Montgomery v. Kellogg & Sandusky

Simrall, J.: Suit was brought by Kellogg & Sandusky, commercial partners, on the following writing, to-wit: Prairie Place, 1st June, 1866. Messrs. Kellogg & Sandusky: Gentlemen — Mr. H. O. Goody proposes to purchase some supplies of you, payable out of the first proceeds of his crop. In case you should let him have them, I will see the amount of his account with you paid, as he may agree with you, to the amount of four hundred dollars, or less, if he should purchase less. Yours, etc., Alex. Montgomery. The several questions made in this court arise out of the rulings of the circuit court, in overruling the defendant’s demurrer to the declaration, in the granting and refusing of instructions to the jury, and in denying the motion for a new trial. 1st. It is maintained by the plaintiff in error, that he had no notice or no sufficient notice of the acceptance of the letter of credit, or guaranty by Kellogg & Sandusky. — 492 — 2d. No sufficient and timely notice of the default made by H. C. Coody in the payment for the goods taken up by him with Kellogg & Sandusky, and the non-averment or insufficient statement of these facts in the declaration, make it obnoxious to demurrer. The allegation in the declaration is, “ of all which, said premises, the defendant had due notice, to-wit: on,” etc. In Willis v. Staten, 5 S. & M., 353, the averment was “ of all which, the said defendant afterwards had due notice.” The suit was.upon a letter of credit, for a liability to be incurred on its faith. It was held that the allegation of notice was sufficient. The important inquiries are, what, if any notice of the acceptance of the guaranty, was the guarantor entitled to ? and what notice of the default made by Coody, in paying for the goods ? And was the law of the case properly laid before the jury in the instructions of the court? In Thrasher v. Ely, 2 S. & M., 147, the doctrine is recognized that if the guaranty is of a specific existing demand, as a promissory note or other evidence of debt, then no notice of default in payment on the part of the principal debtor, is required. In such case, the guarantor knows precisely what he undertakes and the measure of his responsibility. The principle seems to be, that if the guaranty is absolute in its terms, definite as to amount and extent, notice is dispensed with. But if the guaranty be for future advances, credits, or payments, it is the duty of the party making the advances, to give notice to the guarantor of his acceptance, and of his consent to make the advances on the faith of the guaranty. This is very clearly settled, as the rule in the supreme court of the United States. Burrell v. Clarke, 7 Crunch. 69; Edmundson v. Drake, 5 Peter’s Rep., 629; Douglas v. Reynolds, 7 Peters 113; Lee v. Dick, 10 Peters, 482; Adams v. Jones, 12 Peters, 207; Reynolds v. Douglas, 12 Peters, 497. If the engagement be to make advances on future contingencies, which may or may not happen, in addition to the general notice, of acceptance of the guaranty, and a purpose — 493 — to act on its faith and credit; it may be necessary also, to advise the guarantor of the occurrence of the contingencies and the advances made, for otherwise, he might not know whether any use were made of the guaranty, and might, because thereof, loose opportunity to obtain indemnity from the principal debtor. Crumer v. Higginson, 1 Mason, 323. In Douglas v. Reynolds, already cited, it was declared in reference to a continuing guaranty, for acceptances, endorsements and credits, that it was but reasonable when the whole transactions were ended, notice of the amount claimed from the guarantor should be given within a reasonable time after-wards. The purpose of the notice is that the guarantor may at once set about securing himself against loss. When the letter of credit, therefore, is continuing, and indefinite as to amount, the reason is stronger for a prompt notice of a default in the principal debtor and its amount. The principles which have been stated and illustrated in the adjudications of the supreme court of the United States have been accepted here and recognized. 4 How., 231; 5 S. & M., 347. The character of Montgomery’s letter of credit, or guaranty, entitled him to notice that it was accepted by the plaintiffs, and that they would act under it; andjalso, after the transaction was closed, and the debt became due from Coody, that he had failed to make payment. And this last information must be communicated within a reasonable time after default made, unless, indeed, there was some reason potent enough to relieve of the duty of imparting notice. For it should be borne in mind that the object of the information is to enable the guarantor to protect and save himself from loss. If notice, by no possibility, could be of service to him, as where the debtor was absolutely and hopelessly insolvent, then it seems it may be dispensed with. It must be observed also, that the same promptness is not exacted in giving notice as the Law Merchant demands of the dishonor of commercial paper. The latter is of strict right; and whilst letters of credit, or of guaranty, are of commercial origin and — 494 — of consequence have drawn to their construction and import of the principles of commercial law; they stand as to tliis matter on a broader ground than negotiable paper. Generally, if the debtor was insolvent when the debt became due, and has ever since so continued, no notice to the guarantor is necessary — not even a demand of payment of the debtor when the debt became due. Warrington v. Furbor, 8 East R., 242; Van Wirt v. Wilkins, 3 Barn. & Cress., 439-447. We will refer now to the testimony, and see what evidence went to the jury, as to notice of acceptance and notice of default. Robert Ooody deposed, that H. C. Goody applied to Kellogg & Sandusky to furnish him with supplies; they refused, unless the defendant, Montgomery, would guarantee payment. Mr. Kellogg, of the firm, wrote the letter of guaranty, which they required Montgomery to sign before they would open the account. The paper was handed to Judge Montgomery, who signed it. It was then taken to Kellogg c% Sandusky. About the time of opening the account, and after Montgomery had knowledge of the credit, he asked witness if goods were got on the faith of this paper ; witness answered affirmatively. At Montgomery’s house, about the time they were fairly picking cotton, and before disposing of any cotton, Montgomery said he was in receipt of a letter, stating that Coody’s account was due and unpaid, and asking what arrangement was made for payment. Montgomery had notice within ten days after the account was opened. H. 0. Goody says that Kellogg & Sandusky agreed to supply him goods on the guaranty of Montgomery. Demand of payment of the account was made on Coody, shortly after it was due, and a letter written by the book-keeper to Montgomery, notifying him of non-payment. The testimony on behalf of the defendant does not agree in several particulars — as to date of notice of default particularly. The testimony was quite enough to justify the jury in the conclusion that Montgomery received notice that the goods would be advanced on his guaranty. The notice, whether of acceptance or of default in payment, need not be — 495 — given in any precise form, nor in writing, but may be inferred from facts and circumstances in the evidence. Reynolds v. Douglas, 12 Peters, 496; Oaks v. Weller, 16 Vt., 70. What is a reasonable time for the performance of an act, is by the authorities rather referred to the court as a question of law, than of fact to the jury. In the administration of justice, there are many cases where certain general propositions can be laid down, but when they come to be applied, they encounter a variety of incidents unforeseen, and not before contemplated, and in reference to which no 'general rule could beforehand be prescribed; the court must exert its best discretion and judgment in determining what the law must be deemed to be as applicable thereto. Such is the .inevitable result of all things depending on human foresight. Precedents often cannot, on account of the endless variety and complication of transactions, dissimilar often to any that have occurred in any previous case, be referred to as aiding in the formation of a judgment, on a proposition like this. Therefore, the great propriety of the suggestion of Judge Story in the case of Wilds v. Savage, 1 Story Rep., 22: That it is difficult, and perhaps dangerous, to attempt to lay down any general rule as to what is reasonable notice, leaving each case to stand on its own distinguishing and special features. In the cases cited from 7 Peters, 113, and 10 Peters, 482, it was said the guarantor must have notice of the amount for which he is held, as well as default of the principal debtor in a reasonable time. But it is not attempted to define what would be reasonable time. In Howe v. Nichols, 22 Maine Rep., 178, the court expressed an appreciation of the intrinsic difficulty, if not impossibility of laying down any precise rule. As respects negotiable paper, the custom of merchants and the decisions of the courts have given precision and definiteness as to what shall constitute reasonable notice to drawers and endorsers. But as we have already said the same strictness does not apply in favor of the guarantor. — 496 — Looking to the special facts in this case, we are of opinion that Montgomery had notice, within reasonable time, of the non-payment by the principal debtor. For the fundamental principle as the basis of the rules, on this subject, is, did the want of notice or delay to give it, operate injuriously to the guarantor. If so, he is to be released according to the circumstances pro tanto or in toto. 1 Story Rep., 22; 22 Maine, 179. Testimony was before the jury, to the effect, that whilst Goody was gathering his cotton, and before any of it was sold, Montgomery had knowledge that the account had not been paid, and that he was looked to for payment. Referring to the letter of credit, the first sentence reads thus : “Mr. H. G. Goody proposes to purchase some supplies, payable out of the first proceeds of his crop?' The cotton was the fund, out of which payment was to be made. It was because of Montgomery’s confidence in this resource, that he incurred the liability. Having notice, before any of the cotton was sold, it was in time to enable him, if he could, to obtain indemnity, or see to the application of the cotton to the debt. It is not shown that he has lost anything, or any opportunity to save himself from loss, by not receiving earlier advice. The letter of Montgomery, in evidence to the jury, does not claim exemption from liability, on the want of notice. But rather that the goods were furnished R. Goody, for whom he was not surety, and a claim that H. 0. Goody must be first sued, as defendant was only surety. The instructions to the jury accord with these views; perhaps the third instruction granted on the prayer of the defendant, is broader than would be warranted by the authorities, and was certainly as favorable to the defendant as he could ask, but as to this, we are called upon to give no opinion. • It is complained that the court erred in refusing a prayer in these words: “ If the jury believe from the evidence, that the defendant, has incurred any liability, it is as surety for H. 0. Goody, the principal, and that said defendant, gave written notice to the creditors, plaintiffs in this action, to commence and prosecute legal proceedings against said — 497 — principal debtor, and the plaintiffs refused to do so, to the next term to be held thirty days after giving notice, and to prosecute the same to effect, the defendant is discharged from liability, etc. The principle embraced in this prayer, has no application or fitness to the facts of the case, and therefore the court was right in withholding it from the jury. On the acceptance of the guaranty, and notice of non-payment by Goody, the liability of Montgomery became fixed and absolute, with an immediate right of action against him. An original liability. The decisions of the circuit court, on the several points raised in that court, being in accord with these views, we affirm the judgment.