Opinion
No. 30180.
November 21, 1932.
1. PLEADING.
Execution of bond held not in issue, where defendants denying execution thereof did not make affidavit to their bill or denial under oath (Code 1930, section 1587).
2. INDEMNITY. Indemnitors' liability on bond providing that obligee's assumption of obligation was at request of indemnitors and that request continued until revoked held joint and several, precluding indemnitors' release by co-indemnitor's death before obligee's assumption of obligation.
Bond provided, in substance, that all obligations assumed by the obligee were assumed at the special instance and request of the indemnitors, that such request remained in full force and effect until revoked in writing by each and every indemnitor, and that the indemnitors' interest in the bank, on whose behalf the obligee assumed suretyship, was sufficient consideration for the indemnity bond.
3. INDEMNITY.
Death of indemnitor prior to obligee's assumption of obligation on faith of indemnity bond revocable by indemnitors, though death was without notice to obligee, terminated liability of such indemnitor and his estate upon bond.
4. INDEMNITY.
Deposits of county funds in depository bank held sufficient consideration for indemnitors' indemnity bond to obligee becoming surety for depository bank.
APPEAL from circuit court of Sunflower county. HON. JAS. L. WILLIAMS, Judge.
Cooper Thomas, of Indianola, for appellant.
In the case of Jordan v. Dobbins, 23 Am. Rep. 305, the action was brought on a continuing guaranty to recover the price of goods sold after the guarantor's death, and it was held there could be no recovery, on the ground that the guarantor's death terminated the guaranty, notwithstanding it was unknown at the time the goods were sold. In thus holding, the case is clearly unsupported by the decided weight of authority.
Rapp v. Phoenix Insurance Company, 55 Am. Rep. 427.
A contract of guaranty is, as a rule, not terminated by the death of the guarantor.
Chamberlain v. Dunlop, 22 Am. St. Rep. 814; Aitkens v. Lang, 90 A.S.R. 263.
The general rule unquestionably is that all contracts entered into by one, not of a personal character, are equally binding upon himself and his legal representatives after his decease.
Rapp v. Phoenix Insurance Company, 55 Am. Rep. 427.
The mere death, without notice or knowledge ought not to defeat the creditor's indemnity for advances made in good faith, after that event.
Menard v. Scudder, 56 Am. Dec. 610.
Where a bond was executed by the directors of a corporation, guaranteeing to a bank payment of money which might be loaned by it to the corporation, necessary to carry on its business for a year, not exceeding a specified sum, it was held that the guaranty was not revoked by the death of one of the guarantors; and that the estate of the deceased guarantor would be liable for paper discounted or renewed for the corporation within the year, even though this occurred after such death, of which the bank had notice.
Home Sav. Bank v. Hosie, 119 Mich. 116, 77 N.W. 625.
A joint and several guaranty of the payment of drafts and notes made, or to be made, by a certain firm, which by its terms was declared to be a continuing one, to remain in force until revoked by written notice to the bank secured by it, was held not to be revoked by the death of the guarantor, or by the giving of notice by his administrators to creditors, where the administrator had given notice to terminate the undertaking, since it had never been ended according to its terms.
Knotts v. Butler, 31 S.C. Eq. (10 Rich.), 143.
Where a joint and several continuing guaranty bond provided that the obligors, or any one or more of them, or their respective representatives, might at any time determine their liability under the bond by one month's notice in writing, it was held that the word "representative" included executors, and that mere notice by the executor to the principal of the surety's death, without a notice to determine the liability in accordance with the undertaking, would not discharge his estate from liability for an indebtedness subsequently incurred.
Re: Silvester, 1 C.N. (Eng.), 573.
The guaranty should be construed as not terminated by the death of one of the guarantors and the giving of notice by his executors of revocation of the guaranty, but as continuing in force until notice was given by each and all of the guarantors or the executors of any deceased.
Egbert v. National Crown Bank (1918), A.C. (Eng.), 903 P.C.
The mere fact of the death of the guarantor, without notice to the guarantee, will not revoke the guaranty.
Menard v. Scudder, 7 La. Ann. 385, 56 Am. Dec. 610; Bradbury v. Morgan, 8 Jur. N.S. (Eng.) 918; Fennell v. McGuire, 21 U.C.C.P. 134.
The general rule is settled, that, where express words of limitation to the contrary are not found, the presumption is that the promisor intends to bind his personal representatives.
Barett v. Towne, 13 L.R.A. (N.S.) 645.
In all cases of joint or joint and several indebtedness, the creditor may settle or compromise with the release any one or more of such debtors; and the settlement or release shall not affect the right or remedy of the creditor against the other debtors for the amount remaining due and unpaid and shall not operate to release any of the others of the said debtors.
Section 2027, Code of 1930.
Two or more persons may bind themselves as indemnitors severally in which case the obligation of each indemnitor is independent of the others, and the liability of one is not affected by the fact that the agreement may be invalid as to another. They may also bind themselves jointly, or jointly and severally.
31 C.J., sec. 22, p. 428.
The liability of one of several creditors as indemnitors on his contract of indemnity is not affected by the fact that the indemnitee releases other creditors from their several contracts of indemnity, because such release in no way affects the rights of such indemnitor to contribution.
31 C.J., sec. 42, p. 445.
The death of one joint guarantor does not relieve his estate from liability, where the guarantor was interested in the contract and received benefits therefrom other than as a mere guarantor. So, also, the death of one coguarantor under a joint and several continuing guaranty does not of itself terminate the future liability of the surviving guarantor; but the surviving guarantor may thereupon revoke the guaranty as to future liability.
28 C.J., section 73, page. 929.
The death of the guarantor does not ipso facto terminate liability under the contract; the personal representative of the guarantor must give notice in order to put an end to it in respect to future transactions, especially where by the terms of the guaranty it is to remain in force until revoked by notice.
28 C.J., sec. 75, p. 930.
The death of one guarantor does not terminate the liability of the surviving guarantors, where the contract of guaranty, which was of credit given or to be given to an elevator company, provided that nothing should affect the liability of the guarantors except notice of withdrawal by a guarantor or the surrender or cancellation of the guaranty by the guarantee.
Midland Nat. Bank v. Security Elevator Co., 161 Minn. 30, 200 N.W. 851.
It is evident there was no intention on the part of the indemnitors that death would terminate the liability and certainly no intention that the death of one of them would terminate the liability as to all, for they expressly bound themselves that it was to remain in full force and effect until jointly revoked in writing.
A.M. O'Neil, of Drew, and Moody Johnson, of Indianola, for appellee.
The point is that the offer made is one offer in which several unite, and that that offer is revoked by the death of one, for how can a contract be made with a dead man? That the principle relied on is applicable to contracts generally.
13 C.J., page 298, section 182; Lang v. Thayer, 37 Law Ed. 1167; Weaver v. Richards, 6 L.R.A. (N.S.) 855.
It is also applicable to principal and agent.
2 C.J., page 550, sec. 183.
And it is also applicable to guarantors.
5 Elliot on Contracts, sec. 3958 and cases cited; Jordan v. Dobbins, 23 Am. Rep. 305; Aitken v. Lang, 90 Am. St. Rep. 263.
If applicable to an offer of guaranty it is equally applicable to an offer of indemnity for an offer of indemnity only differs from an offer of guaranty in that the former is an offer or an engagement to make good and save another from the loss upon some obligation, which he has incurred, or is about to incur to a third person, while the latter is an offer to become answerable for the payment of some debt or the performance of some duty or contract for another person who stands first bound to perform.
22 Cyc. 681.
Notice of an acceptance is essential to a guaranty.
Douglas et al. v. Reynolds, Bryne Co., 8 Law Ed. 627-631; Hill v. Calvin Hurse, 4 How. 232; Montgomery v. Kellogg, 43 Miss. 486, 492; Ellis v. Jones, 70 Miss. 60, 62.
Subject to the exception hereinafter stated notice to and acceptance by the creditor of the offer of one to become a surety for a principal is an essential requisite to a valid and binding contract of suretyship.
32 Cyc. 30.
This court holds that notice, as to an offer of guaranty, must be given.
Montgomery v. Kellogg, 43 Miss. 486, 492; Ellis v. Jones, 70 Miss. 60, 62.
The court should apply well settled principles of law, applicable to an offer that are not applicable to a contract, which would, if applied, lead irresistibly to the conclusion that the appellant failed to prove a contract on which to base a recovery.
The court should distinguish a unilateral offer from a unilateral contract, a distinction that is essential and elemental, and is clearly pointed out by writers on the law of contracts.
Williston on Contracts, Section 13, pages 12 and 13.
An offer is a promise which is in its terms conditional upon an act, forbearance or return promise being given in exchange for the promise or its performance.
Restatement Law of Contract, Am. Law Institute, sec. 24, ch. 3.
A mere offer or proposal made by a person in his lifetime but not accepted before his death, will not bind his personal representatives.
Chamberlain v. Dunlap, 22 Am. St. Rep. 814.
This suit was brought by the appellant, the United States Fidelity Guaranty Company, against G.W. Wofford, R.W. Manning, N.J. Burnett, S.C. King, and the heirs of D. Miller, deceased, to enforce an indemnity contract signed by said above-named parties, which indemnity contract reads as follows:
"Know all men by these presents, that the undersigned (thereafter called the indemnitors) is or are held and firmly bound unto the United States Fidelity Guaranty Company in the just and full sum of five thousand dollars to be paid to the United States Fidelity Guaranty Company, its certain attorney, successors or assigns, to the payment whereof, well and truly to be made and done, the said indemnitors bind themselves or himself, and each of their or his heirs, executors and administrators, jointly and severally, firmly by these presents, whereas, the said United States Fidelity and Guaranty Company, at the special instance and request of said indemnitors, became or may in future, become surety on certain bonds, in different penalties and under different dates in which the Commercial Bank Trust Company of Drew, Mississippi, is, or will be the principal, the condition or conditions of the said bond or bonds being particularly set forth in the said bond or bonds, which are distinctly understood to be made parts hereof as if fully incorporated herein and set out at length, and, Whereas, the United States Fidelity and Guaranty Company has assumed and will assume suretyship on such bonds at the special instance and request of the said indemnitors, who hereby agree that the application by the principal to the United States Fidelity and Guaranty Company to assume suretyship on a bond is to be taken as and constitutes a request from the indemnitors to said United States Fidelity and Guaranty Company to assume such suretyship and brings said bond within the provisions of this instrument, and Whereas, it is expressly understood and agreed that said request remains in full force and effect until revoked in writing by each and every one of the undersigned constituting said indemnitors, and that any and all obligation of suretyship assumed by the United States Fidelity and Guaranty Company on behalf of said principal above mentioned, both prior and subsequent to the execution of this instrument, including suretyship assumed by continuation or renewal of any original obligation or suretyship, is assumed at the special instance and request of said Indemnitors, who especially warrant the making of such request and that his or their interest in the principal and the giving of said bonds is sufficient to and does constitute a valid consideration for the execution of this bond of indemnity.
"Now, therefore, the condition of the above obligation is such, That if the above bounden indemnitors, or their heirs, executors or administrators, shall at all times hereafter save harmless and keep indemnified the said United States Fidelity and Guaranty Company, its successors and assigns, against all suit, actions, debts, damage, costs, charges and expenses, including court costs and counsel fees at law or in equity, and against all loss and damages that shall or may at any time hereafter happen or result to the said United States Fidelity Guaranty Company, its successors or assigns, for or by reason of the suretyship of the said United States Fidelity and Guaranty Company, on behalf of the Commercial Bank Trust Company of Drew, Mississippi, then this obligation to be void and of no effect, otherwise to be and remain in full force and effect. It is expressly understood by the parties hereto and made a condition hereof that the United States Fidelity Guaranty Company has the right to bring suit under this bond of indemnity immediately after the payment by it of the initial loss and is not compelled to wait until it has exhausted its remedies against the principal or received any or final dividends at the hands of the legal representatives of the principal.
"In witness whereof, the said indemnitors have or has caused these presents to be duly executed the 25th day of February, 1928."
This indemnity was signed by the parties above named, and D. Miller died within a few days after signing and delivering this indemnity bond.
In March, 1929, the United States Fidelity Guaranty Company executed a bond for the Commercial Bank Trust Company of Drew, Mississippi, as depository for county funds, in the sum of ten thousand dollars, and this bond was renewed the following year. The bank became insolvent and unable to meet its obligations, and was taken over by the state banking department for liquidation. Demand for the money was made by the county upon the depository, payment was refused, and suit was entered against the United States Fidelity Guaranty Company, and it paid over the sum of nine thousand dollars on account of its suretyship for said depository. The United States Fidelity Guaranty Company made demand upon the defendants in this suit for the payment of five thousand dollars, which payment was refused, and suit was brought.
The defendants denied most of the allegations of the bill, denied the execution of the indemnity bond, but did not make affidavit to their bill or denial under oath, as required by section 1587, Code 1930. Consequently, the execution of bond was not in issue.
The proof shows that the depository failed and the amount paid by the surety company on account of its suretyship exceeded the amount of the indemnity bond.
The questions presented for decision, as we understand them from the record, are: (1) Whether the death of D. Miller prior to the execution of the bond for the Commercial Bank Trust Company at Drew, terminated the liability of D. Miller and his estate upon the indemnity bond; and (2) whether by virtue of the death of D. Miller before the execution of the depository bond by the appellant, the surety company, all of the signers of the indemnity bond were released from their obligation.
By one of the provisions of the bond above quoted, it is stipulated as follows: "Whereas it is expressly understood and agreed that said request remains in full force and effect until revoked in writing by each and every one of the undersigned constituting said indemnitors, and that any and all obligation of suretyship assumed by said United States Fidelity Guaranty Company on behalf of said principal above mentioned, both prior and subsequent to the execution of this instrument including suretyship assumed by continuation or renewal of any original obligation or suretyship, is assumed at the special instance and request of said indemnitors, who especially warrant the making of such request, and that his or their interest in the principal and the giving of said bonds is sufficient to and does constitute a valid consideration for the execution of this bond of indemnity."
We think this provision makes each of the signers of the indemnity contract a joint and several maker of said contract, and that the indemnity bond continues until revoked, in writing, by each party for himself. In other words, each signer, individually and severally, remained liable on the indemnity bond to the surety company upon its making a bond in conformity to the provisions of this indemnity contract.
We think, under the authorities, that the death of D. Miller constituted a revocation in his behalf, because the bond for the Commercial Bank Trust Company of Drew, Mississippi, had not been executed by the surety company at the time of Miller's death. In Aitken, Son Co. v. Lang, 106 Ky. 652, 51 S.W. 154, 155, 90 Am. St. Rep. 263, it was held that a continuing guaranty, revocable at the will of the guarantor, is revoked by his death, without notice thereof to the guarantee.
In the case before us, there does not appear to have been any notice to the surety company, or anything from which notice could be inferred of actual knowledge of the death of D. Miller at the time it executed the bond.
In the course of the opinion in Aitken, Son Co. v. Lang, supra, after discussing the principles of liability, the court said: "Applying these principles to the case at bar, it follows that the defendant is entitled to judgment. The guaranty is carefully drawn, but it is, in its nature, nothing more than a simple guaranty for a proposed sale of goods. The provision that it shall continue until written notice is given by the guarantor that it shall not apply to future purchases affects the mode in which the guarantor might exercise his right to revoke it, but it cannot prevent its revocation by his death. The fact that the instrument is under seal cannot change its nature or construction. No liability existed under it against the guarantor at the time of his death, but the goods for which the plaintiffs seek to recover were all sold afterwards. We are not impressed by the plaintiffs' argument that it is inequitable to throw the loss upon them. It is no hardship to require traders, whose business it is to deal in goods, to exercise diligence so far as to ascertain whether a person upon whose credit they are selling is living."
The appellees relied upon the authorities contained in the case notes of Chamberlain v. Dunlop, 22 Am. St. Rep. 815, wherein it was held that "A mere offer or proposal made by a person in his lifetime, but not accepted before his death, will not bind his personal representatives: Grand Lodge, I.O.G.T. v. Farnham, 70 Cal. 158 [11 P. 592]; Pratt v. Trustees of Baptist Society of Elgin, 93 Ill. 475, 34 Am. Rep. 187; Wallace v. Townsend, 43 Ohio St. 537 [3 N.E. 601], 54 Am. Rep. 829; Phipps v. Jones, 20 Pa. 260, 59 Am. Dec. 708; Helfenstein's Estate, 77 Pa. 328, 18 Am. Rep. 449. An administrator has no right to make an invalid contract of his intestate binding upon his estate: Smith v. Brennan, 62 Mich. 349 [28 N.W. 892], 4 Am. St. Rep. 867."
In Jordan v. Dobbins, 122 Mass. 168, 23 Am. Rep. 305 it was held that "A guaranty of the payment by another of goods to be sold, not founded upon any present consideration passing to the guarantor, and providing that it should continue until written notice should be given of its termination, is revoked by the death of the guarantor."
The opinion in this case is well reasoned, and strikes us as being sound and controlling so far as D. Miller's death is concerned.
However, Miller's death, in our judgment, did not affect the liability of the other signers of the indemnity contract. Their obligation on the indemnity bond was, by its terms, joint and several. We think the stipulations therein as to consideration were contractual stipulations, and that there was sufficient consideration for the execution of the bond for the Commercial Bank Trust Company as a depository of county funds to bind the indemnitors.
The argument that the bond was a joint one merely, and that all were bound or none were bound, we think is not sound under the terms of this contract.
The chancellor rendered a judgment in favor of all the defendants. We find his holding is erroneous as to the defendants Wofford, Manning, Burnett, and King. As to these defendants, the chancellor should have rendered a judgment for the amount of the bond against each jointly and severally. The chancellor's judgment in favor of the heirs of D. Miller is correct, and will be affirmed; but his judgment will be reversed as to Wofford, Manning, Burnett, and King, and judgment rendered here upon their obligation.
Affirmed in part, and reversed in part.