Allen v. Pike

Wilde, J.

This is an action of assumpsit on a contract of guaranty in writing, in the words following, namely'': —

[Here the judge repeated the terms of the instrument, inserted on the preceding page.]

This letter of credit was directed to the plaintiff and one Charles Lee, by the defendant, and was dated the 30th of May, 1842. It appeared in evidence, by the testimony of Dockam, that he gave the letter to the plaintiff soon aftei *241its date, and afterwards purchased goods of him, from time to time, until October, 1844, when he purchased the goods for the price of which this action was brought; and that he had no knowledge that the defendant had been notified of these dealings, and the acceptance of the guaranty by the plaintiff. And there was no evidence, that the defendant had been so notified, before the purchase of the goods in October, 1844. Upon this evidence, the defendant’s counsel requested the court to instruct the jury, that the defendant was not liable on the guaranty, unless he had notice, within a reasonable time, that it had been accepted by the plaintiff, and that the plaintiff- had trusted Dockam on the faith of it; and that there had been an unreasonable delay in giving notice, in this case, which discharged the defendant from his liability. The court refused so to instruct the jury, but instructed them, that it would be a reasonable notice, in this case, if it were given within thirty days after the day when the note for the goods purchased in October, 1844, became due, which was in April, 1845; and it was left to the jury to decide, whether notice was given within the thirty days.

From these facts it appears, that this case is in all its material facts similar to the case of Mussey v. Rayner, 22 Pick. 223, in which it was decided, as a settled rule of law, that in cases of a written guaranty for a debt yet to be created, and uncertain in its amount, the guarantor should have notice, in a reasonable time, that the guaranty is accepted, and that credit has been given upon the faith 'of it. And as in that case no such notice was given until nearly three years after the date of the guaranty, it was held that the notice was not given within a reasonable time, and therefore that the action could not fee maintained. A longer time intervened in the present case, before the notice was given; and that case, therefore, if rightly decided, is decisive of the present case. And we have no doubt of the correctness of that decision. It is supported by numerous authorities, and founded upon just and reasonable principles. The case of McIver v. Richardson, 1 M. & S. 557, is the leading case on this point The *242defendant in that case wrote to the plaintiff, declaring that he had no objection to guaranty him against any loss from giving A. & Co. the credit they had requested of him; and it was held that this letter did not amount to a guaranty; it being a mere overture to a guaranty, and there being no notice given by the plaintiffs to the defendant, that they accepted it as such, or any consent of the defendant that it should be a conclusive guaranty.

This decision has been followed up by numerous similar decisions in this country; in New York, Pennsylvania, Maryland, Maine, and in several cases in the courts of the United States. In the case of Adams v. Jones, 12 Pet.. 213, Story, J., says : “ We are all of opinion, that upon a letter of guaranty for a future credit to be given to the party, in whose favor the guaranty is drawn, notice is necessary to be given to the guarantor, that the person giving the credit has accepted and acted upon the guaranty, and given the credit on the faith of it.” And this, he says, was not then an open question, after the numerous decisions in that court before made. “ It is,” he remarks, “ a reasonable rule, enabling the guarantor to know the nature and extent of his liability, and to exercise due vigilance to guard against losses.”

The case of Eaton v. Tiffany, 2 Har. & Gill, 22, was decided on the same rule of law, as were the cases of Norton v. Eastman, 4 Greenl. 521; Tuckerman v. French, 7 Greenl. 115 ; and Beekman v. Hale, 17 Johns. 134. This rule of law is therefore well established, and, as we think, on reasonable principles. The distinction is between an offer to guaranty a debt about to be created, the amount of which the party making the offer does not know, and it is uncertain whether the offer will be accepted, so that he may be ultimately liable; and the case of an absolute guaranty, the terms of which are definite as to its amount and extent. In the latter case no notice is necessary to the guarantor; whereas in the former case the contract is not completed until the offer is accepted. And this rule is of great importance in the case of a continuing guaranty, like the present, where the *243amount of the credit which may be given from time to time is not limited, nor the duration of time for which it may continue.

It was argued for the plaintiff, that the guaranty was complete when the plaintiff first gave credit on the faith of it; and that although notice of the acceptance was not given within a reasonable time, yet if notice was given before any material change in the circumstances of the principal debtor, it would be sufficient. But this rule applies only to the guaranty of a debt which is definite in its amount, and not to a mere offer to guaranty a debt or debts, which may or may not be afterwards created.

Upon these authorities and principles, we are of opinion, that the instructions to the jury were incorrect. The jury were instructed, that although the defendant, as guarantor, was entitled to a reasonable notice, that the plaintiff had accepted his guaranty, and had trusted Dockam on the faith of it, yet notice within thirty days after the debt became due was a reasonable notice. This was three years after the offer to guaranty the debts proposed to be created, and after the plaintiff had first given credit to Dockam on the faith of it. This, we think, was not reasonable notice; and the jury should have been instructed, as the court was requested to do by the defendant’s counsel.

Exceptions sustained, and new trial ordered.