J. W. Watkins Med. Co. v. Lovelady

SAYRE, J. — When the parties formulated the contract exhibited to counts 1 and 2 of the complaint, most likely they had not in mind the distinction between suretyship and guaranty which the courts generally have observed. This appears from the fact that, while in the body of the contract sued upon defendant Love-lady and another undertake to “guarantee” the performance of his agrément by Davidson, the principal obligor, at the bottom of the contract, which evidently had been prepared by the obligee medical company, and was intended for signature by, and was in fact signed by, those parties only who.would answer for Davidson’s [418] default, was this direction, “Sureties sign here, business men preferred;” and under the place reserved for the signatures of the obligors was this statement, “The above-mentioned sureties will be furnished, upon request., at any time, a statement of the amount due the company from the party of the second part,” and this notation: “Signed by the above sureties in our presence. Witness sign here.” The main contract had been executed by and between the medical company and Davidson. Both agréments were shown by one paper, as we infer. Each depended upon the other. They nevertheless, for the purposes of this suit, which hinges upon .the distinction adverted to in the beginning, must be taken and held for separate contracts, as the difference in the contracting parties and in the obligations assumed sufficiently indicate. And this suit, so far at least as concerns the appellee, Lovelady, in Avlio.se favor the jugdment on demurrer Avas rendered in the court below, is based necessarily upon that agreement into which he entered, and by which he became collaterally liable, and this is true though for the full meaning of the contract in suit recourse must be had to the terms of the primary agreement between Davidson and the medical company. The single term of obligation in the collateral agreement here is “guarantee,” and this term is Avithout modification or limitation in the body of the contract. Appellant attaches importance to the fact that appellee guaranteed payment “at the time and place and in the manner in said agreement provided,” referring to the primary contract. But this language is without significance in the present contention, for, Avhether the contract binding upon appellee Avas one of guaranty or suretyship, in either event appellee became bound for Davidson’s performance of his undertaking “at the time and place and in the manner in said agree [419] ment provided”; the only question being whether that responsibility was absolute or conditional. Contracts of suretyship and of guaranty have much in common — in both the undertaking is to answer for the debt, default, or miscarriage of another. The difference is that a surety insures the debt, is bound with his principal as an original promisor, is a debtor from the beginning; a guarantor answers for the debtor’s solvency, must malee good the consequences of his principal’s failure to pay or perform, is bound only in case his principal is unable to pay or perform. To this effect is Saint v. Wheeler Mfg. Co., 95 Ala. 362, 10 South. 539, 36 Am. St. Rep. 210; 20 Cyc. 1400. From this difference, one consequence of importance in respect of the procedure to be followed in the enforcement of liability flows: “A principal and a surety, being equally bound, may 'be joined in the same suit; but a guarantor, being bound by a separate contract, must be sued separately.”—14 Am. & Eng. Encyc. (2d Ed.) 1130. This case requires that the obligation of Lovelady be defined as either that of a surety or a guarantor. The result in this case is to be determined, as matter of law, from the language of the contract, though, as matter of fact, the parties may not have considered the difference, for there is nothing else to disclose the intention of the parties. They must be held to the legal intendment of the language they employed. As we have seen, Lovelady guaranteed Davidson’s undertaking in' the only language of obligation he employed, and this he did in a separate contract. The separation of the contracts indexed the intention of the parties to make an engagement of guaranty, as well as the term used. These are the principal factors of interpretation, since they arise out of the body and substance of the contract. They must therefore have a controlling influence in de [420] termining the intention of the parties, notwithstanding the contract was incorrectly labeled as a contract of suretyship in those incidental directions and notations to which we have referred. The trial court so held, and its judgment must be affirmed. Affirmed. Anderson, C. J., and McClellan and Somerville, JJ., concur.