Southwestern Co. v. Wynnegar

• Decision Date: 15 May 1916
• Citation: 71 So. 737,111 Miss. 412
• Court: Mississippi Supreme Court
• Parties: SOUTHWESTERN COMPANY v. WYNNEGAR ET AL

71 So. 737

111 Miss. 412

SOUTHWESTERN COMPANY v. WYNNEGAR ET AL

Supreme Court of Mississippi

May 15, 1916

March 1916

APPEAL from the circuit court of Prentiss county, HON. J. H MITCHELL, Judge.

Suit by the Southwestern Company against T. J. Wynnegar and others. From a judgment for defendants, plaintiff appeals.

The facts are fully stated in the opinion of the court.

Reversed and remanded.

E. C Sharp and W. H. Kier, for appellant.

Many instructions were asked by appellant and refused by the court and a peremptory instruction given for appellees.

It was developed during the progress of the trial that the same sureties were also sureties on a former contract between these same parties and on which there was a considerable balance due at the time of the execution of the present letter of credit and that no notice was given to the sureties of the former default.

"The creditor or obligee is not under a duty to disclose all of his dealings with the principal. . . . The creditor or obligee is not under a duty to disclose former trivial defaults of the principal, such as, that he had failed to account, or to remit promptly, or that he had intermingled his funds with those of his employer, nor, in the absence of inquiry, is the creditor or obligee obliged to divulge the indebtedness of the principal." 32 Cyc. 63, and cases cited therein.

The evidence shows that the company had no knowledge of any default; on the contrary, the testimony shows that they did not believe that he was dishonest. True he had not paid up his account; the character of the work made it impossible to pay until the deferred payments were collected. "It is for the jury to determine whether a failure of the obligee to inform the sureties of a shortage of the principal indicates bad faith." 32 Cyc. 66. Therefore I submit that the case should be reversed and remanded.

Jas. A. Cunningham and J. E. Berry, for appellees.

Where an agent defaults with a principal, and the same principal afterwards induces a third person or accepts of a third person, as surety for such agent as a principal it is the duty of such principal to notify the surety of such default, and failure to do so vitiates, such suretyship altogether. 32 Cyc. 66, subdivision "B."

Inducing this agent to again go out and get sureties on a letter of credit to whom they looked as sureties to this defaulting agent certainly vitiates the suretyship and releases these appellees.

This is not a question to submit to the jury because the records show first; that the default is not questioned in the record by appellants, second; that these same principals were the defaulting agents' sureties at the time of the prior default, and had no knowledge of the default, and the appellant had full knowledge of such default, and failed to inform appellees. The court therefore was eminently right in giving a peremptory instruction for appellees. We insist that the cause should be affirmed.

OPINION

POTTER, J.

This is a suit brought by the Southwestern Company, a book publishing corporation of Nashville, Tenn., against T. J. Wynnegar on a letter of credit executed by T. J. Wynnegar and J. J. Taylor, as sureties guaranteeing the account of Paul Wynnegar for books, cash, etc., which the said Southwestern Company agreed to furnish and furnished to Paul Wynnegar.

The only question to be determined in this case is whether or not the sureties on the letter of credit sued on are released from liability thereon, because at the time the letter of credit under consideration was executed the principal in the case, Paul Wynnegar, was already indebted to appellant in a large sum on account of default in a previous contract, and for which previous contract the same sureties were responsible in...