Boyd v. Snyder , 49 Md. 325 ( 1878 )

Alvey, J.,

delivered the opinion of the Court.

In the case of the present plaintiffs against Kienzel and others, an action brought on the same obligation sued on in this case, this Court held that the obligation was several and not joint, and that a joint action against all the obligors could not he maintained. If was further held, that each obligor was bound to the extent of $2500, and that his liability could not be extended beyond that amount. 46 Md., 294.

The present is a separate action against one of the obligors; and the questions are, who are entitled to sue upon the contract? Under what circumstances can the obligors be held liable ? And what will amount to a discharge of their liability ?

The obligors or guarantors were directors of the Baltimore County Brewery, Malting and Distilling Company, and the contract recites that they had employed Peter Schneider their agent, with power and authority to purchase the malt and hops for the brewery ; and that each director of the Company had agreed to become individually responsible in the sum of $2500, “ for the malt and hops which the said manager shall purchase for the use of the said brewery, during the space of one year from the date hereof.” This recital is followed by a stipulation whereby, in consideration that Schneider would undertake the employment, and that dealers in hops and malt would sell to him upon the faith of'the obligation, they bound themselves severally in the sum of $2500, making a total of $30,000, for the payment of hops and malt which Schneider might purchase for the use of the brewery, during the space of one year ; and they further obligated themselves to pay such hop and malt bills, in the total not to exceed $30,000, or $2500 each, in manner and at the time the agent should agree to pay them. This obligation, under the hands and seals of the parties, was dated the 22nd of December, 1873. And, according to the proof in the cause, soon after its execution it was placed in the hands of the firm of S. and W. Strauss, malsters, with whom the Brewery, Malting and Distilling Company, and its agents, had had large dealings ; and it remained in their hands until produced by them on the trial of this case.

It was shown in proof that the plaintiffs, being dealers in malt, had sold to Schneider, the agent, between May 1st and September 30th, 1874, malt to the amount of $5667.50 ; and that the Messrs. Strauss, within the year from the date of the guaranty, had sold to the same agent malt to the amount of $70,000, and $55,000 of which sales were between the date of the guaranty and the 1st of May, 1874. There was proof that the plaintiffs, in selling the malt to the agent, acted on the faith of the guaranty. It was also shown, that the Messrs. Strauss had brought suit on the guaranty against the present defendant, and that, by adjustment, they had agreed, and did actually accept, $2000 in full satisfaction and discharge of the defendant’s liability on the contract of guaranty.

It is now contended by the plaintiffs in this action, that notwithstanding the defendant was required to pay, and did actually pay, the sum of $2000, to the Messrs. Strauss, under the contract of guaranty, he is still responsible to the plaintiffs, under that contract, to the extent of $2500. In other words, that the amount of the defendant’s liability on the guaranty it not exhausted by the sale of one vendor to the amount of $2500, and the actual payment of that amount by the defendant, but that the full amount of the individual liability, as fixed by the contract, enures to the benefit of each vendor respectively, irrespective of sales made by other vendors upon the faith of the guaranty. But in this construction we do not for a moment agree.

In our judgment, according to the express terms oí the contract, and the true intent of the parties signing it, the liability of each signer is limited.to $2500, irrespective of the number of persons with whom the agent may have dealt. If the construction of' the plaintiffs were adopted as the true one, then, instead of the aggregate amount of $30,000 being the limit for which the directors agreed to be bound, there would be no limit at all; and the principle of several liability would be of little or no protection to the parties signing the guaranty. The contract having already been construed to create but a several liability, the extent of that liability is exactly fixed by the terms of the contract, and the amount cannot be exceeded, no matter how many purchases may have been made.

Taking this to be the true construction of the contract, the defendant contends, that inasmuch as the contract was placed in the hands of the Messrs. Strauss, who held it for the entire period for which it was to run, and that the plaintiffs never in fact saw it during that time ; and that the Messrs. Strauss furnished on contracts with the agent malt amounting to greatly more than the aggregate limit of the obligation given by the directors, that, therefore, the plaintiffs can maintain no action on the guaranty. But, from this constrction, as from that contended for by the plaintiffs, we must dissent.

As has been observed, the guaranty sued on is not addressed to the Messrs. Strauss any more than it is to any other dealers in hops and malt. It in terms authorised any and all dealers in hops and malt to sell to the agent on its account ; and the makers of the guaranty obligated themselves, to a certain amount, to pay such hop and malt hills as the agent should contract. This contract of guaranty, though under seal and in special form", is analogous to a general letter of credit, which authorizes any person to whom it is presented to act upon the proposition therein contained. Any person, of the class and business therein described, is authorized to act on the faith of" the guaranty ; and when he does so act, a contract at once arises between him and the maker of the instrument. And being general, if it authorize more than a single transaction, it may he acted on by several persons successively, keeping within the aggregate limit specified. Union Bank of La. vs. Coster, 3 Comstock, (N. Y., 203.) And so with respect to the present guaranty ; any person, being a dealer in malt, was authorized to act on the faith of it, and being general, addressed to no particular person, several persons in succession could well contract in reference to it, and all be entitled to recover, provided no more he recovered in the aggregate than the amount specified in the contract. The fact that the instrument was kept by one of the dealers, with whom the agent made large contracts, can make no difference in its construction. It was to be kept by some person interested in its preservation, and there could be no person more proper as the custodian than the firm dealing most largely npon the faith of it. Their custody, however, did not preclude-other parties from dealing on the faith of the instrument. If, therefore, the plaintiffs, knowing of the existence of the guaranty, and its general provisions, did in fact contract with the agent, and furnish the malt, on the faith of the guaranty, then there can he no good reason why they should not have the benefit of the security, at least to the extent that it has not been exhausted by payments on other contracts within the terms of the guaranty. In what manner the rights of several parties acting on the faith of the instrument should .be adjusted inter se; whether priorities should be allowed, and under what circumstances ; are questions not now presented, and we express no opinion in regard to them. The Messrs. Strauss are now making no claim ; and so far as the defendant is concerned, it is shown by the receipt produced, that he has been fully and completely discharged from all claim made by them, on account of the guaranty, upon payment of $2000. It is said, however, that this was by way of compromise, and that inasmuch as the claim compromised was more than the $2500, the defendant’s liability under the guaranty should be regarded as extinguished. Bur this, we think, is by no means a fair mode of adjusting the rights of these parties. If the Messrs. Strauss had thought proper to release their claim altogether, or to look to the Brewery and Malting Company alone, instead of relying npon the collateral obligation of the defendant, it could hardly be contended that the defendant, as against other parties, could resort to such claim as means of exonerating himself from responsibility on the guaranty. And if he could not escape liability in such case, why should he escape in this ? ' There is really no distinction in the cases.

The next position urged by the defendant is, that no liability arose upon the guaranty, in the absence of notice from the plaintiffs of the extent of the credit given on the faith of the instrument. But this is clearly not maintainable. The present is no mere offer to guarantee, but it is an absolute, unqualified undertaking to those furnishing malt' or hops on the faith of it; and the obligation attached upon completion of the contract with the agent authorized to act in making the purchases. The case falls immediately within the principle of the cases of Canton vs. Shaw, 2 H. & G., 13, 25, and Mitchell vs. McCleary, 42 Md., 374.

With these views in regard to the construction of the contract, and the extent of the defendant’s liability thereon, it follows that we concur with the Judge of the Superior Court in his ruling on the prayers offered by the plaintiffs. We think he was entirely correct in rejecting the first and second of those prayers, and in granting the third and the fourth. And as to the prayers offered on the part of the defendant, we also concur in the rulings of the Judge. All the prayers rejected by the Court, as well those on the part of the plaintiffs as those on the part of the defendant, are clearly at variance with the views we have expressed in this opinion ; and it is not necessary to say more in regard to them than that they were properly rejected.

It only remains to notice briefly two or three questions in regard to the admissibility of evidence, presented in exceptions taken by the defendant. And the first of these is that presented by the first and second exceptions; the' first exception being taken to the question to the witness, and the second to the answer of the witness. It is only the answer that is of any importance to be noticed. The witness was one of the plaintiffs, and speaking with reference to his knowledge of the existence of the guaranty, and the reason for the conduct of his firm in contracting with the agent, he stated in answer to the question excepted to, that it was usual for the directors of the Brewery and Malting Company, to give such a bond (referring to the guaranty sued on) to their manager, to secure purchases to he made by him, the Company being of doubtful credit; and that they sold on the understanding that the bond was to be brought to them, and that they sold on the faith of the agent’s representation that there was such a bond. We can perceive no objection whatever to this testimony. The agent was certainly authorized to make contracts of purchase on the faith of the guaranty, and he was authorized to represent the fact of its existence; and the fact that it had been, to the knowledge of the witness, the previous habit or usage of the directors of the company to give such an obligation or guaranty, was but confirmatory evidence of the agent’s representation as to the existence of the guaranty upon which the plaintiffs were then requested to act. We perceive, therefore, no error in the admission of this evidence.

(Decided 28th June, 1878.)

Then, as to the third exception taken by the defendant, we have disposed of the question presented in that, in determining that the Court below committed no error in granting the plaintiffs’ fourth prayer. At whose request or demand the guaranty was executed is quite immaterial, if by its construction it embraces the dealings and transactions with the plaintiffs; and that we have shown to be the case. If this were a controversy between the Messrs. Strauss, who held the guaranty, and the plaintiffs, as to priority of security under it, the question might, possibly, be material; but in this case it is not so, and therefore the question, and the evidence sought to be elicited by it, were properly excluded.

The ruling of the Court as stated in the fourth exception was clearly right. The defendant had proved by the same witness Strauss, that all claim held by his firm against the the defendant, on account of the guaranty, had been fully satisfied and discharged by the defendant, on payment of $2000. Whether that firm held claims against Schneider, the agent, the Brewery Company, or the other signers of the guaranty, their obligations being several, was a matter that could constitute no defence to this action, and the fact being immaterial, it was properly excluded from the jury.

Upon the whole, we are of opinion that the judgment on both appeals should he affirmed.

Judgment affirmed.