Opinion
No. 21329
Decided February 20, 1929.
Guaranty — Limitation not extended by construction beyond unambiguous contract terms — Payment of invoices guaranteed until incorporation effective — Liability period not extended by subsequent provision concerning financial statement — Directed verdict for guarantor sued upon services rendered after incorporation completed.
1. The clear and unambiguous terms of an instrument of guaranty will not be extended by construction or implication to cover a period of time not embraced within those terms.
2. Where a guarantor in writing assured the payment of invoices for services rendered "until such time as the corporation of the Union Body Company, Inc., has been made effective," a subsequent statement in the instrument, that "when the corporation is completed we will furnish your company a financial statement such as will make it possible for you to extend our company your usual terms of credit," does not serve to extend the period of liability of the guarantor beyond the time when the incorporation of said company became effective.
3. In an action predicated upon such instrument to recover for services rendered such company in April, 1925, it being conceded that the incorporation was completed and effective December 29, 1924, the defendant was entitled to a directed verdict in his favor.
ERROR to the Court of Appeals of Lucas county.
This action was brought in the court of common pleas of Lucas county to recover from the defendant, Burton K. Blanchet, on the following guaranty:
"Toledo, Ohio, November 3, 1924.
"Jules P. Storm Sons, Inc., 2 West 46th Street, New York City.
"Gentlemen: Until such time as the corporation of The Union Body Company, Inc., has been made effective we the undersigned Blanchet and Thornburg and A.C. Burch will be pleased to assure Jules P. Storm Sons, Inc., of the payment of such invoices as they render The Union Body Company, Sandusky, Ohio.
"This guaranty may be considered our personal guarantee of payment. For the present we will arrange to take care of your invoices ten days after date of same.
"When the corporation is completed, we will furnish your company a financial statement such as will make it possible for you to extend our company your usual credit terms.
"B.K. Blanchet. "A.C. Burch."
The petition set out a claim of $1,471.66 for advertising and advertising material furnished to the Union Body Company, asserting that the same had not been paid, and that said company had become wholly insolvent. These allegations were admitted by answer of the defendant, and as a defense he alleged that the incorporation of the Union Body Company had become effective and a financial statement had been furnished the plaintiff as provided in such guaranty prior to the furnishing of said advertising service by the plaintiff.
Upon the trial it was disclosed that, pursuant to said guaranty, credit was extended, and that invoices rendered each month were paid until the invoice for the month of April, 1925; and this controversy is with respect to the service rendered during that month. The incorporation of the company was completed December 29, 1924. A motion of the defendant made at the close of the evidence for a directed verdict in his favor was overruled, and the case was submitted to the jury upon the issue whether plaintiff was advised of the incorporation of said company, and a statement of the company's financial condition was furnished plaintiff prior to April 1, 1925.
In its general charge the court instructed the jury that "the burden of proof in this case rests upon the plaintiff and it must make out a case of its right to recover by a preponderance of the evidence."
The jury returned a verdict in favor of the defendant, and judgment was rendered thereon, which, upon review by the Court of Appeals, was affirmed. Thereafter, upon motion, the case was ordered certified to this court.
Messrs. Taber, Chittenden, Daniells Cochrane, for plaintiff in error.
Messrs. Tracy, Chapman Welles, Mr. Frank A. Harrington, and Mr. Earl F. Boxell, for defendant in error.
The fact is undisputed that the incorporation of the Union Body Company was completed prior to the furnishing of the advertising service upon which plaintiff's claim is predicated, and for which recovery is sought in this action. The question whether, under the terms of the instrument executed by the defendant, his guaranty ended when the incorporation of the Union Body Company was effected, was presented by plaintiff's demurrer to defendant's answer, and was also involved in the consideration of the motion for a directed verdict in behalf of the defendant. We are therefore required first to examine the written guaranty and ascertain its effect and its limitations. It is elementary that the liability of a guarantor does not extend beyond the limits fixed by the instrument of guaranty, and, where a guaranty is made in terms to bind the parties for a limited time therein stated, it will not attach to debts contracted subsequent to that period. The terms of the first paragraph of this instrument are plain and clear. "Until such time as the corporation of the Union Body Company, Inc., has been made effective," the defendant, and others signing the same, "assure Jules P. Storm Sons, Inc., of the payment of such invoices as they render The Union Body Company." The Union Body Company had not been incorporated when this instrument was executed, and the making of such guaranty was for the evident purpose of securing the services of the plaintiff, an advertising company, and assuring payment of its invoices for such services as should be rendered by it prior to the completion of the corporation. The limitation of time of such guaranty is not only clearly stated, but is emphasized by its position at the very beginning of the instrument. The language employed is clear and unambiguous, and was just as effective in stating the limitation as if it had read that such guaranty should not be binding after the completion of incorporation of the Union Body Company.
The limitation thus clearly specified was not removed or modified by any language used in the subsequent portions of the instrument. The statement relied upon as creating a continuing liability, or further extending the period of liability upon the part of the guarantors, is as follows: "When the corporation is completed, we will furnish your company a financial statement such as will make it possible for you to extend our company your usual credit terms." The attitude of the plaintiff with reference to credit terms to be extended to the company was, of course, within its own control and subject to its own wish and determination. The defendant did not undertake to guarantee any indebtedness created by the incorporated company, or to pay for any service rendered subsequent to the completion of the incorporation. This portion of the instrument did nothing more than to state in substance and effect that for services rendered after the incorporation the guaranty should not be binding upon the parties signing same, and that terms of credit would then be based, not upon such instrument of guaranty, but upon a financial statement of the company itself. Instead of being a modification of the provisions of the instrument, which had clearly stated the limitations of the guaranty, the subsequent language is in full accord with such limitation by specifying the basis of credit to be extended for any service to be rendered subsequent to the completion of the incorporation. A contrary view would create a liability beyond that incurred by the terms of the written guaranty. It would extend the period beyond that fixed by the clear and unambiguous terms of the instrument itself.
The authorities are quite uniform in holding that the obligation of such an instrument cannot be extended by construction or implication beyond the terms of the contract. In 28 Corpus Juris, 935, numerous cases are cited, including Morgan v. Boyer, 39 Ohio St. 324, 48 Am. Rep., 454, and Third National Bank v. Laidlaw, 86 Ohio St. 91, 98 N.E. 1015.
It is quite generally held that where the language employed is ambiguous, the construction will be adopted which favors a limited rather than a continuing guaranty. This is expressly decided in the case of Morgan v. Boyer, supra.
It is our conclusion therefore that the pleadings and conceded facts presented by the record require a judgment for the defendant. No prejudicial error could result to the plaintiff from the submission of the case to the jury, the same verdict being rendered as should have been directed by the trial court.
Judgment affirmed.
MARSHALL, C.J., ROBINSON, JONES, DAY and ALLEN, JJ., concur.
KINKADE, J., not participating.