59 Mass. 43 - Chace v. Brooks — 59 Mass. 43

Caleb Chace & others vs. Francis A. Brooks. The plaintiff applied to the defendant, by letter, to guarantee “ G.’s debt and lug future purchases: ” The defendant answered, by letter, that “ in regard to G.’s indebtedness present and future,” he would guarantee the payment of the same for a commission of two and a half per cent, upon certain conditions, and among others, that the plaintiff, immediately upon selling goods to G., should give the defendant information of the amount sold at each sale, and of the time of credit; and that if the plaintiff accepted his offer, he should notify the defendant of the amount of G.’s indebtedness, give the defendant credit for the amount of his commissions on the same, and from time to time notify the defendant of sales to G. as they should be made: The plaintiff accepted the offer, notified the defendant of the amount and particulars of G.’s indebtedness, and gave the defendant credit for his commission thereon; but no further sales of merchandise were ever made by the plaintiff to G.: It was held: (I.) That the guaranty, so far as it related to future indebtedness, was limited to future purchases of merchandise by G.; (2.) That it was not discharged by an accidental omission, in the statement of G.’s indebtedness, of one sale of merchandise to him, or by the omission therefrom, in good faith, of the amount of interest due on a balance of account therein stated, or of the amount of a note of hand given by G. to the plaintiff, but not for merchandise; (3.) That the plaintiff, after the several terms of credit originally given had expired, having extended the time by taking G.’s notes for the whole amount of his debt, payable at a future day, without the knowledge or consent of the defendant, and without any subsequent rati fication or assent by him, the guaranty was thereby discharged. This was an action of assumpsit, brought originally by the plaintiffs against Aaron Brooks, jr., since deceased, the present defendant’s testator, on an alleged contract of guaranty, and referred to John M. Williams, esquire, as auditor, to state the account between the parties, and to find and report all such facts, as should be proved before him, for the judgment of the court thereon. From the auditor’s report, and the papers annexed thereto, the following facts, among others which became immaterial by the view taken of the case by the court, appeared : — On the 26th of March, 1842, oné William Goddard, of Petersham, being indebted to the plaintiffs in the balance of an account for merchandise ‘previously sold and delivered by them to him on or before the 5th of January previous, amounting to $1213.60, they wrote to the original defendant, Aaron Brooks, jr., also of Petersham, proposing to him to guarantee the debt above-mentioned, and Goddard’s further purchases. In this letter, the plaintiffs say, “ When you was in the city last week the subject of giving you a commission on Mr. Goddard’s debt and his future purchases was mentioned, which you remarked would be acceptable. This we will do,” &c. They conclude, “ Should he want any goods, he shall be well used and goods given him low.” In answer, Brooks wrote the plaintiffs a letter on the 5th of May, 1842, offering his guaranty, upon the terms and conditions therein mentioned, as follows: “ In regard to Mr. Goddard’s indebtedness, present and future, I will guarantee the payment of the same upon the following terms. I shall require information from you, immediately, upon your selling him goods, of the amount sold him at each sale, and of the time of credit. I shall not be holden to pay for them, except in the event of Mr. Goddard’s failing and inability to pay ; in other words, I shall provide no funds tc meet his engagements, and shall stand as guarantor of the same, and save you harmless and indemnified from loss by him, in case of ultimate inability in him to pay you. And for such liability I shall charge you two and a half per cent, the usual commission of lawyers for doing business If you accept of this offer, you will notify me of the amount of his present indebtedness to you, and give me credit for the amount of two and a half per cent upon the same, and then from time to time notify me of your sales, as they shall be made; reserving the right to put an end to my liability on giving you notice of the same.” The plaintiffs accepted this offer, and, on the 3d of June, 1842, sent Brooks a letter, signifying their acceptance, and giving him notice of the amount of Goddard’s indebtedness to them at that time, and of the credit given Brooks for his commissions on the guaranty. The plaintiffs, subsequent to this time, made no sales of merchandise to Goddard. The statement of Goddard’s indebtedness amounted to $3491.09, and contained three items: “ Amount of account to March 30th, 1842, $2433.69; May 2d, merchandise at six months, $102.26June 2, merchandise at six months, $955.14.” The plaintiffs had also, on the 12th of May, 1842, sold Goddard merchandise, at six months’ credit, to the amount of $31.12, •of which no notice was given to Brooks, the same having been accidentally omitted by the plaintiffs’ clerk in making up the statement. At the date of the notice above-mentioned, June 3d, 1842, Goddard was indebted to the plaintiffs on account, for merchandise sold as follows: — January 5, 1842, Balance of account before mentioned, . $1213.60 March 30, “ Merchandise at six months,..... 1220.09 $2433.69 May 2, “ Merchandise “ ..... 102.26 “ 12, “ “ « ..... 31.12 June 2, “ “ “ ..... 954.64 $3521.71 On the 2d of June, 1842, the plaintiffs discounted Goddard’s note, not given for merchandise sold him by the plaintiffs, but for his own accommodation, for $1000, payable in thirty days. This note was taken up by the plaintiffs at its maturity, and replaced by a new note payable in thirty days, given by Goddard and indorsed by the plaintiffs, which, on the 1st of August, following, was paid by the plaintiffs, in part from funds furnished by Goddard, leaving a balance advanced by them of $327.84. It appeared, also, that on the 3d of January, 1843, the plaintiffs took sundry notes of Goddard, payable respectively, in fifteen days, four, five, six, and seven months, covering the whole of Goddard’s indebtedness to them, and embracing sums not included in the statement of June 3d, 1842, and amounting in the whole to $3950.29. These notes, which were all given after the several terms of credit on the sales of merchandise had expired, were signed by Goddard, indorsed by the plaintiffs, and discounted at banks. Goddard failed to pay them, and they were respectively paid at their maturity by the plaintiffs. Whether this arrangement was made with or without the previous consent or knowledge of the guarantor ; and whether, if done without his knowledge, it was after-wards ratified and assented to by him, with full knowledge; were questions raised upon the statements contained in the auditor’s report, and which were considered and decided by the court, as will be found fully stated in the opinion. The court-were of opinion, that the taking of the notes was without the previous consent or knowledge of the guarantor, and that he did not afterwards assent to and ratify the arrangement. The plaintiffs claimed to recover of the defendant the sum of $3509.35, and interest; namely, for the amount of merchandise sold Goddard, according to the statement above-mentioned, $3521.71; for balance of note paid, as above stated, at the Suffolk bank, $327.84; and for balance of another note, dated -March 16, 1843, at one month, and paid by the plaintiffs, on Goddard’s account, at the Shoe & Leather Dealers bank, $65980; deducting from the amount of these three items the sum of $1000, paid by Goddard on account. Of the several grounds of defence specified by the defendant and reported upon by the auditor, three only need be mentioned, "which were considered by the court, namely : 1 st. That the defendant was not liable on his guaranty for any debts of Goddard, other than for goods sold and delivered to him by the plaintiffs; 2d. That the plaintiff did not notify the defendant of the whole amount of Goddard’s indebtedness, at the time of the acceptance of the guaranty, but furnished an incorrect statement calculated to mislead the guarantor; 3d. That the plaintiffs, without the consent of the guarantor, took Goddard’s notes, from time to time, for his indebtedness, payable at periods beyond the original terms of credit. B. R. Curtis, for the plaintiffs. F. A. Brooks, for himself. — Dewey, J. (majority) The opinion of the court (Fletcher, J. not sitting in the cause) was delivered at the March term, 1851, Dewey, J. This is assumpsit on a contract of guaranty, i he nature and extent of which, and its various limitations, are to be found in the letter of the defendant’s testator, Aaron Brooks, jr., of the 5th of May, 1842, taken in connection with the letter of the plaintiffs of the 26th of March, 1842, proposing the guaranty. As to the subject of the guaranty, or the debts to which it referred, we are of opinion, that as a guaranty of the future indebtedness of Goddard, it was applicable only to future purchases of merchandise by him. This is the import of the letter of the plaintiffs, in which they propose the guaranty; and the letter of Brooks, although more general as to the future debts, is yet to be taken in connection with the letter of the plaintiffs, to which it was a reply. In the letter of Brooks promising to guarantee the farther debts of Goddard, there is quite sufficient to indicate the nature of this liability as to future debts. It is stated therein as one of the terms of the guaranty, that Brooks should “ receive information, immediately upon the plaintiffs selling him goods, of the amount sold him at each sale, and of the term of credit.” These terms all point to debts arising from the sale of goods to God lard. Such was the subject to which the guaranty applied As a farther element in this guaranty, and one which has . some bearing upon the other questions raised, there is a provision, that for such guaranty, Brooks should receive two and a half per cent on the sums so guaranteed. The plaintiffs, on the 3d of June, 1842, gave notice to Brooks, that they had credited him two and a half per cent on Goddard’s indebtedness to them, stating the amount at $3491.09, all of which was for sales of merchandise on account; of which $2433.69 was for goods sold prior to March 30tb, 1842; $102.26, for goods sold on the 2d of May, 1842, at six months; and $955.14, for goods sold on the 2d of June, 1842, at six months. Among other grounds of defence, it was urged, that the guaranty was discharged by reason of certain omissions in the plaintiffs’ statement of other items of indebtedness of Goddard to them, namely; 1st. A small account of $31.12; 2d. Interest that had accrued on the balance stated as due January 5th, 1842, of $1213.60; 3d. A note of hand of Goddard given June 2d, 1842, for $1000. The first of these was an accidental omission, which did not increase the liability of the defendant, and does not affect the guaranty. So of the interest. The omission of the other item of $1000 might be more plausibly urged, as an objection grounded in want of fair dealing; the defendant Brooks expecting to receive his two and a half per cent on the whole amount of indebtedness ; and also on the further ground, that it might be material for Brooks to be fully apprised of Goddard’s entire-indebtedness to the plaintiffs. Such, however, were not the terms of the guaranty, and the plaintiffs were left free to have other dealings with Goddard, not included in the guaranty. But an objection more relied upon by the defendant is, that the plaintiffs, without the consent of the guarantor, extended the original credit given to Goddard, by taking his notes for the whole debt on further time than that of the credit originally given on the sales of merchandise, and taking such notes after the term of credit on these sales had fully expired. On this point, it appears, that the plaintiffs, on the 3d of January, 1843, took sundry notes of Goddard to cover his whole indebtedness to them, and embracing sums not included in the statement of the 3d of June, 1842, for the. amount of $3950.29, payable at different periods of fifteen days, four, five, six, and seven months, from that date. That this was done without the previous knowledge or consent of the guarantor, is, we think, substantially found by the auditor. The further inquiry is, whether after this was done, the guarantor, with full knowledge of the fact, assented to and ratified the arrangement 1 This assent is to be shown by the plaintiffs, and if shown at all, it results from the letters of Brooks, and from his conversation with the clerk of the plaintiffs. The letters are appended to the auditor’s report, and from a careful consideration of them, we are of opinion, that they fail to establish any ratification of or assent to the extension of the term of credit to Goddard by taking notes on further time. It appears therefrom that Brooks supposed himself liable to some extent on his guaranty; but they do not show, that he assented to the extension of the credit or the renewal of the notes. To a limited extent he was apprised of the renewal of Goddard’s notes, but whether notes given for the merchandise sold by the plaintiffs to Goddard and included in the notice to Brooks, or other notes, does not appear. Nor does the conversation with the clerk amount to such waiver of a discharge from his liability on the guaranty. It was a casual conversation, cautioning the clerk against further renewals, and remarking that ’ “ an extension of credit would discharge the guarantor.” To what extent, Brooks had knowledge of the renewals and extension is also quite uncertain. It would seem from the letter of the plaintiffs to Brooks of the 23d of May, 1843, that Goddard’s debts were stated at only $ 1800 ; whereas they were in fact double that sum. Upon the whole evidence, we are not satisfied that Brooks ever waived any benefit of a discharge of his liability, by any subsequent assent to the extension of time given to Goddard. That such an extension of time unconditionally, without any reservation of a right to proceed against the guaraní or, and without leaving the guarantor at liberty, after the expiration of the first term of credit, to pay the debt and proceed against his principal, will ordinarily discharge a surety, is a familiar principle, and will not be contested. That the mere taldng of a promissory note from the debtor, whose debt is guaranteed, of the same amount and payable at the same time as the credit given on the sale, will not discharge a guarantor, is well sustained by the cases cited for the plaintiffs. Babcock v. Bryant, 12 Pick. 133, and Curtis v. Hubbard, 9 Met. 322. It is the taking of a note, after the original credit has expired, on farther time, that operates to discharge the surety. The only remaining questions, therefore, are, in the first place, whether a guarantor is affected in the like manner as á surety by the taking of such note ; and, if so, secondly, whether there is any thing in this particular guaranty to make it an exception to the general principle. That a guarantor and an ordinary surety are alike affected by such extension of the time of payment, seems to be required by sound principles of law, and has often been held, as in Combe v. Woolf, 8 Bing. 156, which was a guaranty of payment for certain merchandise sold to one Joseph. The guaranty contained no stipulation as to the length of the credit to be given to Joseph ; but the custom was a credit of six months, and then in some instances to take in payment a bill at two months. The plaintiff having given a more extended credit, without the knowledge of the defendant, it was held that the guaranty was thereby discharged. The ground was, that after eight months, the guarantor had a right to inquire whether the debt had been discharged, and if he found it still due to take his measures against the debtor accordingly. In the case of Samuel v. Howarth, 3 Meriv. 272, the action was brought upon the following guaranty : “ We engage to guarantee the payment of any goods you may supply to Mr. Isaac Henry, between the 2d of April, 1814, and the 2d of April, 1815.” Goods were sold on the usual terms of a credit of six months, as to part, and of nine months as to part, payable at the expiration of those terms, respectively, in bills at three months. Instead of enforcing the payment of these bills so accepted, the defendant permitted Henry to renew them in every instance, by giving or accepting other bills at extended periods; and this was done without the knowledge, privity or consent of the surety. It was held that the guarantor was discharged thereby. The reason assigned for this decision is, that the surety is held to be discharged, because the creditor, by so giving time to the principal, puts it out of the power of the surety, to consider 11 whether he will have recourse to his remedy against the principal or not, and because he in fact cannot have the same remedy against the principal, as he would have had under the original contract.” On the part of the plaintiffs was cited the case of Carr v. Browne, 12 J. B. Moore, 62, in which the view taken is apparently contrary to that which we take in the present case. It was there held, that a guaranty given by the defendant to Joseph Thorpe Baker not exceeding ¿6400, was not discharged by the fact, that a bill of exchange, which had been given by Baker to the plaintiff, was dishonored by him, and that the plaintiff permitted the debtor to renew it. The great question there was, whether the failure of the principal to pay the bill was such a failure as to entitle the surety to a notice of the renewal. Nor do we perceive any thing in the particular guaranty now before us, that will authorize this extension of credit, and postponement of all liability to pay to a future day. It was a contract of guaranty, embracing, in the first place, debts then due, and secondly, any future sales of merchandise; and as no time of credit was mentioned as to such sales, whatever credit was originally given the defendant might have been responsible for. So, if mere delay had occurred in enforcing the payment, it would have afforded no ground for discharging the guaranty. This guaranty was for a commission of two and a half per cent on the amount of the debt, which must be understood as a commission for securing payment of* the particular debts created by the sale of merchandise. If, some eight months afterwards, the creditor elects to blend the guaranteed debt with other dealings, and to make a new contract, it would seem reasonable, that this new arrange ment should not be embraced within the original gua* ranty. Looking at the case in al. its aspects, the court are of opinion, upon the entire case stated and submitted to them, that the guarantor was discharged, and that the plaintiffs cannot main tain this action against his legal representative, the pre« sent defendant. Judgment for the defendant.