Bloom v. Bender

• Decision Date: 02 July 1957
• Citation: 313 P.2d 568,48 Cal.2d 793
• Court: California Supreme Court
• Parties: Samuel S. BLOOM, Plaintiff and Respondent, v. Bess BENDER, an individual, Defendant and Appellant. L. A. 24508.

Page 568

313 P.2d 568

48 Cal.2d 793

Samuel S. BLOOM, Plaintiff and Respondent, v. Bess BENDER, an individual, Defendant and Appellant.

L. A. 24508.

Supreme Court of California, In Bank.

July 2, 1957.

Rehearing Denied July 31, 1957.

Simon, Brown & Arnold, Palm Springs, and Merrill Brown, Cathedral City, for appellant.

Milton D. Klein and Gerald A. Margolis, Los Angeles, for respondent.

Morrison, Foerster, Holloway, Shuman & Clark, J. F. Shuman and Howard M. Downs, San Francisco, as amici curiae on behalf of respondent.

SCHAUER, Justice.

From a judgment for plaintiff in his action to recover on a continuing guarantee, defendant appeals, claiming that, for reasons hereinafter specified, her liability as guarantor had terminated. We have concluded that, under the provisions of the agreement and the applicable principles of the law of suretyship, ¹ defendant's contentions are not supportable, and the judgment for plaintiff should therefore be affirmed.

Stipulated facts are as follows:

On April 18, 1947, defendant executed a guarantee addressed to Crompton-Richmond Co., Inc. (hereinafter referred to as Company). This agreement, reduced to its material terms, provides as follows:

'For and in consideration of * * * One Dollar * * * and * * * your extending credit * * * to Midwest Sportswear Manufacturing Co. Inc. (hereinafter termed Midwest) * * * the undersigned * * * do(es) hereby guarantee unto you, unconditionally, the prompt payment or settlement at maturity of any and all amounts owing or that may be hereafter owing to you by * * * (Midwest) on the terms as stated on the bill or bills rendered by you * * * to the extent of Unlimited Dollars ($_ _), on all purchases. * * *

'The liability hereby assumed shall not be affected by any forbearance by you, or by the giving of any extension of time or by any other modification of any sale, contract, account or obligation or instrument in connection therewith, or by the acceptance of any settlement or composition offered by * * * (Midwest), either in liquidation, readjustment, receivership, bankruptcy or otherwise.

'It being also understood and agreed that you are not required to give notices to the undersigned of the different purchases, orders or contracts, nor the amounts thereof, nor of any failure or omission on the part of * * * (Midwest) to meet all payments or obligations as they mature, and that immediately upon a notice of default in payment or settlement of any bill or bills by * * * (Midwest) the undersigned * * * will pay to you without question, the amount of such bill or bills * * *

'This is to be construed as a continuing and binding guarantee until revoked by me in writing * * *'

During the period from April 18, 1947, to November 30, 1949, Midwest became indebted to Company on an open book account for goods purchased in the amount of $5,031.03. Thereafter on April 16, 1951, Company signed a document entitled 'Release' pursuant to a 'general assignment for the benefit of its creditors' entered into by Midwest. By this document Company agreed to 'accept its prorata and proportionate dividend, if any, under said assignment * * * as an accord and satisfaction of and release, discharge and acquittance of any and all claims, demands, obligations and liabilities existing in favor of * * * (Company) as an extending creditor, as against * * * (Midwest).' Under the composition agreement the prorata dividend received by Company was $321.99, which sum was applied against the total amount due, leaving an unpaid balance of $4,709.04.

On June 10, 1954, plaintiff, as assignee of Company, commenced the present action on the guarantee to recover such unpaid balance. The trial court found that at the time of the filing of the action, the statute of limitations (Code Civ.Proc., § 337) barred any cause of action by plaintiff of Company against Midwest, but that defendant was outside of California from on or about October 1, 1951, until on or about November 1, 1952, during which time the statute of limitations on her guarantee was tolled. The court also determined that the release executed by Company did not discharge defendant, and that her agreement was a continuing guarantee.

The trial court concluded that even though the statute of limitations had run against Midwest, the obligation of defendant 'is a separate and distinct contract' on which the statute of limitations had not run and that defendant guarantor was not exonerated by the release of the principal debtor since she had expressly consented to such release. Judgment in favor of plaintiff for the full amount claimed was entered against defendant and from this judgment she appeals.

Five grounds are specified in support of defendant's contention that the judgment should be reversed: (1) the running of the statute of limitations against the obligation of the principal debtor terminated the obligation of the guarantor; (2) the obligation of the guarantor is itself barred by the statute of limitations; (3) the Company failed to give notice to the guarantor of Midwest's default in payment as assertedly required by the agreement; (4) the release of the principal debtor by Company terminated the guarantee; and (5) the obligation of the guarantor as determined by the trial court, exceeds the obligation of the principal and, hence, transgresses the provisions of section 2809 of the Civil Code. These contentions will be considered seriatim.

Running of Statute of Limitations against Principal as Barring Action against Surety. In 1939, by amendment to section 2787 of the Civil Code, the Legislature abolished the distinction between sureties and guarantors. Prior to that time it had been held in California that the bar of the statute of limitations against an action on the obligation of a principal foreclosed recovery from his guarantor (Anderson v. Shaffer (1929), 98 Cal.App. 457, 460(3), 277 P. 185; see also Santa Ana Sugar Co. v. Smith (1931), 116 Cal.App. 422, 431, 2 P.2d 866), but did not prevent recovery from his surety (Gaffigan v. Lawton (1934), 1 Cal.2d 722, 723(3), 37 P.2d 79; Gill v. Johnson (1935), 8 Cal.App.2d 369, 372(3), 48 P.2d 139). Section 2787, as amended in 1939, provides in material part that 'The distinction between sureties and guarantors is hereby abolished. * * * Guaranties of collection and continuing guaranties are forms of suretyship obligations, and except in so far as necessary in order to give effect to provisions specially relating thereto, shall be subject to all provisions of law relating to suretyships in general.' Although there is a substantial conflict of authority in other jurisdictions as to whether a surety is discharged when the cause of action against his principal is barred by the statute of limitations (see 72 C.J.S. Principal and Surety § 233, p. 692), this court has recognized that 'the more reasonable and logical rule, supported by a number of cases, is that the obligation of the surety remains notwithstanding the fact that the statute of limitations has run on the obligation of the principal. (Citations.)' (Gaffigan v. Lawton (1934), supra, 1 Cal.2d 722, 723-724(3), 37 P.2d 79, see also Gill v. Johnson (1935), supra, 8 Cal.App.2d 369, 372(3), 48 P.2d 139; Rest., Security, § 120, comment a, and § 130, comment a on subsection (1) and illustration 2.) Thus, in California, the obligation of defendant on her continuing guarantee is not barred merely because the statute of limitations had run against the obligation of the principal debtor, Midwest.

Statute of Limitations on the Guarantee. The debt of Midwest to Company for goods purchased accrued between April 18, 1947, and November 30, 1949. There is nothing in the record to establish the exact date of purchase of any of the goods which comprise the source of the total debt. The instant action was commenced on June 10, 1954, more than four years after the date of the last purchase, and defendant relies on the four-year statute of limitations (Code Civ.Proc., § 337) as barring this action on the guarantee. However, defendant does not challenge the trial court's determination that the running of the statute was tolled during a thirteen-month period when defendant was found to have been absent from the state. (Code Civ.Proc., § 351.) As a consequence, plaintiff's action against defendant is not barred unless it accrued prior to May 11, 1949.

Defendant argues that at least some of the goods in question were purchased prior to May 11, 1949, and that the action as to those items is therefore barred. It is contended that since it cannot be determined what portion of the total debt is attributable to the items for which recovery is barred, the entire judgment must be reversed for inability to determine whether the evidence supports the judgment with reference to the purchases after May 11, 1949. To uphold this argument defendant cites Williams v. Dougan (1950), 100 Cal.App.2d 421, 427(1), 223 P.2d 631. But the present situaton, unlike the Williams case, does not involve the problem of determining the value of the separate items which make up the account. The parties here stipulated, and the trial court found, that the indebtedness in question was incurred on an 'open book account.' Section 337, subdivision, 2, of the Code of Civil Procedure provides that the statute of limitations on an action to recover a balance due on an open account based on more than one item begins to run from the date of the last item comprising the account. The general rule is that the liability of a surety (in the absence of a different contractual provision) accrues at the same time as that of the principal, or upon default of the principal. (Brock v. Western Nat. Indem. Co. (1955), 132 Cal.App.2d 10, 16(2), 281 P.2d 571; 23 Cal.Jur. 1049, § 42; 72 C.J.S. Principal and Surety § 99, p. 577; Civ.Code, § 2807.) The terms of the agreement sued on here do not relieve defendant of the burden of the general rule. Since the cause of action...