Opinion
No. 27007.
April 2, 1928.
1. GUARANTY. Guaranty being ambiguous, whether it was intended to be special or continuing should be determined by surrounding circumstances and subsequent dealings.
The language of a guaranty being ambiguous as to whether it was special or continuing, the circumstances accompanying its execution, and the subsequent dealings between the parties, that is, how they treated the guaranty, should be considered to determine their intent.
2. EVIDENCE. Guaranty held ambiguous as to whether special or continuing.
Language of guaranty of account of A., for purchases on and after a certain day for an account not exceeding a certain amount for goods sold and delivered after this date, held ambiguous as to whether guaranty was special or continuing.
APPEAL from circuit court of Sunflower county; HON. S.F. DAVIS, Judge.
J.M. Forman, for appellant.
The declaration alleges that this guaranty on the part of the defendant was executed as a continuing guaranty and was never revoked and that the plaintiff, acting, thereon, sold and delivered goods, wares, and merchandise to Atkinson, from time to time, up to the time he filed a petition in bankruptcy. The language employed "sold and delivered after this date as shown by their books either in the shape of notes or open account," certainly authorizes the sale and delivery of goods under this guaranty until such authority should be revoked by Parks, and in order to ascertain the facts and circumstances surrounding the execution of the guaranty, it should be necessary to submit proof to the jury. "There seems to be no general rule for determining whether a guaranty is continuing; each case must be construed according to its terms and the surrounding circumstances." 12 R.C.L. 1062; White's Bank of Buffalo v. Miles, 73 N.Y. 335; Galloway Cole Co. v. Hunter, 79 Miss. 559; Pratt v. Cotton Co., 51 Miss. 470; Gillenwater v. Miller, 49 Miss. 150; Galloway Cole Co. v. Hunt, 79 Miss. 559. "Where a contract of doubtful meaning may be construed as valid or invalid, that construction will be adopted which makes it legal and effective, and the burden is upon him who sets up the illegality to prove it." Wilkins v. Reiley, 47 Miss. 306; Clay v. Allen, 63 Miss. 426. Parole evidence is admissible. 12 R.C.L. 1062; Galloway Cole Co. v. Hunter, 79 Miss. 559; Pratt v. Cotton Co., 51 Miss. 470. "If the parties treat an instrument as a continuing guaranty, and its terms are not inconsistent with such construction, the courts will adopt that view." 12 R.C.L. 1062; Taussigo v. Reed, 145 Ill. 488; State Bank v. Peck, 28 Vt. 200; Trustee, etc., v. Gilliford, 139 Ind. 524. Matthews v. Phelps, 61 Mich. 327. There is another elementary principle of law very applicable in this case, which is, "The rule is that where fair-minded men might honestly differ as to the conclusion to be drawn from facts, either controverted or uncontroverted, the question at issue should go to the jury." St. L.I.M. S. Ry. Co. v. Fukqua, 114 Ark. 112.
Ward Allen, for appellee.
There is a Mississippi case which settles this one and appellant nowhere refers to it in his brief. We believe it cannot be explained away. It is the case of Merchants, etc., Bank v. Calmes, 82 Miss. 603, 35 So. 161. The guaranty sued on in the Calmes case is in the following language: "Brooksville, Miss., December 6, 1898. We hereby guaranty the account of Calmes St. John Co. with Merchants Farmers Bank of Macon, Miss., to the amount of two thousand five hundred dollars. It is agreed and understood that this guaranty is to cover all amounts which above firm may owe the said bank to the above specified amount. (Signed) W.P. Calmes, Josie Calmes." In the opinion, the court said of this guaranty: "We think the guaranty was not a continuing one, and was confined to the account as of its date, December 6, 1898. This goes to the root of the case." In the case at bar, the guarantor's position is much stronger than in the Calmes case. Instance the tense of the verbs used: To project the Parks guaranty into the future is not only to strain it, but to do it great violence. The Calmes guaranty uses the word may, which looks into the future as well as the present and past. As to strict construction of guaranties in Mississippi see Greer v. Bush, 57 Miss. 575. J.M. Forman, in reply brief for appellant.
Counsel for appellee cites Merchants, etc., Bank v. Calmes, 82 Miss. 603. The guaranty in the Calmes case simply guaranteed the account of Calmes St. John Co. with the bank for two thousand five hundred dollars and to cover all accounts which the said company may owe said bank to the above specified amount. This was no continuing guaranty; nothing is said in that guaranty about "on and after" and "after this date," as is recited in the case at bar. The guaranty in the Calmes case referred to the amount which Calmes St. John Co. "may owe" said bank. May owe refers to whatever amount the account was at the time of the execution of the guaranty and was of course limited.
In Tootle v. Elgutter, 14 Neb. 158, 45 Am. Rep. 103, the contract was in the following words and figures: "Omaha, Neb., March 11, 1878. Dear Sir — Please let Mr. John Newman have credit for goods to the amount of one hundred dollars, and for the payment of which I hold myself responsible. (Signed) M. Elgutter." In holding this to be a continuing guaranty, the court said in part: "In Hargreave v. Smee, 6 Bing 244, Chief Justice TINDAL said: `The question is, what is the fair import to be collected from the language used in this guaranty? The words employed are the words of the defendant, and there is no reason for putting on a guaranty a construction different from that which the court puts upon any instrument. With regard to other instruments the rule is, that if the party executing them leave anything ambiguous in his expressions, such ambiguity must be taken most strongly against himself.' In Mason v. Pritchard, 12 East, 227, it is said: `The words are to be taken as strongly against the party giving the guaranty as the sense of them would admit.' In Lawrence v. McCalmont, 2 How. 426-449, it is said: `Some remarks have been made on the argument here, upon the point, in what manner letters of guaranty are to be construed, whether they are to receive a strict or liberal interpretation. We have no difficulty whatever in saying that instruments of this sort ought to receive a liberal interpretation. By a liberal interpretation, we do not mean that the words should be forced out of their natural meaning; but simply that the word should receive a fair and reasonable interpretation, so as to obtain the objects for which the instrument is designed and the purpose to which it is appealed.'
"In construing contracts of guaranty the general rule arising from the implication of the language used is, that when the amount of the liability is limited and the time is not, the contract should be construed as a continuing guaranty. Mathew v. Phelps, 61 Mich. 327, 1 Am. St. Rep. 581; People Savings Bank v. Landstreet, 87 So. at p. 228; Exhaustive note to Pearsell Mfg. Co. v. Jeffreys, 185 Mo. 386, 105 Am. St. Rep. 496. In Merle v. Wells, 2 Campbell 413, the guaranty was as follows: `I consider myself bound to you for any debt my brother may contract not exceeding one hundred pounds after this date.' Lord ELLINGBROUGH said: `I think the defendant was answerable for any debt not exceeding one hundred pounds which William Wells might from time to time contract with the plaintiffs in the way of his business. The guaranty is not confined to one instance, but applies to debts successively renewed. If the party means to be a surety for only a single dealing, he should take care to say so. By such an agreement as this, a continuing suretyship is created to the specified amount.' In Mason v. Prichard, 2 Campbell 436, the guarantor promised to be responsible to plaintiff for any goods `that you have supplied or may supply to my brother to the amount of one hundred pounds,' under which the plaintiff supplied him with goods exceeding one hundred pounds, but for which he was regularly paid and continued to deal with him until he furnished him with goods for which action was brought for something less than one hundred pounds. The case is reported in 12 East 227. See, also, Conduitt v. Ryan, 3 Ind. App. 1, 29 N.E. 160."
Regardless of whether the court takes the view that the contract of guaranty in this case is a continuing one, or is ambiguous in its terms, the case should be reversed and remanded.
Argued orally by J.M. Forman, for appellant.
Appellant sued appellee upon a guaranty. Appellee demurred to the declaration, raising the point that the guaranty was special, and was not continuing. The guaranty reads as follows:
"For and in consideration of one ($1) and other consideration, receipt of which is hereby acknowledged, I guarantee to the Hessig-Ellis Drug Company, Memphis, Tenn., the account of S.C. Atkinson or Atkinson Pharmacy, Drew, Miss., for purchases sold on and after February 1, 1922, for an amount not to exceed two thousand dollars for goods, wares, and merchandise sold and delivered after this date as shown by their books, either in the shape of notes or open account.
"Signed this the 17th day of May, 1922.
"R.R. Ellis, Witness. R.W. Parks."
Atkinson Pharmacy, the debtor, was adjudged a bankrupt in January, 1927, owing appellant one thousand eight hundred eighty dollars and ninety-five cents. This indebtedness was made up of items sold by appellant to debtor during 1926. The trial court sustained the demurrer, effectually holding it was not a continuing guaranty.
The question before us is a construction of the guaranty. In Standley v. Miles, 36 Miss. 452, this court held, in construing a contract of guaranty:
"If the language employed be uncertain or doubtful in its import, the true intention must be ascertained, by reference to facts and circumstances accompanying the execution of the instrument; and this may be done without a violation of any rule of law in relation to adding to or contradicting written instruments" — citing Drummond v. Prestman, 12 Wheat. (U.S.), 515, 6 L.Ed. 712; Bell v. Bruen, 1 How. (U.S.) 169, 186, 11 L.Ed. 89; Lee v. Dick et al., 10 Pet. (U.S.) 482, 493, 9 L.Ed. 503.
The language of this guaranty is ambiguous. Without knowledge as to the circumstances surrounding the parties at the time of its execution, and not being enlightened as to whether the parties themselves treated the instrument as a continuing guaranty, it is made difficult to place a clear construction thereon. Thus confronted, we think the court below should have heard what testimony, if any, the parties had to offer that would shed light on the situation — the circumstances accompanying the execution, the subsequent dealings between the parties. In other words, did the parties themselves treat it as a continuing guaranty?
After the proof is developed the court can, of course, determine if it is a case for a directed verdict, or an issue of fact for the jury. 12 R.C.L. 1062; case note 39 L.R.A. (N.S.), 727; First National Bank v. Waddell, 74 Ark. 241, 85 S.W. 417, 4 Ann. Cas. 818.
Appellee relies upon Bank Merchants' Farmers' v. Calmes, 82 Miss. 603, 35 So. 161. The court was considering the particular instrument there involved. No rule of construction was laid down. The language there employed was unambiguous. Quite different here.
It follows that this case should be reversed and remanded.
Reversed and remanded.