Vinal v. Richardson , 95 Mass. 521 ( 1866 )

Wells, J.

It is difficult to determine the rights of parties upon pleadings so inartificial and loose as those in the present case. The plaintiff’s declaration sets forth an agreement by the defendant to pay certain sums of money for the future rent, and for arrears of rent due from one Bailey. The copy of agreement annexed shows a contract of guaranty that Bailey shall pay said sums. The declaration does not refer to the copy annexed, nor allege that the contract set forth was in writing. The defendant omits to demur, and seeks to defeat the action by a request to the court to order a nonsuit, or a verdict for the defendant, “ on the ground that the evidence did not support the declaration, and there was a variance between the claim and the proof.” The case is argued «here by the defendant upon the position that the “ copy of agreement ” is no part of the declaration, 1st, because not referred to as a part of the declaration ; and 2d, because repugnant to the allegations of the declaration.

If these grounds are open to the defendant, they would seem to be fatal to the action. But, upon recurring to the answer, we find that the defendant “ denies that he ever signed a paper as alleged by plaintiff, and if he did ever sign such a paper, it was without consideration.” We think this cures the defect in the declaration, and makes an issue upon the written agreement set out by the copy annexed, as if it were well set forth by the plaintiff’s allegations. As the copy of agreement thus becomes part of the pleadings, the question of variance in the proof disappears.

The ruling of the court upon the question of consideration was correct. The plaintiff’s forbearance to eject Bailey, and his restoration to the relation of tenant at will, were a sufficient consideration for the defendant’s guaranty. Johnson v. Wilmarth 13 Met. 416. Boyd v. Freize, 5 Gray, 553. It is the existence of a consideration, not its quantity, nor quality, nor appropriateness, that gives validity to a contract. It need not be an equivalent. Nor is there any reason for distinguishing between the different parts of this contract, or of its subject matter. A guaranty of past indebtedness requires no other or different consideration from any other contract. The legal quality of the consideration is determined without any regard to the character of the contract that is sought to be based upon it. A consideration bemg shown for the defendant’s agreement, all its provisions alike are supported by it.

The case stated shows no ground for the claim that the plaintiff changed the terms of the contract by his dealings with Bailey. The very consideration of the guaranty was that Bailey should be restored to the relation of tenant at will. That tenancy was again terminated at the defendant’s request, and the easing to another party was its proper sequence. Neither change released the defendant from his contract of indemnity. Mellen v. Nickerson, 12 Gray, 445. There is nothing in the case to sustain the 4th and 5th positions taken by the defendant at the trial.

The ruling of the court upon the measure of damages was correct. It accords with the terms of the guaranty.

The last ruling, that “ under the circumstances of this case it was not necessary to prove a formal demand upon and refusal by Bailey, or notice of such demand and refusal to the defendant,” was also, in the opinion of a majority of the court, correct. The subject of the guaranty was the payment of certain sums at certain times, both absolute and fixed by the terms of the guaranty itself. It required no act of the plaintiff to precede the performance by Bailey, except the permission for Bailey to remain, which the defendant knew had been given. If Bailey made a corresponding agreement to do what the defendant agreed he should do, it was broken by the mere fact of non-payment, without demand upon him. The same fact was, of itself, a breach of the defendant’s contract of guaranty. A forma demand upon Bailey is not necessary to make his failure to pay the rent a breach of his obligation ; and the defendant’s contract is simply that Bailey shall perform his agreement. But, whether Bailey made such a corresponding agreement or not, the defendant, by his guaranty, undertook that Bailey should perform certain specific acts ; and he is liable on his agreement for Bailee’s failure to do those acts.

It is true, there are authorities to the effect that a demand upon the party primarily liable, and notice of his default given to the guarantor, are necessary, before any action can be maintained upon the guaranty. But the better doctrine, and that which seems to us to be best supported, both upon reasoning and authority, is that demand and notice are not essential prerequisites to an action, and need not be alleged nor proved, unless the terms of the guaranty, or the nature of the thing guaranteed, require such proceeding, in order to a proper fulfilment of the obligations imposed by the guaranty upon the party holding it, or in order to establish a default by the principal and a breach of the contract declared on. The necessity of such demand and notice is not incidental to the relation of guarantor and guarantee, as it is to that of indorser and indorsee. It must be derived, if it exist, from the terms of the contract, or the nature and circumstances of the particular case, and not from the general rule.

In a certain class of cases the writing of guaranty has been sometióles treated as a proposition only, requiring from the other party notice of its acceptance in order to make it take effect as a complete contract.

In another class, such as continuing guaranties, and guaranties of future credits of uncertain amount, with or without a fixed limit, it is held that, when the transactions are effected, the guarantor is entitled to be informed of the extent to which the credit has been availed of; that is, the amount of liability for which the guaranty is relied on. But this rule is generally held subject to a qualification that makes the effect of omission to give the notice within a reasonable time depend upon the question whether the guarantor has suffered any loss or been prejudiced thereby. And, in the great diversity of decisions and opinions upon this subject, it is difficult to determine whether the notice is to be regarded as an essential condition of the con tract, or whether the want of notice, coupled with some prejudice to the guarantor, furnishes a ground of defence merely. In Babcock v. Bryant, 12 Pick. 133, notice in such cases was held to be essential. But even in this view, the notice, does not serve to fix the liability of the guarantor as for a breach of the contract ; it has no relation to any default of the principal debtor. Its office is to render fixed and absolute that which was indefinite and uncertain by the terms of the guaranty itself; to ripen into perfect obligation that which was originally an undertaking imperfect in the uncertainty of one of its terms. When such notice has been given the case will still stand, in principle, upon the same footing, as to the necessity of demand and further notice of default, as other cases of guaranty where the terms are absolute and the amount fixed.

Many of the authorities which seem to hold such demand .and notice of default necessary are only attempts to extend or apply, without careful discrimination, the principles which relate to continuing guaranties. And generally, where demand and notice have been said to be necessary in guaranties upon notes or other absolute undertakings, the qualification has been recognized that the guarantor can insist upon such notice only when he is or may be prejudiced by the want of it. If it appear that the principal debtor was insolvent before default, or that he has continued as solvent since as before, the holder will be relieved from the duty to give the notice, or from all consequences of failure. The only question in such cases would seem to be, whether it is incumbent upon the plaintiff to allege and prove some excuse or equivalent for the demand and notice, as by showing that it would have been useless, or whether it is for the defence to show loches and loss, or prejudice therefrom. Practically it is almost invariably treated as matter of defence, by way of discharge from the contract, and not merely as a defeat of the suit.

The authorities upon all sides of these various questions have been so numerously collected and thoroughly discussed in the notes upon Douglass v. Reynolds and Lent v. Padelford, 2 Amer Lead. Cas. 56, as to render citations here unnecessary. A decision of this court, however, reported in Ilsley v. Jones, 12 Gray, 260, requires revision. In giving the reasons for the decision upon the demurrer in that case, the court adopt a remark of Lord Ellenborough in Morris v. Cleasby, 4 M. & S. 574, namely, that “ Where the form of action makes it necessary to declare upon the guaranty, application to the principal must be stated on the record. In all cases it must, if required, be proved.” But in Morris v. Cleasby the suit was not upon the guaranty, and no question whatever was raised as to liability upon the guaranty. The only point in the case was whether a broker who had sold goods with a guaranty of payment, could, after payment of the price by him to his principal, avail himself of all rights of set-off against the assignees in bankruptcy of the purchaser, as if he were himself principal in the transaction. In the dictum quoted, Lord Ellenborough was not attempting to state the precise conditions of recovery as between the guarantor and the holder of the guaranty. Reference to those conditions was of no importance, except for the purpose of deducing therefrom some inference as to the relations of the guarantor to the principal debtor. In this respect, t’nát which was pertinent was the consideration that the liability of the guarantor resulted from the default of the principal debtor; not the facts which would constitute a breach of the guaranty, nor the evidence by which a breach might be proved. This language of Lord Ellen-borough therefore cannot be taken as a declaration of the law upon the point to which it is cited. That it was not so intended, and is not even the opinion of that learned judge, is shown by his concurrence in the previous decision of Warrington v. Furbor, 8 East, 242, to the contrary. The case of Thompson v. Perkins, 3 Mason, 232, is referred to as sustaining the decision in Ilsley v. Jones. But the only question raised in that case was whether notes taken by a factor, for goods sold under a del credere commission, became the absolute property of the factor, so that, upon his failure, the principal would have no right to resort to the purchaser for the unpaid purchase money, or tc claim the notes or their proceeds in the hands of the assignees of the factor. The case contains no allusion to the question of the necessity of a demand, by the holder of the guaranty upon the debtor, except in the quotation of the same remarks of Lord Ellenborough which are relied on in Ilsley v. Jones.

The case of Bickford v. Gibbs, 8 Cush. 154, is also cited ir support of the same position. But in Bickford v. Gibbs, demand and notice were expressly waived; so that the point was not really involved in that case. The remarks upon the necessity of demand and notice, which accompany that decision, must therefore be regarded merely as statements of what was supposed to have been decided by the cases there referred to ; and they profess to be nothing more. One of those cases, Oxford Bank v. Haynes, 8 Pick. 423, was upon a guaranty of a note. No notice was given of its non-payment. The case was decided for the defendant, not upon the ground of want of notice, but explicitly on the ground of loches and prejudice thereby to the guarantor. The court (Parker, C. J.) recognize as “reasonable and just” the distinction in which the guarantor “ is discharged only by the joint effect of negligence on the part of the holder, and an actual loss or prejudice ” to the guarantor in consequence of that negligence, (p. 428.) In Dole v. Young, 24 Pick. 250, there was no demand on the debtor except by letter, and no notice to the guarantor from the holder of the guaranty; but the debtor informed him of the letter to himself, and the guarantor replied that “ he would attend to it; he should wait to be notified.” The court (Shaw, C. J.) held the demand sufficient, and used this language : “ It was the duty of the principal to come and pay his debt, and his failure to do so on notice by letter was a default, which rendered the defendant liable on his guaranty.” The case of Babcock v. Bryant, 12 Pick, 133, was upon a continuing guaranty. The defence was based chiefly upon the neglect of the party holding the guaranty to give the guarantor notice of the amount of goods delivered to the principal debtor; and it is this notice which the court held to be essential to the maintenance of the action, and not demand upon the debtor, and notice of non-payment. In Gibbs v Cannon, 9 S. & R. 198, it is distinctly held that demand and notice are not essential, where they would be of no avail; and that the guarantor would be liable “ unless he proved he was prejudiced by the want of notice.” So far therefore as the decision in Ilsley v. Jones rests upon the authority of adjudicated cases, the cases relied upon fail to support it. But an examination of the decision itself will show that it cannot be maintained as an authority, and that as it stands it must be the result of some misapprehension. The action was for the price of goods sold by the defendant as the plaintiff’s factor, upon commission with guaranty. The declaration demurred to contains nothing from which it would appear that the money was due, nor that it had not been already paid by the debtor to the factor. In either case there would be no default, and of course no breach of the contract of guaranty declared on; and a demurrer upon this ground would have been rightly sustained. Crocker v. Gilbert, 9 Cush. 131. But the cause of demurrer assigned was that the declaration “ did not allege that the plaintiff had endeavored and been unable to collect the amount due on the sales of hay and straw, from the purchaser, and had applied to him for the collection of that amount.” Now whatever may be the rule as to demand and notice in ordinary cases, it would seem to be too clear to admit of question that a factor, selling goods for his principal, and whose duty it is to collect and remit the proceeds of such sales, cannot insist that his principal shall himself undertake the collection and notify the factor of his failure, before he can call upon him to make good his guaranty. Yet that, would seem to be the result of the decision in Ilsley v. Jones. In this respect it is entirely inconsistent with the law as recognized in Swan v. Nesmith, 7 Pick. 224. We are therefore constrained to think that the decision in that case was made solely upon the insufficiency of the declaration, as failing to show a breach of the contract of guaranty ; overlooking the special grounds assigned for the demurrer. The opinion was drawn up for the reports after the decease of the late Chief Justice, and from the imperfect minutes of the decision left by him. This may account for the form in which it now appears. However that may be, the case is far from satisfactory, and we cannot regard it as establishing a right view of the law upon that subject.

In a suit against a guarantor it is undoubtedly necessary to allege and prove a breach of the contract of guaranty; but it is only necessary to show such facts as would constitute a breach of the particular contract in suit. If the guaranty be for the performance of a specific act of another, and be absolute in terms, whatever is sufficient to show default in that other person will ordinarily show a breach of the contract of guaranty, and a right of action upon it. When a demand is not necessary to establish such default, the guarantor cannot require a demand to be made; at least, such demand is not necessary in order to fix the liability of the guarantor, as it is in case of an indorser. Where, however, other parties to a bill or note are discharged by neglect to present it for payment, or where it is made to appear that the bill or note would have been paid if it had been presented when due, it may be ground of discharge to the guarantor. But that stands upon other considerations. And so also, as we think, does the question of discharge for want of notice of the non-performance by the principal. Formal notice is not necessary in order to charge the guarantor with liability. All the cases agree that in this respect there is a distinction between an indorser and a guarantor. Negligence of the holder of the guaranty, in permitting the claim to slumber, when the guarantor might reasonably suppose it had been paid when due, or in the usual course of business, is the real ground on which the guarantor is exonerated. It is delay without notice, and not the bringing of a suit without notice, that is fatal to the holder of the guaranty.

This view of the law places guaranties upon the same footing with other contracts where the right of action accrues upon the performance or non-performance of some act by a third party In Vyse v. Wakefield, 6 M. & W. 442, it is said (Abinger, C. B.) “ The rule to be collected from the cases seems to be this, tho where a party stipulates to do a certain thing in a certain spe cific event which may become known to him, or with which he can make himself acquainted, he is not entitled to any notice unless he stipulates for it; but when it is to do a thing whicn lies within the peculiar knowledge of the opposite party, then notice ought to be given him.” And, in the same case (Parke, B.), “ When a specific act is to be done by a third party named” no notice is necessary. The same role is laid down in 1 Chit. PI. (6th Amer. ed.) 286, 287.

In the present case the point raised is simply upon the necessity of demand upon the debtor; and we think it clear that neither the terms of the guaranty nor the nature of the thing guaranteed required that any demand should be made. We have considered the question of notice, because that also was included in the instructions to the jury. There is nothing in this case to raise any question of loches by the plaintiff and prejudice to the guarantor. The circumstances show pretty conclusively that the defendant knew of the default of the principal debtor. If he did not know of it, it was from his own neglect to inform himself. He has not suffered from want of notice; and a formal demand and notice, as we have seen, are not necessary to charge him with liability, nor to entitle the plaintiff to maintain his suit. We are satisfied that the conclusions to which we have come upon the general rule as to demand and notice will best reconcile the great variety of decisions, and accord with the spirit of the relations between guarantor, guarantee and the principal debtor. Besides the cases already referred to, it may be useful to cite a few of the other authorities which sustain the positions we have sought to establish. Hitchcocks v. Humfrey, 5 Man. & Gr. 559. Walton v Mascall, 13 M. & W. 72; S. C. Ib. 452. Wildes v. Savage, 1 Story R. 22. Allen v. Rightmere, 20 Johns. 365. Douglass v. Howland, 24 Wend. 35. Brown v. Curtiss, 2 Comst. 225. Hammond v. Gilmore, 14 Conn. 479. Cooper v. Page, 24 Maine 73. Globe Bank v. Small, 25 Maine, 366. Gillighan v. Boardman, 29 Maine, 79. Train v. Jones, 11 Verm. 444. Peck v Barney, 13 Verm. 93. Thrasher v. Ely, 2 Srn. & Marsh. (Miss.) 141. Duval v. Trask, 12 Mass. 154. Salisbury v. Hale, 12 Pick. 416-424. Johnson v. Wilmarth, 13 Met. 416. Parkman v. Brewster, 15 Gray, 27. Protection Ins. Co. v. Davis, 5 Allen 54. Exceptions overruled.