Gay v. Ward

• Decision Date: 16 December 1895
• Court: Connecticut Supreme Court
• Parties: GAY et al. v. WARD et al.

34 A. 1025

67 Conn. 147

GAY et al.

v. WARD et al.

Supreme Court of Errors of Connecticut.

Dec. 16, 1895.

Case reserved from superior court, Hartford county; Thayer, Judge.

Action by Erastus Gay, executor of the estate of William Gay, deceased, and another, against Susan Ward, administratrix of the estate of Augustus Ward, deceased, and others, for contribution. Reserved upon an agreed state of facts, for the advice of the supreme court. Judgment advised for defendants.

Charles E. Perkins and Arthur Perkins, for plaintiffs.

T. Henry Dewey, for Mary C. Hardy and executors of Samuel S. and Horace Cowles. Henry C. Robinson, for Susan Ward.

WHEELER, J. This case comes before us for our advice, on a reservation upon an agreed statement of facts, and with a stipulation, entered into by all the parties to the record, that all questions arising upon the pleadings or upon the agreed facts may be finally determined by this court.

On January 8, 1872, the stockholders of the Delaney & Munson Manufacturing Company, located at Farmington, Conn., executed and delivered to the National Exchange Bank of Hartford a contract of continuing guaranty in the form of a bond, the terms of which appear at length in the opinion of this court in the case of Bank v. Gay, 57 Conn. 224, 231, 17 Atl. 555, brought against one of the guarantors upon the bond. This bond guarantied to the bank "the full, prompt, and ultimate payment" of all commercial paper which the bank may "have discounted or may hereafter discount, * * * to an amount not to exceed $15,000 in all at any one time." It provided that, upon notice to the bank by one or all of the guarantors upon such instrument, such guarantor or guarantors should not be holden upon said bond for any liability created by such company subsequent to the giving of such notice. From the date of the bond, to February 9, 1888, the bank discounted commercial paper of said company, upon which date the company failed. On January 21, 1889, the bank recovered judgment against the executors of Gay, one of the guarantors upon the bond, for the sum of over $11,000, which sum, together with the expenses of the suit, the executors paid. Subsequently, Wadsworth, another guarantor upon the bond, voluntarily paid to the executors of Gay one-half of said amounts. The present action is brought by the executors of Gay and of Wadsworth, against the administratrix of Augustus Ward, a guarantor upon the bond; William Potts, administrator upon the estate of Samuel S. Cowles, a guarantor upon the bond; Horace Cowles, a son of said Samuel S. Cowles; and Mary C. Hardy, a purchaser from a distributee of the estate of Horace Cowles. Said Ward died April 6, 1883. His estate was duly settled, and distribution made December 8, 1883. Said Samuel S. Cowles died in 1873. His estate was duly settled and distribution made June 7, 1873; a part being distributed to his son, Horace Cowles, who died in 1876. His estate was duly settled and distribution made September 25, 1876. A part of the estate inherited by Horace Cowles from his father, Samuel S. Cowles, was purchased by Mary C. Hardy, from a distributee of the estate of Horace Cowles, and owned by her when she was made a party to this action. All of the discounts existing February 9, 1888, which the estate of Gay and Wadsworth paid, were made by the bank long subsequent to the death of Samuel S. Cowles, and none were renewals of discounts made in his lifetime. $5,000 of said $11,000 were discounts made by the bank after having notice of Ward's death, and $6,000 of said $11,000 were renewals of paper made after notice of Ward's death, but of paper originally discounted prior to Ward's death. The bank, Gay, and Wadsworth had immediate notice of the death of said Samuel S. Cowles and of Ward. The said manufacturing company was solvent at the time of the death of said Samuel S. Cowles and of Ward.

The stockholders of the Delaney & Munson Manufacturing Company, by pledging their individual credit to the National Exchange Bank, secured funds, through discounts made by the bank, with which to conduct its business. "To avoid the inconvenience of indorsements by several individuals upon each of a large number of original notes and the renewals thereof, the obligors made one comprehensive continuing contract of indorsement, in the form of a guaranty under their respective hands and seals." Bank v. Gay, supra. The bond constituted a contract of continuing guaranty, upon the part of its obligors or guarantors, of payment of all paper discounted by the bank up to the limit of the amount named in the bond. No consideration passed at the execution of the bond. Each discount, when made upon the credit of the guaranty, constituted a consideration, separable and divisible. No obligation arose and no liability was created until a discount was made upon the credit of the guaranty. The bond was framed to meet the contingency of the long continuation of discounts by the bank, and the extension and renewal of discounts made upon the security of its guaranty. Upon the nature of this guaranty this court expressed itself, in the case we quoted from above, as follows: "To guaranty 'full and prompt' payment would meet the case of a note, on usual bank time, actually to be paid in full at maturity. To guaranty, in addition to 'full and prompt' payment, the 'ultimate' payment, can have no other meaning than that the obligor should continue bound to the end of all substitutions, renewals, and extensions."

The bank was under no compulsion to discount the company's paper. It might, at its option, refuse to continue discounting it When it made the discounts, the guaranty of the bond attached. Each guarantor upon the bond might, upon notice in writing to the bank, terminate all liability thereafter arising under the bond. Unless the terms of the guaranty forbid, the law writes in the contract of continuing guaranty a like power to revoke the guaranty upon notice. Coultliart v. Clementson, 5 Q. B. Div. 42; Jordan v. Dobbins, 122 Mass. 168; Bank v. Strever, 18 N. Y. 502. The effect of the death of a guarantor upon a continuing guaranty has been determined differently in different jurisdictions. In Massachusetts, death is held to work a revocation of the guaranty. The court, in construing a continuing guaranty of the sale of goods, in the case of Jordan v. Dobbins, supra, said: "Death terminates the power of the deceased to act, and revokes any authority or license he may have given, if it has not been executed or acted upon. His estate is held upon any contract upon which a liability exists at the time of his death, although it may depend upon future contingencies. But it is not held for a liability which is created after his death, by the exercise of a power or authority which he might at any time revoke." See, also, Hyland v. Habich, 150 Mass. 112, 22 N. E. 765. In England, death does not work a revocation of the continuing guaranty. The case of Coulthart v. Clementson, supra, was an action brought by a bank upon a continuing guaranty against the executor of a deceased guarantor. The court said: "A guaranty like the present is not a mere mandate or authority revoked, ipso facto, by the death of the guarantor." These two cases illustrate the two views held by courts of different jurisdictions. We prefer to adopt the latter view. To adopt the Massachusetts doctrine would impose upon the guarantee the burden of knowing at all times whether or not the guarantors are in life. There could be no safety in relying upon the credit of the guarantor, unless at the moment of reliance the guarantee knew the guarantor to be in life. The practical difficulties in the way of a guaranty so construed would prevent credit being given upon it, and curtail a useful method of commercial business. Further, a guaranty of this nature is intended to continue until revoked by act of the parties or its equivalent. But, when the guarantee has...