People ex rel. Zeeland Brick Co. v. Fidelity & Deposit Co.

Brooke, J. (after stating the facts). On July 23, 1915, this court handed down a decision in the case of the People, for use of Contracting Co., v. Bowen, 187 Mich. 257 (153 N. W. 672), in which it was held that a paid surety could not avoid liability upon its bond by showing that credit had been emended, to the principal in the bond, without the knowledge of the surety, in the absence of a showing that such extension of time operated to the injury of the surety. The material facts in the case at bar are identical with those in the case of the People v. Bowen, supra. It is contended that at the time of the payment by the defendant surety company to the use plaintiff of the sum of $1,373.12 and the giving by the Zeeland Brick Company to the surety company [745] of a receipt in full, there was in fact due from the surety company to the Zeeland Brick Company the full sum of $2,444.95, and that said sum was a liquidated claim. It is argued, therefore, that the payment by the surety company to the brick company of a sum less than the amount actually due (even though a receipt in full was exacted upon payment thereof), does not discharge the surety company from its obligation to now pay the balance of the claim. This position is met by the appellant by the assertion that at the time the claim of the Zeeland Brick Company was presented to the surety company it was the belief of the surety company and its bona fide contention that if credit were extended to the principal without the consent or knowledge of the surety, the surety was relieved of its obligation under the bond pro tanto. Under the law in this State there is no doubt that a payment of less than the full amount of a past-due liquidated and undisputed debt, although accepted and receipted for as in full satisfaction, is only to be treated as a partial payment, and does not estop the creditor from suing for and recovering the balance. Leeson v. Anderson, 99 Mich. 247, 248 (58 N. W. 72, 41 Am. St. Rep. 597); Tanner v. Merrill, 108 Mich. 58, 60 (65 N. W. 664, 31 L. R. A. 171, 62 Am. St. Rep. 687); Cunningham v. Irwin, 182 Mich. 629 (148 N. W. 786). The rule, however, is subject to numerous exceptions among them, as stated in Cunningham v. Irwin, supra, the following: “When the claim is unadjusted or unliquidated; when payment is made before it is due; when a new security is given; when there is a composition with creditors; and where part payment in full settlement is made by a third party who is a stranger to the claim and under no legal obligations in relation to it. While this court, in accepting the general rule, has had little occasion to deal with these exceptions, they are well settled by almost universal weight of authority.” [746] The rule being a technical one and tending to defeat the express intention of the parties, it cannot be extended to embrace cases not within its strict letter. Tanner v. Merrill, supra. The single question presented by the undisputed facts in this case is whether at the time the surety company paid to the brick company the sum of $1,-373.12, and received in exchange therefor its receipt in full, there was then a “past-due, liquidated, and undisputed debt” due from the surety company to the brick company in the amount of $2,444.95. We are of opinion that it cannot be said that the claim as filed with the surety company by the brick company, amounting to $2,444.95, was a liquidated claim within the meaning of the rule invoked. The first letter written by the defendant surety company to the use plaintiff clearly indicated this fact. It is there said: “Please understand that until we have made this investigation we -cannot admit liability and this letter is written with a full reservation of all our rights.” In a subsequent letter of June 23d, the position of the surety company is made plain to the use plaintiff, and the contention is set up- by the surety company that the extension of time to the principal worked a discharge of the surety .to the extent of the amount of the note or notes taken. Not only this, but the use plaintiff was advised of the authority in this State upon which said claim was predicated. The surety being abundantly responsible, it is apparent to us that the use plaintiff became convinced of the soundness of the position taken by the surety company, otherwise it would scarcely have accepted $1,373.12 for an indebtedness of $2,444.95. Nor.can it he said, considering the state of the law at that time, that the claim made by the surety company was without warrant. It is true that this court four years later decided that the position then taken by it was untenable, but at the [747] time the compromise was made neither party knew that such a holding would be made. At the moment of the compromise the use plaintiff had two courses open to it: It could sue upon the bond and decide the question of the surety company’s liability for the amount of the note, or it could immediately accept the sum proffered, admitting the propriety of the surety company’s contention, and end the controversy. It chose the latter course. The case of Simons v. Supreme Council, A. L. H., 178 N. Y. 263 (70 N. E. 776), is upon the facts very similar to the case at bar. The court there held the claim to have been unliquidated, and reversed the judgment of the lower court in favor of the plaintiff. The judgment will be reversed; and, inasmuch as there is no dispute upon the facts, there will be no new trial. Kuhn, C. J., and Stone, Ostrander, Bird, Moore, Steere, and Fellows, JJ., concurred.