Shows v. Steiner, Lobman & Frank

• Decision Date: 30 November 1911
• Parties: SHOWS v. STEINER, LOBMAN & FRANK.
• Court: Alabama Supreme Court

57 So. 700

175 Ala. 363

SHOWS v. STEINER, LOBMAN & FRANK.

Supreme Court of Alabama

November 30, 1911

Rehearing Denied Feb. 15, 1912.

Appeal from Circuit Court, Crenshaw County; A. E. Gamble, Judge.

Action by Steiner, Lobman & Frank against T. W. Shows. From a judgment for plaintiffs on a directed verdict, defendant appeals. Reversed and remanded.

F. B Bricken and Tyson, Wilson & Martin, for appellant.

Powell & Hamilton, for appellees.

MAYFIELD J.

This is an action on a contract of guaranty, which contract was in writing, and was as follows:

"Agreement of Guaranty. The State of Alabama, Montgomery County:

"This agreement, made this the 17th day of October, 1907, by and between Steiner, Lobman & Frank, a partnership, engaged in the wholesale dry goods and notion business, at Montgomery, Alabama, of the one part, and T. W. Shows, of Luverne, Alabama, of the other part, witnesseth: That whereas, the said Steiner, Lobman & Frank have agreed to supply the firm of Beall & Fundaburk, from time to time, in the course of trade, with merchandise, on credit, to the extent of twenty-five hundred ($2,500.00) dollars, for a period of twelve (12) months from this date, provided the said Shows will enter into this agreement of guaranty; and whereas, the said T. W. Shows is willing to become guarantor to the said Steiner, Lobman & Frank, upon a line of credit extended to the said Beall & Fundaburk, as hereinafter provided: Now, therefore, in consideration of the premises and the sum of five ($5.00) dollars, by the said Steiner, Lobman & Frank to the said T. W. Shows in hand paid, the receipt whereof is hereby acknowledged by the said Shows, the said T. W. Shows does hereby guarantee unto the said Steiner, Lobman & Frank, the payment, to the extent of one thousand ($1,000.00) dollars of any indebtedness which the said Beall & Fundaburk may, from time to time, owe the said Steiner, Lobman & Frank, during the continuance of this guaranty. It is agreed that the guaranty hereby given is a continuing guaranty for twelve (12) months from the date of this instrument, and that the said Steiner, Lobman & Frank may grant time, or other indulgence, or compound with, or take additional security from the said Beall & Fundaburk, or extend credit to the said Beall & Fundaburk in excess of twenty-five hundred ($2,500.00) dollars, without, in any way, affecting this guaranty. In witness whereof, the said parties to this contract have hereunto set their hands, the year and day first above written. [Signed] Steiner, Lobman, & Frank, [Signed] T. W. Shows."

The complaint as last amended contained three counts. The first and second declared upon the contract, which was set out in full, and the third on the common counts, which last count need not be considered. Demurrers to the complaint being overruled, the defendant filed a great number of special pleas, including one of non est factum. Demurrers were sustained to most of these pleas, and the trial was had upon pleas 1, 2, 13, 14, A, and C, and two special replications to pleas A and C, which replications it is unnecessary to notice. Assignments of error from 1 to 21, inclusive, go to the sustaining of demurrers to special pleas from 3 to 10, and to pleas B and 15.

The defenses attempted to be set up in the pleas, in varying forms, may be reduced to three, which were: First, that defendant had had no notice of the acceptance of the guaranty by the plaintiffs; second, that the contract, when signed by defendant, contained blanks which were afterwards filled in, such after filling in constituting an alteration of the contract; third, that there was no sufficient consideration to support the contract, in that the defendant did not actually receive the recited consideration of $5, and had no notice of plaintiffs' acceptance of the guaranty, nor of their furnishing the credit, so as to make it a binding contract.

None of these numerous pleas, to which demurrers were sustained, was good. The three defenses attempted to be set up in them were not availing in this action. It is very true that notice of acceptance by the guarantee of a mere proposed guaranty, such as a letter of credit, is necessary to make the undertaking binding upon the guarantor; but it is equally true and well settled that no formal or further acceptance is necessary where the guaranty, as in this case, is a bilateral contract, completely executed by both parties, reciting on its face that it is executed upon a recited, even though nominal, consideration.

These two rules are well settled by the Supreme Court of the United States, in the case of Davis v. Wells, 104 U.S. 159, 26 L.Ed. 686. It is there said: "In Adams v. Jones, 12 Pet. 207, 213 Mr. Justice Story, delivering the opinion of the court, said: 'And the question which, under this view, is presented is 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 the guaranty is drawn, notice is necessary to be given to the guarantor that the person giving the credit has accepted or acted upon the guaranty and given the credit on the faith of it. We are all of the opinion that it is necessary; and this is not now an open question in this court, after the decisions which have been made in Russell v. Clark, 7 Cranch, 69 ; Edmondston v. Drake, 5 Pet. 624 ; Douglass v. Reynolds, 7 Pet. 113 ; Lee v. Dick, 10 Pet. 482 , etc.' "

But it is further on, in the same opinion, said: "If the guaranty is made at the request of the guarantee, it then becomes the answer of the guarantor to a proposal made to him, and its delivery to or for the use of the guarantee completes the communication between them and constitutes a contract. The same result follows, as declared in Wildes v. Savage, supra [1 Story, 22, Fed. Cas. No. 17,653] where the agreement to accept is contemporaneous with the guaranty, and constitutes its consideration and basis. It must be so wherever there is a valuable consideration, other than the expected advances to be made to the principal debtor, which, at the time the undertaking is given, passes from the guarantee to the guarantor, and equally so where the instrument is in the form of a bilateral contract, in which the guarantee binds himself to make the contemplated advances, or which otherwise creates, by...