Royal Tailors v. Newton

• Citation: 239 P. 949,66 Utah 154
• Decision Date: 17 September 1925
• Docket Number: 4238
• Court: Supreme Court of Utah
• Parties: ROYAL TAILORS v. NEWTON

239 P. 949

66 Utah 154

ROYAL TAILORS v. NEWTON

No. 4238

Supreme Court of Utah

September 17, 1925

Appeal from District Court, Third District, Salt Lake County; G. A Iverson, Judge.

Action by the Royal Tailors against C. W. Newton. Judgment for defendant, and plaintiff appeals.

REVERSED and REMANDED, with directions.

Irvine Skeen & Thurman, of Salt Lake City, for appellant.

Walter C. Hurd, of Salt Lake City, for respondent.

GIDEON C. J. CHERRY and STRAUP, JJ., FRICK, J., concurring. THURMAN, J., did not participate.

OPINION

GIDEON, C. J.

The appellant, plaintiff below, appeals from a judgment that "the Royal Tailors take nothing by its complaint herein against the defendant." The action is founded upon a writing, in form a letter, alleged to be a contract of guaranty executed by respondent, defendant below. It is admitted that the respondent signed the writing. It is addressed to the appellant and is as follows:

"Letter of Guaranty.

"To the Royal Tailors, Chicago, U.S. A.--Gentlemen: For and in consideration of the Royal Tailors, a corporation, extending credit to R. M. Gates & Co., of Salt Lake City, Utah, for goods, wares, and merchandise that may be sold and delivered to said R. M. Gates & Co., or order, I hereby guarantee the payment of all sums that may become due and payable from R. M. Gates & Co. to the Royal Tailors for goods, wares, and merchandise, and I further promise and agree to pay all such sums promptly on demand at or after the date of maturity. It is expressly understood and agreed that the total amount of my liability under the terms of this guaranty shall not exceed the sum of five thousand dollars ($ 5,000) remaining due and unpaid, at any time, on any and all accounts of said R. M. Gates & Co. for goods, wares, and merchandise purchased from the Royal Tailors.

"The said guarantor hereby expressly waives notice of any extension of time for the payment of any and all such accounts, or any part thereof, and, in case of the taking of notes or other evidence of indebtedness, waives the protest of such notes or other evidence of indebtedness and the notice of such nonpayment.

"This guaranty may be revoked at any time by the guarantor, provided thirty days' previous written notice shall be given the Royal Tailors of the guarantor's intention to terminate the guaranty, but such notice of termination shall not in any wise affect the liability of the guarantor for the payment of the purchase price of all goods, wares and merchandise bought before the date of such termination.

"In witness whereof I have hereunto set my hand and seal this 26th day of January, 1921.

"C. W. Newton."

The record shows no disputed facts. At the close of appellant's testimony, respondent rested his case, without offering any proof. It appears that appellant is a corporation, with headquarters at Chicago, Ill., and is engaged in the manufacture of men's clothing. It has agents or representatives in the tailoring business in various cities. On orders furnished by its various agents goods are shipped to the representative and the price agreed upon charged to such representative or agent. The appellant is in no way directly connected with the purchasers or parties ordering the goods from the agent.

The undisputed facts as appear from the record and as found by the court, are that in the month of January, 1921, there was a meeting in the office of appellant company at Chicago. There were present at that meeting the secretary, the sales manager, and the credit manager of the appellant company; also R. M. Gates, who was then the Salt Lake representative of appellant. Discussion was had as to extending credit to R. M. Gates & Co., of Salt Lake City. It was explained to Mr. Gates that appellant could only do business with him on a C. O. D. basis unless he obtained a guaranty of the account. Inquiry was made of Mr. Gates as to whom he could give as guarantor. He replied that he could get C. W. Newton of Salt Lake City, the respondent. The credit rating of Mr. Newton was examined, and Mr. Gates was advised that respondent would be accepted as guarantor. Thereupon the blank form of guaranty used by the appellant was produced, and the name of R. M. Gates & Co. inserted. Mr. Gates was told to take the guaranty to Salt Lake City, get Mr. Newton to sign it, and upon receipt of the guaranty by appellant, properly executed, R. M. Gates & Co. would have the privilege of an open account up to the amount of the guaranty, but that, until the guaranty was returned, merchandise, if needed, would be shipped C. O. D. Mr. Gates returned to Salt Lake City, and at a later date forwarded to appellant the letter of guaranty quoted above, signed by the respondent. No notice was given respondent by appellant of the acceptance of the guaranty, not did any consideration pass from the guarantee to the guarantor for the execution of the writing. Credit was extended to R. M. Gates & Co. by the appellant by reason of the letter of guaranty. The account was not paid in full, and this action was brought to recover the balance.

There is no conflict in the authorities as to the principles or rules of law governing the rights and liabilities of guarantors. These principles are clearly stated in the annotator's note to the case of Deering & Co. v. Mortell, 16 L. R. A. (N. S.) at page 354, as follows:

"But guaranties are, nevertheless, capable of classification, and have fixed rules of interpretation. When the nature of the guaranty is determined, the rule seems to be well settled that, if the guaranty is direct, and the thing guaranteed definite in its amount, and known to the guarantor at the time he gives his guaranty, notice of acceptance need not be given; for the guarantor knew when he made the guaranty the full extent of his liability. But, when the guaranty is collateral, and the debt guaranteed yet to be created, the amount of which is uncertain and may be variable, and cannot be known to the guarantor at the time he makes the guaranty notice to him within a reasonable time of the guarantee's acceptance of the guaranty is necessary or the guarantor will be discharged; for he cannot, without such notice, know that the guaranty is accepted, or protect himself from loss by the principal debtor. In short, the distinction running through all the modern cases is between a proposition or overture towards a guaranty, and the guaranty itself, when perfected by the assent of both parties; and interpretation is the crucial test by which the necessity or nonnecessity of notice of acceptance is determined.

"It should also be noted that the widely variant wording of those guaranties that have claimed the attention of the courts has necessarily weakened the force of the respective decisions as precedents when applied to subsequent cases, since it is obviously difficult to construe the language used by a person at one time under certain given circumstances by a...