Taussig v. Reid 35 Ill. App. 439

William Taussig et al. v. Simon Reid et al.

Guaranty—Debt Incurred by Another—Default of Debtor—Notice—Demand.

In case of a collateral continuing guaranty of the payment of debts of uncertain amounts, to mature at periods unknown, and the existence of which depends entirely on the future action of the principal and the guarantee, reasonable notice of default of payment by the principal need not be given to the guarantor, and he is not discharged to the extent of his loss or damage caused by the failure to give him such notice.

[Opinion filed March 10, 1890.]

Appeal from the Circuit Court of Cook County; the Hon. R. S. Tdthill, Judge, presiding.

Messrs. Kb ads, Matee & Stbih, for appellants.

Messrs. Hofheimbb & Zeislee, for appellees.

Baylies in his work on Sureties and Guarantors, page 200, thus states the condition of the law on the question under consideration:

*440“ The question as to whether notice of the default of the principal debtor is necessary to fix the liability of the guarantor, has given rise to numerous and conflicting decisions, which it would be idle to attempt to harmonize. For the rule of law in any State determining this question, the reported decisions of that State must be the guide.”

And on page 202, the same author says: “ In Illinois it is laid down as a general rule that where one guarantees the act of another, his liability is commensurate with that of his principal, and that he is no more entitled to notice of default than the latter. Both must take notice of the whole at their peril.”

In McGuire v. Newkirk, 1 Engl. (Ark.) 142, cited by appellants, the guaranty was as follows:

“We hereby guarantee the payment of bill of this date to Newkirk & Olden, by Bandolph & Keeshley, for $806.12.

“Montgomery, Kelly & Co.”

The guarantors being sued upon this instrument, the Supreme Court of Arkansas held “ that the stipulation is to pay in case the original debtor does not, and is an auxiliary obligation; * * * that the creditor ought not to be allowed to enforce the payment of the security without notice of the non-payment of the principal debtor.”

In Gage v. Mechanics Nat. Bank, 79 Ill. 62, the guaranty was: “For value received,, we guarantee the payment of the within note at maturity.” Our Supreme Cou rt came to the conclusion “the holder was under no obligation to demand payment of the maker, and on his default to notify the guarantors, for they undertook to pay, at all hazards, at maturity, the one being as much bound as the other. * * * It is a primary, positive undertaking, joint and several in its nature.”

Or, as this court said with reference to exactly the same kind of a guaranty in Johnson v. Glover, 19 Ill. App. 585 (588, bottom): “A contract of guaranty is not a collateral but an original undertaking.” In Virden v. Ellsworth, 15 Ind. 144, likewise cited by opposing counsel, the guaranty *441was as follows : “ For value received, I guarantee the payment of the rent, as stipulated by said Ford, in case of nonpayment by him.”

The Supreme Court of Indiana hold that “ the undertaking or contract of the guarantor was distinct from that of the principal, and collateral thereto;” therefore notice of the default of the lessee was necessary.

We invite a comparison of that case with the decision of our own Supreme Court in Voltz v. Harris, 40 Ill. 155. There, also, “Yoltz signed a guaranty to the effect that he would be responsible for the rent and for all damages the lessors might sustain by reason of non-compliance or fulfillment of the lease by Widmer.”

In this case, the Supreme Court say (page 159) : “By the terms of the guaranty in this case, the liability of the guarantor was primary and for all rent, and consequently he was not entitled to notice. It was his duty to see the rent was paid by Widmer, or by the person he had let into possession.” In the case of McDougal v. Calef, 34 N. H. 534, the guaranty was as follows:

“This may certify that we, being acquainted with Frank Stevens, and reposing good confidence in his honesty, and the goods you may see fit to entrust him with we will hold ourselves good for, provided he should sell them and abscond with the money and squander them away, and this shall be your note against us.

Signed: “ Daniel J". Calef,

“J. Fellows.”

The condition of guarantors’ liability is very clearly expressed: “provided he should sell the goods and abscond with the money and squander them away.”

The guaranty, therefore, was a conditional undertaking, not an absolute one, and upon that ground the court very properly held notice of default to be necessary; and they clearly make this distinction, that where the guarantors’ undertaking is absolute no demand or notice is necessary; otherwise, where the undertaking is only collateral.

The Hew Hampshire doctrine will more clearly appear from *442two other decisions of that State. See March v. Putney, 56 N. H. 34; Bank v. Sinclair, 60 N. H. 100.

In Smith v. Ide, 3 Vt. 290, the guaranty was as follows; “Mr. William Smith.

“ Sir : Avara Gilman says he has bought a pair of horses of you for $200 in sixty days. I will warrant him to pay according to his agreement.

“Signed: George Ide.”

The court say: “ The last point made in this case depends on the question whether the undertaking of the defendant was absolute or conditional. And we think it was an absolute engagement that Gilman should pay for the horses at the expiration of sixty days, or that the defendant would himself make the payment. Therefore, on failure of payment at the time it fell due, the defendant became fixed with this debt without reference to any demand on Gilman or notice to himself.” See Train v. Jones, 11 Vt. 444; Sylvester v. Downer, 18 Vt. 32; Noyes v. Nichals, 28 Vt. 159; Craft v. Isham, 13 Conn. 28; Bushnell v. Church, 15 Conn. 406.

On all fours with the case at bar is Lowe v. Beckwith, 14 B. Mon. (Ky.) 150. The court there considers all arguments of reason as well as of authority, in favor of the proposition contended for by appellants, finds proper and convincing answers thereto, and reaches the conclusion that notice of the default of the principal debtor is unnecessary.

In Yancey v. Brown, 3 Sneed (Tenn.), 89, the guaranty was as follows:

“Mr. W. G. Stuart, the bearer of this, is a young man who has lived with me for the last twelve months, and has now visited your city with a view of buying a small stock of goods. Knowing him to be a young man of strict integrity, and of sober, moral and industrious habits (and I have known him all his life), I have no hesitancy in recommending him to you as such. I want you to sell him a bill of goods on the best terms you can afford; I will guarantee the payment of every dollar.

“Yours most respectfully,

“John Yancey.”

*443In regard to the question of notice of the failure of the principal debtor, the court say (p. 96):

“Upon much consideration we have adopted the doctrine of the English authorities upon this subject; and the settled law in this State now is, that where the instrument purports to be an absolute engagement, no notice either of the acceptance of the guaranty, or of non-payment by the principal, is necessary.”

In Clark v. Burdett, 2 Hall (N. Y. Super. Ct.), 197, the guaranty was as follows:

“ I hereby guarantee the payment of any bill or bills of merchandize Mrs. Phillips has purchased or may purchase from E. P. Clark & Co.; the said Mrs. Phillips having the privilege of ninety days’ credit on the purchases made by her, the amount of this guaranty not exceeding two hundred dollars, and this guaranty to expire at the end of one year from this date.

“ Jacob Bürdett.”

Objection was made to the plaintiff’s recovery on the ground that no demand on- the principal debtor for payment had been made, and no notice of default had been given to the defendant. But the court decides that neither was necessary.

In Smith v. Dann, 6 Hill, 543, this was the form of the guaranty:

“If you will let Mess. Steel & Wall, of this village, grocers and bakers, have 100 dollars in goods at your store on a credit of 3 months, you may regard me as guaranteeing the payment.

“ Amos Dank.”

The court say: “If the defendant wanted notice, and did not get it from the persons whom he thought worthy of credit, it was his business to inquire and ascertain what had been done.

“I know there are cases which require notice (see Adams v. Jones, 12 Pet. 207; Reynolds v. Douglass, Id. 497; Am. Jur., Vol. 27, p. 336 et seq.), but we think they are not based upon the common law, and for that reason they have not been followed in this State.” See Douglass v. Howland, 24 Wend. *44435; Whitney v. Groat, 24 Wend. 82; Allen v. Rightmere, 20 Johns. 365; Ketchell v. Burns, 24 Wend. 456; Brown v. Curtiss, 2 N. Y. 225; Clay v. Edgerton, 19 O. St. 549.

In Woolley v. Sergeant, 8 N. J. L. 262, the rule is broadly stated that except in cases of mercantile instruments, the obligation of a guarantor or surety is'absolute and unconditional without necessity of demand upon the principal debtor or notice of his failure to pay.

An examination of the decisions of our own State will establish their entire harmony with the common law view and their repudiation of the doctrine introduced into American jurisprudence by the dicta of Marshall and Story.

Let us first quote from Gage v. Lewis, 68 Ill. 604, where it is stated (p. 618), as “ a general rule, that where one guarantees the act of another, his liability is commensurate with that of his principal, and he is no more entitled to notice of the default than the latter. Both must take notice of the whole, at their peril. Somersall v. Barnaby, Cro. Jac. 287; Atkinson and Wolfe’s case, 1 Leon. 105; Douglass v. Howland, 24 Wend. 35; Hammond v. Gilmore’s Adm’r, 14 Conn. 479; Duffield v. Scott et al., 3 Term R. 374.”

It is clear from the citations made in support of the above text, that our Supreme Court, with reference to the question of notice of default, stand upon common law ground and are in full accord with the New York doctrine as expressed in Douglass v. Howland, supra, as well as with the modified view of the Connecticut Supreme Court. It will be remembered that Douglass v. Howland, in terms rejects the opinions of Ch. J. Marshall in Russell v. Clark, 7 Cr., and that of Story, J., in Douglass v. Reynolds, 7 Pet., as having no foundation in English jurisprudence.

Our Supreme Court has, at least by implication, done the same, by citing with approval the case of Douglass v. Howland.

The oldest Illinois decision involving the point under discussion is Heaton v. Hurlbert, 3 Scam. 480. It still flavors of the rule of Douglass v. Reynolds, which it cites, and winds up by stating that “a distinction has been taken *445between the absolute guaranty of a promissory note, or a sum ascertained and certain, and a letter of credit, with a guaranty which requires acceptance and notice.” But this is entirely obiter dictum. See Allison v. Waldham, 24 Ill. 132; Penny v. Crane Bros. Mfg. Co., 80 Ill. 244; White v. Walker, 31 Ill. 422; Voltz v. Harris, 40 Ill. 155; Dickerson v. Derrickson, 39 Ill. 574; Powell v. Chicago Carpet Co., 22 Ill. App. 409; Hance v. Miller, 21 Ill. 636; Gridley v. Capen, 72 Ill. 11; Johnson v. Glover, 19 Ill. App. 585; Gage v. Bank, 79 Ill. 62.