Construction of a letter of guarantee.
In the construction of all written instruments, to ascertain the
intention of the parties is the great object of the court, and this
is especially the case in acting upon guarantees.
Generally all instruments of suretyship are construed strictly
as mere matters of legal right. The rule is otherwise where they
are founded on a valuable consideration.
The case, as stated in the opinion of the court, was as
follows:
The defendant in error and Joshua Mauran, Jr., of the City of
New York, on 8 September 1836, entered into articles of
co-partnership, in the trade and business of general shipping
merchants, and of buying and selling merchandise on their own
account, and also on commission for the account of others; which
was to continue three years. Mauran agreed to pay into the firm, as
capital stock, such sums as he should be able to realize on closing
the business of merchandizing, in which he had been engaged. Bullus
agreed to pay a sum of from $28,000 to $30,000 in cash.
And it was stipulated, that Mauran should not withdraw from the
concern more than $2,000 per annum, nor Bullus more than $3,000,
unless by consent of the co-partners in writing. Mauran covenanted,
that within a reasonable time, he would pay the debts owing by him,
out of his private funds, and that on or before 8 September
instant, he would give to Bullus satisfactory security for the
performance of this covenant.
On 9 September 1836, the defendant below wrote to Bullus the
following letter:
"Mr. Edward Bullus -- Dear Sir: "
"As you are about to form a connection in the mercantile
business in the City of New York, with my son, Joshua Mauran, Jr.,
under the firm of Mauran & Bullus. And as the said J.
Mauran,
Page 41 U. S. 529
Jr., having been, and is at this time prosecuting mercantile
business in that city, on his own account. Now therefore, in
consideration of the same and at the request of Joshua Mauran, Jr.,
I hereby agree to bear you harmless in regard to the closing up and
settlement of the said Joshua Mauran, Jr.'s former business, and I
hereby guarantee you against any loss or liability you may sustain
from the former business of said Joshua Mauran, Jr., &c."
"Joshua Mauran"
The action was brought by Bullus on this guarantee. On the
trial, an account against the old concern of Joshua Mauran, Jr.,
with the firm of Mauran & Bullus, was given in evidence, from
which it appeared that the old concern was indebted to the new in
the sum of $5,403.75. And it was proved by Joshua Mauran, Jr., that
the partnership continued until August 1839, when the firm failed.
That Bullus paid into the partnership stock $29,695.86, and that
the witness was unable to pay anything. That at the time of forming
the co-partnership, his father, the defendant, was in New York,
with whom he conversed relative to the terms of the partnership.
That he showed his father the articles or the minutes from which
they were drawn, and was satisfied that the conditions were fully
known to him. But the witness stated that he did not know of his
father's having any knowledge that the firm were to settle and pay
the debts owing by the witness.
The witness stated that certain loans were made by the firm to
him in anticipation of the receipts from the old concern, which
were charged. After the completion of the articles of
co-partnership, the witness delivered to his father a paper, drawn
by the attorney who drew the articles, for his father's signature;
his father did not sign the paper, but after his return to
Providence, sent the letter of guarantee. Many of the debts of his
old concern, the witness stated, became due before sufficient funds
could be collected from the same to meet them, and these debts were
paid by the firm. That this was a mode of settlement of the
accounts of the old concern, not originally contemplated. His
father often inquired what the deficiency of the old concern would
amount to, but he did not know, to the knowledge of the witness,
that the old concern was indebted to the firm.
Page 41 U. S. 530
That the firm, on their failure, assigned all their property and
estate to William D. Robinson including the debts of the old
concern, which amounted to the sum of $12,418.95. These debts were
credited to the stock of Joshua Mauran, Jr., and at the time, they
were all, except one of George Bucklin, of about $1,800, considered
bad, and that one had been released, though the witness considered
him bound in honor to pay it. Various accounts between the firm and
Joshua Mauran, junior and senior, and other persons, were given in
evidence.
The defendant introduced his son, Suchet Mauran, as a witness,
who stated, that his father brought with him, on his return from
New York, about 8 September 1836, a bond, binding him to pay the
debts of Joshua Mauran, Jr. It was under seal, and the witness read
it, and it was, as he believes, in the handwriting of Mr. Bonney,
of the City of New York, who wrote the articles of co-partnership;
that his father would not sign the bond, but sent the letter of
guarantee. The bond remained among the loose papers of his father,
for some time, but after a diligent search could not be found. That
the bond, by its terms, required his father to pay all the
outstanding debts of Joshua Mauran, Jr., to his creditors, or to
whoever might pay them.
The evidence being closed, the defendant below moved the court
to give the following instructions:
1. That said letter of guarantee of the defendant, dated 9
September, contained no authority to the said Mauran & Bullus
to pay any part of the debts of the said Joshua Mauran, Jr.'s old
concern; that if it authorized any payment of said debts, by any
person, it was by the said Edward Bullus alone; and that the said
Edward Bullus could not recover said sum of $5,403.75, or any part
thereof; inasmuch as he had paid no part thereof, the whole having
been paid by the said Mauran & Bullus. Which instruction the
court refused to give, as prayed for; on the contrary, they
instructed the jury that if, from the evidence submitted to them,
they were of opinion, that at the time of signing said letter of
guarantee, it was understood both by the plaintiff and the
defendant, that the plaintiff was to be at liberty to
Page 41 U. S. 531
pay the said debts of the said Joshua Mauran, Jr., either out of
his own private funds, or out of the partnership funds of the firm
of Mauran & Bullus, and in either case, the plaintiff was to be
entitled to indemnity therefor, under and in virtue of the said
letter of guarantee, and if they were of opinion, from the facts in
said case, that no funds whatsoever had been paid into the
partnership by the said Mauran, Jr., as a part of the capital stock
thereof, and that all the capital stock had been paid by the said
Bullus, and that he was and still remained a creditor of the firm
to the full amount of such capital stock; then the plaintiff was
entitled to recover in the present suit, such sums of money as he
had paid in discharge of the said debts of Mauran, Jr., either out
of his own private funds or out of the funds of the said firm of
Mauran & Bullus, for which he had not otherwise received any
indemnity.
2. And the defendant's counsel prayed the court further to
instruct the jury, that even if said letter had imposed upon said
defendant any obligation to pay said debts to the said Edward
Bullus, or to the said Mauran & Bullus; that the said Mauran
& Bullus, by assigning the uncollected debts due to the said
Joshua Mauran, Jr., to the said Robinson their assignee, and
placing them entirely beyond the control, or agency and management
of the defendant, had discharged the defendant from any liability
which might originally have arisen from said letter of guarantee.
Which instruction the court refused to give, but instructed the
jury, that if they should find a verdict for the plaintiff, they
ought to deduct from the amount of the plaintiff's claim in the
writ, the full value of the debts of the said Mauran, Jr., so
assigned, and charge it against the claim of the plaintiff, and
render a verdict in his favor for the balance only, after such
deduction.
To the instructions refused and those given, the defendant
excepted.
The jury, under the instructions of the court, found a verdict
in favor of the plaintiff for $3,764.25, on which a judgment was
entered. The defendant prosecuted this writ of error.
Page 41 U. S. 533
McLEAN, JUSTICE, delivered the opinion of the Court.
After stating the facts, he said the questions in this case
arise on the instructions of the court, and they, very properly, as
we think, refer the jury to the facts and circumstances under which
the guarantee was given. It is
Page 41 U. S. 534
only by such reference that that instrument can be correctly
understood and construed. In the construction of all instruments,
to ascertain the intention of the parties is the great object of
the court, and this is especially the case in acting upon
guarantees.
The guarantee under consideration, in the first place, refers to
the fact that Bullus, to whom it was addressed, was about to form a
connection in the mercantile business in the City of New York with
the son of guarantor. And from the evidence it appears that he was
well acquainted with the nature and extent of that partnership, for
he had read the articles of co-partnership, or the memoranda from
which they were drawn. As it appears from the statement of Bonney
that the articles were drawn in August and placed in the hands of
Bullus, who returned them with the blanks filled and some
alterations, there can be little doubt that the defendant below
read them while at New York. That he was well acquainted with the
conditions of the partnership his son testifies.
With this knowledge, we come to the next sentence in the
guarantee, which is, "And as the said Joshua Mauran, Jr., having
been, and is at this time prosecuting mercantile business in that
city on his own account."
It will be recollected that in the articles of co-partnership,
Joshua Mauran, Jr., covenanted, that he would give to his partner
satisfactory security that he would pay all the debts which he then
owed, and all the responsibilities incurred by him in carrying on
his former business without drawing upon the partnership fund. Of
this covenant the defendant below not only had full notice, but it
was proved that on his return from New York to Providence, he took
with him a bond drawn by the person who drew the articles of
co-partnership binding him to pay the debts of his son. This bond
he did not execute, but wrote to Bullus the letter of guarantee.
With these facts in view, after stating the fact that his son had
been in business in New York as above and that Bullus was about
commencing a partnership with him, the defendant says,
"Now therefore, in consideration of the same and at the request
of Joshua Mauran, Jr., I hereby agree to bear you harmless in
regard to the closing up and settlement of the said Joshua Mauran,
Jr.'s former business. And I hereby guarantee you against
Page 41 U. S. 535
any loss you may sustain from the former business of said Joshua
Mauran, Jr."
Now looking at the facts connected with the guarantee and the
circumstances under which it was given, there would seem to be no
doubt of the understanding and intention of the parties. Bullus,
having a capital of nearly $30,000, was unwilling to advance it as
the stock of the new firm unless he should be indemnified against
the debts which had grown out of the former business of his
partner. And Joshua Mauran, Sr., with the view of securing so
considerable a capital and so advantageous a connection in business
for his son, was willing to indemnify Bullus against these debts.
And he preferred the guarantee to the bond which was prepared. The
latter would have imposed an unconditional obligation to pay these
debts, whilst the former only required him to pay Bullus the sum
advanced by him in discharge of them.
But it is earnestly contended that as these debts were paid by
the firm and not by Bullus only, he cannot maintain an action in
his own name on the guarantee. It is very clear that the firm could
not maintain an action on this instrument. The indemnity was
personal and limited to Bullus.
But the best answer to this argument is the finding of the jury,
under the instruction of the court. It was instructed
"That if from the evidence it should find that at the time of
signing the letter of guarantee, it was understood both by the
plaintiff and the defendant, that the plaintiff was to be at
liberty to pay the debts of Joshua Mauran, Jr., either out of his
own private funds or out of the partnership funds, and in either
case the plaintiff was to be entitled to indemnify therefor, under
the letter of guarantee,"
&c., it should find for the plaintiff. It did so find, and
consequently the facts hypothetically stated in the instruction are
established. And the only question that can arise on this part of
the instruction is whether the facts found were properly submitted
to the jury.
Now out of what fund these debts were to be paid could not be a
matter of any importance, it would seem, to the guarantor. The
objection that Bullus cannot recover because the debts were paid
with the partnership funds, under the circumstances, is purely
technical. Every dollar of the money thus paid, though used in
Page 41 U. S. 536
the partnership name, was in fact the money of Bullus. To meet
this technical objection and carry out the indention of the
parties, we think the instruction was proper. The facts on which it
was founded did not contradict the written agreement, nor in any
degree affect the liability of the party beyond the clear import of
the guarantee.
By the articles of co-partnership, either partner, with the
consent in writing of the other, might withdraw from the firm any
amount of money. This was known to the guarantor. And also the fact
that the whole capital of Bullus was paid into the firm. If this be
admitted, it followed that any payments made by Bullus in discharge
of the debts could only be paid out of the firm.
The jury also found, in pursuance of the latter part of the same
instruction, that Bullus was a creditor of the firm to the full
amount of its capital stock.
These facts found by the jury disembarrass the case from the
technicalities thrown around it by the counsel of the guarantor.
They show that it was the understanding of the guarantor that
Bullus should be indemnified against the previous debts of his
partner whether he paid them out of the partnership fund or
otherwise.
The construction that the guarantor is only bound to indemnify
in case payment of these debts had been enforced against Bullus by
legal measures is not sustained by the words of the instrument.
In the first place, he was not and could not be made legally
responsible for these debts. The guarantor then must have
contemplated a voluntary payment, or at least not a payment by
legal compulsion. The guarantor agrees to bear Bullus "harmless, in
regard to the closing up and settlement of the said Joshua Mauran,
Jr.'s former business." Here is a strong recognition of an agency
by Bullus in the settlement of these debts. To sustain the credit
of the firm, it was necessary to pay the debts in question, and we
find that in a very short time after the firm commenced business,
the payment of these debts was commenced, and such payments were
made from time to time by the firm until near the time of its
failure. The moneys received from the debts due to the previous
concern were credited on the books of the firm, and the payments
made by it on the
Page 41 U. S. 537
same account were charged. But the mode of keeping the account
by the firm can have no bearing in the case, as the facts found by
the jury obviate all objections on this ground.
Suppose Bullus had been charged on the books of the firm with
the moneys paid in discharge of the debts; the objection as to the
partnership interest could not in that case be made. But the money
thus applied would have been no more the money of Bullus than that
which was paid by the firm. The facts found by the jury present the
case in its true character, and give a strong equity to the
plaintiff below. Generally, all instruments of suretyship are
construed strictly, as mere matters of legal right; the rule is
otherwise where they are founded on a valuable consideration. But
in the present case, the relationship of Mauran, the partner, and
the guarantor, connected with the other circumstances, constitute
as clear a case for indemnity as could well be imagined. That the
debts of Mauran, Jr., were paid by Bullus or with his assent in
virtue of the guarantee there is no reason to doubt. Indeed this
fact is substantially found by the jury.
The assignment by the firm of the uncollected debts of Joshua
Mauran, Jr., to Robinson does not release the guarantor. In this
respect, the instruction of the court was correct. The jury was
directed, if it should find for the plaintiff, to deduct from the
amount thus found the full value of the debts of Joshua Mauran,
Jr., which had been assigned by the firm, and render a verdict for
the balance. The debts of Mauran, Jr., assigned by the firm were
proved to be bad with but one exception, and that appears to have
been deducted by the jury from the sum paid by the firm in
discharge of those debts.
Upon the whole, we are satisfied that substantial justice has
been done between the parties by the judgment of the circuit court,
and we think there is no principle of law, arising out of the
instructions which require a reversal of the judgment. It is,
therefore
Affirmed.
