« PreviousContinue »
give such notice will affect the liability of the guarantor; whether it will not operate to discharge him unless the demand, by being within a reasonable time, be such notice. White v. Woodward, 5 Man. Grang. & Scott 814, 57 Eng. Com. Law Rep. 814.
According to Mr. Justice Story, all that is generally required of the person making the advances or giving the credit, after having given due notice of his acceptance and intention to act upon the guaranty, is to make a demand upon the debtor when the credit has expired or the amount has become due, and upon his default to give notice thereof within a reasonable time. afterwards to the guarantor. Wildes &c. v. Savage, 1 Story's Rep. 32, 3. This is the general rule; departed from in particular cases which stand upon peculiar circumstances.
Thus in one case, where advances not exceeding $50,000 were contemplated upon certain future contingencies which might or might not arise, it appeared that the plaintiffs, as soon as practicable after receiving the letter of guaranty, did inform the defendants of their readiness to make such advances; so that the question was narrowed to this, whether notice was necessary of the fact that the contingencies had arisen, and the advances been made, and of the amount of such advances. Mr. Justice Story considered that in such a case it was the duty of the plaintiffs, within a reasonable time after the advances were actually made, to give notice thereof to the defendants, and that reliance was placed upon their guaranty to ensure the repayment. And notice not being given in what he deemed a reasonable time, nor until a material change in the circumstances of the debtors, the laches of the plaintiffs, it was held, discharged the defendants from all liability for the advances actually made. Cremer v. Higginson &c. 1 Mason 340.
In a case before the supreme court of the United States, it was insisted that to entitle the plaintiffs to recover, they must prove that in a reasonable time after they had made advances on the faith of the guaranty, they gave notice to the defendants of the amount and extent thereof. Mr. Justice Story in delivering the opinion of the court said, that this being a case of a continuing guaranty, in which the parties contemplated a series of transactions, and inasmuch as the defendants so soon as they received notice of the acceptance must necessarily have understood that there would be successive advances either in cash or by acceptances or endorsements, which would be renewed and discharged from time to time, the court did not perceive any ground of principle or policy upon which to rest the doctrine that notice of each successive transaction, as it arose, should be given. If when all the transactions under
the guaranty were closed, notice of the amount for which the guarantors were held responsible was, in a reasonable time afterwards, communicated to them, this, it seemed to the court, was a sufficient notice of the advances. Douglass &c. v. Reynolds &c. 7 Peters 126. It is not to be understood that in such a case the notice to charge the guarantor must be as strict as in the case of a drawer or endorser of a bill of exchange. Reasonable notice is all that is essential. Louisville Man.
Co. v. Welch, 10 How. 474.
8. Necessary there should be demand on principal and on his refusal notice to guarantor. Consequence of not giving it.
In the case of Douglass v. Reynolds, the court was of opinion that a demand of payment should have been made of the principal debtor, and in case of non-payment by him that notice of such demand and non-payment should have been given in a reasonable time to the guarantors. With this accords a Massachusetts case where the guarantor having within a few days after the credit to the principal expired, received notice of his non-payment, this was considered within a reasonable time, and held sufficient. Dole v. Young, 24 Pick. 250.
In case of failure to make such demand and give notice of non-payment, the guarantor will be discharged to the extent of the damage which he may have sustained thereby but no farther. Consequently if at the time the debt for which the guaranty was given, became payable, the party for whom he became guarantor was insolvent, the liability of such guarantor will remain in full force. Reynolds &c. v. Douglass &c. 12 Peters 503; Wildes &c. v. Savage, 1 Story 35, 6. And whatever benefit might in any case result to the guarantor from the failure to give him notice of non-payment, that benefit may be waived by his acknowledgment of the debt and promise to pay it. Reynolds &c. v. Douglass &c. 12 Peters 505; Louisville Man. Co. v. Welch, 10 How. 476.
9. Where default in paying negotiable paper, rule as to notice to a person who is not a party to it.
Where there is default in paying a bill of exchange or negotiable note, and a person, though not a party to the bill has yet before it became payable, become a guarantor of its payment, there has been some question as to the necessity of notice to him of the dishonour. It is certainly not necessary to pursue the same strictness in order to charge the guarantor as
to charge the drawer or endorser.
ber &c. 8 East 242.
Warrington &c. v. Far
At one time it was said, that if the necessary steps were not taken to obtain payment from the parties liable on the bill, the guarantor would be discharged; and it seemed to be thought, that notice of non-payment should be given him, to guard against his paying in his own wrong when they were discharged. Philips v. Astling &c. 2 Taunt. 206.
That there has been a failure to present a bill to the acceptor and give notice of dishonour to the guarantor is clearly no valid objection on his part, unless he has sustained some damage by the laches. Hitchcock &c. v. Humfrey, 5 Man. & Grang. 560, 44 Eng. Com. Law Rep. 560. The presumption must be that he has sustained none, if the parties for whom he was guarantor were insolvent when the bill or note became payable. Holbrow &c. v. Wilkins, 1 Barn. & Cress. 10; Van Wart v. Woolley &c. 3 Id. 439; 8 Eng. Com. Law Rep. 8; 10 Id. 145; Gibbs v. Cannon, 9 S. & R. 203; Leech v. Hill, 4 Watts 448; Taylor v. McCune, 1 Jones 464; Reynolds v. Douglass &c. 12 Peters 497; Rhett v. Poe, 2 How. 485.
In New York if a party guaranties the payment of a note, his undertaking is not deemed conditional like an endorser; but absolute that the maker shall pay the note when due, or that the guarantor will himself pay it; and proof of demand and notice of non-payment is not necessary. Allen v. Rightmere, 20 Johns. 365; 24 Wend. 35; 1 Hill 260.
And in England it is now established, that where one guaranties and undertakes to pay the amount of a note, provided it be not duly honoured and paid by the maker at maturity, he-not being a party to the note-is not entitled to notice of dishonour. Walton v. Mascall, 13 M. & W. 72.
In Massachusetts, if the circumstances of the parties remain the same, and the guarantor suffers no loss by delay, demand and notice at any time before action brought will be sufficient. Babcock v. Bryant, 12 Pick. 133. But if the circumstances of a drawer or endorser do not remain the same-if he was solvent when the paper arrived at maturity and became insolvent afterwards, the effect of a failure to make demand and give notice, may be very different from what it was in the other case. Oxford Bank v. Haynes, 8 Pick. 423; Talbot v. Gay, 18 Id. 534; Dole v. Young, 24 Id. 250; Sigourney &c. v. Wetherell &c. 6 Metcalf 562. So it is likewise in Ohio. Greene v. Dodge &c. 2 Hammond 431.
But demand and notice may be waived. Bickford v. Gibbs &c. 8 Cush. 154. It is considered in Massachusetts, that in the case of an ordinary endorser who has had no legal notice,
if with full knowledge of his discharge, by reason of not having notice, he makes a new promise to pay the note, he may be charged; and hence, that in the case of a guarantor of a note, a new promise or unequivocal act of recognition of his continued liability, made by the guarantor with full knowledge of the laches of the holder of the note, will continue the guarantor's liability. Sigourney &c. v. Wetherell &c. 6 Metcalf 563.
10. Whether on guaranty action will lie for a person not a party to it.
There is, Chancellor Walworth observes, (26 Wend. 430,) a mercantile guaranty, recognized by the codes of commerce, both of France and Spain, called an aval, by which the payment of a bill of exchange may be guarantied. When the form of the aval is such that it can operate as a general endorsement, it will pass to any subsequent endorsee or holder of the bill, in the same manner as if it was an endorsement on the bill itself; but when it is restricted in its terms, as in case of an endorsement filled up without words of negotiability, it can only be sued by the person to whom it is given. Code of Com. of France, Rod. Transl., B. 1, art. 142; Code of Com. of Spain, in French, by Foucher, p. 165, tit. 1, § 6, art. 477, 478. But to make the guarantor liable in those cases the same protests and notices are necessary as in the case of a real endorser. Crivelli's Dict. Du Droit, tit. Aval. That species of negotiable mercantile guaranty, is not even co-extensive with those countries where the civil law prevails; for in the case of Cooley v. Lawrence, 4 Martins' Rep. 640, the supreme court of Louisiana held that a guaranty of that nature was not known to the laws of that state, but must be governed by the rules of other special contracts. See also, 3 Martin's Rep. N. S. 659; 10 Louis. R. 374. And Mr. Bell, the distinguished commentator on the commercial law of Scotland, where the civil law also prevails, distinctly expresses the opinion that the separate guaranty of a bill or note is not negotiable so as to authorize a subsequent holder to sue on it in his own name. 1 Bell's Comm. on Com. Law of Scotland 376.
Considering the question with reference to the law of England and the law of New York, Chancellor Walworth thinks that a guaranty upon a negotiable note, whereby the guarantor agrees with the holder of the note, that he will be answerable that the note shall be paid to him or to his order, or the bearer hereof, when it becomes due, is probably negotiable by
the transfer of the note upon which it is written; for he deems it in fact a special endorsement of the note, or more properly a negotiable note in itself. 26 Wend. 431. It may be questionable whether this is entirely consistent with Lamourieux v. Hewit, 5 Wend. 307, cited ante, p. 283, or with other authorities cited ante, p. 226.
However that may be, certain it is, that to make a guaranty negotiable as a part of the note to which it relates, it must be on the note itself or at least annexed to it. A separate guaranty is not negotiable so as to authorize the assignee to bring a suit thereon in his own name. McLaren v. Watson's er'ors, 26 Wend. 430. It must, says Cowen, J., end where it began, like a bond or other like chose in action. Wend. 568.
S. C. 19
If there be an agreement that a bill shall be honoured by the drawees, the party with whom that agreement is made may maintain an action thereon and recover the damages which he has sustained by the breach thereof. But the contract is not negotiable. And on it no one can sue in his own name but an original party to the contract, unless it be otherwise provided by statute. Birckhead v. Brown, 5 Hill 646.
ACTION ON A PROMISE TO INDEMNIFY.
1. As to consideration for promise; and legality of act against which indemnity is given.
The particular promise sued on is sometimes regarded as not a collateral but an original one. Nevertheless there must be a consideration for it. Myers v. Morse, 15 Johns. 427. The consideration was sufficient in Frain v. Gold, 5 Pick. 384, and Chapman v. Ross, 12 Leigh 565.
If the act directed or agreed to be done is known at the time to be against law, an express promise to indemnify would be illegal and void. Martyn v. Blithman, Yelv. 197; Bull. N. P. 146; Merryweather v. Nixon, 8 T. R. 186; 1 Caines' Rep. 460; 14 Johns. 381; 17 Johns. 144; Ayer v. Hutchins &c. 4 Mass. 373; Denny v. Lincoln, 5 Id. 385; Churchill v. Perkins &c. Id. 541; 3 Iredell 538. But if it was not known at the time to be unlawful, the promise to indemnify is a good