Fond du Lac Harrow Co. v. Bowles

Orton, J.

The plaintiff and one S. N. Griffith entered into a contract at the city of Eond du Lac on the 17th day of December, 1878, by which the plaintiff was to sell and Griffith buy at least 107 harrows, to be delivered on the - cars at that place; and Griffith was to have the exclusive right to sell them in certain places in the state of Minnesota named, and in Manitoba, and was to pay the plaintiff for the harrows he purchased, either “by cash or note, due July 1, 1879, with privilege of five months’ extension, if desired, with ten per cent, interest.” Attached to said contract was the following guaranty: “ Having read the foregoing agreement, and under- , standing the terms and conditions therein, the undersigned, for value received and acknowledged, hereby guaranty that said Griffith will pay for all purchases made, and in case of' payment of the whole, or any part thereof, by note, I guaranty payment of such uote or notes, or any renewals thereof, at maturity or any time thereafter;” signed by Susannah Bowles, James H. Haskins, and Ruth A. Griffith. The said Susannah Bowles thereupon executed the mortgage sought to be foreclosed in this suit, to secure the plaintiff on said guaranty. Afterwards the following change was made in the contract: “In connection with the above territory allotted, we hereby give S. N. Griffith privilege to sell our harrows at Crookston, Minnesota, and vicinity.” Signed by the plaintiff. The circuit court found that the plaintiff duly sold under the principal contract to the defendant Griffith, on the 6th day of March, 1879, 102 harrows for the price of $1,306, and that plaintiff and Griffith had an. accounting on the 5th of April, and the'sum of $997 remained due from Griffith to the plaintiff on such sales, and that Griffith executed the following note therefor:

“$997. Fond du Lac, Wisconsin, April 5, 1879.

“On or before November 1st, after date, for value received, I promise to pay to the order of Fond du Lac Harrow Company $997, at the Savings Bank of Fond du Lac, with interest at ten per cent, per annum, annually, after July 1, 1879, until paid.

“ S. N. GRIFFITH.”

It was further found that all of the harrows had been sold, and at Crookston, Minnesota, and that the change of the contract and the making of the note in this form were at the request of Griffith and without the knowledge of the defendant Bowles. The learned circuit judge found “ that the taking of said note by the' plaintiff from the defendant Griffith, payable November 1, 1879, instead of' July 1, 1879, without the •knowledge or consent of said Susannah Bowles, was a departure from the terms of said principal contract, which released said Susannah Bowles from all liability under her said guaranty of said principal contract, and annulled said mortgage.” It was on this ground alone that judgment was rendered in favor of the defendant Bowles, and this , presents really the only important question in the case. The learned counsel of the respondent, however, claims that there were other sufficient grounds for such judgment, such as the change in the contract by the addition of other territory in which the harrows might be sold, and the failure of Griffith to make sales, and his taking in a partner, Haskins, who made all such sales, and the fact that the sales were all made in such added territory.

It might be sufficient to say that this guaranty is strictly limited to the payment of the cash received and the notes given by Griffith to the plaintiff for'harrows purchased, and was security for nothing else; and the learned counsel of the respondent very properly contends that the guaranty cannot be extended by construction beyond its terms. Griffith had the right and was bound to purchase of the plaintiff at least 107 harrows, and he purchased only 103 clearly within the contract, and it would seem that the guarantors could have no concern in any other part of the contract.' Their liability is fixed as soon as the purchases are made, whatever becomes of the harrows afterwards.

The contract requires that Griffith should personally “work in introducing and selling said harrows in the territory [above allotted] in a thorough business manner.” The learned counsel would not contend that the guaranty could be construed to make the guarantors liable for the failure of Griffith to perform this part of the contract. The change alleged of the addition of other territory was certainly very favorable to Griffith as well as to the plaintiff, in’ increasing the facilities of sales; but of course this would make no difference if such a change was material and the guarantors were concerned in this part of the contract. But this was really no change of the contract. The contract gave Griffith the exclusive pi’ivilege to sell the harrows in the places first named, and the pretended change gave him the privilege (not exclusive) to sell at Crooks-ton. It does not appear that the plaintiff had any patent-right to dispose of with these harrows, or that they were patented at all. Griffith was not hound by the contract not to sell anywhere except in the places named. He secnred the exelu-siva privilege of selling in those places, and of course had the right and privilege of selling anywhere else, and even at Crookston, if he chose to do so without the consent of the plaintiff.

Whether the note is within the terms of the guaranty is the important question, and it is a very close one.

In all of the cases cited, and we think in all cases, where it was not clearly apparent that a substantial change had been made which discharged the guarantor, and yet where a change of some sort had been made, the materiality of the change has been the test. In that part of the brief of the learned counsel of the respondent in which it is argued that the change in the contract in respect to additional territory released the guarantor, Mrs. Bowles, he admits that such change must be material to have such effect. If that be so, then the difference between this note and that provided for in the contract must be material. There is a difference between the word “ extension ” in the contract and the word “ renewals ” in the guaranty; and yet it- cannot be doubted that all parties understood and intended that these two words should have substantially the same meaning, so that we can say they are not materially different. And so the materiality of the difference between this note and the notes described in the contract is the real question. Robinson v. Dale, 38 Wis., 330; Sage v. Strong, 40 Wis., 575; Gardner v. Van Norstrand, 13 Wis., 543; Stewart v. McKean, 10 Exch., 675; Smith v. Addison, 5 Cranch C. C., 623; Amicable M. L. Ins. Co. v. Sedgwick, 110 Mass., 163; Davey v. Phelps, 2 M. & G., 300; Finney v. Condon, 86 Id., 78; Curtiss v. Hubbard, 9 Met., 322; Rice v. Filene, Allen, 230; De Golyer on Guaranties, etc., 398, and note.

It is unnecessary to cite other authorities, as they agree in holding that the changes or differences must be substantial and material to release the guarantor; and all of the authorities cited by the learned counsel of the respondent are to the same effect, and they will therefore not be considered, unless closely analogous in facts. The case more nearly analogous than any cited, and the one.upon which the learned counsel of the respondent chiefly relies for the affirmance of the judgment, and the one the learned judge of the circuit court most probably relied upon in deciding the case, is that of Locke v. McVean, 33 Mich. (11 Post), 473. The contract in that case rvas, “that McYean shall give his note of hand for all purchases of machines at the time of purchase, said notes to be on four months’ time, without interest. If so desired, an extension of time will be granted by O. M. Locke, equal to sixty days on each note, said MeYearf' to pay interest therefor at the rate of eight per cent, per annum.” McYean gave his five several promissory notes to Locke, each payable six months after date, and each, except the second one, only drawing interest after four months, and then at the rate of eight per cent. The second note was so worded as upon its face to draw interest at seven 'per cent, from date for the first four- months, and thereafter eight. As to the second note the court said: “ Clearly this note was a great ways from being the same as one drawn pursuant to the plan covered by the guaranty and then extended sixty days;” and ás to the other four notes it said: “But a short computation and comparison will prove that neither of these notes, in regard to length of time or amount of interest, is in substance the same as if drawn four months without interest, and extended sixty days, with interest at eight per cent, during that period. In every case the time and amount are both greater.” It will be observed that the only possible reason for the court to say that the time and amount were both greater or even different, is that the extended time in "the notes of two months is greater than or different from that in the contract of sixty days; and that" without question constituted a material difference. This reason was amply sufficient for the exoneration of the surety in that case; but the court mentions two others, one of which is that the right to compel reception of payment, and the surrender of the paper, was postponed; and the other that excess of time is afforded for transfer before maturity. The last reason certainly has no force whatever; for so far as the transfer of the note before maturity is concerned, there would be no difference. The extension would have to be made before the note became due, for then the rights of the parties as to the note are fixed and determined past alteration or change. The extension, to have any legal effect whatever, postpones the time of the maturity of the note, and keeps it from becoming due until the extension expires. The extension clause, if inserted in the note, would bind the holder with notice; and if not inserted in the note, the bona fide holder without notice would not be bound to extend the time of payment. The other reason, as to the right to compel the reception of payment, is of much force, and the court announced the true rule in such cases by saying, “ and these are substantial differences.”

In respect to this note, neither the time nor amount of the payment is different from that fixed in the contract, and the note is payable on or before the first day of November, 1879, so that the right to compel the reception of payment is not postponed. The contract does not require Griffith to exercise the privilege of extension on the first day of July or any other time, and here he exercised it when the note was given.

The real substance and effect of the contract in respect to the credit given to Griffith for harrows purchased of the plaintiff are, that such credit might be five months or less after July 1, 1879, with ten per cent, interest after that time, or until July 1, 1879, without interest, at the option of Griffith. lie exercised that option or privilege in this case by obtaining four months’ extension after July 1,1879, on the above terms. It is evidently true that the/orm of this transaction, according to the contract and the guaranty, was to be that the note should be first drawn payable July 1, 1879, and that then, before its maturity, Griffith should exercise the privilege of having the time of payment ex tended not to exceed five months, or of having it renewed for such. time. But wherein is the substantial difference? We are unable to see any material difference' in the two cases, and we must therefore hold that the defendant Emoles,' the guarantor, is liable to pay this note within the terms of her guaranty, and that the plaintiff is entitled to judgment of foreclosure of the mortgage to secure such guaranty.

By the Court.— The judgment of the circuit court is reversed, and the cause remanded with direction to render judgment of foreclosure for the amount found due upon said note in the sixteenth finding of fact.