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2. Consideration to support the guaranty.
It is not necessary that there should be a consideration directly between the persons giving and receiving the guaranty. It is sufficient if thereby the party for whom the guarantor becomes a surety receives a benefit, or the party to whom the guaranty is given suffers a loss. Burn v. Grey, 4 East 190; Morley v. Boothby, 3 Bingh. 107; Willatts v. Kennedy, 8 Id. 10, 11 Eng. Com. Law Rep. 53; 21 Id. 200; Moore &c. v. Holt, 10 Grat. 295.
When a guaranty of a note is made before the note is delivered to the party to whom the guaranty is given, it is deemed to be done to add to the strength of the note and to induce that party to take it for his money or property; and no other consideration is necessary. Bickford v. Gibbs &c. 8 Cush. 156; Manson v. Durham &c. 3 Hill 584; Snevily v. Johnston, 1 W. & S. 309; Amsbaugh v. Gearhart & Co. 1 Jones 482; Hopkins &c. v. Richardson, 9 Grat. 494. If, after a note has become a complete contract, there be written on the back of it a guaranty of its payment, a distinct consideration should be proved for the guaranty. Tenney v. Prince, 4 Pick. 385; Howe v. Merrill, 5 Cush. 80. If it be without consideration, it is clearly nudum pactum and void. Aldridge &c. v. Turner, 1 Gill & J. 427. But if the guarantor receives a consideration for it, he may make himself liable for the amount of the note, although the money received by him be less than that amount. Oakley v. Boorman, 21 Wend. 591.
3. Rules for construing a guaranty.
It is often a question, what is the fair import of the language used in a guaranty. Lee v. Dick, 10 Peters 493, 4; Mauran v. Bullus, 16 Peters 528; Bell &c. v. Bruen, í How. 187; Lawrence v. McCalmont &c. 2 How. 450, 51. For its interpretation, the cases have laid down rules the very opposite of each other. In England, the diversity is even more striking than in the United States.
It has been said, sometimes, that the words of a guaranty are to be taken as strongly against the party giving the guaranty as the sense of them will admit of. Mason v. Pritchard, 12 East 227; Drummond v. Prestman, 12 Wheat. 518. Sometimes that guarantees ought to receive a strict construction; and they should be so drawn up as to embrace in terms the dealing intended to be guarantied. Best, C. J. in Evans v. Whyle, 5 Bingh. 485, 15 Eng. Com. Law Rep. 514. Then,
again, we will be told, that such commercial agreements ought to receive a liberal, not a strict construction. Burrough, J. in Hargreave v. Smee, 6 Bingh. 244, 19 Eng. Com. Law Rep. 69. That the words employed are the words of the grantor, and there is no reason for putting on a guaranty a construction different from that which the court puts on any other instrument; and with regard to other instruments the rule is that if the party executing them leaves anything ambiguous in his expressions, such ambiguity must be taken most strongly against himself. Tindal, C. J. in S. C. While another judge will say it is not unreasonable to expect from a party, who is furnishing goods on the faith of a guaranty, that he will take the guaranty in terms which shall plainly and intelligibly point out to the party giving the guaranty the extent to which he expects that the liability is to be carried. Bayley, B. in Nicholson v. Paget, 1 Cr. & Mee. 48; 3 Tyrwhy. 164. If he were obliged to choose between the two conflicting principles laid down on this subject, Alderson, B. would rather be disposed to agree with that given in Mason v. Pritchard, than with the opinion of Bayley, B. in Nicholson v. Paget. 6 M. & W. 612.
It may now be safely laid down that the proper rule of construction of a guaranty is—that applied to other contracts— to give the instrument that effect which shall best accord with the intention of the parties, as manifested by the terms of the guaranty, taken in connection with the subject matter to which it relates; neither enlarging the words beyond their natural import in favour of the creditor nor restricting them in aid of the surety. This may be regarded as now the rule best established in England, Allnutt &c. v. Askenden, 5 Man. & Grang. 392, 44 Eng. Com. Law Rep. 210; in Massachusetts, Mussey v. Rayner, 22 Pick. 228; Curtis &c. v. Hubbard, 6 Metcalf 191, 2; and generally in the United States.
On the one hand a judge is naturally desirous, where parties have acted on the faith of such engagements, that they should, if possible, be sustained, Wilde, C. J. in Edwards v. Jevons, 8 Man. Grang. & Scott 444, 65 Eng. Com. Law Rep. 444, while on the other hand a court will consider that no party is bound beyond the extent of the engagement, which shall appear from the expression of the guaranty and the nature of the transaction. Drummond v. Prestman, 12 Wheat. 518.
In one case of guaranty, it was said in New York, that on general principles a strict interpretation should be applied in favour of a surety. Whitney v. Groot, 24 Wend. 82. But every instrument of this sort ought to receive a fair and
reasonable interpretation according to the true import of its terms. It being an engagement for the debt of another, there is certainly no reason for giving it an expanded signification or liberal construction beyond the fair import of its terms. On the other hand, as these instruments are of extensive use in the commercial world, upon the faith of which large credits and advances are made, care should be taken to hold the party bound to the full extent of what appears to be his engagement. Douglass &c. v. Reynolds &c. 7 Peters 122. It is, says Mr. Justice Thompson, to be construed according to what is fairly to be presumed to have been the understanding of the parties without any strict technical nicety. Lee v. Dick, 10 Peters 493. The understanding is to be ascertained from the facts and circumstances accompanying the entire transaction. Bell &c. v. Bruen, 1 How. 187. To ascertain the intention of the parties is the great object of the court in the construction of all instruments; and this is especially the case in acting upon guarantees. Mauran v. Bullus, 16 Peters 528.
The words should not be forced out of their natural meaning: but they should receive a fair and reasonable interpretation, so as to attain the objects for which the instrument is designed and the purposes to which it is applied. We should never forget that letters of guarantee are commercial instruments generally drawn up by merchants in brief languagesometimes inartificial and often loose in their structure and form; and to construe the words of such instruments with a nice and technical care, would not only defect the intentions of the parties but render them too unsafe a basis to rely on for extensive credits, so often sought in the present active business of commerce throughout the world. Lawrence v. McCalmont &c. 2 How. 449, 50; Moore &c. v. Holt, 10 Grat. 294.
4. Endorser not to be turned into maker or guarantor; and guarantor not to be turned into maker or endorser.
In New York there are some cases which hold in effect, that a written contract of one kind may be turned into a contract of a different kind, by parol proof concerning the intention of the parties; that the endorser of a promissory note, may, under certain circumstances be charged as maker or guarantor; and that the guarantor of a promissory note may sometimes be charged as maker or endorser. Judge Bronson remarks, that although these cases stand upon no principle,
it has been a work of some time and difficulty to get rid of them. 1 Comstock 324.
The authority of Joselyn v. Ames, 3 Mass. 274, cited ante, p. 135, was conceded by the opinion of Spencer, J. but not by the decision in Herrick v. Carman, 12 Johns. 161, cited ante, p. 232. That opinion was followed in Nelson v. Dubois, 13 Johns. 175, and Campbell v. Butler, 14 Id. 139. But the decision in Herrick v. Carman, rather than that opinion was followed in Tillman v. Wheeler, 17 Johns. 328, where it did not appear that the party sued as guarantor knew for what purpose the note was designed, or that there was any promise to, or communication between him and the holder of the note. His name being on the note as second endorser, the court would not construe his endorsement to be a special guaranty; it took the distinction mentioned ante, p. 135, between this case and the cases in 13 Johns. 175, and 14 Id. 349. Then there were the cases of Dean v. Hill, 17 Wend. 215, and Hough v. Gray, 19 Id. 202. After which, on a reconsideration it was denied that the mere endorsement of negotiable paper can be turned into an absolute guaranty from the circumstance of its being intended to give the maker credit with the holder. Seabury v. Hungerford, 2 Hill 83. And this case was followed in Hall v. Newcomb, where the court of errors, though at first equally divided, after a second argument decided by a pretty strong vote to uphold contracts as they had been made by the parties instead of making new contracts for them. 1 Comstock 324. In that case of Hall v. Newcomb, a promissory note made by P. Farmer, payable to the plaintiff or order, was endorsed by the defendant for the maker's accommodation; and no demand of payment having been made, nor any notice of dishonour given to the defendant, he was sued in one count as maker and in another as guarantor. If the person to whom or to whose order the note in Hall v. Newcomb was payable, had endorsed it himself, there was no doubt a holder might have charged the defendant in the character of second endorser. 3 Hill 235. His writing his name in blank on the back of a negotiable promissory note imported nothing more; it imported merely that he would pay the note to the holder on receiving due notice that the maker on demand at the proper time, had neglected to pay it. Where," said Walworth, C., "a note is made payable to an individual or his order and is endorsed by him in blank and in that situation is presented to another person for his accommodation endorsement, who endorses it accordingly, the legal effect of his endorsement is to make him liable in the charac
ter of second endorser merely; and he can in no event be made legally liable to the first endorser." 7 Hill 419. And so in Nelson v. Dubois, where the note was payable to Nelson or bearer, as the defendant might have been charged as endorser, without any endorsement by Nelson, the holder should not have been allowed to change the contract of endorsement into one of guaranty. Id.
So likewise in Pennsylvania. After the decision in Leech v. Hill, 4 Watts 448, the supreme court of that state had before it Tillman v. Wheeler, 17 Johns. 328, cited ante, p. 288, and followed it. Taylor v. McCune, 1 Jones 466. The court has expressed the opinion when a person who is neither maker, drawer, payee or acceptor, puts his name on commercial paper, before it is negotiated, that the payee may place the names after his own, in a course of endorsements; and that entitles a holder to maintain an action against either of the signers as prior endorsers. Kyner v. Shower, 1 Harris 444.
And in Massachusetts all the cases from Hunt v. Adams, 5 Mass. 358, down, in which an endorser has been charged absolutely as a promisor or guarantor, Shaw, C. J. observes, are cases where the name appears on the note but not as a regular endorser. When on the face of the paper the payee is the first and the defendant the second endorser, the legal effect of the endorsement cannot be altered by parol evidence. It matters not that the name of the first endorser was forged; the defendant's liability is still as endorser-on the condition of dishonour of the note by the promisor and seasonable notice to the endorser. Howe v. Merrill, 5 Cush. 80.
The courts of New York are equally opposed to allowing a guarantor to be turned into either a maker or an endorser. It will not treat as joint or several maker, a man who is the payee and has written on the back a guaranty of payment. Still less will it treat as such a man who had nothing to do with the original concoction of the note, and whose name did not appear on it till some months after it was given, and till it had passed through the payee's hands. If this last could be sued as the maker of a note, Ketchell v. Burns, 24 Wend. 456, he certainly cannot be sued either as a joint, or a joint or several maker of the original note. Miller v. Gaston, 2 Hill 191. Nor can either of them be charged as endorser; for the plain reason that they have severally made an express contract of a different nature, and have not agreed to answer as endorsers. Meach v. Churchill, 2 Wend. 630; Lamourieux v. Hewett, 5 Id. 307. Watson's ex'ors v. McLaren, 19 Wend. 557, 566, is not regarded as deciding that a guaranty can, unVOL. II.-19