Central Savings Bank v. Shine.

160, 175; Grant v. Hotchkiss, 26 Barb. 63; Bright v. McKnight, 1 Sneed (Tenn.), 158; Van Rensselaer v. Miller, Lalor's Sup. to Hill & Denio, 237; Yancey v. Appleton, 3 Sneed, 89; Woodstock Bank v. Downer, 27 Vt. 482; Farmers' & Mech. Bank v. Kercheaval, 2 Mich. 504; Union Bank v. Coster's Ex'rs, 3 N. Y. 203; Watson's Ex'rs v. McLaren, 19 Wend. 557; McLaren v. Watson's Ex'rs, 26 id. 425; Curtis v. Brown, 2 Barb, 51; Beckwith v. Angell, 6 Conn. 315; Mathews v. Chrisman, 12 Sme. & M. 595; Springs v. Williams, 7 Ired. 384; Griggs v. Voorhies, 7 Blackf. 562; Butler v. Wright, 20 Johns. 367; Breed v. Hillhouse, 7 Conn. 523; Williams v. Granger, 4 Day, 444; Read v. Cutts, 7 Greenl. 186; Train v. Jones, 11 Vt. 444; Smith v. Ide, 3 id. 301; Cochran v. Dawson, 1 Miles, 276; Carson v. Jones, 1 McMul. 76; Bushnell v. Church, 15 Conn. 406; Smith v. Dann, 6 Hill, 543; Whitney v. Groot, 24 Wend. 82.

WAGNER, J. This cause was tried on a second amended petition, in which the plaintiff states as its cause of action that Peter O'Neil and Francis Doyle were partners under the name of O'Neil & Co., and that, on the 13th of March, 1868, Joseph O'Neil being president of the plaintiff, the defendant wrote to him on that day from Ireland, as follows:

"Hearing from P. O'Neil and Mr. Doyle that they could use advantageously some additional cash over and above the amount already had of your bank, and being desirous to promote their interests and enable them to carry on their business efficiently, I will thank you to submit to your board that, if they will lend O'Neil & Co. $15,000 I shall hold myself responsible for that amount, and will leave with you, as collateral security, the note and mortgage of Isaac Walker, which is at present in your vault, for a like sum (say $15,000). If the Central cannot conveniently make this advance, I will feel obliged to assist them in procuring it elsewhere."

The petition also states that this paper was delivered to the said president on the 30th day of March, 1868, by him on the same day laid before the board of directors and by them accepted; that, by this writing, defendant promised the plaintiff that if it would loan to O'Neil & Co. $15,000, he (defendant) would be responsible for that amount; that thereupon, "on the faith thereof, plaintiff lent to O'Neil & Co., in the ordinary and usual manner of such loans. $15,000, of which defendant afterward had due notice; that of this sum $10,000 was lent on the 30th of March, 1868, for sixty days, VOL. VIII.- 15

Central Savings Bank v. Shine.

and the balance on the 9th of April, 1868, for sixty days; of all of which the defendant afterward had full knowledge, and agreed and assented thereto and approved thereof."

The answer admitted the writing set out in the plaintiff's petition, but denied that the plaintiff at any time gave to the defendant notice of the acceptance of the proposal, or that the proposal was accepted; denied, further, that plaintiff made to O'Neil & Doyle any loans or advances on the faith of the writing as stated and set forth, or that he had any notice of them from any source, prior to the commencement of this suit, or that he at any time assented to or approved the same.

To this answer there was a replication, which simply denied that defendant made a proposal in writing to guaranty plaintiff, in case it would make any loan to O'Neil & Doyle, and that the only writing or contract made by the defendant, relating to the loan, was the agreement mentioned in the petition. The cause was tried by the court sitting as a jury, and the verdict and judgment were rendered for the plaintiff.

Whether the loans were made, and in what manner, were questions of fact, and the verdict and finding of the court below in that regard is conclusive here. So far as refusing instructions asked for the defendant is concerned, we see no ground for interference. Those already given at his instance covered the material points in the case and were sufficiently favorable.

The second instruction given for the plaintiff is, I think, unobjectionable. If, after the loan was made, defendant had information thereof, and with full knowledge approved of what the plaintiff had done in the premises and assented thereto, this would amount to a ratification, and he would be bound thereby. But, under the pleading, the main issue presented is as to the real character of the writing addressed by the defendant to the plaintiff. The view of the plaintiff is that it is an original, primary undertaking — an absolute promise, binding the defendant, without any notice of acceptance. On the other hand, the defendant contends that it is nothing more than a guaranty, and that, to impose any obligation on the defendant, notice of acceptance was indispensably necessary.

The first and third instructions given by the court for the plaintiff proceed upon the theory that the writing was an original promise, and so treat it, and declare that if the plaintiff loaned the sum to O'Neil & Co., in pursuance of the writing, then it was entitled to

Central Savings Bank v. Shine.

recover. The instructions wholly dispense with any notice of acceptance to be given to the defendant, and hold the writing to be a binding contract as soon as acted upon by the plaintiff, whether the defendant was ever apprised of that fact or not.

There is a marked difference between an overture or proposition to guaranty and a simple contract of suretyship. The one is a contingent liability, the other is an actual undertaking. The surety is bound with his principal as an original promisor; he is a joint debtor with his principal from the very inception of the agreement, and his obligation continues until full payment is made. An indulgence by the creditor will not absolve him, for his liability is absolute, and he is bound to know of his principal's default. But the contract of a guarantor is his separate, independent contract. It is not a joint engagement with the principal to do a thing. It is in the nature of a warranty that some one else shall do a certain thing or act, and the guarantor is responsible only for the default or failure. of his principal. A surety, being a joint contractor, may be sued with his principal; a guarantor cannot be.

The great weight of authorities, including the decisions in this State, establish the proposition that, as the original contract with the principal is not the contract of the guarantor, the creditor is bound. to give him notice if he intends to hold him responsible. The counsel for the plaintiff have cited cases to show that no notice is necessary, and that the guarantor is bound whenever the creditor receives his proposition and acts on it; but the law of this State is settled otherwise. That the paper, addressed by the defendant to the plaintiff, was simply an overture or proposition, instead of a direct or absolute undertaking, seems to be sufficiently plain. He says, in substance, that hearing that O'Neil & Co. could use some additional cash, over and above the amount already had of the plain tiff, he would thank the president of the plaintiff to submit to the board if they would lend the firm $15,000, and he would hold himself responsible for that amount; but, if the plaintiff could not conveniently make the advance, he should feel obliged to procure it elsewhere. This was nothing but the submission of a proposition. The defendant did not know whether it would be accepted or not, and until he was notified of its acceptance he obviously could not tell any thing about the nature or certainty of its liability. This, it appears to me, is the fair and correct interpretation of the instrument: and the decisions in this State and in other courts, which we

Central Savings Bank v. Shine.

have followed, have so construed similar writings, and held that notice of acceptance was necessary to fix the responsibility of the guarantor.

In the case of Smith v. Anthony, 5 Mo. 504, Smith addressed to Anthony the following letter:

"COL. WM. ANTHONY: Dear Sir - Wm. Mitchell, Jr. will probably call on you to purchase your horse; and, should you conclude to sell, you can do so. Take his note, and I will be responsible for the payment on his return.

Anthony sold Mitchell his horse, and Mitchell took him to Alabama, and returned; and, failing to make payment, suit was brought against Smith, and it was held that before Anthony could recover he must prove that he gave Smith notice that he had sold on the faith of the guaranty, and that he looked to him for payment.

In Rankin v. Childs, 9 Mo. 676, McCourtney applied to Rarkin to purchase lumber for building a ferry-boat. Rankin refused to credit him without security. McCourtney mentioned the name of Childs as security, and he was accepted as sufficient. A few days after McCourtney presented a bill of the lumber in Childs' handwriting, at the foot of which was written:

"Messrs. Rankin will furnish the above bill as soon possible, and I will order what more I may want for my boat in a short time. JAMES MCCOURTNEY." "I hereby guaranty the payment of the above bill. January 29, WM. CHILDS."

1842.

It was in evidence that the lumber was delivered, and that, while the boat was being built, Childs was frequently present as a visitor but took no part in the matter. In an action against Childs, it was held that his contract was not a direct promise but a mere guaranty, and, to hold him liable, notice should have been given of the acceptance of the guaranty.

In Douglass v. Reynolds, 7 Pet. 113, a letter was addressed by the defendant to the plaintiff in the following words:

"Gentlemen- Our friend, Mr. Chester Haring, to assist him in business, may require your aid from time to time, either by accept

Central Savings Bank v. Shine.

ance or indorsement of his paper, or advances in cash. In order to save you from harm in so doing, we do hereby bind ourselves, severally and jointly, to be responsible to you at any time for a sum not exceeding $8,000, should the said Chester Haring fail to do so."

It was held that this was a guaranty, and that, to hold the guarintors liable, they were entitled to notice of its acceptance.

This is now and has long been the firmly established doctrine in the supreme court of the United States. Reynolds v. Douglass, 12 Pet. 497; Russell v. Clark, 7 Cranch, 69; Edmondston v. Drake, 5 Pet. 624; Lee v. Dick, 10 id. 482.

In Maine, the following instrument was construed in the same way:

"Messrs. W. & G. Tuckerman: Gentlemen - For the bill of goods which Mr. Charles B. Prescott bought of you on the 6th inst., I hold myself responsible to you for payment agreeably to the contract made with him; and I will hold myself responsible for any goods which you may sell him, provided the amount does not exceed at any time $500." This was decided to be a guaranty, and as the plaintiff had not given notice of its acceptance in the first instance, nor of the delivery of the goods under it subsequently, he could not succeed in his action. Tuckerman v. French, 7 Me. 115. A similar decision was made in the case of Bradley v. Cary, 8 id. 234.

The question was decided in the same way, on essentially the same state of facts, in Craft v. Isham, 13 Conn. 28; Oakes v. Weller, 13 Vt. 106; S. C., 16 id. 63; Lowry v. Adams, 22 id. 166; Babcock v. Bryant, 12 Pick. 133; Mussey v. Rayner, 22 id. 223. In all these cases, the courts hold that notice of acceptance is an essential element, without which a guaranty of future advances cannot rise higher than mere proposal or offer, nor ascend to the rank of a binding agreement.

Mr. Parsons sums up the rule, as deduced and extracted from the weight of authority, that where there is a guaranty for future operations, perhaps for one of uncertain amount, and offered by letter, there should then be a distinct notice of acceptance, and also a notice of the amount advanced upon the guaranty, unless that amount be the same that is specified in the guaranty itself. 2 Pars. Cont. (5th ed.) 13.

The reason which underlies the principle of notice is that the guarantor may know distinctly his liability, and have the means of arranging his relations with the party in whose favor the guaranty