Musgrove v. Luther Publishing Co.

63 S.E. 52, 5 Ga. App. 279, 1908 Ga. App. LEXIS 93

Opinion

Hill, C. J.

(After stating the foregoing facts.)

The controlling question in the case arises upon the construction of the contract signed by Cheshire and Bush. If this is a contract of guaranty, the demurrer on the ground of misjoinder ■of parties should have been sustained, because a guarantor and his principal are not joint promisors such as may be sued in the same, action. Manry v. Waxelbaum Co., 108 Ga. 14, 17 (33 S. E. 701); Sims v. Clark, 91 Ga. 302 (18 S. E. 158); Reed v. Cutts, 7 Greenleaf (Me.), 186 (22 Am. D. 184). It is often difficult to tell whether a particular contract is one of guaranty or suretyship. “A surety and a guarantor have this in common, that they are both bound for another person; yet there are points of difference between them which should be carefully noted. A surety is usually bound with his principal by the same instrument, executed at the same time and on the same consideration. He is an original promisor and debtor from the beginning, and is held ordinarily to know every default of his principal. . . On the other hand, the contract of the guarantor is his own separate undertaking, in which the principal does not join. It is usually entered into before or after that of the principal, and is often founded on a ■separate consideration from that supporting the contract of the principal. The original contract of the principal is not the guarantor’s contract, and the guarantor is not bgund to take notice of its non-performance.” 1 Brandt on Suretyship (3d ed.), §2. The surety joins in the same promise as his principal and is primarily liable; the guarantor makes a separate and individual promise and is only secondarily liable. His liability is contingent ■on the default of his principal, and he only becomes absolutely liable when such default takes place and he is notified thereof. 20 Cyc. 1400 et seq.; Childs on Suretyship & Guaranty, 7. Measured by these rules, it seems clear that the contract in the case at bar is one of guaranty, and not of -suretyship. It is merely collateral to the contract which the principal signed; and he is in no way a signatory party thereto. The sole purpose of this collateral contract is to guarantee the faithful performance of the main contract; and the language used shows secondary and not primary liability. In no way do the guarantors join in the promise made by their principal; nor the principal in the contract made by his guarantors. The case of Singer Mfg. Co. v. Littler, 56 Iowa, 601 (9 N. W. 905), is strikingly similar to the instant case. The plaintiff, a manufacturer of sewing machines, appointed one Littler its agent; and afterwards the defendants signed a contract guaranteeing the faithful performance by Littler of his agency contract. The court says: “Littler was, or was about to become,, indebted to plaintiff upon tbe contract under which he was appointed agent. Defendants were not bound upon that contract.. Neither were they bound upon the notes, accounts, acceptances,, or upon any contract upon which Littler became indebted to plaintiff. They became first and only bound upon' the bond, whereby they guaranteed that Littler would pay his indebtedness to plaintiff, in whatever form it assumed. A guarantor becomes bound for the performance of a prior or collateral contract upon which the principal alone is indebted. A surety is bound with the principal upon the contract under which the principal’s indebtedness arises. This is a familiar doctrine of the law. Upon applying it to the facts of the case, it will be seen that defendants are guarantors, and not sureties.” See also Kramph v. Hatz, 52 Pa. St. 525; Saint v. Wheeler, 95 Ala. 362 (10 So. 539, 36 Am. St. R. 210). In fact the instrument signed by the guarantors in this ease is in no material particular different from that involved in the ease of Consolidated Portrait Co. v. Claxton, 1 Ga. App. 809 (57 S. E. 980), wherein we held that the obligation created was that of guaranty and not suretyship. The writing there was as follows: “Should R. W. Uoursey order goods of you at one or several times within the next twelve months -from date of this-letter of credit, we jointly and severally request that you ship-such goods to his order allowing credit thirty days from date of' shipment; and if said R. W. Coursey fails to pay for such goods, within thirty days after date of shipment, we agree to pay for-said goods at the price you charged him for same, provided our responsibility shall not exceed two hundred dollars.” See also-Small Co. v. Claxton, 1 Ga. App. 83 (57 S. E. 977), Andrews v. John Church Co., 1 Ga. App. 560-566 (58 S. E. 130).

It is insisted, however, that by the provisions of our Civil Code,. §2966, the writing sued on is a contract of suretyship, since in. a contract of guaranty the consideration must be “a benefit flowing-to the guarantor.” Always when the promisee incurs legal detriment in exchange for the promise, it is sufficient to make the-promise binding, and it is' immaterial whether the benefit which, is the counterpart of the detriment inures directly to the promisorhimself or to some one else for whose benefit he made the promise. Furthermore, it is ip be presumed that ha receives some^ benefit from credit extended to his principal or other indulgence granted him. 1 Brandt, supra, §35. In interpreting the foregoing section we must remember that it is not of • statutory origin. This identical language appears in the Code of 1861 (§2135), and is merely a statement of certain common-law principles. At the time this section was inserted in the code, and to-day, it is universally held that if there be a consideration for the promise of the guarantor, it is immaterial whether or not the guarantor himself gets any immediate and direct benefit therefrom. 1 Brandt-on Suretyship (3d ed.), §23; 20 Cyc. 1413. Of course the mere naked promise to pay the debt of another, by which the principal debtor gains no benefit and the creditor incurs no detriment, is ineffectual to create any kind of suretyship contract, whether it be by' guaranty, indorsement, or suretyship in the narrower sense of the term. Civil Code, §3656; Gay v. Mott, 43 Ga. 252, 254; Davis v. Banks, 45 Ga. 138; Hollingshead v. American Nat. Bank, 104 Ga. 250 (30 S. E. 728). A past consideration — one-which has already .served its purpose in a former transaction- — • is not sufficient to support a contract of guaranty; and where such a contract is created subsequently to the main contract, it must be supported by a new consideration. Hargroves v. Cooke, 15 Ga. 321; Green v. Thornton, 49 N. C. 230; 20 Cyc. 1417. It often happens, therefore, that contracts of guaranty do have the ele-ment of an independent consideration the benefit of which flows directly to the guarantor. Brandt, supra, §2. But this is' merely - a circumstance, and not a decisive test which would convert a contract bearing every earmark of suretyship into guaranty. Would it be contended that bonding companies, who make a business of standing surety, upon judicial and official bonds and upon contracts of like character, are guarantors, and not sureties, because they receive a consideration the benefit of which flows immediately to them? It would be anomalous to say that the mere fact of the receipt by the promisor of an independent and immediate benefit would make him a guarantor and. not a surely. Suretyship is more burdensome than guaranty. “A surety binds himself to perform if the principal does not, without regard to his. ability to do so. His contract is equally absolute with that of his. principal. They may be sued in the same action, and judgment-may .be entered up against both. A guarantor, on the other hand,. does not contract that his principal will paje, but simply that he is able to do so. . . Before an action can be maintained against a guarantor, therefore, it must be shown that the principal is unable to perform.” Manry v. Waxelbaum Co., supra. Certainly it is not the meaning of our code section that merely because the promisor receives an independent benefit he is to be held to the less burdensome liability.

The nature of a contract is to be determined from the language used, together with the other circumstances of the transaction. Since the contract of guaranty is a separate undertaking and is often entered into before or after the main contract to which it is collateral, it quite frequently happens that it is supported by an independent consideration; and the presence of such a consideration may be a circumstance indicating guaranty and not suretyship. But, as we have already said, the fundamental difference between these two classes of contracts is that the surety is primarily liable, while the guarantor is only secondarily liable; the surety joins in the promise which his principal makes, while the guarantor makes a separate and individual promise in which his principal may or may not join, the sole purpose of which is to give the creditor additional recourse in the event he is unable to make his money out of the rights given him by the main contract. The fact that the promisor receives no independent benefit from the consideration which makes his promise binding does not of itself impose upon him primary liability, when the language used and the other circumstances of the transaction clearly indicate only contingent and secondary liability. When a man promises to become sponsor for the debt of another, his promise is to be strictly construed. Civil Code, §2968. The wise man wrote, “He that is surety for a stranger shall smart for it, and he that hateth surety-ship is sure.” Proverbs, XI, 15. When men, disregarding this ancient warning, take upon themselves the obligation which Judge Lumpkin has called “a lame substitute for a thorough knowledge of human nature,” every ambiguity and doubt is to be resolved, not so as to increase, but so as to decrease the burdens thereb3r assumed. Jones v. Whitehead, 4 Ga. 397, 402. As has been said by Chief Justice Marshall, “The law will subject a man, having no interest in the transaction, to pay the debt of another, only when his undertaking manifests a clear intention to bind himself for that debt. Words of doubtful import ought not, it is conceived, to receive that construction. It is the duty of the individual, who contracts with one man on the credit of another, not to trust to ambiguous phrases and strained constructions, but to require an explicit and plain declaration of the obligation about to be assumed.” Russell v. Clark, 7 Cranch, 69 (3 L. ed. 278). We find it unnecessary, however, in the case at bar to invoke the aid of any such rule of construction. The language used is free from ambiguity, and every other circumstance is clearly indicative of guaranty and not suretyship. Since the fact of misjoinder of parties was apparent from the declaration itself, there was error in overruling the demurrer thereto. This initial error has rendered the subsequent proceedings nugatory, and it is unnecessary to consider any of the other assignments of error.

Judgment reversed.