Shows v. Steiner

| Ala. | Nov 30, 1911

MAYFIELD, J.

This is an action on a contract of guaranty, which contract was in writing, and was as follows:

“Agreement of Gfuaranty. The State of Alabama, Montgomery County:

“This agreement, made this the 17th day of October, 1907, by and between Steiner, Lobman & Frank, a partnership, engaged in the wholesale dry goods and notion business, at Montgomery, Alabama, of the one part, and T. W. Shows, of Luverne, Alabama, of the other part, witnesseth: That whereas; the said Steiner, Lobman & Frank have agreed to supply the firm of Beall & Fundaburk, from time to time, in the course of trade, with merchandise, on credit, to the extent of twenty-five hundred ($2,500.00) dollars, for a period of twelve (12) months from this date, provided the said Shows will enter into this agreement of guaranty; and whereas, the said T. W. Shows is willing to become guarantor to the said Steiner, Lobman & Frank, upon a line of credit extended to the said Beall & Fundaburk, as hereinafter provided: Now, therefore, in consideration of the premises and the sum of five ($5.00) dollars, by the said Steiner, Lobman & Frank to the said T. W. Shows in hand paid, the receipt whereof is hereby acknowledged by the said Shows, the .said T. W. Shows does hereby guarantee unto the said Steiner, Lobman & Frank, the payment, to the extent of one thousand ($1,000.00) dollars of any indebtedness which the said Beall & Fundaburk may, from time to time, owe the said Steiner, Lobman & Frank, during the continuance of this guaranty. It is agreed that the guaranty hereby given is a continuing guaranty for twelve (12) months from the date of this instrument, and that the said Steiner, Lobman & Frank may grant time, or other indulgence, or compound with, or take additional security from the said Beall & Fundaburk, or extend credit to the said Beall & Fundaburk in excess of twenty-five hundred ($2,500.00) dollars, without, in any way, affecting this guaranty. In witness whereof, the said parties to this contract have hereunto set their hands, the year and day first above written. [Signed] Steiner, Lobman & Frank. [Signed] T. W. Shows.”

The complaint as last amended contained three counts. The first and second declared upon the contract, which was set out in full, and the third on the common counts, which last count need not be considered. Demurrers to the complaint being overruled, the defendant filed a great number of special pleas, including one of non est factum. Demurrers were sustained to most of these pleas, and the trial was had upon pleas 1, 2, 13, 14, A, and C, and two special replications to pleas A and C, which replication it is unnecessary to notice. Assignments of error from 1 to 21, inclusive, go to the sustaining of demurrers to special pleas from 3 to 10, and to pleas B and 15.

The defenses attempted to be set up in the pleas, in varying forms, may be reduced to three, which were: First, that defendant had had no notice of the acceptance of the guaranty by the plaintiffs; second, that the contract, when signed by defendant, contained blanks which were afterwards filled in, such after filling in constituting an alteration of the contract; third, that there was not sufficient consideration to support the contract, in that the defendant did not actually receive the recited consideration of $5, and had no notice of plaintiffs’ acceptance of the guaranty, nor of their furnishing the credit, so as to make it a binding contract.

None of these numerous .pleas, to which demurrers were sustained, was good. The three defenses attempted to be set up in them were not availing in this action. It is very true that notice of acceptance by the guarantee of a mere proposed guaranty, such as a letter of credit, is necessary to make the undertaking binding upon the guarantor; but it is equally true and well settled that no formal or further acceptance is necessary where the guaranty, as in this case, is a bilateral contract, completely executed by both parties, reciting on its face that it is executed upon a recited, even though nominal, consideration.

The two rules are well settled by the Supreme Court of the United States, in the case of Davis v. Wells, 104 U.S. 159" court="SCOTUS" date_filed="1881-11-14" href="https://app.midpage.ai/document/davis-v-wells-90437?utm_source=webapp" opinion_id="90437">104 U. S. 159, 26 L. Ed. 686. It is there said: “In Adams v. Jones, 12 Pet. 207" court="SCOTUS" date_filed="1838-03-18" href="https://app.midpage.ai/document/adams-cunningham--co-v-jones-86043?utm_source=webapp" opinion_id="86043">12 Pet. 207, 213 [9 L. Ed. 1058] Mr. Justice Story, delivering the opinion of the court, said: ‘And the question which, under this view, is presented is whether, upon a letter of guaranty, addressed to a particular person or to persons generally, for a future •credit to be given to the party in whose favor the guaranty is drawn, notice is necessary to be given to the guarantor that the person giving the credit has accepted or acted upon the guaranty and given the credit on the faith of it. We are all'of the opinion that it is necessary; and this is not now an open question in this court, after the decisions which have been made in Russell v. Clark, 7 Cranch, 69" court="SCOTUS" date_filed="1812-03-12" href="https://app.midpage.ai/document/russell-v-clarks-executors-84971?utm_source=webapp" opinion_id="84971">7 Cranch, 69 [3 L. Ed. 271] ; Edmondston v. Drake, 5 Pet. 624" court="SCOTUS" date_filed="1831-03-14" href="https://app.midpage.ai/document/edmondston-v-drake--mitchel-85753?utm_source=webapp" opinion_id="85753">5 Pet. 624 [8 L. Ed. 251]; Douglass v. Reynolds, 7 Pet. 113" court="SCOTUS" date_filed="1833-03-11" href="https://app.midpage.ai/document/douglass-and-others-v-reynolds-and-others-85816?utm_source=webapp" opinion_id="85816">7 Pet. 113 [8 L. Ed. 626]; Lee v. Dick, 30 Pet. 482 [9 L. Ed. 503], etc.’ ”

But it is further on, in the same opinion, said: “If the guaranty is made at the request of the guarantee, it then becomes the answer of the guarantor to a proposal made to him, and its delivery to or for the use of the guarantee completes the communication between them and, constitutes a contract. The same result follows, as declared in Wildes v. Savage, supra [1 Story, 22" court="None" date_filed="1839-10-15" href="https://app.midpage.ai/document/wildes-v-savage-8640015?utm_source=webapp" opinion_id="8640015">1 Story, 22, Fed. Cas. No. 17,653], where the agreement to accept is contemporaneous with the guaranty, and constitutes its consideration and basis. It must be' so wherever there is a valuable consideration, other than the expected advances to be made to the principal debtor, which, at the time the undertaking is given, passes from the guarantee to the guarantor, and equally so where the instrument is in the form of a bilateral contract, in which the guarantee binds himself to make the contemplated advances, or which otherwise creates, by its recitals, a privity between the guarantee and the guarantor; for in each of these cases the mutual assent of the parties to the obligation is either expressed or necessarily implied.”

Such were the undisputed facts in this case, appearing on the face of the complaint. The guaranty, which was set out in the complaint, recited that the proposal came from the guarantees to the guarantor, and was accepted by him upon a recited consideration of $5 paid, and of the proposed credit of $2,500, to be extended to and for the benefit of a third party named therein.

Moreover, this was a continuing contract of guaranty for the term of one year; such being expressly declared in the contract. It was therefore wholly immaterial who signed the contract first, or what was the order in which the parties signed it. Hence the pleas, setting-up the fact that the contract was signed by defendant first, and that he did not know that plaintiffs had signed it, were immaterial; it being shown on the face of the contract that the proposal proceeded from the guarantees to the guarantor.

It was likewise immaterial that the recited consideration of $5 was not actually paid, as recited. This same question was also disposed of in the cited case of Davis v. Wells, supra, 104 U. S. 167, 168, 26 L. Ed. 686" court="SCOTUS" date_filed="1881-11-14" href="https://app.midpage.ai/document/davis-v-wells-90437?utm_source=webapp" opinion_id="90437">26 L. Ed. 686, in which the court said: “It is not material that the expressed consideration is nominal. That point was made, as to a guarantee, substantially the same' as this, in the case of Lawrence v. McCalmont, 2 How. 426" court="SCOTUS" date_filed="1844-03-16" href="https://app.midpage.ai/document/lawrence-v-mccalmont-86289?utm_source=webapp" opinion_id="86289">2 How. 426, 452 [11 L. Ed. 326], and was overruled. Mr. Justice Story said: “The guarantor acknowledged the receipt of the $1, and is now estopped to deny it. If she has not received it, she would now be entitled to recover it. A valuable consideration, however small or nominal, if given or stipulated for in good faith, is, in the absence of fraud, sufficient to support an action an any parol contract; and this is equally true as to contracts of guaranty or as to other contracts. A stipulation in consideration of $1 is just as effectual and valuable a consideration as a larger sum stipulated for or paid.’ ”

There was nothing in the pleas which attempted to allege an alteration by the filling in of the blanks. If the facts set up in such pleas were true, they showed, that the defendant was bound by the contract when the blanks were filled in. The blank to be filled in was wholly immaterial to the contract; the engagement would have been binding with the blank remaining, as it was, merely a blank for the name of the partnership to which the goods were to be furnished. The partners were known, but the exact name of the partnership had not been agreed upon; and when it was agreed upon it was inserted in the blank space. This was fully understood by all the parties. The defendant, by signing the contract in that condition, authorized the holder to fill in this blank when the facts were known; and hence it was as binding upon him, as a contract, as if the name had been inserted in the blank space when he affixed his signature.

“1. There are two general rules which apply to the law as to filling in blanks in written instruments: First, no one can found a title upon a forgery (7 C. B. Eng. 448; 30 L. J. C. P. 117) ; second, Svhere a man has willfully made a false assertion calculated to lead others to act upon it, and they have done so to their prejudice, he is forbidden, as against them, to deny that assertion’ (31 L. J. Ex. 436). It has been held that a deed or bond containing blanks delivered to the grantor’s agent may subsequently be filled up and effectually delivered by him.— [Gibbs & Labuzan v. Frost & Dickinson] 4 Ala. 720" court="Ala." date_filed="1843-01-15" href="https://app.midpage.ai/document/gibbs-v-frost-6501895?utm_source=webapp" opinion_id="6501895">4 Ala. 720; [Duncan v. Hodges, 4 McCord (S. C.) 239] 17 Am. Dec. 734; [Reed v. Morton, 24 Neb. 760" court="Neb." date_filed="1888-07-15" href="https://app.midpage.ai/document/reed-v-morton-6645818?utm_source=webapp" opinion_id="6645818">24 Neb. 760, 40 N. W. 282] 1 L. R. A. 736 [8 Am. St. Rep. 247].”

“3. It has been said by the Supreme Court of the United States: ‘We agree that by signing and acknowledging the deed in blank, and delivering it to an agent with expressed or implied authority to fill up the blank, perfects the conveyance, and its validity cannot well be doubted.’ — [Drury v. Foster] 2 Wall. 24" court="SCOTUS" date_filed="1865-01-23" href="https://app.midpage.ai/document/drury-v-foster-87623?utm_source=webapp" opinion_id="87623">2 Wall. 24 [7 L. Ed. 780].” — 6 Mayf. Dig. 86.

Pleas 11, 12, E, and F, which attempted to set up a compromise of the indebtedness due from Beall & Fundaburk to plaintiffs for Avhich defendant Avas guarantor, were not sufficient, and demurrers thereto Avere properly sustained. Under this particular guaranty, it Avas necessary for such pleas to allege that the defendant Avas thereby released; it Avas not sufficient to allege that the principal debtor Avas released, because the guaranty ■expressly authorized plaintiffs to compound with the debtors, without affecting the guaranty.

Construing the pleas most strongly against the pleader, defendant Avas not released by such general assignment by the debtor. We are of the opinion, hoAvever, that the court erred in giving the affirmative charge for the plaintiffs, under the evidence shoAvn by this record, and upon the issues on which the trial was had.

The contract of guaranty upon which this suit-was brought Avas, as before stated, a bilateral undertaking, signed by both the guarantees and the guarantor. The undertaking on the part of the guarantees Avas, that they would extend a line of credit to Beall & Fundaburk, to the amount of $2,500, during the next year, in consideration that defendant Avould guarantee the payment of the amount of $1,000. The amended complaint alleged that they did so credit Beall & Pundaburk, to that amount, during the year, and that Avas therefore made a material averment. It is true that the plaintiffs’ evidence proved this averment Avithout dispute; but the defendant’s evidence, that of both Beall & Pundaburk, denied that credit Avas extended to the amount named in the contract and alleged in the complaint, and that they declined • to furnish the full amount, .and shoAved that .it was extended to an amount less than that named. It Avas • therefore for the jury to say whether, as to this averment, they believed the evidence of the plaintiffs or the evidence of the defendant. The effect of the charge Avas to take this question from the jury, Avhich, of course, rendered the charge erroneous. ■ We do not now decide that it Avas necessary for the complaint to allege that credit was extended to the amount of $2,500; but the complaint Avas amended by changing the amount of the credit alleged to have been extended from $2,450 to $2,500, thus emphasizing the importance of the averment. It ivas thus clearly made a material averment.

The defendant utterly failed to prove his special plea of non est factum. His own testimony, as well as the other evidence, showed that he did execute the contract sued upon. The letter Avritten by him Avas properly admitted in evidence to disprove this plea. While it is a letter touching a settlement of the matter in dispute, and shows that it was Avritten to avoid a snit, and was therefore not admissible to shOAV liability under it, yet it Avas admissible to shOAV that he did execute the contract.

As the case must be reversed, Ave Avill not pass upon those questions which may not arise on another trial;. but we would suggest that the proof should be more certain that the copies of letters Avritten by plaintiffs Avere true and correct transcripts of the originals, and that the originals Avere addressed and properly posted to the addressees, than it appears to have been upon this trial.

Reversed and remanded.

All the Justices concur,, save Dowdell, C. J., not sitting.