Mamerow v. National Lead Co.

Me. Presiding Justice Feeeman delivered the opinion of the court. The account for which it is sought to recover in the present case against the plaintiff in error as guarantor was wholly created after the execution of the alleged guaranty. It is claimed that no notice was given to the guarantor here sued, of the acceptance of the guaranty by the Hational * Lead Company. It was, however, executed and delivered, and no notice was necessary under the facts. It is also claimed that no notice of the default of the Berner-Mayer Company in making payment on the account, now said to have been included under the guaranty, was ever given. Plaintiff in error testifies that he first learned of the existence of the debt for which he is now sued in December, 1898, or January, 1899, at least a year after the failure of the Berner-Mayer Company, and about a year and nine months after the execution of the guaranty. Previous to that time he states that he had no knowledge that defendant in error had extended credit for any goods sold after 'the said instrument was executed and delivered. It is first contended, on the part of the plaintiff in error, that the guaranty in question does not apply to nor include purchases thereafter made. With this contention we are unable to agree. The preamble of the instrument states that the National Lead Company “has refused to permit the indebtedness of said The Berner-Mayer Company to increase until the said present indebtedness is amply secured,” and that the parties to the guaranty “desire that the said National Lead Company shall continue to sell goods to the said The Berner-Mayer Company, and have requested it so to do,” in consideration of which, among other things, the guaranty is made of all debts, “ of whatever nature or character, now due, or which may hereafter become due, from said The Berner-Mayer Company to the said National Lead Company.” It is true that there is room for argument that this phraseology shows the guaranty was intended to and does apply only to existing and not to future indebtedness. All the indebtedness then existing has, it appears, been paid. But, looking at the instrument as a whole, it is certainly open to the construction that it was intended to cover debts not only due, but which might become due thereafter in pursuance of the expressed wish of the guarantors that the Lead Company should continue to sell goods to the Berner-Mayer Company. We can not agree with counsel for plaintiff in error “ that the recitals expressly limit the guaranty c to the said present indebtedness.’ ” There is a recital which states the guarantors have agreed to furnish “security for all accounts due and to become due from said The Berner-Mayer Company ” to the Lead Company. There is no limitation here of the security to accounts already existing; and where the parties themselves have made no such limitation, we know of no canon of construction that would justify the court in making it for them. While it is true that the liability of a surety is not to be extended by implication beyond the terms of the contract (Shreffler v. Nadelh offer, 133 Ill. 536; Tolman Co. v. Rice, 164 Ill. 255), it is also true that it is not to be limited by implication beyond its terms. In Smith v. Molleson, 148 N. Y. 241, it is said: “ Like all other contracts, the undertaking of a surety must be construed fairly and reasonably, and according to the intention of the parties. If the party secured has advanced his money on the faith of the interpretation most favorable to his rights, that will ordinarily prevail, if the instrument is open reasonably to such interpretation.” In Lawrence v. McCalmont, 2 How. 426, 450, it is said by Justice Story that letters of guaranty “ ought to receive a liberal interpretation; ” that they are commercial instruments, generally drawn by merchants in brief language, sometimes inartificial and often loose in their structure and form; ” and “ if the language used be ambiguous and admits of two fair interpretations, and the guarantee has advanced his money upon the faith of the interpretation most favorable to his rights, that interpretation will prevail in his favor; for it does not lie in the mouth of the guarantor to say that he may, without peril, scatter ambiguous words, by which the other party is misled to his injury.” We regard the guaranty as fairly subject to the interpretation that it was intended to cover future sales made in accordance with the request, as therein stated, of the guarantors. It is further contended that plaintiff in error is not liable under the .guaranty because notice of the default of the Berner-Mayer Company should have been given within a reasonable, time after such default. It is claimed this was not done, more than a year having expired thereafter, and after the failure of the Berner-Mayer Company. In Taussig v. Reid, 145 Ill. 488, 491, the court says: “ Story on Contracts, Ybl. 2, Sec. 1133, in the discussion of the question, says: ‘Whenever the undertaking by a guarantor is absolute, notice is necessary; but where it is collateral merely, notice must be given within a reasonable time, otherwise the guarantor will be discharged, unless he is not prejudiced by the want of notice.’ In Baylies on Sureties and Guarantors, 202, the author says : ‘ It may be laid down as a general rule, that in case of an absolute guaranty the guarantor is not entitled to demand or notice of non-performance; but where the undertaking is collateral, and not absolute, notice must be given within a reasonable time, unless circumstances exist which will excuse the want of notice. If' the principal is insolvent when the debt becomes due or default is made, so that no benefit could be derived by the guarantor from the receipt of notice, no notice is required.’ * * * The principle upon which this doctrine rests, is that the contract is absolute, and not conditional or collateral. But does the contract upon which this action is brought rest upon the same principle, or is it to be governed by a different rule?” Answering the question, the court holds that after the guaranty was executed, if appellee chose not to sell any goods to the party for whom the guaranty was made, “ it could not be claimed that an absolute guaranty existed, because there was no debt upon which it could operate. How can a guaranty be absolute where it is uncertain whether a debt will ever exist to which it could apply ? ” Applying the principle so stated to the case at bar, it is clear, we think, that the guaranty can not be deemed absolute, but conditional or collateral, requiring notice to be “given within a reasonable time, otherwise the guarantor will be discharged, unless he is not prejudiced by the want of notice.” Story on Contracts, Vol. 2, Sec. 1133, quoted in Taussig v. Reid, supra. Was the guarantor in the case before us so prejudiced ? If he was it does not, we think, so appear. The trial court held evidence upon that subject inadmissible under the pleadings. In'this there was ho error. The only plea, as above stated, was the general issue. Under this plea, it is true, any matter which shows the plaintiff never had a cause, of action, and most matters showing no subsisting cause of action at the commencement of the suit, may be given in evidence. But the introduction of evidence to show that the plaintiff in error was prejudiced by the want of notice is something more than mere matter of defense. It is affirmative proof which can only be introduced when such defense has been specially pleaded, and the burden of maintaining such pleas is on the party setting up such matter of defense. It is urged that though the guaranty be regarded as covering future credits, it was nevertheless necessary for the guarantee to exercise due diligence in the prosecution of its claim against the principal debtor, and this, it is urged, was not done. The liability of a guarantor under a collateral or conditional guaranty is to pay if the principal debtor fails to do so, in the present case “ upon demand.” “ The creditors are not, indeed, bound to institute any legal proceedings against the debtor, but they are required to use reasonable diligence to make demand and to give notice of the non-payment.” Where the undertaking “ is collateral merely, notice must be given within a reasonable time, otherwise the guarantor will be discharged, unless he is not prejudiced by the want of notice.” “ If the writer states that he will guarantee the payment of the goods to be afterward sold to another, or that he will see the goods paid for, or that he will be security for their payment, the promise is only collateral.” Taussig v. Reid, supra, p. 493, and cases there cited. In the language of the guaranty now under consideration, there is warrant for the construction that the guarantors intended to and did bind themselves to pay any and all obligations of whatever character were or might become due the guarantee from the BernerMayer Company “ upon demand,” Without reference to when the demand should be made. The guaranty is not to pay at maturity of such indebtedness, but “ upon demand.” As to indebtedness existing at the time of the guaranty, it was absolute. “ A contract guaranteeing the payment of a note or debt, is an absolute contract.” Dillman v. Nadelhoffer, 160 Ill. 121, 125. But it was conditional as to future indebtedness, as above stated. It is claimed by defendant in error that the guarantor, as a stockholder and director of the Berner-Mayer Company, must be deemed to have had notice of the failure of said company to pay its indebtedness to the guarantee, and that the latter was therefore relieved from the necessity of giving such notice. In view, however, of the failure of plaintiff in error to show under appropriate plea that he has been in any way prejudiced by the alleged want of notice, we do not deem it necessary to consider at length whether, had he made such defense, it could have availed him in the present case. Under the pleadings, we find no error in the refusal of the trial court to admit the evidence offered by plaintiff in error for the purpose of endeavoring to show a want of notice, and that the insolvent corporation was in possession of goods until the date of its assignment sufficient to have satisfied the claim of the guarantee; and other evidence not admissible under the general issue. The judgment of the Superior Court must be affirmed.