N. O. Nelson Mfg. Co. v. Shreve

• Decision Date: 13 May 1902
• Citation: 94 Mo. App. 518,68 S.W. 376
• Parties: N. O. NELSON MFG. CO. v. SHREVE.
• Court: Missouri Court of Appeals

68 S.W. 376

94 Mo. App. 518

N. O. NELSON MFG. CO. v. SHREVE.

Court of Appeals at St. Louis, Missouri.

May 13, 1902.

GUARANTY — ACCEPTANCE — NOTICE — NECESSITY — EVIDENCE — INSTRUCTIONS — BURDEN OF PROOF.

1. Where a guaranty is given in response to a request for it by the creditor, no notice to the guarantor that he has been accepted is necessary to bind him.

2. Where a guarantor offers to become liable for a third party's obligation, and the facts show that he has actual notice that his offer has been accepted, no formal notice of acceptance is necessary to bind him.

3. In an action on a contract of guaranty, letters addressed to the principal debtor by the creditor with respect to the guaranty are admissible as tending to prove the contract between the parties, where it appears that they were shown to the guarantor, or that the contents were communicated to him.

4. In an action on a guaranty, a charge that if plaintiff, within a reasonable time, notified defendant of his acceptance as guarantor, etc., defendant was liable, was error where the uncontradicted evidence showed that plaintiff did not notify defendant of his acceptance.

5. Refusal of a requested instruction was not ground for reversal where one more favorable to appellant was given by the court at his request.

6. Where a guarantee relies on the insolvency of the principal debtor as an excuse for not notifying the guarantor of demand of payment and default, the burden is on him to show it.

Appeal from circuit court, Pike county; David H. Eby, Judge.

Action on a guaranty by the N. O. Nelson Manufacturing Company against Cyrus O. Shreve. Judgment for plaintiff, and defendant appeals. Reversed.

James W. Reynolds, for appellant. Tapley & Fitzgerald, for respondent.

GOODE, J.

Respondent alleged that it sold to one Isaac C. Shreve on a credit of 30 days, certain goods, wares, and merchandise of the value of $412.62, and attached an itemized account thereof to the petition; that the defendant, in consideration that plaintiff should sell to said Isaac C. Shreve said goods, wares, and merchandise, promised in writing to be responsible for the payment by Isaac C. Shreve of the prices of said merchandise; that the merchandise was sold and delivered on the faith of defendant's guaranty, and plaintiff duly notified defendant thereof; that, when due, payment of the account was demanded of the debtor, and he failed to pay the same, as to all of which defendant had notice; that Isaac O. Shreve was at the time, and still is, insolvent, whereby defendant became liable to pay the indebtedness he had guarantied, but, though often requested, failed and refused to pay it. Defendant answered, admitting the execution of the instrument of guaranty, but averring that plaintiff did not notify him in a reasonable time that he had been accepted as guarantor, and that he had no knowledge or information that he had been so accepted until the 19th day of January, 1900. Further, that he received no notice of the presentation of plaintiff's account, or any of the bills composing the same, to Isaac C. Shreve and of his failure to pay, until long after the bills were due, to wit, the date last named. Instruments similar to the one sued on have sometimes been hell to be original promises; but the evidence shows this undertaking was understood by both parties to be a guaranty of Isaac Shreve's account, and so both parties treat it. It was a letter addressed by Cyrus D. Shreve to the plaintiff of the following tenor: "St. Louis, Mo., 6-28-99. Messrs N. O. Nelson Mnfg. Co., St. Louis, Mo. — Dear Sirs: Your letter to my son is before me. In reply will say, you let him have such amount of goods as he needs until further orders, and I will stand good to you for the same. Also what he owes you at the present time. Yours very respectfully, C. D. Shreve." All of the merchandise for the price of which this action was begun was sold after the receipt of the aforesaid letter of credit on different dates from the 20th day of September, 1899, to the 20th day of November. The letter appears to have been the outcome of a certain correspondence between the plaintiff and the principal debtor, Isaac C. Shreve, and the defendant, Cyrus D. Shreve. Isaac C. Shreve was engaged in the plumbing business in the city of Louisiana, Mo., and had been trading with the plaintiff for some time, and in June, 1899, had a considerable account with it. He had no commercial rating, which caused the plaintiff, on the receipt of an order from him on the 22d day of June, to answer as follows: "June 22, 1899. I. C. Shreve, Esq., Louisiana, Mo. — Dear Sir: We have your order of the 21st inst., which will receive our prompt attention. By referring to your account we find that you owe us a balance on April account of $114.07, together with shipments made you during May and June, bringing the total amount up to date $265.00. You mentioned to the writer when you were in our office several days ago that Mr. C. D. Shreve had expressed his willingness to guaranty the payment of our account against you, and, as it has now grown to be a right considerable amount, and we hope will be larger in the future, we would thank you to have him write us to that effect. Awaiting your reply, we are, yours truly, N. O. Nelson Mnfg. Co." This letter was excluded by the circuit court when offered by the plaintiff, on the defendant's objection that it was a copy, and not addressed to the defendant, and that there was no evidence that defendant ever knew of it; but it, and perhaps another letter or two, passed between the parties prior to the one containing the guaranty which is the basis of the present action. While notice of the amount of advances under a guaranty is sometimes required at the close of the transactions (Douglass v. Reynolds, 7 Pet. 113, 8 L. Ed. 626; Reynolds v. Douglass, 12 Pet. 497, 9 L. Ed. 1171), in this case appellant counts only on the failure of the respondent to notify him it accepted his offer to guaranty his son's account, and its failure to give him timely notice of his son's default, as valid defenses and good causes for reversing the judgment, and those points will be considered.

Generally speaking, it may be said that offers to guaranty the payment of future advances of money or property to a person must be accepted by the parties to whom they are made in order to charge the offerers with liability. Rankin v. Childs, 9 Mo. 675; Bank v. Shine, 48 Mo. 456, 8 Am. Rep. 112; Taylor v. Shouse, 73 Mo. 361. Two reasons are assigned for this rule. One is that a guarantor is entitled to notice of acceptance in order that he may have a clear knowledge of his relations to the principal debtor and to the creditor, and take such precautions to protect himself from loss as may be possible and proper. The other reason is that notice of acceptance is necessary in order to show the minds of the offerer and of him to whom the offer was made met and united in a contract, for possibly the offer to guaranty may not be assented to or acted upon. Both reasons are accepted as satisfactory by most courts of this country as to the propriety of the rule as it generally obtains; but, like all legal rules, it is qualified by circumstances, and exceptions are allowed when the reasons for observing it fail. Occasionally the facts show the minds of the guarantor and guarantee met without a formal notice of acceptance of the proposal to guaranty, and also that the guarantor knew his proposal had been acted on, and he had thereby become responsible; as when his promise was...