Beebe v. Dudley

Eastman, J. There is some confusion in the books as to the precise nature and extent of a contract entered into by a guarantor. The same undertaking, embraced in almost the same terms, has, by some jurisdictions, been declared to be absolute, while in others it is held to be collateral merely. And this by tribunals of high standing. Butler v. Wright v 20 Johns. 367; Oxford Bank v. Haynes, 8 Pick. 423; Sage v. Wilcox, 6 Ct. Rep. 81; Curtis v. Brown, 2 Barb. Sup. Ct. Rep. 51. The difficulty seems to be, not so much in deciding whát the law is, when once the extent of the contract entered into is defined, as in settling what the contract is, whether collateral or absolute. [253] In the ease of promissory notes, the liability of a guarantor is ordinarily greater than that of an indorser, and less than that of a surety. His position is between that of an indorser and surety, and his liabilities vary from both. And in a suit against a guarantor, his contract must be specially set forth in the declaration. A guarantor warrants the solvency of his principal and the payment of the debt, fn case of his default; while an indorser is answerable only upon a strict compliance with the law by the holder, whether the principal is solvent or not. A surety is liable without notice, while a guarantor, in many cases, is discharged, unless notice be given him. Where the undertaking to pay is absolute, notice to the guarantor is unnecessary. His liability is fixed without demand or notice. Breed v. Hillhouse, 7 Ct. Rep. 523; Union Bank of Louisiana v. Coster, 1 Sandf. Sup. Ct. Rep. 563; Matthews v. Crisman, 12 Smeade & Mar. 595; Butler v. Wright, 20 Johns. 367; 3 Kent’s Com. 124; Cooper v. Page, 11 Shepl. 73; Carson v. Hill, 1 McMullan’s (S. C.) Rep. 76. Where the undertaking is collateral and not absolute, notice must be given within a reasonable time, or it must appear that the situation and circumstances of the parties are such that no injury has resulted to the guarantor for the want of notice. The object of notice is to let the guarantor know that he js relied, upon for payment; and it should be given to him whenever it would be of any advantage to him to have it, that he may, if possible, secure himself against liability. Oxford Bank v. Haynes, 8 Pick. 423; Cannon v. Gibbs, 9 Serg. & Rawle 202; Norton v. Eastman, 4 Greenl. 521; Babcock v. Bryant, 12 Pick. 133; Folmar v. Hole, 9 Barr 83; Cremer v. Higginson, 1 Mason 323; Howe v. Nichols, 9 Shepl. 175; Mussey v. Rayner, 22 Pick. 223. Where the party for whom the undertaking is made becomes insolvent, so that no advantage can arise to the guarantor by notice being given, notice is unnecessary. It must [254] appear that the neglect to give notice has produced some loss or prejudice to the guarantor, otherwise notice and demand before the action is brought is sufficient. ' Lord Ellen-borough, in 8 East 242, says that guarantors insure the solvency of the principals, and, therefore, if the latter become bankrupt and notoriously insolvent, it is the same thing as if they were dead, and it is nugatory to go through the ceremony of making a demand upon them. Salsbury v. Hale, 12 Pick. 416; Warrington v. Furber, 8 East 242; Bank v. Haynes, 8 Pick. 423; Phillips v. Astling, 2 Taun. 206; 3 Kent’s Com. 123; Skofield v. Haley, 9 Shepl. 164; Rhett v. Poe, 2 Howard’s U. S. Rep. 457; Peck v. Barney, 13 Vt. Rep. 43. Was the undertaking of this defendant absolute or collateral ? It would seem to be plain by the latter clause of the contract, “when he may call for them,” that the engagement related to goods that should be thereafter delivered; that the undertaking was to pay for future sales, and not for the past; and that, therefore, at the time the contract was made, nothing had been done upon which an absolute promise could operate, — nothing upon which an action, could then be supported. Again, no time is fixed in which the goods are to be delivered, which is usually, an essential element to an absolute contract, and'the designation of Charles P. Dudley as of Lowell, would at least indicate that he was not the mere agent of the defendant. These matters, coupled with the use of the term “ guarantee,” would seem to show, that judging from the instrument alone, the undertaking was only collateral. But when the facts disclosed by the auditor are also considered; that the goods were procured in different parcels; that the bills were made out to Charles P. Dudley, and that the charges upon the plaintiffs’ books were also made to him, it would seem clear that the parties, or at least the plaintiffs,, understood Charles P. Dudley to be the principal in the transaction, that the origi [255] nal credit was given to him, and that the agreement of the defendant was only collateral. In Babcock v. Bryant, 12 Pick. 133, the undertaking was u to be responsible and pay to the plaintiff for whatever goods have been or maybe delivered to C. within one year.” The plaintiff delivered goods to C. within the year, and took his negotiable note for the price. It was held that the undertaking of the defendant was collateral only, and that his liability as guarantor was not discharged by the plaintiff’s taking C.’s note. We think the undertaking, in this case, was collateral, and, consequently, reasonable notice of the amount furnished and of claim upon Moses Dudley therefor, should, under ordinary circumstances, have been .given to him, in order to perfect his liability. But notwithstanding the undertaking was collateral, and notwithstanding notice was not given, at least till the day on which the suit was commenced, yet, inasmuch as Charles P. Dudley failed in January, 1848, less than three months after the date of the guarantee, and before one half of the amount for which the guarantee was given was obtained, the plaintiffs are relieved from showing any special notice or any particular and special demand. Before the failure notice was unnecessary, and after it had taken place it could be of no service to the defendant. He has not, therefore, been prejudiced by want of notice, and notice and request, at any time before the commencement of the suit, would be sufficient. Whether any notice of the. plaintiffs’ claim was given to the defendant before the commencement of the suit, does not distinctly appear. The auditor finds that no notice was given “ until the commencement of the suit,” and counsel differ as to the construction that shall be put upon this finding. The plaintiffs state “that notice was given and demand made, and a refusal by the defendant on the day of the commencement of the suit, before the writ was served. But [256] this is not acceded to by the defendant, and the report mast, therefore, be re-committed to ascertain this fact. • Report re-committed.