Williams v. Collins, 5 N.C. 580, 2 Car. L. Rep. 580 (1816)

July 1816 · Supreme Court of North Carolina

5 N.C. 580, 2 Car. L. Rep. 580

Williams v. Collins.

Assumpsit on the following letter written by the defendant, and addressed to the plaintiffs.

Sir,——The bearer hereof, Mr. Henry Fleury, informs me, that he is about bargaining with you for the purchase of a new vessel and a cargo for her, also for a quantity of Indian corn. In case you and he should agree, I will guarantee any contract he may enter into with you for the same or any part thereof, and am,

Sir, very respectfully, Your obedient servant.

JOSIAH COLLINS

Edenton, Nov. 2, 1803.

The material facts in the case were, that in consequence of the above letter, the contract was made, and the vessel and cargo delivered to Fleury, who was to pay for them in three several installments; for which he executed three notes,— one payable 1st January 1805, one on the 15th June 1805, and one on the 15th June 1806. These notes being unpaid, Williams instituted suit against Fleury, on the 17th August 1807, returnable to September term of the same year. A verdict was found for the plaintiff at March term 1808, and an execution issued from that term which was returned at June term ‘nothing to be found;' an alias issued which was returned at September in the same manner.

The writ in this suit issued the 9th October 1808, returnable to November of the same year, at Martin Superior Court.

On the 15th January 1807, Fleury mortgaged to creditors in New-York, property which was sold on the 19th December 1809, for £1283 7.

Fleury became entitled to property under the will of Vallett, which was found in December 1306, to the amount of £345. Fleury and Collins both lived in Edenton.

Henderson and Nash for the plaintiff.

The contract is, that the defendant will guarantee any contract which Fleury may enter into with the plaintiff. The defendant is therefore bound to the full extent that Fleury himself would have been. There is no analogy between a bill of exchange and a guaranty. In the latter, no notice is necessary. In Peil and others v. Tatlock, three years had elapsed before any notice was given; yet the plaintiff recovered—1 Bos. & Pull. 419. In Eddowes v. Neil, there was a lapse of nineteen years without notice.—4 Dallas 133. All the cases go to establish, that the guaranty, binds indefinitely; and that he who gives it is bound to take notice of the circumstances of the debtor, and to do the first act.—1 Binny 195. 8 East 243. 3 Cranch 490.

Browne, for the defendant.

Where a creditor has a right to look to two in succession, he is obliged to use due diligence against the first. This applies to all cases whatever, whether the liability has arisen from the endorsement of a bill of exchange, or from any other cause. With this difference, perhaps, that in the first case, the law merchant requires more vigilant diligence on account of the sudden changes of fortune to which mercantile men are liable.

The endorser of a note is only a warranty thereof, that the drawer will pay it, and if he does not, that the indorser will.—1 Wils. 48.

There is the same undertaking, or guaranty, on an unnegotiable instrument and due diligence, although perhaps not so strictly, is there also required.—2 Wils. 353.

The law is precisely the same with regard to a letter of guaranty. The writer only warrants the solvency of the person in whose favour he writes; and if a loss happens owing to the want of diligence of the person written to, he must bear it.—8 East 242. If the warrantee might have Saved himself and did not, he can have no recourse on the warrantor. Justice and equity require, that the person benefited by the transaction should be first applied to, to pay for that benefit. And wherever the law makes it the duty of a man to do any thing, it requires of him due diligence in doing it.

Fleury remained absent for two years after the first note became due; one year and seven months after the second; and seven months after the last became due; and the plaintiff took no step to recover the money from him until one year and two months after the last note had become due. Nor did he give the defendant any notice whatever, that the notes, or either of them, had not been paid. Surely, no one can pretend that the plaintiff used due diligence, or that the loss arising from Fleury’s insolvency was not owing to his neglect.

Of the cases cited for the plaintiff, that of Peil & als. v. Tatlock, admits the doctrine contended for on behalf of the defendant. But the Court thought “there was no want of communication with the defendant.” They further thought that no loss had been sustained, which could by any means have been avoided. The case in 4 Dallas 133, also admits the doctrine. But the Court thought that, considering the war, the situation of the parties, and the other circumstances of the case, due diligence had been used.

In the case cited from 1 Binney 195, the writer of the letter of guaranty promised to be accountable with the person in whose favour it was written. And the question now before the Court was never raised in that case. What weight will be allowed to the decisions of a Court where a cause can be discussed at great length and decided without even once glancing at the principal question arising from the facts, is not for me to say.

Nash, in reply,

entered into a particular examination and analysis of the cases before cited for the plaintiff, for the purpose of showing that the law relative to bills of exchange was in no respect applicable to letters of guaranty. As to the case cited for the defendant from 1 Wils. it was on a promissory note endorsed; and of course, subject to the rules which govern bills of exchange. The case from 2 Wils. was where the drawer of the order had effects in the hands of the drawee, and a demand and notice were consequently indispensable. The plaintiff here was under no obligation to concern himself about Fleury’s circumstances, who was not contracted with on his own credit, but on Collins’s. The latter, therefore, should have observed the transactions of Fleury, and apprised the plaintiff of any probable loss. Not having done so, he must be supposed to have approved of the moderate forbearance exercised by the plaintiff. It is a part of the case, that Collins and Fleury resided in the same town; the plaintiff lived in Martin county.

Seawell, J.

delivered the opinion of a majority of the Court:

The present action is brought for a breach of defendant’s agreement, to which the defendant has pleaded, the ‘general issue and act of limitation.’ The agreement which the plaintiff exhibits is a letter written by the defendant to the plaintiff, in which the defendant states, that he will guarantee any contract which one Fleury may make with the plaintiff for a vessel and cargo, or any part thereof. Fleury makes a contract for the vessel and cargo, payable in instalments, the last of which was within three years of the commencement of the present action. And the defence relied upon is, that Fleury was able to have complied with his own engagement if the plaintiff had used due diligence, but that he is now, and has been for some time, insolvent; and that the loss should be borne by the plaintiff, who might by proper vigilance have obtained payment from Fleury.

In the opinion of a majority of the Court, the case is completely stripped of all difficulty by examining what was the nature and extent of the guaranty. It was not, as seems to be supported by the argument, that Fleury should be able to comply with any contract he might make; but that he should comply. The defendant, therefore, to all legal consequences, became pledged, absolutely to the same extent that Fleury was bound, as soon as the plaintiff parted with his property; for it is apparent, from the terms in which the letter is written, that it was the defendant who was principally relied on. And as to the failure of Fleury, that was an event which it was incumbent on the defendant to guard against; and it behoved him, to hasten the plaintiff, or make such other provision for his own safety as Fleury’s circumstances would afford. But as to the plaintiff, he had from the beginning provided against that, by requiring some other person to be bound to him, who should be able to make good the contract of Fleury, though Fleury himself might fail. That the extent of the defendant’s liability, as to every consequence in law, was the same as it he had himself signed the obligations which Fleury executed to the plaintiff; and that if his situation as a surety, or warrantor was to avail him any thing, he must himself, entertain and express an anxiety that suit should be brought against Fleury, otherwise the plaintiff need not; for indeed the fact may be, that the plaintiff considered the defendant and Fleury equally interested in the purchase, as a joint concern. As to the act of limitation, that is out of the question. The plaintiff could maintain but one action upon the agreement, and to have the full benefit of it, he must wait till the last failure of Fleury. Upon the whole, we think there is not the least analogy between this case and those which were cited for defendant.

The guaranty made by an endorser is a conditional one, this an absolute one. The guaranty that the purchaser of cotton should be indemnified upon a resale, can only be understood to mean an engagement that the price of the article shall be such, that if the purchaser chooses, he may have an opportunity of saving himself. The engagement in the present case to be analogous to those, must be, that defendant guaranteed Fleury should be able to comply with his engagement. He has however thought proper to warrant that he should comply, and, consequently, as Fleury has failed, the defendant is bound to perform his own; and therefore there must be judgment for the plaintiff.

Taylor, C. J.

I formerly considered this case upon the whole statement, and made up an opinion when it was usual for the Court to pronounce upon the record as sent up, without distinguishing, as we now do, between questions of law and those cases which contain only evidence or facts exclusively belonging to a jury. From the view I have taken, of the case, it does not appear to me within our jurisdiction ; as it presents only the question, whether the debt has been lost by the want of diligence in the plaintiff; and though, this is sometimes called in the books a mixed question of law and fact, and more frequently a question of law, yet I believe that the practice of this State has, with much uniformity, treated it as a question of fact to be decided by the jury. My brothers think that the character of this contract excludes the question, and that the defendant is bound to make good Fleury’s engagement, to the same extent as if he had signed the notes himself. I am of opinion that there is a distinction founded in justice and recognized by law, between an original debtor and a surety or guarantee; and that whenever a contract is shown in Court, which upon the face of it, exhibits the defendant in the character of a surety, certain principles immediately apply to it; one of which imposes on the creditor the duty of showing that nothing has been done on his part tending to exonerate the principal and burthen the security.

Upon a joint and several bond, although one of the parties may in truth be a surety, yet in a court of law both are principals, because there is no way of getting at the transaction. But take the same case into a court of equity, and a difference will be made between the principal and surety ; for if it can be shown that any act has been done by the obligee that may injure the surety, the Court will lay hold of it in favour of the surety.—4 Vesey, jr. 824. 2 Bro. Ch. Ca. 578. 2 Vesey, jr. 540.

In the case before us, the true nature of the relation between the defendant and the plaintiff is shown by the letter; and if upon the question being submitted to a jury, they should be of opinion that the plaintiff might have recovered his debt from him who was benefited, by the contract, and that the loss was occasioned by the plaintiff’s want of diligence, I should think he ought to bear it. For, to use the language of Lord Loughborough, in a case depending on the same principles, “ it is a breach of the obligation in con science and honesty, and it is not too much to say of that objection in point of law.”—Nesbit v. Smith. 2 Bro. Ch. Ca. 578. By a guaranty I understand a contract of indemnity which binds the party who gives it, only in default in him for whose benefit it is given. And from, the nature of such a contract it results, that the debtor must be resorted to in the first instance.

In respect to the degree of diligence, that must depend on the circumstances of each case; and though I am not disposed to think that the strict rules relative to bills of exchange are applicable to this case, yet I am persuaded that the justice on which such rules are founded ought to have a correspondent effect wherever a man is sued for a debt for which he was not originally liable. The plaintiff in this case has considered the contract in the same light; for he has received part payment from Fleury, and prosecuted a suit for the residue.