Taussig v. Reid ( 1890 )

Garnett, J.

This is an appeal from a judgment against appellants for §1,680.34, upon the following instrument signed by them:

“For value received I hereby guarantee the prompt pay-, ment at maturity of any indebtedness owing to Beid, Murdock & Fischer by Mrs. Mathilde Zuckerman, of 370 State street and 214 and 216 North Clark street, Chicago, for goods purchased or which may be purchased hereafter of them to the amount of §1,500, with interest on all the above indebtedness according to the tenor and effect thereof at the rate of eight per cent per annum, and I agree to pay all costs and expenses paid or incurred in collecting the same.

“Signed at Chicago, this 14th day of January, 1887.

“E. Kohn.

“Witness: Jos. Zuckerman, Wm. Taussig.”

The judgment includes interest on the §1,500 from the time this suit was commenced. Mrs. Zuckerman was, at the date of the guaranty, the proprietor of two retail grocery stores at the places named, and appellees were engaged in business in Chicago as wholesale grocers.

Immediately after the delivery of that paper to appellees they commenced to sell her goods on credit, and continued such sales until November 23d following. The state of her account varied at different times. In April she was indebted to appellees over §1,800, which was settled by her promissory notes, guaranteed by appellants; the notes, however, are not the basis of this action. On June 1st she was in default to the extent of §1,762.30; July 1st and August 1st, over §1,900; September 1st, §2,112.63; October 1st, §2,342.80; ¡November 1st, §2,389.51, and ¡November 23d, §2,714.96.

This suit was brought December 9, 1887, and, among other defenses, appellants set up that no notice was given to them of the default of Mrs. Zuckerman in paying for the goods, and that in consequence thereof, and of her insolvency, they were deprived of the opportunity to secure indemnity. There was evidence tending to prove that she became insolvent November 24, 1887, and that no notice of her default was given to appellants before that time.

It must be admitted that the authorities leave this question in considerable confusion. But I conceive the weight of authority in this country to support the doctrine that in case of a collateral continuing guaranty of payment of debts of uncertain amounts, to mature at periods not known, and the existence of which depends entirely on the future action of the principal and the guarantee, reasonable notice of default of payment by the principal must be given to the guarantor, and he is discharged to the extent of his loss or damage caused by the failure to give him such notice. It makes no difference that the guaranty limits the amount of the indebtedness. Such a case was Howe v. Nickles, 22 Me. 175, where the court held that two general principles may be considered as fully established in cases of this bind: first, that the guarantor must be apprised of the acceptance of the proposed guaranty; second, that he must within a reasonable time be notified of the amount which may have been advanced, and of demand of payment, without effect, of the principal debtor. So in Douglass v. Reynolds, 7 Peters, 113, which was a suit on a continuing guaranty of acceptance or indorsement of the principal’s paper, or advances to him in cash, not to exceed §8,000, the court held that, while the creditors were not bound to institute legal proceedings against the debtor, they were required to use reasonable diligence to make demand, and to give notice of non-payment to the guarantors. The same defense was set up in Davis v. Wells, 104 U. S. 159, where the court fully recognized the rule contended for by appellants, but held the terms of the contract waived demand and notice.

In Dickerson v. Derrickson, 39 Ill. 574, the court, after first holding that no demand or notice of non-payment is required where the guaranty is absolute, say: “When, however, the guaranty depends upon the happening of a contingent event, it is necessary, when the event has occurred, that notice should be given to the guarantor within a reasonable time. This is manifestly proper to enable the guarantor to secure himself against loss. 2 Parsons on Contracts, 174. But what is a reasonable time depends upon the circumstances of the case. If, however, it is given before loss could occur, or the situation of the parties become changed so as to endanger loss, it is believed to be sufficient. If delayed so long as to deprive the guarantor of the means of rendering himself secure, it would not be in time, and the guarantor would be released.” This principle is supported by the reasoning in Newman v. Streator Coal Co., 19 Ill. App. 594, where the court cites, with approval, Howe v. Nickles, 22 Me. 175. See, also, Smith v. Bainbridge, 6 Blackf. 12; Clark v. Remington, 11 Met. 361.

The only notice that was ever given to appellants of any action on the faith of the guaranty was when they were requested, in April, 1887, to guarantee the notes of Mrs. Zuckerman for something over $1,800.

To require notice of default in payment imposes no unreasonable burden on the creditor. If he does not give notice, the guarantor must either rely on the principal to voluntarily keep him informed, or he must, in order to protect himself, make continual inquiries of the creditor.

Not knowing when, if at all, indebtedness will be contracted, or when it will become payable, he can not know whether it is paid or not without taking upon himself annoyance that no one would care to endure. It is apparent that if guarantors, in this class of cases, are to receive such treatment from the courts, it will operate as a great discouragement if not a practical prohibition of all friendly assistance of that kind. The first instruction given for the plaintiffs authorized a recovery without requiring demand and notice of non-payment, and without noticing the alleged damage to the defendants in consequence thereof. In this the instruction was faulty, and the omission was not supplied by any other instruction. "Whether there was demand and notice of default, and whether defendants suffered any damage by reason thereof, should have been submitted to the jury under a proper instruction. Howe v. Nickles, 22 Me. 175; Gibbs v. Cannon, 9 Serg. & R. 198.

The other assignments of error are not well taken.

The views expressed in this opinion as to the necessity of demand and notice of default are personal to the writer, but as the other two judges of the court lean to the other side of the question, and desire the question finally set at rest by the Supreme Court of the State, the judgment will be affirmed.

Judgment, affirmed,.