Opinion
No. 32046.
January 27, 1936. Suggestion of Error Overruled February 10, 1936.
1. PRINCIPAL AND SURETY.
Benefits under statute discharging sureties unless creditor brings suit within specified time after statutory notice held not waived by contract whereby accommodation sureties waived notice of time extension and also waived necessity for creditor first to exhaust remedies against principal (Code 1930, section 2957).
2. PRINCIPAL AND SURETY.
Legal rights of accommodation surety, whose burdens are thereby lightened, cannot be ousted by mere implications of suretyship contract.
APPEAL from the circuit court of Jones county; HON.W.J. PACK, Judge.
L.B. Melvin and Welch Cooper, all of Laurel, for appellants.
The appellants contend that section 2957 is applicable here and that since notice was given the appellee to institute suit and that suit was not instituted, they, as sureties, by reason of section 2957, are released and discharged and the judgment of the court below is erroneous.
The beneficent purpose served by section 2957, which is to lighten the burden of the surety, is manifest and the court in the Rau opinion clearly discloses its approval of this purpose.
First National Bank v. Rau, 112 So. 688, 146 Miss. 520.
In the case at bar we have a clause wherein the sureties agree that it shall not be necessary for the seller or the obligee to first exhaust its remedies against the buyer before proceeding to collect from the sureties. The court holds that this was a waiver of the right on the part of the sureties to avail themselves of the provisions of section 2957. The court below says that it waives the right to require the creditor to move.
Where the obligation of the guarantors and of the principal simultaneously spring from the act of the creditor, then the principal and the guarantors may be sued together.
McConnon Co. v. Prine, 90 So. 730, 128 Miss. 192; 28 C.J., pages 969, 970 and 989.
The purpose of draftsmen in inserting the clause about it not being necessary for the seller to first exhaust his remedies against the buyer before proceeding against the signers of the document was to provide a waiver in the event the question of whether the document was a contract of suretyship or one of guarantyship was decided to be the latter. It is a provision frequently found in documents of this nature. This was the purpose that the writer of the document in question had in mind. There could not possibly be any connection between that waiver and the rights granted by statutes like section 2957.
Section 2957 simply places in the hands of the surety the right to hasten action against the principal debtor. It places a penalty on the creditor's failure to move as directed by the statute to bring suit. Section 2957 deals with time and not parties and not causes of action.
Nothing in the clause of the bond in any way conflicts with the provisions of section 2957, or is in any way inconsistent therewith. There is no waiver of the provisions of section 2957 because under section 2957 the creditor had a right to proceed against principal and sureties.
Section 2957 was enacted for the purpose of protecting the sureties. It gives to them a weapon which the common law denied them.
We submit that a waiver of the rights under that statute should not be held to exist until it is made to appear that the terms of the waiver clearly indicate that it was the purpose of the sureties to so waive. The bond in the case at bar contains no provision which indicates in any way that there is a waiver and much less does it clearly indicate such a waiver. The purpose of the statute is one thing and the purpose of the clause which the court below construed to be a waiver is an entirely different thing.
Martin Berry, of Prentiss, for appellee.
We here quote the pertinent provisions of the contract and bond on which the lower court decided the case against the appellants: ". . . and waive notice of any nature whatsoever" and "We also agree that it shall not be necessary for the seller to first exhaust its remedies against the buyer before proceeding to collect from us."
The contract must be construed as a whole and if the part quoted first is ambiguous, then all ambiguity disappears when it is read with the second quotation from the contract.
The contract of a surety is to be construed liberally and in furtherance of its spirit, to promote the use and convenience of commercial intercourse.
Davis v. Wells, 104 U.S. 159.
The whole burden of appellants' brief and argument seems to be an effort to take plain, unambiguous language and construe it to mean something else than that expressed; that the intent and purpose of the waiver were to make it so that appellee could sue both the principal and surety in the same suit. We cannot understand why the creditor would want the quoted waiver in there for the purpose ascribed by appellants when the creditor already had that right almost everywhere. That would not be waiving a thing, for the creditor had that right already. We give the following cases showing that the dealer and the sureties can be joined in the same action:
J.R. Watkins Co. v. Moss, 141 N.W. 497; Fluhart v. Rawleigh, 190 S.W. 118; Yager v. Ky. Title Co., 112 Ky. 932, 66 S.W. 1027; White Sewing Machine Co. v. Powell, 74 S.W. 746; Memphis v. Brown, 87 U.S. 289; Dodd v. Rawleigh Co., 203 S.W. 131; Cockrel v. Williams, 177 S.W. 1091; Fidelity Deposit Co. v. Sherman Machine Iron Works, 161 P. 793; Rutherford v. Holbert, 42 Okla. 735, 142 P. 1099; Horne v. Oklahoma State Bank of Atoka, 42 Okla. 37, 139 P. 992; Rawleigh v. Walker, 77 So. 70; Sims Auchmuty v. Clark, 91 Ga. 302; Manry v. Waxelbaum Co., 108 Ga. 14; Small Co. v. Claxton, 1 Ga. App. 83; Musgrove v. Luther Pub. Co., 5 Ga. App. 279; Kalman v. Scarborough, 11 Ga. App. 547; Funderburke v. Baggs Deal, 11 Ga. App. 173; Shores-Mueller v. Palmer, 216 S.W. 295; McConnon Co. v. Prine, 90 So. 730, 128 Miss. 192; Watkins Co. v. Marbach, 93 S.E. 270; Hess v. Watkins Co., 123 N.E. 440; Rawleigh v. Deavors, 95 So. 549; Galbraith v. Shores-Mueller Co., 199 S.W. 779; Huckaby v. McConnon, 105 So. 886; Jones v. McConnon Co., 130 So. 760; McConnon Co. v. Richardson, 78 So. 292, 117 Miss. 345.
We submit that the purpose of section 2957, Code of 1930, is to force the creditor to bring into court the principal debtor. The creditor may sue all together, but the statute, when the notice is given, calls on the creditor to direct the fire of liability at the principal debtor. The principal debtor must be in that crowd, for if judgment is rendered, the surety is protected under section 2963, if the principal is solvent. The creditor can sue all in the same suit, but the surety is protected, provided the principal is solvent.
We certainly cannot understand how the English language can be plainer in this than to simply state that these sureties here waive all rights they had under section 2957, Code of 1930.
We submit that the waiver was inserted for the purpose as we contend for here and we give the following citations to show that in contracts of suretyship or absolute guaranty the sureties or guarantors may be sued without first exhausting the remedies against the principal.
Huchaby v. McConnon, 105 So. 886; Rawleigh Co. v. Deavors, 95 So. 459; Rawleigh Co. v. Walker, 77 So. 70; Hess v. Watkins Co., 123 N.E. 440; Furst v. Buss, 178 P. 411; New Idea Spreader Co. v. Satterfield, 265 P. 664.
Sureties may waive rights by the form of their agreement.
Rawleigh v. Laursen, 141 N.W. 64; Hughes v. Roberts, 72 S.W. 799; Davis v. Rosenbaum, 16 So. 340; Davis v. Wells, 104 U.S. 159; Rawleigh v. Walker, 77 So. 70; Rawleigh v. VanDuyn, 188 Pac. ___; Watkins v. McCall, 133 N.W. 966; Solomon v. Waterbury Brass Goods Corp., 6 F.2d 990; Huckaby v. McConnon, 105 So. 886; Heberling M. E. Co. v. Smith, 201 Ill. App. 126; Watkins v. Pruitt, 266 P. 770; Furst v. Buss, 178 P. 411; New Idea Spreader Co. v. Satterfield, 265 P. 664.
It is essential to commercial relations and the facility of their being carried on that contracts be made and even valuable rights are waived every day by people in business. These waivers are parts of the contracts.
By contract these sureties make themselves primary parties. They are more than sureties. They are not protected by section 2957.
McConnon v. Prine, 128 Miss. 192, 90 So. 730; 50 C.J., page 68, sec. 120; Chapter 39, Code of 1930.
Argued orally by Ellis B. Cooper, for appellant, and by G.L. Martin, for appellee.
Appellee is a manufacturer and seller of proprietary medicines, extracts, and the like. One Morse O. Ligon was a local retail dealer for appellee, and appellants were the accommodation sureties on a contract of suretyship executed unto appellee in behalf of said local retail dealer. The contract of suretyship was dated March 30, 1932. On January 10, 1934, the local retail dealer had become considerably in arrears with appellee, and other conditions were such that appellant sureties apprehended a loss on account of their suretyship, and certainly so unless immediate proceedings were instituted against said local dealer.
Accordingly, on the date last aforesaid, the sureties gave "notice in writing to the creditor to commence and prosecute legal proceedings against the principal debtor" at once; the notice averring that the principal debtor was then a resident citizen of this state, and that, "if suit is delayed, it may result in serious damage to us." This notice was given under section 2957, Code 1930, and it is not here contended that the terms or contents of the notice were in any way insufficient. The notice was promptly received at the head office of appellee, but appellee did not institute suit within the time required by the statute aforesaid, during which time the principal debtor remained a resident of this state, but delayed the suit until May 5, 1934, at which latter date the principal debtor had left the state.
In defense of the suit, appellants interposed a plea setting up the facts aforesaid and demanded a judgment of discharge of liability as provided in said statute. A demurrer to this plea was overruled, and appellee replied that the principal debtor was not a resident of the state at the time the notice set up in the plea was given and that for that reason the statute did not come into operation. On this issue the parties went to the jury, and the jury returned a verdict on the evidence on behalf of the sureties, appellants here, and judgment was entered in their favor. This was in the county court. The creditor appealed from that judgment to the circuit court, and the judgment was there reversed on the ground that the sureties had waived the benefits of section 2957, and the sureties have appealed to this court.
The two provisions in the written contract of suretyship which are urged by appellee as constituting a waiver of the statute are these: "We hereby expressly waive notice of the acceptance of this contract and of the shipment of goods to the buyer and of extension of credit to the buyer and of the extension of time in which to pay for the goods so purchased, and waive all notice of any nature whatsoever . . . We also agree that it shall not be necessary for the seller to first exhaust its remedies against the buyer before proceeding against us."
It is argued that, inasmuch as the said contract expressly agreed that the creditor could extend the time of payment without any notice to the sureties and for so long a time as the creditor should choose, and, having done so, the creditor did not in any event have to proceed against the principal debtor before resorting to the sureties, these stipulations are inconsistent with the rights conferred by the aforesaid statute, and being inconsistent therewith, are a waiver thereof. We think the contentions made by appellee have been settled, in principle, against appellee by the case First National Bank v. Rau, 146 Miss. 520, 531, 112 So. 688. There, as here, the indorser had, among other stipulations, agreed that extensions of time for payment might be made without notice to the indorser, and under the law, as fully as if expressly recited in the agreement of indorsement, the creditor did not have to first exhaust its remedies against the principal debtor; yet the court held that such stipulations did not have the effect to oust or waive the statute.
The legal philosophy underlying that and similar decisions is that rights which an accommodation surety has under the law and by which his burdens are lightened are not to be ousted by the mere implications of his contract of suretyship. As said by us in the recent case, W.T. Raleigh Co. v. Rotenberry, 164 So. 5: "A gratuitous surety is a favorite of the law and the contract must be strictly construed to impose upon the surety only the burdens clearly within the terms of the contract, so that it cannot be extended by implication, presumption, or construction." To deprive the sureties of the rights of the statute in question would most certainly increase the load or burden undertaken by them, and this must be by language which is express, and cannot be worked out by implication or construction, unless the construction adopted and allowed is as dependable and satisfactory as that found in express language; and that is not the case here.
Reversed, and judgment here for appellants.