Spitz v. Morse

Cornish, J. Assumpsit upon a written guaranty dated October 22, 1901, whereby the defendant’s intestate, Donald G. Ferguson, guaranteed the prompt payment, at maturity, of all sums of money and debts for merchandise to be subsequently sold by Spitz Bros, and Mork, to his son-in-law V. C. Bowman, not exceeding seven hundred and fifty dollars, "whether such debts be on book account, by note, draft or otherwise and also any and all renewals of such debt.” The guaranty was to continue until written notice withdrawing the same was given by the guarantor, and was not to be terminated by the death of the guarantor without such notice. Merchandise was subsequently sold by Spitz Bros, and Mork to said Bowman on the strength of said guaranty, various payments on account were made and the balance due on January 30, 1902 was $968.92. Shortly after this, Bowman sent to Spitz Bros. & [450] Mork, three notes, aggregating the balance due, signed by himself and his wife Lela E. Bowman, which were entered by Spitz Bros, and Mork on their books to the credit of the husband on February 13, 1902, and endorsed and cashed in the bank in ihe ordinary course of business. Spitz Bros, and Mork made an assignment to Spitz Bros. & Co., the plaintiffs, on March 31, 1902, and for the sake of convenience, either firm will be designated as plaintiffs in this opinion. Bowman paid one note for $254.60 at maturity but failed to pay the other two, amounting to $714.32, and these the plaintiffs as endorsers were obliged to take up from the bank and pay. This suit is the result. Ferguson died'December 24, 1901, without withdrawing the guaranty. The defense interposed is that the acceptance by the plaintiffs of the notes signed by Mrs. Bowman, was a discharge of the debt and therefore of the guaranty. It is a well settled rule of law in this State and Massachusetts that a negotiable promissory note, given for a simple contract debt, is prima facie to be deemed a payment or satisfaction of such debt as between the parties thereto, which simply means, that without further evidence of intent than the giving and receiving of such note, it is construed to be payment. Equally well settled is the rule that this presumption of payment, which is a presumption of fact, may be rebutted by evidence showing a contrary intention. These two rules are usually stated together. Paine v. Dwinel, 53 Maine, 52; Strang v. Hirst, 61 Maine, 9; Crosby v. Redman, 70 Maine, 56; Bunker v. Barron, 79 Maine, 62; Thatcher v. Dinsmore, 5 Mass. 299; Melledge v. Boston Iron Co., 5 Cush. 158; Davis v. Parsons, 157 Mass. 584. Were this simply a question between Bowman and the plaintiffs, in the absence of any guaranty on the part of Ferguson, there might be some' ground for claiming that the acceptance of the notes discharged the account. But the existence of the guaranty is of sufficient evidential strength in itself to rebut the presumption of payment, for the plaintiffs cannot be presumed to have intended action so prejudicial to their interests. "The fact that such presumption would deprive the party who takes the note of a substantial benefit [451] has a strong tendency to show that it was not so intended.” Curtis v. Hubbard, 9 Met. 322. Where a bond was given to secure a balance of account, and a promissory note was afterwards given for the balance of the account, it was held not to be an extinguishment. Butts v. Dean, 2 Met. 76. "Whenever it appears that the creditor had other and better security than such note for the payment of his debt, it will not be presumed that he intended to abandon his security and rely upon his note.” Kidder v. Knox, 48 Maine, 551. To the same effect are Mehan v. Thompson, 71 Maine, 492; Titcomb v. McAllister, 81 Maine, 399. The other evidence in the case still further rebuts the presumption of intended payment. The notes were not sought by the plaintiffs but were voluntarily forwarded by Bowman without any request that the guaranty should be surrendered or discharged. Upon their receipt the plaintiffs at once wrote to Mr. Morse, who was then acting as attorney for the Bowmans, as well as for the Ferguson estate, of which he was subsequently appointed administrator, for information as to the financial condition of Mrs. Bowman and after stating that a recent disastrous fire had compelled them to collect all their accounts, they added "while we are willing to grant Mr. Bowman the extension of time he requests on these notes, we feel we should be secured.” Mr. Morse replied that Mrs. Bowman had a third interest in the Ferguson estate, which estate was estimated at six or seven thousand dollars, with liabilities against it of two notes amounting to $1100, "and a guarantee which I understand he signed with Mr. Bowman for your firm.” This was after the notes had been forwarded by Bowman and shows conclusively that the guaranty was still recognized by his attorney and presumably by himself, as an existing liability against the estate, while the plaintiffs testify emphatically that they did not receive the notes in discharge of the guaranty. Counsel for defendant contends that the presumption of payment holds because the exchange was advantageous to the plaintiffs, as the notes signed by Mrs. Bowman covered the full amount of the indebtedness $968.92, while the guaranty was limited to $750. The parties themselves did not so regard it nor could the plaintiffs be expected to surrender a certainty of $750 for an uncer [452] tainty of $968.92. The purpose of Bowman in sending the notes signed by his wife was not to effect a discharge of the guaranty but an extension of credit, and before granting the extension, the plaintiffs naturally inquired as to the financial condition of Mrs. Bowman, who became surety for the .excess of $218.92 after the guaranty had been complied with. The information they received made them willing to accept her signature for that amount which would be otherwise unsecured, but subsequent events proved that their confidence even to this extent was misplaced. Moreover an extended correspondence was carried on between these parties and their attorneys during the more than two years between the giving of the-notes in February 1902 and the bringing of this suit on April 9, 1904, and there was neither claim nor intimation on the part of the defendant of the legal position taken now. The court can usually adopt with safety the interpretation of a transaction fixed at the time by the parties themselves. The taking of the notes did not therefore discharge the debt. But even if it had, it did not discharge the guaranty. Parham Sewing Machine Co. v. Brock, 113 Mass. 194. If the notes could be treated as payment as between debtor and creditor, the guarantor would still be held, for he bound, himself in express terms to pay all notes given by Bowman to the plaintiffs, up to the amount stated. The notes in suit Were so given and the fact that they were also signed by Lela E. Bowman does not remove them from the scope of the guaranty. The defendant is asked in this case simply to fulfil his promise and no legal excuse has been presented for his failure to do so. In accordance with the terms of the agreed statement, the entry must be, Judgment for plaintiffs for ‡718.11, with interest from May 11, 1902, the date of demand.