Sedalia, Warsaw & Southern Railway Co. v. Smith

Missouri Court of Appeals

Sedalia, Warsaw & Southern Railway Co. v. Smith

27 Mo. App. 371, 1887 Mo. App. LEXIS 35

CourtMissouri Court of Appeals

DecidedOctober 24, 1887

StatusPublished

Cited by4 cases

This text of 27 Mo. App. 371 (Sedalia, Warsaw & Southern Railway Co. v. Smith) is published on Counsel Stack Legal Research, covering Missouri Court of Appeals primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook

Sedalia, Warsaw & Southern Railway Co. v. Smith, 27 Mo. App. 371, 1887 Mo. App. LEXIS 35 (Mo. Ct. App. 1887).

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Opinion

Hall, J.

The general rule is, wherever there is no principal there is no guarantor, and that, whatever entirely avoids the obligation of the principal, releases [378]*378the guarantor. Brandt on Suretyship and Guaranty, sect. 121. Under this rule a guarantor may not interpose those exceptions which are personal to the principal, but he has the right to interpose all which are inherent to the debt. Id., and cases cited. This rule results from the form of the contract of guaranty, which “is a collateral engagement for another, as distinguished from an original and direct engagement for the party’s own act.” Chitty on Cont. 499. We have no doubt, however, on reason as well as authority, but that the guarantor may, by the terms of his contract, make him-' self liable for the principal debt, although it be invalid. Mason v. Nichols, 22 Wis. 360; McLaughlin v. McGovern, 34 Barb. 208; Veasey v. Willis, 6 Gray, 90. Whether the guarantor has made himself thus liable must depend upon the proper construction of the contract, and the intention of the parties thereby ascertained. The contract in this case is clearly a contract of guaranty. The contract is to be construed, on the one hand, so as to give effect to the intention of the parties as it is to be gathered from the instrument Allen v. Savings Bank, 4 Mo. App. 66), and, on the other hand, so strictly as not to extend the meaning of the terms used in the guaranty, or to amplify such meaning, so as to increase the extent of the obligation. Eddy & Co. v. Sturgeon, 15 Mo. 203. The obligation assumed by the terms of the guaranty in this case was to make good to a certain amount any deficit in the payment of certain subscriptions to the capital stock of plaintiff. The guaranty was not that the subscriptions had been made, that they were valid, or even that they would be paid in full. The guaranty was that a certain amount of the subscriptions would be paid, and, that if such amount was not paid, the deficit would be paid in a certain manner. The guaranty was based upon the assumption that the subscriptions had been made, and that they were valid. If no such subscriptions had been actually made, the guaranty would have created no liability. This is plain. The [379]*379guaranty that a certain amount of the money subscribed should be paid could not be extended so as to include a guaranty that the money was, in fact, subscribed. It is equally plain that the guaranty cannot be so extended as to exclude a guaranty that the money was-validly subscribed. The term, “subscription,” means valid subscriptions. To so extend the guaranty would be to make a new guaranty, and to impose a liability upon the guarantors not assumed by them. They guaranteed that a certain amount of the money validly subscribed would be paid, not that any money which was-not subscribed would be paid.

The court held that the guaranty was binding as to-the valid subscriptions only, and in so holding the court was correct. Judgment affirmed.

Ellison, J., concurs ; Philips, P. J., not sitting.

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Hall, J.

The general rule is, wherever there is no principal there is no guarantor, and that, whatever entirely avoids the obligation of the principal, releases [378]*378the guarantor. Brandt on Suretyship and Guaranty, sect. 121. Under this rule a guarantor may not interpose those exceptions which are personal to the principal, but he has the right to interpose all which are inherent to the debt. Id., and cases cited. This rule results from the form of the contract of guaranty, which “is a collateral engagement for another, as distinguished from an original and direct engagement for the party’s own act.” Chitty on Cont. 499. We have no doubt, however, on reason as well as authority, but that the guarantor may, by the terms of his contract, make him-' self liable for the principal debt, although it be invalid. Mason v. Nichols, 22 Wis. 360; McLaughlin v. McGovern, 34 Barb. 208; Veasey v. Willis, 6 Gray, 90. Whether the guarantor has made himself thus liable must depend upon the proper construction of the contract, and the intention of the parties thereby ascertained. The contract in this case is clearly a contract of guaranty. The contract is to be construed, on the one hand, so as to give effect to the intention of the parties as it is to be gathered from the instrument Allen v. Savings Bank, 4 Mo. App. 66), and, on the other hand, so strictly as not to extend the meaning of the terms used in the guaranty, or to amplify such meaning, so as to increase the extent of the obligation. Eddy & Co. v. Sturgeon, 15 Mo. 203. The obligation assumed by the terms of the guaranty in this case was to make good to a certain amount any deficit in the payment of certain subscriptions to the capital stock of plaintiff. The guaranty was not that the subscriptions had been made, that they were valid, or even that they would be paid in full. The guaranty was that a certain amount of the subscriptions would be paid, and, that if such amount was not paid, the deficit would be paid in a certain manner. The guaranty was based upon the assumption that the subscriptions had been made, and that they were valid. If no such subscriptions had been actually made, the guaranty would have created no liability. This is plain. The [379]*379guaranty that a certain amount of the money subscribed should be paid could not be extended so as to include a guaranty that the money was, in fact, subscribed. It is equally plain that the guaranty cannot be so extended as to exclude a guaranty that the money was-validly subscribed. The term, “subscription,” means valid subscriptions. To so extend the guaranty would be to make a new guaranty, and to impose a liability upon the guarantors not assumed by them. They guaranteed that a certain amount of the money validly subscribed would be paid, not that any money which was-not subscribed would be paid.

The court held that the guaranty was binding as to-the valid subscriptions only, and in so holding the court was correct. Judgment affirmed.

Ellison, J., concurs ; Philips, P. J., not sitting.

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27 Mo. App. 371, 1887 Mo. App. LEXIS 35, Counsel Stack Legal Research, https://law.counselstack.com/opinion/sedalia-warsaw-southern-railway-co-v-smith-moctapp-1887.

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