McLean v. Love

• Citation: 157 So. 361,172 Miss. 168
• Decision Date: 05 November 1934
• Docket Number: 31381
• Court: United States State Supreme Court of Mississippi
• Parties: MCLEAN et al. v. LOVE et al

157 So. 361

172 Miss. 168

MCLEAN et al. v. LOVE et al

No. 31381

Supreme Court of Mississippi

November 5, 1934

Division B

Suggestion Of Error Overruled December 3, 1934.

APPEAL from chancery court of Hinds county HON. V. J. STRICKER Chancellor.

Suit by J. N. McLean and others against J. S. Love, superintendent of banks, and others. From an adverse decree, plaintiffs appeal. Affirmed.

Affirmed.

Thomas S. Bratton, of Jackson, for appellants.

Neither the promise to do nor the actual doing of that which the promisor is by law, or subsisting contract bound to do, is sufficient consideration to support a promise made to the person upon whom legal liability rests, either to induce him to perform what he is bound to do, or to make a promise so to do. For this reason if one does or promises to do merely that which the law required of him, it is no consideration for a return promise.

1 Elliott on Contracts, 366 and 369; Keith et al. v. Miles, 39 Miss. 442; Marinovich v. Kilburn, 143 Cal. 638; 13 C. J. 351; Owens Tie Company v. Bank of Woodland, 136 Miss. 114; Empire State Surety Company v. Hanson, 184 F. 58; Clark v. Miller, State Revenue Agent, 105 So. 502; Shiner v. Craft, 51 So. 884; Barlow v. Copulla, 173 S.W. 874.

Distinction must be made between cases where the contract is totally executory, or where the parties agree to abandon the original contracts and enter into a new one.

6 R. C. L. 917.

We can see no elements of estoppel in this case.

10 R. C. L. 696, 691; Yazoo Lumber Co. v. Clark, 95 Miss. 244; Scottish American Mortgage Co. v. Buckley, 88 Miss. 641; Meyer v. Meyer, 106 Miss. 638; Crawford v. Ingram, 157 Ala. 314; 6 R. C. L. 918.

A reading of the record clearly shows that the bank instead of co-operating with the guarantors as it insisted it was doing, to try to save them as much money as possible on their liability under the guaranty, started out with the fixed idea and intention to divert the security and apply it on the later dated notes which were not guaranteed by the guarantors and thus defraud the guarantors of their securities.

J. B. Hutton, Jr., of Jackson, for appellants.

The appellant, J. N. McLean, brought this action to recover an alleged overpayment, as a guarantor, under the following provision of a contract with the appellee, Merchants Bank & Trust Company and under the following letters of tender written by the attorney for the appellant:

"Whereas we, J. N. McLean, J. C. Hood, in consideration of the Merchants Bank & Trust Company's accepting the note of the Hiawatha Milling Company maturing February 1, 1930, as aforesaid, do now contract and agree that Burns Brothers under said contract of sale will on or before February 1, 1930, sell and dispose of the five hundred shares of preferred and two hundred fifty shares of common stock in the Hiawatha Milling Company deposited with the Merchants Bank & Trust Company, trustee, under this agreement, and that the Merchants Bank & Trust Company shall receive, on or before February 1, 1930, from the sale of said stock or from other collateral held by it not less than fifteen thousand dollars ($ 15,000) in cash; otherwise, each for himself and not one for another agrees to purchase from the Hiawatha Milling Company sufficient units of the undisposed part of said stock the proceeds of which are pledged to said bank--so that the Merchants Bank & Trust Company shall receive on its said indebtedness, on or before February 1, 1930, not less than fifteen thousand dollars.

"We further bind and obligate ourselves that Burns Brothers will sell on or before July 1, 1930, a sufficient portion of said stock to fully discharge said indebtedness to the Merchants Bank & Trust Company, whether evidenced by the original or a renewal note, or that said bank will collect said sum from other collateral held by it; otherwise, each for himself and not one for the other will purchase sufficient units of said stock as aforesaid . . . to discharge said indebtedness with interest thereon, each of us to acquire separately one-tenth thereof."

"March 22, 1930.

"Merchants Bank & Trust Co.

"Jackson, Mississippi.

"Gentlemen:

"Kindly let me know for Mr. J. N. McLean the exact amount inclusive of interest that Mr. McLean should pay on his written guaranty in your favor in the Hiawatha Milling Company matter.

"It is his understanding that he is a guarantor or obligor in your favor under written instrument of guaranty; and that installment payments on such obligation come due at certain times, the first being on March 1st, and the next on April 1st.

"On receiving desired information, I will at once notify Mr. McLean, who is anxious to uphold his credit in the matter, irrespective of the loss which the Hiawatha Milling Company may have sustained.

"Yours sincerely,

"H. Chalmers Alexander. "

"April 7, 1930.

"J. M. Hartfield,

"Merchants Bank & Trust Co.,

"Jackson, Mississippi.

"Dear sir:

"Pursuant to the recent conversations had with you and with Mr. G. W. Green, attorney, I now beg to enclose herein check of Mr. J. N. McLean payable to the Merchants Bank & Trust Company for seven thousand nine hundred fifty-three dollars and fifty-three cents, amount stated by you to be now the sum which Mr. McLean is obligated to pay under his executed guaranty held by you, account Hiawatha Milling Company.

"Yours very truly,

"H. Chalmers Alexander, attorney."

The action by Mr. McLean was based on the foregoing instruments of writing. The opinion contains a further statement of the facts.

A guarantor is a debtor secondarily liable upon the inability of the principal debtor to pay. His undertaking is cumulative and collateral and is designed to give security. It is an independent and separate contract governed by its own terms, as any other independent contract is.

Bishop v. Currie McGraw, 97 So. 886; Marberger v. Pott, 16 Pa. 9, 55 Am. Dec. 479; McMillan v. Bulls Head Bank, 2 Am. Rep. 323; Saint v. Wheeler & Wilson Co., 95 Ala. 362, 36 Am. St. Rep. 210.

Since the guarantor's contract is an independent contract, its construction is according to the natural and reasonable meaning of the language used.

Cahn v. Wright, 80 So. 494; Maryland Casualty Co. v. Corley's Estate, 139 So. 391; Lipscomb v. Postell, 38 Miss. 476; Hessign Ellis Co. v. Parks, 116 So. 435; Stone's Estate v. Central Republic Bank & Trust Co., 248 N.W. --.

In the present case there is no term in the guaranty contract, J. or Q., which provides that the guarantors shall assure the payment of future advances.

The guaranty stipulates the notes that were guaranteed, their dates, and amounts, and fixes a time when these sums were to be paid. The guaranty did not extend to the future loans of the Hiawatha company.

The express contract clearly requires the application of the collateral to the guaranteed notes for the benefit of the guarantors.

McMullen v. Hincle, 39 Miss. 142; Smith v. Clopton, 48 Miss. 66; Chafee v. Taliferro, 58 Miss. 544; Clopton v. Spratt, 52 Miss. 251; Barkwell v. Swann, 69 Miss. 907; Chism v. Thompson, 73 Miss. 410; Solomon v. First National Bank, 72 Miss. 854; Mayhew v. Crickett, 2 Swans. 183, 36 Eng. Rep. Full Reprint 585; Pearl v. Deacon, 1 de Gex & Jones 461; Duncan Fox & Co. v. The North & South Wales Bank et al., 43 L. T. (N.S.) 706; Dixon v. Steele, 85 L. T. 404; Smith v. Wood, 139 L. T. 350; 1 Rowlett, Principal & Surety, 266, 267.

A release of the security of a guaranteed note releases the guarantor.

Donally v. Wilson, 5 Leigh 329; Smith v. Day, 23 Vt. 656; Hidder v. Bishop, 5 R. I. 29; Montgomery v. Martin, 21 S.E. 613; Fidelity & Casualty Co. of N. Y. v. Van Dyke, 27 S.E. 709; Foerderer v. Moors, 91 F. 476; Loos v. McCormick, 95 N.Y.S. 1141; State Bank of Slayton v. Edwards, 171 N.W. 677; Miller v. Lilly, 105 S.E. 826; New Netherlands Bank of N. Y. v. Dernburg, 206 A.D. 212; Mechanics & Metals Nat. Bk. of N. Y. v. Pingree, 232 P. 5; National Discount Corporation v. Hasper, 247 N.W. 725.

A surety who pays the principal's debt is entitled to indemnification against the principal debtor, has a provable claim against the debtor, and this claim will be barred by the statute of limitations, or in case of bankruptcy by the bankrupt's discharge the claim being scheduled. The same is true of guarantors. It follows that appellant McLean was correct in law when he said he understood the dividends were paid to him because he had paid one-tenth of the guaranteed notes under his contract of guaranty.

Wainwright v. Atkins, 61 So. 454; U. S. F. & G. Co. v. White, 63 So. 329; Fidelity & Deposit Co. of Md. v. Deposit Guaranty Bank & Trust Co., 144 So. 70; Scott v. Nichols, 27 Miss. 94; Dumont v. Fry, 14 F. 293; Fidelity & Casualty Co. v. Van Dyke, 99 Ga. 542, 27 S.E. 709; Kimmel v. Lowe, 28 Minn. 265; Lipscomb v. Grace, 26 Ark. 231, 236; Smith v. Kinney, 6 Neb. 447, 454; Hayer v. Comstock, 115 Iowa 187, 88 N.W. 351, 353; In re Dillion, 100 F. 627, 629; Sec. 2958, Miss. Code 1930.

Money paid to a private individual or corporation under a mistake of fact may be recovered.

Cavendish v. Middleton, 4 Car. 1, Roll 243, 77 Eng. Rep. Reprint 725; Pritt v. Clay, 6 Beav. 503, 49 Eng. Rep. Reprint 920; Gethering v. Keighley, IX Chan. 547; Vernon v. Vawdray, 2 Atk. 119, 26 Eng. Rep. Reprint 474; Mills v. Alderburg Union, 3 Ex. 154, 154 Eng. Rep. Reprint 980.

H. Chalmers Alexander, of Jackson, for appellants.

Only by some later acceptance by Mr. McLean of a condition changing the written status of the parties (Hiawatha Milling Company the bank, Mr. McLean) could Mr. McLean lose his right to insist that the bank, before demanding any payment from him under the guaranty, must first apply the inanimate and valuable collateral security listed on the back of...