saint to pay, absolutely and wholly irrespective of Saint’s solvency or insolvency, all damages which may result to the obligee from his default. Not only so, but they expressly stipulate that the company need not exhaust its remedies against Saint before proceeding against them. It is, in other words, and in short, a primary undertaking on their part, not secondary and collateral, to pay to the company in the event of Saint’s failure, and not an undertaking to pay only.in the event of Saint’s default and inability to pay. They are sureties of Saint, and not his guarantors, and their rights depend upon the law applicable to the former relation, and not upon the law controlling the latter.
2. One of the important differences in the operation, effect and discharge of the two contracts finds illustration in this case. The undertaking of guaranty in a case like this is
All tbis is otherwise with respect to tbe contract of surety. He is bound originally in all respects upon the same footing as tbe principal. His is not an offer depending for efficacy upon acceptance, but an absolute contract depending for efficacy upon complete execution, and its execution is completed by delivery. From tbat moment bis liability continues until discharged in accordance with stipulations of tbe instrument, or by some unauthorized act or omission of tbe obligee violative of bis rights under tbe instrument, or by a valid release. Nothing that be can do outside of tbe letter of tbe bond can free him from tbe duties and liabilities it imposes. He can not assert tbe right to revoke, unless tbe right is therein nominated. As was said by tbe English court, “if be desired to have tbe right to terminate bis suretyship on notice, be should have so specified in bis contract.”- — Calvert v. Gordon, 3 Man. & Ry. 124; Brandt Suretyship & Guar., §§ 113, 114.
3. Tbe evidence here as to tbe release of Crosstbwaite tends to show no more than tbis: tbat after tbe bond bad been delivered to plaintiff, and after its officers bad advised Saint tbat they were ready for him to enter on tbe discharge of bis duties under tbe contract secured by tbe bond, be (C.) requested plaintiff to take bis name off tbe paper. No assent to tbis request is shown, but only an inquiry on tbe part of plaintiff as to C.’s reasons for desiring to be released. It would seem tbat tbe court itself should have decided tbat these facts did not release Crosstbwaite; but tbe question
4. The exceptions which were reserved on this part of the case are to charges given, and to the refusal to give charges asked by defendants, declaratory of the effect which the discharge of Crossthwaite, if llie jury found lie had leen discharged, would have upon the liability of his co-sureties. As the jury found expressly that he had not been discharged, these exceptions present mere abstractions not necessary to be decided. We have no doubt, however, but that the law in this respect was correctly declared by the court to be, that the release of Crossthwaite operated to release the other sureties only to the extent of his aliquot share of the liability. — Brandt Sur. & Guar., § 383; Burge on Suretyship, 386 ; Klingensmith v. Klingensmith, 31 Pa. St. 460 ; Ex parte Gifford, 6 Ves. 805; Shock v. Midler, 10 Pa. St. 401; Currier v Baker, 51 N. H. 613; Governor v. Jemison, 47 Ala. 390.
5. The sureties of Saint insisted on the trial below that they were discharged from all liability on the bond, by reason of certain alleged changes made in the original contract between their principal and the company by the parties thereto, after they became sureties for its faithful performance, and without their knowledge, consent or ratification. It is not pretended that the paper writing evidencing this contract was ever altered in any respect, but that its terms were changed by subsequent parol agreements, in the following respects, among others to be presently considered : first, that under this contract, which constituted Saint a collector only for the company, he was instructed and required to take up and Resell sewing-machines, when he found the notes for the purchase-money of the same, and which were in his hands for collection, could not be collected; and, second, that he was authorized to discount or sell the notes placed in his hands for collection, when the same could not be otherwise realized upon. Nothing is claimed in this action on account of Saint’s misconduct in respect of any property thus taken up or resold, or of any note discounted by him, or with respect to the proceeds of any such sale or discount. If
6. Tbe sureties further defended on tbe ground tbat tbe contract between Saint and tbe company was changed, without their knowledge or assent, by a subsequent parol agreement entered into by their principal and Walls, rep-presenting tbe company, whereby Saint’s compensation was to be reduced from fifty dollars per month to nine dollars per week. There was evidence of such agreement, but none that it was supported by a consideration, or that it was approved by plaintiff. And it appears from other evidence that all or Wall’s contracts were subject to approval or rejection by other officers -of the corporation, and that plaintiff settled with Saint on a basis as to compensation of fifty dollars per months. We think, on these facts, this defense is without merit. — Steele v. Mills, 68 Iowa, 406.
Equally untenable, in our opinion, is the defense which proceeds on the ground that the instruction of plaintiff to Saint to retain his salary and expenses out of collections made by him was a material change of that provision of the contract which required him to remit 'to the company on the 1st day of each week the amount collected up to that day. The contract provided for Saint’s compensation and expenses, but was silent as to the manner of payment. The method of payment thus adopted tended to decrease the risks of the sureties, as affording less occasion for conversion by Saint than had payments to Min been made only at the end of each month.
7. It is well settled, that mere indulgence of the creditor to the _ principal, the mere forbearance to take steps to enforce a liability upon default, or even an understanding between them looking to payment of the deficit presently due at some time in the future, which does not, for the want of a consideration to support it, or other infirmity, prevent the creditor from immediately demanding j>ayment, will not discharge the surety. Hence, what took place between Walls and Saint in February, 1888, in regard to allowing the latter further time to make good the sum he had theretofore converted, afforded no defense to the sureties with respect to the sum then due.- — 8 Brick. Dig., p. 715, §§36-43; 9 Amer. & Eng. Encyc. of Law, p. 83, n. 4; Canal Co. v. VanVorst, 21 N. J. L. 100.
■. 8. The sureties, however, on another aspect of the transaction last above referred to between Saint and Walls, predicate a defense going to the amount of their liability. They insist that Saint was at that time a defaulter byem-
9. Indeed, the foregoing doctrine is not controverted in this case ; but it is contended that it has no application as between a corporation, being the creditor, and the surety of one of its officers or employes. And there are not a few adjudged cases which support this view. The argument upon which this conclusion is reached is, that “corporations can act only by officers and agents. They do not guarantee to the sureties of one officer the fidelity of the others. The fact that there were other unfaithful officers and agents of the corporation, who knew and connived at his (the principal’s) infidelity, ought not in reason, and does not in law or equity, relieve the sureties from their responsibility for him. They undertake that he shall be honest, though all around him are rogues. Were the rule different, by a conspiracy between the officers of a bank, or other moneyed institution, all their sureties might be discharged. It is impossible that a doctrine leading to such consequences can be sound.”- — Ft. W. & C. Railway Co. v. Shaeffer, 59 Pa. St. 356.; Taylor v. Bank of Ky., 2 J. J. Marsh. 565 ; McShane v. Howard Bank, 10 Law. An. Rep. 552; Brandt on Sur. & Guar., § 369.
It is to be noted that these cases — and there may be others which follow them — hold, not only that where there is a conspiracy between officers of a corporation to embezzle its funds, the dereliction of neither officer will discharge the sureties of the other, but also where there is a negligent failure on the part of one such officer to give notice to the sureties of another of his dishonesty, and a continuance of the dishonest servant in the- corporate service without the assent of his sureties given with a knowledge of the default, the sureties are not discharged from liability for subsequent deficits, though confessedly they would be were the creditor an individual or copartnership. It may be that the first position stated is sound. It would seem to be immaterial whether an original default results from the dishonesty of the principal alone, or conjointly from' his
But even our conservatism in following adjudications of courts of acknowledged ability and learning can in no degree constrain us to adopt the second proposition stated above. We can not subscribe to the doctrine, that there is the radical difference insisted on, or any material difference in fact, between the efficacy of acts and omissions of an agent of a creditor corporation, having authority in the premises, on the one hand, and the acts and omissions of the agent of an individual creditor, or of the individual himself, on the other, in respect of condoning the defalcation of an employe, omitting notice to the employe’s sureties, and continuing him in the service, to operate a release of the sureties as to subsequent deficits of the dishonest employe. No doctrine of the law is more familiar than that notice to an agent, within the scope of his agency, is notice to the principal; and this doctrine has in 'no connection been applied more frequently and uniformly than to corporations and their agents. Indeed, there is an absolute necessity in all cases .for its application to corporations, since they act and can be dealt with only through agents. Notice to one agent of a corporation, with respect to a matter covered by his agency, must be as efficacious as to its directors or to its
We suppose it would not be contended in any quarter that, if these sureties had in terms stipulated that, in case of Saint’s default, notice to them and assent on their part should be a condition precedent to their liability for further defaults, they could be held without such notice and assent; and yet, under the doctrine announced in the cases cited, such a stipulation would be entirely nugatory, and the failure of every agent and officer, all with knowledge of the stipulation and of the default, to notify the sureties thereof, would avail them nothing. Yet it would manifestly be no more the duty of the corporation to give a notice so stipulated for than to give a notice made a part of the contract by the law of the land. And such doctrine, carried to its legitimate results, would defeat all corporate liability growing out of the contracts, acts and omissions of agents clothed with power and authority in the premises. That it is unsound is demonstrated not only in logic, but upon analogous authority. As we have seen, the English court in the leading case of Phillips v. Foxall, supra, which has never been called in question there or in this country, either as to the result or the reasoning upon which it was reached, supported the principle declared upon the same considerations which underlie the doctrine, that if an employer have knowledge of the previous dishonesty of a servant, and accept a guaranty for his future honesty without disclosing such knowledge to the surety, this is a fraud upon the latter, and he is not bound. Now, suppose an officer of a corporation charged with the duty of finding surety for another officer, knowing of such previous dishonesty on the part of such other officer, takes bond for his faithful and honest performance of the services contracted for without giving the surety notice of the prior dereliction, would not that omission of duty on his part stand upon the same plane before the law, and involve precisely the same consequences, as if the default had occurred after the surety has bound himself, and the officer had then failed to give him notice of it? If the corporation is not prejudiced by the omission in one instance, can it be in the other? If the corporation is responsible for the dereliction of its agent with respect to notice of a previous default, would it not also be responsible for its agent’s failure to give notice of the subsequent default? There can, in our opinion, be but one answer to these questions. There can be no possible difference in the duty of the agent
Our conclusion on this point is further supported by tbe cases of C. C. & A. R. R. Co. v. Gow, and A. & P. Tel. Co. v. Barnes, supra, which, without discussing this point, in effect bold that the omission of an officer of a corporation to notify a surety of tbe default of bis principal in a case like this, and tbe continuance by sucb officer of tbe employment of tbe principal, will discharge tbe surety as to all defaults arising during tbe subsequent service. And in Netwark v. Stout, 52 N. J. L. 35, tbe New Jersey court, while adhering generally to tbe doctrine we have been criticising, yet held that, if the default and dishonesty of a municipal officer be brought to tbe attention of tbe city council, which is clothed with tbe power to remove him, and be is allowed to continue in tbe service without notice to and assent on the part of tbe surety, tbe latter will be discharged from liability as to all subsequent defaults. It does not appear to have been so considered by tbat court, but it is manifest tbat this is a radical departure from tbe doctrine held -by tbe Pennsylvania, Kentucky, Maryland and other courts, and relied on by appellee here; and goes strongly in support of tbe contrary rulé, which we believe to be the sound one.
It is also to be noticed, tbat much reliance is bad by tbe courts bolding tbat a surety of one officer of a corporation is not discharged by tbe acts or omissions of another in tbe particulars under consideration, on cases decided by tbe Supreme Court of tbe United States in respect of sureties of public officers. Indeed, it would seem tbat this whole doctrine bad its inception in this class of cases. This can but be considered an infirmitive circumstance going to tbe soundness as authority of those cases which involve sureties of corporation officers. There is a palpable and manifest distinction between tbe two classes of cases bearing directly upon this question, which, while requiring tbe application of this rule to public officers on tbe grounds of public policy,
"We bold that if Walls, while acting for the corporation, land in the capacity of its agent, with respect to the matters and things involved in Saint’s contract, received notice of such a conversion of its funds by Saint as amounted to embezzlement, or involved dishonesty, and, without imparting this knowledge to the sureties and receiving their assent thereto, continued him in the service, that the sureties are not liable for Saint’s subsequent defaults. Charges 5,9 and 7, requested for defendants, when referred to the evidence, were correct expositions of the1 law as we understand in this connection. The refusal of the court to give them involved error which must work a reversal of the case. Most of the other assignments of error are .covered by the points considered in the first part of this opinion. Such of the assignments as are not discussed have been considered, and found to be without merit.'
The judgment is reversed, and the cause remanded.