Smith v. Montgomery

• Decision Date: 31 December 1848
• Citation: 3 Tex. 199
• Parties: MORGAN L. SMITH v. JAMES S. MONTGOMERY
• Court: Texas Supreme Court

3 Tex. 199

MORGAN L. SMITH

v.JAMES S. MONTGOMERY

Supreme Court of Texas.

December Term, 1848.

Appeal from Colorado County.

If the whole credit be not given to the person who comes in to answer for another, his undertaking is collateral, and his liability is only that of a guarantor.

A letter of guaranty, addressed to two persons, but delivered to, one only, and acted upon by that one without reference to the other, does not bind the writer as a guarantor to him who alone acted on the letter.

The liability of a guarantor or surety cannot be extended, by implication or otherwise, beyond the actual terms of his engagement.

Case stated in the opinion of the court.

HARRIS AND PERLEY for appellant.

The liability of Montgomery is that of a principal debtor. The promise to pay depends on the condition, only, that Smith would furnish the goods to Tennard. It is not a promise to pay if Tennard should fail, but it is an absolute promise to see him paid (which is a promise to pay himself) if the goods are furnished.

When the letter was written, and the proposition accepted by Smith, the civil law was in force in Texas; and the validity, interpretation and obligation of the contract must be determined by that law; and there is no principle better settled in the civil law than “that, in whatever manner a party binds himself, he shall be bound.” [5 Martin, 194; 2 N. S. 672; Dallam, 403; Flemming vs. Powel, this court.]

Montgomery having bound himself absolutely to pay, no demand of Tennard, or notice of non-payment, was necessary. Neither was it necessary that Smith should have given written notice to Montgomery of the acceptance of the proposition. The furnishing the goods was a sufficient acceptance. [2 N. S. 245.] The proof shows that the goods were furnished by Smith, and that Montgomery had notice of it.

The fact that Pilgrim had formerly been a partner of Smith, and that his name was also on the letter, cannot affect Smith's right to recover in this action. The letter was directed to “Col. Smith,” and it was proven that Morgan L. Smith, the plaintiff, was that person.

There was no laches or neglect on the part of Smith to collect the debt from the estate of Tennard. Smith was not bound to discuss the property of Tennard's estate--

1st. Because the proof shows that it was insolvent. The insolvency being established, the authorities are uniform that the right of the surety to claim discussion ceases, and the debt becomes one in solido against the principal and surety. [4 La. R. 7; 3 N. S. 134.]

2d. Because no property was pointed out and no money advanced. A surety may be sued before suing the principal; and his requiring a discussion will not avail him, if he have not pointed out property for discussion and advanced the expenses necessary therefor. [5 Martin, 674; 6 Martin, 562; 1 N. S. 478; 12 Martin, 378; 9 Martin, 385; 11 La. R. 136; 13 La. R. 276; 1 Poth. on Obl. 295.]

If the contract of Montgomery was only that of a surety, as is contended by the counsel for the appellee, then the statute of limitations cannot avail him; because the account, at the time this suit was instituted, was not an open account, but had been carried into judgment in the probate court against the estate of the principal debtor; and whenever the rights of the principal creditor have been ascertained, in a suit between debtor and creditor, the judgment forms res judicata between creditor and surety. [4 La. R. 529.]

As the statute has not barred or extinguished the obligation of the principal debtor, it cannot operate as a bar to extinguish the liability of the surety. Besides, this was a written obligation on the part of the surety to pay $3,000, and would not be barred until the expiration of four years. The suit was instituted in a little more than two years after the debt became due.

The authorities cited by the counsel for the appellee do not sustain the positions he has assumed. “Notice and demand on the guarantor, at any time before action brought, will be sufficient, provided he has not been prejudiced by want of notice.” [12 Pick. 133, 416;12 Peters, 497.]

Under the words, “I will warrant A. to pay a certain sum according to his agreement, in sixty days,” the guarantor was held bound on A.'s failure to pay, without demand on A. or notice to himself. [Smith vs. Ide, 9 Vernon, 301.]

A third person guarantied the payment of a note in these words: “I hereby guaranty the payment of this note in four years from its date.” It was held that this was an absolute engagement that the note should be paid by the maker or himself within the time specified, and that demand and notice were not necessary. [7 Cowen, 523.]

A suit against the principal debtor is not necessary to sustain an action against the guarantor, unless such suit is required by the very terms of the contract.

Notice of non-payment need not be given to the guarantor if the principal debtor is insolvent. [9 Serg. & R. 198;11 Wend. 100.]

WEBB for appellee.

1. When a letter of guaranty is addressed to a particular firm or individual, no other person is authorized to give a credit upon the faith of it to charge the guarantor. [Grant vs. Naylor, 4 Cranch, 224; 2 Cond. 95; Walsh vs. Beekman, 10 Johns. 180; Myers et al. vs. Edge, 7 Durnf. & East. 254; Penoyer vs. Watson, 16 Johns. 100;Allison vs. Rutledge, 5 Yerger, 193; 3 Wilson's R. 539; 4 Taunt. 623; 3 Camp. 63; 2 Supt. U. S. Dig. p. 89, sec. 30; Id. p. 96, sec. 163.]

2. The letter of Mr. Montgomery was only an offer to guaranty. It was not a contract until the offer was accepted by those to whom it was made; and, to bind the person making it, notice must have been given him, within a reasonable time, that it was accepted. [7 Peters' R. 114, 125; 10 Peters, 482, 491, 494, and on; 12 Peters, 207, 213;10 Johns. 312.]

3. The undertaking of Mr. Montgomery was only collateral; and to bind him, the terms and conditions of the offer must have been strictly pursued by those to whom the offer was made. [2 U. S. Cond. Rep. 423, 428; 17 Wend. 422.]

4. To charge the guarantor upon the letter, notice must not only have been given to him, within a reasonable time, of the acceptance of the offer, but also of the amount furnished on the guaranty. [7 Peters' R. 126; 2 U. S. Cond. R. 417, 423, 428; 5 Peters, 624, 629, 639; 2 Ala. R. 373; 1 Mason, 92, 96;16 Johns. 67; 4 Howard's Miss. R. 231.]

5. If Smith had a right to accept and act upon a letter addressed to Smith and Pilgrim, offering to guaranty for Tennard to the extent of $3,000, he had no right to extend a credit to Tennard beyond that sum. [17 Wend. 179;10 Peters, 493.] The record shows that a credit was given to Tennard of near $5,000.

6. It is an afterthought to regard Montgomery as the person to whom the credit was originally given, and it comes too late to be available to the plaintiff. If the letter had been addressed to Smith (which it was not), its very terms show that it was a collateral undertaking to see that Tennard paid; and Smith, if he acted with reference to the letter at all, must have so viewed it, because his own books show that he gave the credit to Tennard, and charged the goods to him alone. Besides, he afterwards presented the account to the administrator of Tennard as a claim against his estate. This he would not have done if the credit had been given originally and exclusively to Montgomery.

It was, then, by the plaintiff's own showing, a debt against Tennard, alleged to have been guarantied by Montgomery, and, being on an open account, it was barred by the statute of limitations when this suit was instituted. [2d and 3d sections Act of Limit. 1841, p 164.]

7. The finding of the jury is conclusive as to the facts. The questions, as to whom the letter was addressed? to whom the credit was given? and the notices (if any) to Montgomery, were all in issue, and all were found for the defendant. The correctness of this finding upon the facts was not disputed in the court below, otherwise there would have been a motion for a new trial, upon the ground that the jury found contrary to the evidence; and, there having been no such motion, it cannot be controverted. [1 Texas R. 70, 311.]

Mr. Justice WHEELER delivered the opinion of the court.

The appellant instituted suit to recover of the appellee three thousand dollars, the value of goods furnished by the plaintiff to one Tennard, on a letter of credit given by the defendant. The letter is set out in the petition as follows:

“COLORADO, Dec. 27, 1839.

Col. SMITH & PILGRIM --

Gentlemen: Mr. A. W. Tennard wishes to get some dry goods on time; if you will furnish, I will see you paid as far as to the amount of three thousand dollars.

And much oblige yours with respect,

JAMES S. MONTGOMERY.”

The petition alleges, in substance: That this letter was addressed on the back of it to the plaintiff, Smith; and that it was, by mistake, addressed upon its face to Smith & Pilgrim, for that, at its date, Pilgrim had withdrawn from the firm; that the letter was delivered to the plaintiff by Tennard; and that, in consideration of its contents, he sold and delivered to Tennard goods of the value of three thousand dollars, on time, and gave notice thereof to the defendant; that Tennard departed this life shortly afterwards; that his estate is insolvent; and that the account had been admitted by his administrator, and ranked among the acknowledged debts of the succession.

The defendant, in his answer, contests the right of the plaintiff to maintain his action on the ground that his undertaking was collateral, and only that of a guarantor or surety, and was not entered into with the plaintiff, but with the firm of Smith & Pilgrim, who alone could acquire a right of action upon it.

There were also several other grounds of defense set up in the answer, and relied on by the defendant in the court below. There was a verdict and judgment for the defendant, and the plaintiff appealed.

Of the various questions presented for our...