Stearns v. Jones

138 Tenn. 589 | Tenn. | 1917

Ms. Justice Williams

delivered the opinion of the Court.

Complainant filed the hill of complaint to enforce the liability of defendant Jones as a guarantor. The chancellor and the court of civil appeals decreed in favor of complainant.

One of the questions raised in the assignment of error in support of petition for certiorari is that the contract of guaranty was satisfied, it not being a continuing one.

Stearns is a wholesale merchant, and Jones guaranteed -payment for sales made by him to a firm of Peters & Soulyet up to $1,500, without naming any time limit.

In defense, it is urged that complainant extended to that firm credit on sales to an amount above $7,000, and proof shows that the guaranty sum was largely more than pafd by the firm from time to time on the running account. It is not contended by complainant that the balance due on such total credit exceeds $1,100. The case for liability turns, therefore, on whether the contract was one of continuing guaranty.

In this State it has been held, following Dummond v. Prestman, 12 Wheat. (U. S.), 515 6 L. Ed., 712, in respect of a guaranty in a commercial transaction, that the guarantor shall be held to the full extent of *591Ms engagements, and that the rnle in construing such an instrument is that the words of the guaranty are to be taken as strongly against the guarantor as the sense will admit. Bright v. McKnight, 1 Sneed (33 Tenn.), 158. This rule obtains in a number of jurisdictions and is based on the idea that it is important to uphold such guaranties as helpful to trade and enterprise, which very often “depend upon a combination of the labor and energy of those without means with the credit of those who have them.”

The rule differs from that enforced in respect of a contract of ordinary suretyship.

A “continuing guaranty” is one which is not limited to a particular transaction or specific transactions, but which is intended to cover future transactions 'until revoked. It is generally unlimited as to time, but frequently limited as to the amount af indebtedness to be charged against the guarantor. 12 R. O. L., p. 1061; 1 Words and Phrases (Second Series), 974.

Applying the above rule for construing such a guaranty aganst the guarantor, then though the amount is limited, where a course of future dealings is contemplated, the instrument will be held to be a continuing one up to the amount limited.

If the guarantor desires to limit his responsibility to a single transaction or several specific transactions, not exceeding in all a certain sum, it is as easy to limit the element of time as that of amount. Where a limitation is put on the one without being placed on the other, *592a fair inference arises that it was not the intention of the parties that the contract should he so narrowed in scope.

We seem to have but ont case involving the nature of a continuing guaranty. In Bank of Alexandria v. Turney, 52 S. W. (Ch. App.), 762, affirmed by this court, the following guaranty addressed to a bank was passed upon:

“J. F. Roy, Cashier: ... In the event Mr. J. R. drizzle should overdraw his account in your bank to the amount of $500, pay. his checks and I will be responsible to you for his overdraft to that amount.
GrEORGB Tubjstey.”

’ It was there said that being a commercial instrument its purposes should, by construction, be' promoted as far as consistent with its terms and the intention of the parties, as shown by their situation, the subject-matter, and the accompanying circumstances; and that by implication, when the amount of the liability is limited and the time is not, the contract should be construed to be one of continuing guaranty. See, also, Newcomb v. Kloeblen, 77 N. J. Law, 791, 74 Atl., 511, 39 L. R. A. (N. S.), 724, and note collecting the cases. It is there shown that there are three lines of decisions on the point, due to variant views held as to the primary question of the construction to be given such an instrument — liberal or strict as against the guarantor.

We hold the guaranty in this case to be a continuing one, in effect renewing liability from time to time after *593it has been apparently satisfied, in the absence of a revocation on the part of the guarantor.

The chancellor and the court of civil appeals so held; and, as there was no error in its rulings on the other questions again raised in this court, the decree of the appellate court is affirmed.