Cremer v. Higginson

STORY, Circuit Justice (after stating the facts). There are several questions of law in this case, upon which it is now my duty to instruct • you. The first point is, what is the true construction of tlie letters of the defendants to the plaintiffs, of the 15th of December, 1808, which is the main hinge of the whole of this controversy? I am clearly of opinion, that, in point of law, it is not an absolute undertaking for the payment, in the first instance, of all advances made to Stephen and Henry Higginson, not exceeding 50,000 dollars. It is in fact an original collateral undertalcing to guaranty the payment of such advances; and consequently the debt is properly the debt of Stephen and Henry Higginson, and the defendants are liable only upon their default, and to the extent of the guaranty. It has been asserted, that the guaranty is conditional, having reference to the then state of our commerce; and that the embargo being removed, the implied condition, upon which the advances were to be made. viz. the impracticability of Stephen and Henry Higginson's remitting funds to Europe, was completely done away before' any advances were made; and that the defendants are, therefore, absolved rrom all responsibility. There is nothing in this argument. The letter contains no such implied condition; and it would be extremely dangerous for courts of law to indulge themselves in searching after such hidden and conjectural meanings in such an instrument. It is sufficient for us. that the language of the letter speaks not in such ambiguous or hypothetical terms. As little ground is there for the argument, that the plaintiffs were, by the terms of the letter, bound- to look to the application of the funds, advanced by .them to the agent of Messrs. Stephen and Henry Higginson, under [802] the guaranty. Tlip plaintiffs were not bound to see, whether the agent properly applied the advances or not; or whether he purchased with them French goods, or any other goods. He was to act solely under the instructions of his principals, with which the plaintiffs had notliing to do; and the defendants are liable for all advances, bona fide made under the guaranty, even though the agent may have applied them contrary to the instructions of his principals. Having thus fixed the interpretation of the letter on this point, that it is a mere guaranty of the debt of third persons, the next question upon its construction is, to whom are the advances to be made. If there be any thing clear in this cause, it is, that the advances are to be made to Stephen Higginson, Jr., and Henry Higginson, then copartners in trade under the firm of S. & H. Higgin-son. It follows, therefore, that it covers only advances made to them jointly on their joint credit, and not advances made to them severally upon their' several credit. Unless then it shall be completely established, that the advances were made on the joint account of the firm, there is an end of the plaintiffs’ case. Another question^ upon the construction of this letter is, whether it contains a limited or a continuing guaranty; in other words, whether it be a guaranty for advances made to the amount of 00,000 dollars, and when that sum is once advanced, it is exhausted; or, whether it covers any further advances, made from time to time, after the 50,000 dollars have been once advanced, provided, at the time of such advances, the balance then due to the plaintiffs, does not, with such advances, equal the stipulated sum of 50,000 dollars. Upon examining the terms of this letter I am of opinion, that it is a guaranty limited to a single advance of 50,000 dollars; and that when once this sum is advanced, the guarantors are no longer liable for any future advances, whatever may be the state of the accounts between the parties. The language of a letter should be very strong, that would justify a court in holding the guaranty to be a continuing guaranty, which is to cover advances, from time to time, to the stipulated amount, toties quoties, until the guarantor shall give notice to the contrary. I see nothing in this letter to justify such a conclusion; and in every doubtful case, I think, that the presumption ought to be against it. If, therefore, in the present case the advances to Stephen and Henry Hig-ginson ever equalled 50,000 dollars, all subsequent advances, although the debt of Stephen and Henry Higginson may have been, at the time, diminished by payments, so as to be far within that sum, are beyond the reach of the guaranty. The next point in the cause, is, as to the effect of the dissolution of the partnership of Stephen and Henry Higginson. From the moment that dissolution was made known to the plaintiffs, all right to make future advances upon the credit of the firm was completely done away. To be sure, the plaintiffs, by agreeing to make the stipulated advance of 50,000 dollars, and specifying that in writing to Mr. Wilder, and agreeing to accept his bills to that amount, might have rendered themselves liable to pay to a third person, who should take the bills upon the credit of that written agreement, to the full amount. And in relation to contracts actually made by Mr. Wilder upon the footing of that agreement, and advances made, or agreed to be made by the plaintiffs to satisfy such contracts, before notice of the dissolution, the plaintiffs would be entitled to hold the defendants liable under the guaranty, if the contracts were made with third persons upon the faith and credit of the plaintiffs’ acceptance. But as to all other future advances, notice of the dissolution of the partnership was a complete revocation of all authority to make such advances, at least so far as respects the defendants. The dissolution was publicly announced in May, 1S09, in the newspapers in Boston, to take place on the first day of September of the same year. The defendants had due notice of such dissolution, and had a right to consider, that all advances made by the plaintiffs, after a knowledge of such dissolution, were advances made on the credit of the partners severally, and not on the partnership account, or on the credit of the guaranty of the defendants. And even if there was a secret understanding between Stephen Higginson, Jr., and Henry Higgin-son, after such dissolution, that the shipments made by Mr. Wilder, and the advances made by the plaintiffs for the payment thereof, should be considered as made for their joint interest, in the same manner as if the partnership were not dissolved, and the plaintiffs upon the supposition of such joint interest actually made such advances, still if this was unknown to the defendants, and they never had notice of such understanding, they are not bound by their guaranty for the payment of such advances. As to the manner in which the payments and remittances, made by Stephen and Henry Higginson. or by Stephen Higginson, Jr., to the plaintiffs are to be applied, the law is perfectly clear. Where a debtor owing several debts, makes any payment to a creditor, he has a right to apply it to what debt he pleases. If he makes no specific appropriation, the creditor may apply it as he pleases. And where neither part}' appropriates it, the law will apply it according to its own notion of the intrinsic equity and justice of the case. In the present case, the plaintiffs had a guaranty of the defendants for the advances to the amount of 50,000 dollars, and a guar-ant}' of Henry Higginson for advances to the amount of 50.000 florins; and they further agreed, at least as early as the Sth of January, 1S09, to give to Stephen Higginson, Jr., on his own account an additional credit [803] •of 50,000 dollars. Now, where a creditor holds several funds, or, what is the same thing, has agreed to advance money upon the footing of several distinct credits, he is bound to state at the time of the advance, upon which credit it is actually made. At least, if he does designate in his books or correspondence the particular credit, upon which particular advances are made, he is not at liberty to change the credit afterwards upon any new occurrence, which may materially uffect the rights of third persons. In the present case, the plaintiff has charged certain advances, as made on the credit of the guaranty of the defendants, and others, as on the guaranty of Henry Higginson; and others are without any specific statement of any" guaranty, on which they were made. As to the two former advances the plaintiffs are bound by their original charges, •and cannot now transfer them from the one guaranty to another. And as to the last, they must be deemed, under the peculiar circumstances of this case, to have been made on the several credit of Stephen Higginson, Jr., to whom they are charged. There is another point in this cause, which, if it were alone, would, in my judgment, be conclusive against the plaintiffs. Assuming that all the advances of the plaintiffs were actually made upon the credit of the partnership of Stephen and Henry Higginson; yet it appears, that in August, 1810, the plaintiffs, at the request of Henry Higginson, and with the implied assent of Stephen Higgin--son, Jr., and upon a statement, that the partnership had been dissolved for a whole year before that time, did actually transfer the partnership balance, then due, in certain proportions, to the several and separate accounts -of Stephen Higginson, Jr., and Henry Hig-ginson, and gave credit to them severally for their respective shares of such balance, until after they botli became insolvent (more than three years afterwards) without the facts having been in any way communicated to the defendants. In my judgment, this giving a new and unlimited credit to them severally, upon their several accounts, for that balance, without any communication with, or assent •by the defendants, was a complete discharge of the defendants from their original guar-anty. It was in the highest degree injurious to them, and must be considered, so far as respects the defendants, as an agreement by the plaintiffs to hold that balance upon the sole credit of the partners themselves in the proportions with which' they were charged in their separate accounts. If a creditor will ■undertake to give a new credit to his debtor, ■and thereby materially to change the situation of a surety, and a fortiori of a guarantor, the latter is absolved from all responsibility, unless he has notice of, and becomes party to, the new transactions. The last point of law, which it is necessary to consider, is, whether any notice was necessary to have been given of the amount of the advances made by the plaintiffs to the defendants. It appears that the plaintiffs did inform the defendants of their readiness to make the stipulated advance of $50.000, as soon after their receipt of the letter of guaranty as was practicable; so that the point is narrowed to the consideration of the question, whether notice was necessary of the amount of the advances, after they were actually made. And I am most distinctly of opinion, that it was the duty of the plaintiffs, within a reasonable time after the advances were actually made, to give notice thereof to the defendants, and that reliance was placed upon their guaranty to insure the repayment. And if notice was not given in a reasonable time, nor until after a material change in the circumstances of the debtors, such laches of the plaintiffs was a complete discharge of the defendants from their guaranty. The first notice given to the defendants of any advances in the present case, was not until near the dose of the year 1813, more than three years after all the advances were made, and when both of the debtors had become insolvent. During this period an active correspondence was kept up between the plaintiffs and the defendants, ncarly fifty letters having passed between them, in which not one syllable is to be found relative to any advances to Stephen and Henry Higginson, or either of them. Nor is this extraordinary silence imputable to any accident or mistake. It appears from a letter of the plaintiffs to Ool. Perkins (a witness in the case) that it was studied and intentional. Under these circumstances I am bound to declare, that the law holds the plaintiffs guilty of such laches, as discharges the defendants from all liability for the advances actually made. Verdict for the defendants.