USCA1 Opinion
UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
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No. 94-2104
WESTCHESTER FIRE INSURANCE COMPANY,
Plaintiff - Appellee,
v.
RICHARD H. CAMPBELL & DEBORAH D. CAMPBELL,
Defendants - Appellants.
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APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MAINE
[Hon. Morton A. Brody, U.S. District Judge] ___________________
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Before
Boudin, Circuit Judge, _____________
John R. Gibson* and Campbell, Senior Circuit Judges. _____________________
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Stephen G. Morrell, with whom Laurie A. Dart and Eaton, ___________________ _______________ ______
Peabody, Bradford & Veague, P.A., were on brief for appellants. ________________________________
Keith R. Jacques, with whom Jensen Baird Gardner & Henry, _________________ _____________________________
was on brief for appellee.
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June 1, 1995
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* Of the Eighth Circuit, sitting by designation.
JOHN R. GIBSON, Senior Circuit Judge. Richard and _____________________
Deborah Campbell appeal the summary judgment entered against them
in favor of Westchester Fire Insurance Company on a guaranty the
Campbells executed for the benefit of their family-owned company,
R. H. Campbell, Inc. We affirm the judgment of the district
court.
The facts are undisputed. In 1987 the Campbells signed
an agreement with Universal Bonding Insurance Company to
indemnify Universal against loss on any surety bonds it might
execute on behalf of R. H. Campbell, Inc.1 The agreement had no
termination date, and neither party terminated it. The agreement
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1 The operative language of the agreement provided:
[S]hould the [Universal Bonding] Company
execute or procure the execution of the
suretyship for which application is now
pending, or which may be hereafter
applied for . . . the undersigned [i.e.,
the Campbells] . . . hereby undertake and
agree:
. . .
That the indemnitor will . . . at all
times indemnify and save the [Universal
Bonding] Company harmless from and
against every claim, demand, liability
[or] loss . . . sustained or incurred by
the Company by reason of having executed
or procured the execution of said bonds
or obligations . . . .
The agreement also stated:
The indemnitor and his successors agree
to indemnify and save harmless the Surety
from and against any and all demands,
liabilities, loss, costs, damages or
expenses of whatever nature or
kind. . . .
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defined as the "Surety" entitled to indemnification: "Universal
Bonding Insurance Company, its reinsurers, and any other person
or entity which the surety may procure to act as Surety or co-
surety on any bond or any other person or entity who executes any
bond at its request." In 1990 Westchester issued payment and
performance bonds for R. H. Campbell, Inc., at Universal's
request, in reliance on the guaranty Universal had obtained from
the Campbells. Richard Campbell was aware that his corporation
was obtaining the bonds at the time Westchester issued them,
since he signed the bonds in his capacity as president of R. H.
Campbell, Inc.
Westchester was eventually required to pay almost a
million dollars in claims, expenses, and attorneys' fees on its
surety bonds. Consequently, Westchester sued the Campbells on
the guaranty agreement. The district court granted Westchester
summary judgment. Westchester Fire Ins. Co. v. Campbell, 863 F. _________________________ ________
Supp. 32 (D. Maine 1994).
The Campbells argue that under Maine law, specifically
Norton v. Eastman, 4 Me. 521 (1827), a guarantor on a continuing ______ _______
guaranty is entitled to notice of acceptance of his offer of
guaranty. They argue that they did not receive notice that
Westchester issued its bonds in reliance on their guaranty. The
Campbells quote from American Agricultural Chemical Co. v. _____________________________________
Ellsworth, 83 A. 546 (Me. 1912): "Until acceptance and notice, _________
the writing of guaranty is merely a proposal, making necessary
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acceptance by the other party to complete the contract." Id. at ___
547.
However, there are several situations in which notice
of acceptance is unnecessary, since acceptance can be inferred
from the circumstances of the offer of guaranty. In Ellsworth _________
the Maine Supreme Judicial Court stated:
There are some exceptions to the
general rule [requiring notice], three of
which the plaintiff relies upon in this
case. One is when the consideration of
the guaranty is a valuable one, moving,
directly or indirectly to the guarantor
from the creditor. Another is when the
guaranty is made at the request of the
creditor. And a third is when the
agreement to accept, or the contract
guaranteed, is contemporaneous with the
guaranty. In such cases notice of
acceptance of the guaranty is
unnecessary.
Id. at 547. ___
This case presents the first exception listed in
Ellsworth, since the Campbells agreed in the 1987 guaranty: _________
"Undersigned warrant that each of them is specifically and
beneficially interested in the obtaining of each Bond." The
import of this language is that the consideration for the
guaranty--that is, the Surety's issuance of the bonds--was
valuable consideration benefitting the Campbells themselves.
This exception makes perfect sense, because when the guarantor
benefits from the surety's execution of the bond, he has already
received something under the arrangement and is not entitled to
withdraw from it. Moreover, the very receipt of that benefit
functions as notice of acceptance of the guaranty, making further
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notice superfluous. Here, the Campbells were sole shareholders
of R. H. Campbell, Inc., and as such had an obvious interest in
the issuance of bonds enabling R. H. Campbell, Inc. to do
business. Under these circumstances, the Campbells are not
entitled to insist on further notice of acceptance under
Ellsworth.2 _________
Westchester also states without objection from the
Campbells, that the Campbells executed the guaranty at the
request of the creditor, thus coming within the second exception
to the notice requirement. See Ellsworth, 83 A. at 547; see ___ _________ ___
generally, Annotation, Necessity of Giving Creditor Notice of _________ _________________________________________
Acceptance of Guaranty, 6 A.L.R. 3d 355, 10 (1966 and 1994 _______________________
Supp.); Restatement (Second) of Contracts 54, cmt. d (1981).
Westchester's assertion is corroborated by the fact that the
guaranty agreement consists of a Universal Bonding form signed by
the Campbells. Thus, the Campbells' arguments based on Maine law
are unavailing.
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2 These facts also establish another generally recognized
proviso to the notice of acceptance requirement: when a
guarantor is an insider of the principal corporation, notice of
acceptance to the guarantor is considered redundant once the
corporation has received notice. See Richard F. Dole, Jr., ___
Notice Requirements of Guaranty Contracts, 62 Mich. L. Rev. 57, __________________________________________
79-80 (1963); Annotation, Necessity of Creditor Giving Guarantor _______________________________________
Notice of Acceptance of Guaranty, 6 A.L.R. 3d 355, 13 (1966 ___________________________________
and 1994 Supp.); Restatement (Second) of Contracts 54, cmt. d
(1981). In this case, the Campbells were the sole shareholders
and were officers and directors of the principal corporation.
Richard Campbell was aware that the corporation was obtaining the
bonds. Campbell's knowledge of the transaction between debtor
and creditor is an adequate basis for inferring notice of
acceptance. See, e.g., Cobb v. Texas Distrib., Inc., 524 S.W.2d ___ ____ ____ ____________________
342, 345 (Tex. Civ. App. 1975).
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Finally, to the extent the Campbells are arguing that
Westchester should have notified them about each transaction
concluded in reliance on their guaranty, they have waived such
notice. Their guaranty agreement states: "Undersigned waive
notice of . . . Surety's loaning funds to Principal." Since in
executing the payment and performance bonds the surety lent its
credit to R. H. Campbell, Inc., it was in effect lending R. H.
Campbell funds. Certainly, this was the effect of the
transaction from the guarantor's point of view, since the
guarantor's concern is whether the principal will contract a debt
he cannot repay. Therefore, our decision is bolstered by the
fact that the Campbells waived notice of principal-surety
transactions in their guaranty agreement. See Davis v. Wells, ___ _____ _____
104 U.S. 159, 169 (1881).
We affirm the judgment of the district court.
Affirmed. ________
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