Rector v. McCarthy

• Citation: 33 S.W. 633,61 Ark. 420
• Parties: RECTOR v. MCCARTHY
• Decision Date: 04 January 1896
• Court: Supreme Court of Arkansas

33 S.W. 633

61 Ark. 420

RECTOR v. MCCARTHY

Supreme Court of Arkansas

January 4, 1896

Appeal from Crittenden Circuit Court in Chancery, JAMES E. RIDDICK Judge.

Judgment affirmed.

Messrs Rose, Hemingway & Rose, for appellant.

The guaranty in this case was a continuing one, running until the notes were paid. The contract was that the appellees should pay the interest on the notes, which by terms was interest from date until paid. 31 Ark. 626; 40 id. 120; 32 id. 572; Ib. 616; Id. 165; 36 id. 480; 49 id. 427; 51 id 204. The court below misconceived the effect of 43 N.Y. 194 and 44 id. 677. In those cases there was no contract to pay interest after maturity. Guarantors are liable for the interest on notes the same as the makers. Perley on Interest, 15; 2 Col. 596; 1 Brandt, Suretyship & Guaranty, secs. 157, 158, 159, 160.

Messrs. S. R. Cockrill and Ashley Cockrill, for appellees.

A guaranty is construed strictly in favor of the guarantor, and must be construed so as to give effect to the intention of the parties as gathered from the surrounding circumstances. 48 Ark. 442; Brandt, Suretyship & Guaranty, sec. 93; 42 U.S. 169, 11 L. ed. 89; 35 U.S. 493, 9 L. ed. 507; 41 U.S. 528. 10 L. ed. 1056; Baylies, Sureties & Guarantors, pp. 6, 124; 73 N.Y. 335. If the guaranty extends beyond the date of the maturity of the notes, it extends forever. The guarantors would not have even the poor privilege of discharging their obligation by the payment of the principal, for they are not parties to the note, and a creditor is not bound to accept his debt from a stranger to the contract. Can it be possible that the parties contemplated that interest should thus run on forever? 54 Ark. 229; 1 Brandt, Suretyship & Guaranty, secs. 167-179. The legal presumption was that the maker would discharge the notes when they became due. The guarantors contracted with reference to that fact. 43 N.Y. 244; 1 Brandt, Suretyship & Guaranty, secs. 166-175; 12 Mich. 297. Every person is supposed to have some regard for his own interest; and it is not reasonable to presume that any man of ordinary prudence would become surety for another, without limitation as to time or amount, unless he has done so in express terms or by clear implication. 24 Wend. 82; 2 Watts & S. 237; 13 Barb. 158; 76 Me. 345; 32 S.C. 354; 32 Ohio St. 324; 30. Am. Rep. 572; 39 Ohio St. 324; 48 Am. Rep. 454; 107 N.Y. 565.

OPINION

BUNN, C. J.

Sam J. Churchill executed to appellant his two promissory notes, in the following form: "[$ 1083.33] -- Little Rock, Ark., Jan. 1, 1890. On or before the 1st day of January, 1892, for value received, I promise to pay H. M. Rector one thousand and eighty-three dollars and thirty-three cents, with interest at the rate of ten per cent. per annum from date until paid; interest payable annually. As witness my hand, the date above written. Sam J. Churchill." Upon this note the appellees made the following guaranty: "We guaranty the payment of the interest on the above note. [Signed] McCarthy & Joyce."

"It is agreed that the two notes were given by Sam J. Churchill for a lot of stock and farming implements on what was known as the plaintiff's farm, in Pulaski county, Arkansas, which he had leased from the plaintiff for three years from date of notes, and that the said Sam J. Churchill also executed a mortgage on said stock and property to secure the said notes; that the said Sam J. Churchill abandoned the Rector farm, which he had leased, and failed to pay the first note due for said stock, and thereupon the plaintiff, H. M. Rector, through the trustee in the deed of trust securing said notes, took possession of the said stock and farm property, and sold it, and appropriated the proceeds in part payment of the mortgage debt. This sale was had in February, 1891, and by said sale $ 173.78 was paid on the note in suit first maturing, such payment being credited as of February 17, 1891.

"It is further agreed that the guaranty of interest, as written upon said notes, was written by the defendants in due course of their business as merchants, and for the purpose of enabling Sam J. Churchill to obtain the stock and farm implements for the purpose of farming, in order that he might have an opportunity thereby to pay certain prior indebtedness which he owed the guarantors.

"It is further agreed that no action has been taken by the plaintiff, H. M. Rector, to enforce the collection by law of the said notes against Sam J. Churchill since their maturity, and that the said Churchill has been entirely insolvent, and without visible property, since the maturity of said notes and since said mortgage sale."

Appellant sued the appellees for installments of interest accruing before and after the maturity of the notes, and on the trial before the court, sitting as a jury, asked the following declarations of law: "The guaranty in suit is a continuing guaranty, and running until the notes are paid." The court refused this, and declared that the guaranty ran only until the maturity of the notes, and gave judgment only for the interest accruing before maturity. The plaintiff saved proper exceptions to the ruling, filed a motion for a new trial, saving all points, and, this being overruled, excepted, filed his bill of exceptions, and appealed.

Thus it will appear that the only controversy in this case is, whether or not one who guaranties the payment of the interest on a promissory note is bound for the payment of the interest that may accrue after the maturity of the note. There are few cases in the books that bear directly upon this point, although there is no want of authorities that indirectly influence the discussion of it. And from these we gather that the courts have adopted certain rules by which the contracts of sureties and guarantors are to be construed; and some of these rules briefly stated are: that a surety or guarantor is, first of all, a favored suitor; that the obligation of his contract will not be extended beyond its plain and obvious meaning; and when there is a doubt and uncertainty as to the meaning, growing out of an ambiguity of language that makes construction necessary, the doubt will be resolved in favor of the surety or guarantor, for the reason that he is not, and can never be, the full recipient of the consideration which has accrued or may accrue to the principal debtor, and, further, because his situation is comparatively a dependent one, since he does not enjoy the opportunity of protecting himself that belongs to the other parties to the contract.

We take it, therefore, that courts are to construe, the contracts of these favored suitors, not exactly by the same rule as they would construe the contracts of the principal parties to the contracts. Thus while, as between these principals, the contract is to be construed so as to express the meaning and intention of both parties to it, in the case of the surety or guarantor that construction is to be given to his contract which will cause it to express his meaning and intention, and this intention to be such as the guarantied party should have reasonably attributed to the guarantor in making the contract, judging from the circumstance surrounding and the object to be attained. 1 Brandt, Suretyship & Guaranty, sec. 122, 123, 156.

The principle announced is more readily understood by illustration than by mere general definition of the obligation. It would lengthen out this opinion too much, of course, to pursue the argument by that method. Cases wherein the contracts were held to be continuing are cited and commented upon in Brandt, Suretyship & Guaranty, from section 157 to 161, inclusive; and, when not continuing, from section 161 to 165. In section 166 of...