Midland Nat. Bank v. Security Elevator Co., 24036.

• Decision Date: 21 November 1924
• Docket Number: No. 24036.,24036.
• Citation: 161 Minn. 30,200 N.W. 851
• Court: Minnesota Supreme Court
• Parties: MIDLAND NAT. BANK OF MINNEAPOLIS v. SECURITY ELEVATOR CO. et al.

200 N.W. 851

161 Minn. 30

MIDLAND NAT. BANK OF MINNEAPOLIS v. SECURITY ELEVATOR CO. et al.

No. 24036.

Supreme Court of Minnesota.

November 21, 1924.

Appeal from District Court, Hennepin County; J. W. Molyneaux, Judge.

Action by the Midland National Bank of Minneapolis against the Security Elevator Company, Orrin Kipp, and others. Verdict was directed for plaintiff, and from an order denying his motion for judgment notwithstanding the verdict, or a new trial, the last-named defendant appeals. Affirmed.

Chester L. Caldwell and Harris Richardson, both of St. Paul, for appellant.

Allen & Fletcher, of Minneapolis, for respondent.

STONE, J.

Action on a guaranty of indebtedness of defendant Security Elevator Company to plaintiff. Defendant Kipp alone appeals from an order denying his motion for judgment notwithstanding the verdict or a new trial, after the direction of a verdict for plaintiff for the full amount claimed.

The indebtedness for which recovery is sought is evidenced by two notes of the elevator company to plaintiff, one of December 22, 1921, for $25,000, and another of December 27, 1921, for $25,000. Only small payments have been made, so that defendant (appellant Kipp will be so referred to) is liable, if at all, for almost the entire debt. He is not a joint maker or indorser of either of the notes and is under no liability unless it was created and continues by reason of his contract of guaranty.

The contract bears date of April 12, 1916. It had been in existence more than five years before the execution of the notes. It is signed by appellant and four other individuals, one of whom was Harry F. Weis, now deceased. Its expressed consideration was "credit given and to be given" to the elevator company. The notes indisputably evidence a kind of indebtedness covered by the guaranty, which provides that "no extension of the time of payment or the release or surrender of other security * * * shall affect the liability of the guarantors," which was limited to $100,000. The concluding paragraph of the guaranty is as follows:

"I reserve the right to terminate my liability on this guarantee by written notice thereof to the bank, except as to obligations and indebtedness incurred by the debtor prior to such notice; but I agree nothing shall affect my liability on this guarantee except such notice, or the surrender or cancellation of this guarantee by the bank."

The indebtedness and written guaranty were proved, and upon the case so made must stand the directed verdict for plaintiff. It is attacked upon several grounds which will be considered in their order.

1. The argument that the action is upon the notes and not upon the guaranty, and that in consequence there can be no recovery against defendant because he did not sign the notes, is without merit. The complaint declares expressly upon the guaranty. It is immaterial that the maker of the notes is joined as defendant, and recovery sought against it upon the principal obligation. In a case of this kind it is not only proper, it is commendable, to sue both principal debtor and guarantor in the same action. No longer are the delay and expense of two actions necessary where one will do the work. That was established here in Hammel v. Beardsley, 31 Minn. 314, 17 N. W. 858, followed in Lucy v. Wilkins, 33 Minn. 21, 21 N. W. 849. A more recent decision to the same effect is that in People's Cooperative Store v. Blegen (Minn.) 198 N. W. 425.

It is wholly immaterial so far as principle is concerned, and we are concerned with principle and not with technicality, that the obligation of principal debtor and guarantor are not expressed by the same instrument. It makes no difference how many separate and differing writings there may be so long as there is identity of obligation. No other result is permitted by our statute, section 7683, G. S. 1913, whereby persons severally liable upon the "same obligation" may be joined in the same action at the option of the plaintiff. Under section 7916, G. S. 1913, "all parties to a joint obligation including negotiable paper * * * and all contracts upon which they are liable jointly" may be sued thereon jointly. If judgment goes against all the parties and is paid by a guarantor, he may keep the judgment alive and enforce it against the principal debtor, under section 7915, G. S. 1913. The one action against both principal and guarantor is not only commended by its simple common sense. It is authorized by statute.

The foregoing has to do, of course, with a guaranty of payment. A guaranty of collection is essentially a different undertaking, the obligation of which requires the creditor to exhaust his remedies against the principal (unless insolvency renders it futile), as a condition precedent to proceeding against the guarantor. Wyman, Partridge & Co. v. Bible, 150 Minn. 26, 184 N. W. 45.

2. Next it is argued that there is no proof that the guaranty ever became effective contractually because there was no showing that plaintiff notified defendant of its acceptance. The language of the instrument is not that of mere offer, but of completed contractual assent. It expresses consideration. It speaks as an effective contract. It considers the liability of the guarantors as already existing. The only notice it requires is one from a guarantor to terminate, rather than one from the guarantee to initiate, the contractual obligation. It is well within the rule of Stone-Ordean-Wells Co. v. Helmer, 142 Minn. 263, 171 N. W. 924. For the reasons there stated, proof of acceptance was not required.

We would be content to let the case, on this point, rest there, but for much distinguished authority which is urged upon us to the contrary. It cannot be ignored. We refer to the many cases which hold that, in case of a guaranty of future advances, notice to the guarantor of the guarantee's acceptance is prerequisite to the completion of the contract. Notable among these decisions are Adams v. Jones, 12 Pet. 207, 9 L. Ed. 1058; Davis v. Wells Fargo & Co., 104 U. S. 159, 26 L. Ed. 686; and Davis Sewing Machine Co. v. Richards, 115 U. S. 524, 6 S. Ct. 173, 29 L. Ed. 480. It would be easy perhaps to distinguish this case. But we are met by a doctrine which we cannot approve, and the candid course is to examine it and state the grounds of our disapproval.

If the instrument before us could be construed as only an offer of guaranty, its language still would compel the conclusion that it was an offer of a promise for an act; that the performance of the act, the extension of credit to the elevator company, alone would have been sufficient acceptance without notice to plaintiff.

We cannot attempt now to analyze the decisions which, in such a case, demand proof of communication of acceptance to the offeror. But is it not clear that such a result ignores the fact, in many of the cases, that the offer of guaranty under consideration did not require a communication of the fact of acceptance to the offeror, but, on the other hand, contemplated an acceptance, by the mere act of the offeree; the act being the extension of credit referred to in the offer?

The rule, against which we may be deciding this case, received one of its earliest pronouncements by Mr. Justice Story in Adams v. Jones, 12 Pet. 207, 9 L. Ed. 1058. The question presented was whether, upon a letter of guaranty addressed to a particular person, or to persons generally, for a future credit to be given to the party in whose favor it was drawn, notice was necessary to be given to the guarantor that the person giving the credit had accepted or acted upon the guaranty and given the credit on the faith of it. The court was "all of the opinion" that it was necessary.

The holding has been much followed by the Supreme Court of the United States and in many of the states, the cases from which it is not necessary here to cite. (Most of them are referred to in the annotations hereinafter mentioned.) We decline to follow because we consider the rule contrary to the simple and elementary proposition of the law of contracts that —

"Where the offer contemplates the performance or forebearance from an act as the consideration of the promise of the offeror, the performance or forebearance is an acceptance, unless the offeror expressly or impliedly prescribes that the acceptance must be communicated." Clark on Contracts (3d Ed.) 27.

A simple illustration is the supposed case of A.'s saying to B., "If you want my horse for $200, go to the stable and get him." If, without a word to A., B. takes the horse, the contract is complete. In such a case communication of the acceptance to the offeror has never been suggested as prerequisite to the completion of the contract of sale.

The proposition was put thus in Carlill v. Carbolic Smoke Ball Co., 62 Law Journal (1893) 257 (263):

"I suppose there can be no doubt that where a person in an offer made by him to another person expressly or impliedly intimates a particular mode of acceptance as sufficient to make the bargain binding, it is only necessary for the other person to whom such offer is made to follow the indicated method of acceptance; and if the person making the offer expressly or impliedly intimates in his offer that it will be sufficient to act on the proposal without communicating an acceptance of it back again to himself, performance of the condition is a sufficient acceptance without notification."

There is no reason why that simple and unexceptionable rule should not apply to the conventional, blanket guaranty frequently given to bankers and merchants. Seldom, if ever, do they require notice of acceptance. The act of extending the credit, standing alone, without notice to the guarantor, is sufficient acceptance of his undertaking. That is so because the offer does not require such notice or anything other than or additional to the act of the creditor in extending credit to the principal debtor as a binding acceptance.

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