Singer Manufacturing Co. v. Littler

9 N.W. 905, 56 Iowa 601

• Court: Supreme Court of Iowa
• Decided: October 5, 1881
• Status: Published

Opinion

Beck, J.

I. The action is upon a bond executed by Littler as principal, and the other defendants as sureties, conditioned that Littler shall pay to plaintiff all his indebtedness to it, existing or afterward to exist, whether upon notes, accounts, or in any other manner. The petition alleges that Littler became agent of plaintiff for the sale of sewing machines, and the bond in silit was executed, when he was .appointed, to secure plaintiff from loss that might accrue on account of his employment. The petition alleges that Littler became delinquent in his payments and executed a note to plaintiff, upon which a judgment was afterward rendered, for the amount of his indebtedness.

The sureties answered the petition alleging that Littler and the plaintiff entered into an agreement whereby Littler became plaintiff’s agent, and became bound to pay to plaintiff money upon the sales of sewing machines or upon the indorsement of paper taken upon such sales as stipulated in the agreement. The agreement provides that either party may terminate the contract at their pleasure. Other conditions need not be set out. '■

The answer further alleges that plaintiff had terminated Littler’s agency before the note was executed by him, and that the defendants had no notice at any time that Littler was in default, or that any claim was made by plaintiff against them upon the bond. Upon a demurrer to this answer the court held, that the defendants were entitled to notice of the amount due from Littler within a reasonable time after the settlement between him and plaintiff. The court found upon the trial that no snch notice was given to the defendants, wherefore they suffered loss, and' that plaintiff, therefore, is not entitled to recover.

1. guabanty: ilimiiw obugation: notice. II. The controlling question in the case, and the only one argued by counsel, involves the correctness of the court’s ruling in holding that defendants are not liable ° ° ^01' ^e reason that notice was not given them of ^he extent of Littler’s liability within a reasonable time after his agency was terminated and his indebtedness fixed by his settlement with plaintiff. The ruling of the court we think is correct, and in accord with Davis Sewing Machine Company v. Mills et al., 55 Iowa, 543. We held in that case “where the guaranty is a continuing one, and the parties must have understood their liability thereunder would be increased and diminished from time to time, and the guaranty is uncertain as to when it will cease to be binding upon the guarantor, and when the party indemnified has the power at pleasure to annul and put an end to the contract guaranteed, without the knowledge of the guarantor, he is entitled to notice, within a reasonable time after the transactions guaranteed are closed, of the. amount of his liability thereunder.” It will be observed, upon considering the statement of the terms of the contract guaranteed as above set out, that they are within this rule, and that under it the defendants in this case are not liable in the absence of the notice contemplated therein.

2.-: who tors.0 III. But counsel for plaintiff in an ingenious argument attempt to distinguish this case from Davis Sewing Machine Company v. Mills et al. They insist that while the contract in that case was a guaranty, in this case defendants are not guarantors, but are sureties for Littler, and are jointly liable with him upon an original contract. The error of this position is apparent. Littler was, or was about to become, indebted to plaintiff upon the 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 is alone 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, for the performance of the contract upon which Littler’s indebtedness to plaintiff arose. They were therefore entitled to notice under the rule of Davis Sewing Machine Company v. Mills et al.

It may be observed that guarantors are often called sureties.- We use the -term sureties in the foregoing discussion to describe one who is bound by a contract with his principal —who joins with his principal in the execution of the contract, and becomes pecuniarily liable thereon. But, as we have seen, a guarantor, the surety in a contract of guaranty, is not primarily liable upon the principal’s contracts, and only, becomes liable upon his default. A guarantor under this rule is entitled to notice of the amount of his liability within a reasonable time after that liability is determined by the transaction between the original debtor and creditor. It is our opinion that the judgment of the Circuit Court ought to be

Aeetrhed.