The following guarantee,
viz.:
"In consideration of Messrs. J. & A. Lawrence having a
credit with your house, and in further consideration of $1 paid me
by yourselves, receipt of which I hereby acknowledge, I engage to
you that they shall fulfill the engagements they have made and
shall make with you for meeting and reimbursing the payments which
you may assume under such credit at their request, together with
your charges, and I guarantee you from all payments and damages by
reason of their default."
"You are to consider this as a standing and continuing
guarantee, without the necessity of your apprizing me from time to
time of your engagements and advances for their house, and in case
of a change of partners in your firm or theirs, the guarantee is to
apply and continue to transactions afterwards, between the firms as
changed until notified by me to the contrary."
is a continuing guarantee, and includes not only transactions
under a letter of credit existing at the date of the guarantee, but
also transactions which arose under a second letter granted at the
expiration of the first, although the second credit contained a
proviso
"that the bills be drawn by or in favor
Page 43 U. S. 427
of parties permanently resident in Europe, and if made from the
continent, they be made at the customary date, say three
months."
The principles laid down in the case of
Bell v.
Bruen, 1 How. 169,
42 U. S. 186,
which should govern the construction of commercial guarantees,
reviewed and confirmed.
A valuable consideration, however small or nominal, if given or
stipulated for in good faith, is, in the absence of fraud,
sufficient to support an action on any parol contract, and this is
equally true as to contracts of guarantee as to others.
The consideration in this case was not past.
The question whether or not the guarantor had sufficient notice
of the failure of the principals to pay the debt was a question of
fact for the jury.
Where notes are deposited for collection by way of collateral
security for an existing debt, the case does not fall within the
strict rules of commercial law applicable to negotiable paper. It
falls under the general law of agency, and the agents are only
bound to use due diligence to collect the debts.
The facts were these:
Robert McCalmont and the other defendant in error, were
co-partners in trade in London, trading under the name of
McCalmont, Brothers & Company.
In the year 1838, J. & A. Lawrence were merchants who
resided in Brooklyn, near New York, in the same house with their
mother, Susan Lawrence the plaintiff in error. Their counting house
was in the city. McCalmont, Brothers & Co. had agents, J. Gihon
& Co., also residing in New York.
On 21 November, 1838, J. & A. Lawrence obtained from the
agents at New York the following letter:
"New York, 21 Nov. 1838"
"Messrs. McCalmont Brothers & Co., London: "
"Gent.: We have granted to Messrs. J. & A. Lawrence of this
city a credit with you of �10,000, say ten thousand pounds
sterling, to be availed of within six months from this time, in
such drafts as they may direct, at four months' date, against
actual shipments of goods for their account, and coming to their
address; said goods to be forwarded through you or your
agents."
"The above credit if granted under their engagement to cover
your acceptances before maturity, by direct remittances from this
country of approved sixty day bills -- seconds of exchange to be
handed to us for transmission to you. You are to charge one percent
commission
Page 43 U. S. 428
on the amount accepted, and to keep the account at five percent
interest per annum. We are, gents., your ob. st."
"JOHN GIHON & CO."
In the course of the trial, William Davidson being under
examination, the plaintiff's counsel asked the witness whether the
letter of credit of 21 November, 1838, was delivered on an
agreement for the guarantee. To this evidence the defendant's
counsel objected as irrelevant and inadmissible. The judge decided
that it was admissible for the purpose of showing the nature and
character of the plaintiff's claim on J. & A. Lawrence, but not
to vary the construction of the guarantee, and admitted the
evidence; to which the defendant's counsel excepted.
The witness then testified that the said letter of 21 November,
1838, was delivered on Mr. Lawrence's proposal of his mother's
security for the credit, which will be presently mentioned.
On 22 November, 1838, this letter was transmitted to England
with the following endorsement:
"New York, Nov. 22, 1838"
"Messrs. McCalmont, Bros. & Co."
"Gent.: You will please accept our, Mr. A. T. Lawrence's, dfts.
for amount of within credit, in such amounts, and at such times, as
he may draw."
"Your ob. st.,"
"J. & A. LAWRENCE"
On 10 December, 1838, Mr. A. T. Lawrence, being then in England,
received the above letter, and forwarded it to London, accompanied
by the following letter from himself:
"Nottingham, Dec'r, 10, 1838"
"Messrs. McCalmont, Bros. & Co., London: "
Gent.: I now hand you enclosed, Messrs. J. Gihon & Co.'s
letter of credit on you in favor of my house, J. & A. Lawrence,
endorsed over to me for �10,000 sterling, and will you
please write me, giving authority to draw for the amount? I observe
that one of the conditions of the credit is that goods to the
amount of the same shall be shipped through your agents. Will you
please inform me the names of the houses in Liverpool and London,
though whom you would wish the shipments made? Please address me at
this place.
"Respectfully, your obt. servt.,"
"A. T. LAWRENCE"
On 11 December, 1838, McCalmont, Brothers & Co.,
acknowledged the receipt of the above letter as follows:
Page 43 U. S. 429
"London, 11 Dec. 1838"
"A. T. Lawrence, Esq., Nottingham: "
"Sir: We have to acknowledge receipt of yours of yesterday's
date covering the letter of credit in your house's favor, opened by
our mutual friends, Messrs. John Gihon & Co., say to the extent
of ten thousand pounds sterling, to be availed of by drafts on us
at four months against actual shipments of goods for their account,
and going to their address, said goods, if shipped from Liverpool,
to be forwarded through our agent there, Nathan Cains, Esq., India
Buildings, or from hence through us, or such shipping agent as you
may appoint; but in that case, a copy of the bill of lading to be
lodged with us prior to presentation of your drafts, and such
drafts to appear within thirty days from date of shipment. This
credit to be availed of within six months from 21 ulto., and your
house undertaking to comply with the other stipulations stated in
it by Messrs. J. Gihon & Co.,
viz., that they engage
to cover our acceptances before maturity, by direct remittances
from United States by approved bills of sixty days, the seconds to
be forwarded to us through our agents, Messrs. John Gihon &
Co., your house to pay us one percent Commission on the amount of
our acceptances and disbursements, the account to be kept at five
percent interest per annum, which credit we hereby confirm to you,
trusting that in opening an account with your respectable firm it
will lead to a mutually agreeable and profitable
correspondence."
"We remain, sir., your most obedt. servt.,"
"McCALMONT, BROS. & R. CO."
"It is to be understood that the above credit is the only one
you have in Europe."
"McC., BROS. & R. CO."
On 17 December, 1838, Susan Lawrence, the plaintiff in error,
wrote the following letter:
"Messrs. McCalmont, Brothers & Co., London: "
"Gent.: In consideration of Messrs. J. & A. Lawrence having
a credit with you house, and in further consideration of one dollar
paid me by yourselves, receipt of which I hereby acknowledge, I
engage to you that they shall fulfill the engagements they have
made and shall make with you, for meeting and reimbursing the
payments which you may assume under such credit at their request,
together with your charges, and I guarantee you from all payments
and damages by reason of their default. "
Page 43 U. S. 430
"You are to consider this a standing and continuing guarantee
without the necessity of your apprizing me, from time to time, of
your engagements and advances for their house, and in case of a
change of partners in your firm or theirs, the guarantee is to
apply and continue to transactions afterwards between the firms as
changed until notified by me to the contrary."
Yours, respectfully,
"SUSAN LAWRENCE"
Under these documents, advances were made and settled, and for
the transactions within the six months, from November 21, 1838,
nothing was claimed.
At the expiration of the six months, the credit was renewed by
the following letter:
"New York, June 12, 1839"
"Messrs. McCalmont, Brothers & Co., London: "
Gent.: With reference to our letter of 21 November last, opening
a credit on your good selves, favor Messrs. J. & A. Lawrence
for �10, 000, to be drawn within six months from that date,
and which expired by limitation last month. We hereby renew the
same for a like period from the date hereof, and under the same
stipulations, with this proviso, that the bills be drawn by or in
favor of parties permanently resident in Europe, and if made from
the continent, they be made at the customary date, say three
months.
"We remain &c.,"
"JOHN GIHON & CO."
In the course of the trial, William Davidson, again called by
the plaintiff's counsel, was asked whether at the time of the
renewal of the credit in June, 1839, a conversation took place with
Mr. Lawrence respecting the application of the guarantee to it, to
which the defendant's counsel objected, but the judge admitted the
same to show the nature and character of the plaintiff's claim on
J. & A. Lawrence, but not to affect the construction of the
guarantee, to which the defendant's counsel excepted. The witness
then testified that Mr. Lawrence on that occasion called on him and
asked if it was agreeable for witness' firm to continue the credit
for �10,000. Witness replied that he had no objection to
continue it on the same terms as before, stating that it was to be
on his mother's guarantee attached to the previous credit; he
answered that he did not expect it on any other terms, or without
the guarantee. Witness was in a hurry, and said that he should
refer to it to find out whether the guarantee was for a particular
credit or was a continuing guarantee.
Page 43 U. S. 431
Witness afterwards referred to the letter of guarantee, and
subsequently drew up the letter continuing the credit and delivered
it to Mr. J. D. Lawrence, and exhibited to him his mother's letter;
he read it.
The plaintiffs' counsel then offered to prove that both the
house of J. Gihon & Co. and J. & A. Lawrence acted upon the
guarantee as a continuing guarantee. To this the defendant's
counsel objected, but the judge admitted the evidence for the
purpose of showing that both acted upon it as a continuing
guarantee, but not to vary the construction of the guarantee
itself, to which the defendant's counsel excepted. The witness then
testified that Mr. Lawrence and he both agreed that it was a
continuing guarantee, and as such no new letter was needed.
Witness testified that their house received sundry bills
receivable, understood and represented to be business paper, not at
maturity when received, to be collected and realized, as far as
they could do it, and the proceeds to be remitted to the plaintiffs
for the credit. It was a distinct understanding between witness'
firm and J. & A. Lawrence, that they received this paper
subject to its encashment, on being paid at maturity. Witness has
had a statement made of the proceeds of the paper thus deposited.
Witness' firm had realized from it, and remitted �1,309
16
s. 6
d. The amount due on the plaintiffs' said
account with J. & A. Lawrence, crediting those remittances, and
charging interest to the third day of May, instant, is
�9,712 11
s. 4
d. -- amounting in dollars,
at $4.85 to the pound sterling, to $47,105.95.
On 28 June, 1839, this letter was received by Mr. A. T.
Lawrence, being still in England, and forwarded with the following
letter from himself:
"Nottingham, June 28, 1839"
"Messrs. McCalmont, Bors. & Co.: "
"Dear Sirs: By the steamer
Great Western I have
received a letter of credit for �10,000, granted to our
house by your friends Messrs. J. Gihon & Co., on your house,
which I now hand you enclosed. �5,000 of the same I wish you
to hold subject to the drafts of Messrs. Jones, Gibson & Ord,
of Manchester, drawn at such times and for such amounts as they may
deem proper. The balance you will hold subject to my draft or the
drafts of such parties as I may advise at the time of their
drawing."
"I am, gent., your ob't serv't."
"A. T. LAWRENCE"
"It is understood, of course, in case of your confirming the
above
Page 43 U. S. 432
named credit, that the remittances to meet the drafts drawn
against it shall be in such bills as are approved of by your
friends in New York."
On 5 July, 1839, the receipt of the above was acknowledged by
the following letter addressed to the house in New York:
"London, 5 July, 1839"
"Messrs. J. & A. Lawrence, New York: "
"Gent.: Your favors of 6 and 24 May, were duly received with
their enclosed remittances, which you will find at your credit in
the annexed statement of your account current to 30 ulto."
"This account we hope you will find correct, and the bills about
coming due will, we doubt not, have your usual attention."
"The further credit for �10,000 on your account opened by
Messrs. J. Gihon & Co., we have confirmed to your Mr. A.
Lawrence, on the understanding that it is to be met by remittances
from New York, satisfactory to J. Gihon & Co."
"We are, gent. your most ob't serv't,"
"McCALMONT, BROS. & CO"
Upon this credit, J. & A. Lawrence drew several drafts in
the months of July and August, 1839.
On 31 October, 1839, J. & A. Lawrence addressed the
following letter to the London bankers:
"New York, 31 Oct., 1839"
"Messrs. McCalmont, Bros. & Co., London: "
"Gent.: We were in hopes that we should have been enabled ere
this to have made you a remittance to meet your acceptances for our
account, due 13 and 19 Nov., but such is the state of our money
market that it is almost impossible to get money at any rate. The
best of our commercial paper is offered freely at three and four
percent per month discount, and owing to the deranged state of our
internal exchanges, it is impossible to collect amounts due us in
other cities except at a ruinous rate. Exchange on Philadelphia,
only 96 miles from this, is 15 percent discount today. Under all
these circumstances, we have to beg a little indulgence on your
part. We shall remit you the moment it is in our power. We have
offered your friends, Messrs. John Gihon & Co., to place our
business paper in their hands in settlement, but they have declined
at present. Browns and other bankers are settling in this way."
"We are, gent'm, resp'y &c.,"
"J. & A. LAWRENCE"
Page 43 U. S. 433
On 24 January, 1840, McCalmont, Brothers & Co. transmitted
their account current to the Messrs. Lawrence, the receipt of which
was acknowledged in the following letter:
"New York, May 30, 1840"
"Messrs. McCalmont, Bros. & Co., London: "
"Gent.: Your favor of 24 January came duly to hand, enclosing
your account current with us to 31 December last, showing balance
due you on that day of �10,349 8
s. 5
d. --
say ten thousand three hundred and forty-nine pounds eight
shillings five pence, which we find correct. On 18 March last, we
made a payment on your account to Messrs. J. Gihon & Co., of
$11,822.26 -- say eleven thousand eight hundred and twenty-two
26/100 dollars -- for which we have their acknowledgment as your
agents."
"Respectfully, your ob't serv't,"
"J. & A. LAWRENCE"
On 29 May, 1840, John Gihon & Co. addressed the following
letter to Susan Lawrence:
"New York, May 29, 1840"
"Mrs. Susan Lawrence: "
"Madam: We enclose on behalf of Messrs. McCalmont, Bros. &
Co., a copy of the account of Messrs. J. & A. Lawrence with
them, showing a balance due of �10,349 8
s.
5
d. -- say ten thousand three hundred and forty-nine
pounds eight shillings and five pence sterling, on first January
last, with interest. These gentlemen not having fulfilled their
engagements to reimburse this account, we claim payment of you
under your guarantee to Messrs. McCalmont, Bros. and Company."
Respectfully, yours,
"J. GIHON & Co."
"Agents of McCalmont, Bros. & Co., of London"
In July, 1840, an action of trespass on the case was brought in
the circuit court by McCalmont, Brothers & Co., against Susan
Lawrence upon the guarantee, who pleaded the general issue.
Evidence was given by the plaintiff upon the trial to sustain
the above facts. The defendant offered evidence that sundry notes
were deposited in the hands of John Gihon & Co., by J. & A.
Lawrence for collection, and that due notice of their not being
paid was not given to them and to Susan Lawrence.
The counsel for the defendant then asked the court to charge the
jury upon the points of law arising in the case, as follows,
viz.,
"1st. That the said credit of 21 November, 1838, is a standing
and continuing credit during the six months. "
Page 43 U. S. 434
"2d. That defendant's guarantee of 17 December, 1838, is
confined to the said credit, both as to time and amount."
"3d. That the acceptances and claims of the plaintiffs demanded
in their declaration in this suit are not covered by the guarantee
of the defendant aforesaid."
"4th. That the new credit aforesaid of 12 June, 1839, is not a
continuance or repetition of the first credit, but a departure from
it, and is not covered by or embraced in the defendants' said
guarantee."
"5th. That the nominal consideration of one dollar and the past
consideration stated in defendant's said guarantee are not, nor is
either of them, sufficient to sustain the said guarantee."
"6th. That the evidence that the said J. & A. Lawrence
agreed to give a guarantee at the time said credit of 21 November,
1838, was given is not sufficient in law to render valid the
consideration expressed in defendant's said guarantee or to sustain
the said guarantee."
"7th. The facts being ascertained, the question whether the
notice given to the defendant by the plaintiffs of the failure of
the said J. & A. Lawrence to remit to cover the plaintiffs'
acceptance was reasonable is a question of law, and no notice
sufficient in law was given of such failure to the defendant."
"8th. If the sufficiency of such notice be a question
exclusively of fact, a reasonable and sufficient notice was not
given to her of such failure of J. & A. Lawrence to remit as
aforesaid."
"9th. The notes received by the plaintiffs, through their agents
to collect, ought, when there was a failure of payment, to have
been regularly protested and due notice thereof served on the
defendant and J. & A. Lawrence, and on failure thereof, a
credit should be allowed for the same."
The judge thereupon charged the jury that the plaintiffs were
not precluded from recovering under the guarantee in evidence by
reason of any supposed want of consideration therefor, and the same
was not without sufficient consideration.
That the said guarantee of the 17th December, 1838, was not
limited to the credit of November 21, 1838, but was a standing and
continuing guarantee, and did apply to, and was sufficient to
embrace, transactions arising after the said credit of November,
1838, was expired.
That the new credit of June 12, 1839, and the advances and
Page 43 U. S. 435
transactions under it, were not in law without the scope of the
guarantee of December 17, 1838, and that the plaintiffs were, under
the evidence, entitled to recover for the same under the said
guarantee.
That the defendant was entitled to a reasonable notice of the
default of the principal debtors to enable her to take measures for
her indemnity; that it was for the jury to consider whether, under
all the circumstances in evidence, the defendant had not had such
notice.
That as to the notes turned over by the principal debtors to J.
Gihon & Co., as the same were merely lodged with the latter, on
their engagement that the proceeds of them, when received, were to
be passed to their credit, the want of protest of any such notes as
were dishonored, or of notice thereof to the said J. & A.
Lawrence would not entitle the defendant to charge the plaintiffs
with the amount of such notes, or to claim a deduction for that
amount.
And with that charge, left the said cause to the jury, unto
which charge, and to the refusal of the judge to charge otherwise
and as requested by defendant as aforesaid, the defendants counsel
then and there excepted.
The jury found a verdict for the plaintiff for $47,105.97.
Page 43 U. S. 445
MR. JUSTICE STORY delivered the opinion of the Court.
On 21 November, 1838, J. & A. Lawrence obtained from the
agents (Messrs. Gihon & Co) at New York, of McCalmont, Brothers
& Co., of London, the following letter of credit:
"New York, 21 Nov., 1838"
"Messrs. McCalmont, Brothers & Co., London: "
"Gents: We have granted to Messrs. J. & A. Lawrence of this
city a credit with you of �10,000, say ten thousand pounds
sterling, to be availed of within six months from this time, in
such drafts as they may direct, at four months' date, against
actual shipments of goods for their account, and coming to their
address, said goods to be forwarded through you or your
agents."
"The above credit is granted under their engagement to cover
your acceptances before maturity by direct remittances from this
country of approved sixty day bills -- seconds of exchange to be
handed to us for transmission to you. You are to charge one percent
commission on the amount accepted, and to keep the account at five
percent interest per annum. We are, gents, your ob. st.,"
"JOHN GIHON & CO."
The letter of credit was delivered on Mr. Lawrence's proposal of
his mother's (the plaintiff in error's) security for the credit. On
17 December, 1838, Mrs. Lawrence gave the following guarantee:
"Messrs. McCalmont, Brothers & Co., London: "
"Gents: In consideration of Messrs. J. & A. Lawrence having
a credit with your house, and in further consideration of one
dollar
Page 43 U. S. 446
paid me by yourselves, receipt of which I hereby acknowledge, I
engage to you that they shall fulfill the engagements they have
made and shall make with you for meeting and reimbursing the
payments which you may assume under such credit at their request,
together with your charges, and I guarantee you from all payments
and damages by reason of their default."
"You are to consider this a standing and continuing guarantee
without the necessity of your apprizing me from time to time of
your engagements and advances for their house, and in case of a
change of partners in your firm or theirs, the guarantee is to
apply and continue to transactions afterwards between the firms as
changed, until notified by me to the contrary."
"Yours, respectfully,"
"SUSAN LAWRENCE"
Under these documents, McCalmont, Brothers & Co. made the
stipulated advances, which were repaid, and on the transactions
included within the six months from 21 November, 1838, nothing has
been claimed by the London house. About the expiration of the six
months, Mr. Lawrence (one of the firm of J. & A. Lawrence) at
New York, called on the agents of McCalmont, Brothers & Co.,
and asked if it was agreeable for the agents to continue the credit
for �10,000. The reply of one of the agents was that there
was no objection to continue it on the same terms as before,
stating that it was to be on the mother's guarantee attached to the
previous credit. Mr. Lawrence then answered that he did not expect
it on any other terms or without the guarantee. The agent then
wished time to examine whether the guarantee was for a particular
credit, or was a continuing guarantee, and having referred to the
letter of guarantee, they drew up and delivered to Mr. Lawrence a
second letter of credit (Mr. Lawrence and the agents both agreeing
that it was a continuing guarantee, and as such no new letter was
needed from the mother). The second letter of credit, dated 12
June, 1839, was as follows:
"New York, June 12, 1839"
"Messrs. McCalmont, Brothers & Co., London: "
"Gent.: With reference to our letter of 21 November last,
opening a credit on your good selves, favor Messrs. J. & A.
Lawrence for �10,000, to be drawn within six months from
that date, and which expired by limitation last month. We hereby
renew the same for a like period from the date hereof, and under
the same stipulations,
Page 43 U. S. 447
with this proviso, that the bills be drawn by or in favor of
parties permanently resident in Europe, and if made from the
continent they be made at the customary date, say three
months."
"We remain &c.,"
"JOHN GIHON & CO."
Under this second letter of credit, bills were drawn and paid by
McCalmont, Brothers & Co. to an amount exceeding in the whole
the �10,000 stipulated for. The bills being all drawn at
four months. The firm of J. & A. Lawrence not having made any
remittances to pay the new advances, and firm having failed, the
agents of the London house, on 29 May, 1840, addressed the
following letter to Mrs. Susan Lawrence, giving her notice of the
nonpayment of the advances:
"New York, May 29, 1840"
"Mrs. Susan Lawrence: "
"Madam: We enclose on behalf of Messrs. McCalmont, Bros. &
Co. a copy of the account of Messrs. J. & A. Lawrence with
them, showing a balance due of �10,349 8
s.
5
d. -- say ten thousand three hundred and forty-nine
pounds eight shillings and five pence sterling, on first January
last, with interest. These gentlemen not having fulfilled their
engagements to reimburse this account, we claim payment of you
under your guarantee to Messrs. McCalmont, Bros. &
Company."
"Respectfully, yours,"
"J. GIHON & CO."
"Agents of McCalmont, Bros. & Co., of London"
She declining to pay the deficit, the present action of
assumpsit was brought against her to enforce the payment. At the
trial upon the general issue, in addition to the facts already
stated, it was in evidence that during the whole period of these
transactions, Mrs. Lawrence resided at Brooklyn (New York), in the
same house with her sons, J. & A. Lawrence. There was also
evidence in the cause to show that McCalmont, Brothers & Co.,
had by their agents certain notes belonging to the firm of J. &
A. Lawrence and endorsed by the firm for collection, and the
proceeds when received were to be applied towards the liquidation
of the debt due to the London house, subject to their encashment on
being paid at maturity, under which the sum of �1,309,
16
s. 6
d. had been realized. The notes thus
deposited for collection, which were dishonored at maturity, were
protested accordingly, and the original plaintiffs offered the
protests and notices to J. & A. Lawrence of the dishonor in
evidence, but the evidence as to some of the notices was
Page 43 U. S. 448
not full. Much other evidence was given at the trial, which,
however, it is not necessary to state.
The counsel for Mrs. Lawrence then asked the court to charge the
jury as follows:
"1st. That the said credit of 21st November, 1838, is a standing
and continuing credit during the six months."
"2d. That defendant's guarantee of 17 December, 1838, is
confined to the said credit, both as to time and amount."
"3d. That the acceptances and claims of the plaintiffs demanded
in their declaration in this suit, are not covered by the guarantee
of the defendant aforesaid."
"4th. That the new credit aforesaid of 12 June, 1839, is not a
continuance or repetition of the first credit, but a departure from
it, and is not covered by or embraced in the defendant's said
guarantee."
"5th. That the nominal consideration of one dollar and the past
consideration stated in defendant's said guarantee are not, nor is
either of them, sufficient to sustain the said guarantee."
"6th. That the evidence that the said J. & A. Lawrence
agreed to give a guarantee at the time said credit of 21 November,
1838, was given is not sufficient in law to render valid the
consideration expressed in defendant's said guarantee or to sustain
the said guarantee."
"7th. The facts being ascertained, the question whether the
notice given to the defendant by the plaintiffs of the failure of
the said J. & A. Lawrence to remit to cover the plaintiffs'
acceptances was reasonable is a question of law, and no notice,
sufficient in law, was given of such failure to the defendant."
"8th. If the sufficiency of such notice be a question
exclusively of fact, a reasonable and sufficient notice was not
given to her of such failure of J. & A. Lawrence to remit as
aforesaid."
"9th. The notes received by the plaintiffs through their agents
to collect ought, when there was a failure of payment, to have been
regularly protested and due notice thereof served on the defendant
and J. & A. Lawrence, and on failure thereof, a credit should
be allowed for the same."
The judge thereupon charged the jury that the plaintiffs were
not precluded from recovering under the guarantee in evidence by
reason of any supposed want of consideration therefor, and the same
was not without sufficient consideration.
Page 43 U. S. 449
That the said guarantee of 17 December, 1838, was not limited to
the credit of November 21, 1838, but was a standing and continuing
guarantee, and did apply to, and was sufficient to embrace,
transactions arising after the said credit of November, 1838, was
expired.
That the new credit of June 12, 1839, and the advances and
transactions under it, were not in law without the scope of the
guarantee of December 17, 1838, and that the plaintiffs were, under
the evidence, entitled to recover for the same under the said
guarantee.
That the defendant was entitled to a reasonable notice of the
default of the principal debtors, to enable her to take measures
for her indemnity; that it was for the jury to consider whether
under all the circumstances in evidence, the defendant had not had
such notice.
That as to the notes turned over by the principal debtors to J.
Gihon & Co., as the same were merely lodged with the latter, on
their engagement that the proceeds of them, when received, were to
be passed to their credit, the want of protest of any such notes as
were dishonored, or of notice thereof to the said J. & A.
Lawrence would not entitle the defendants to charge the plaintiffs
with the amount of such notes, or to claim a deduction for that
amount.
And with that charge left the said cause to the jury, unto which
charge, and to the refusal of the judge to charge otherwise and as
requested by defendant as aforesaid, the defendant's counsel then
and there excepted.
The jury found a verdict for the plaintiffs for $47,105.97, upon
which judgment was rendered for the plaintiffs, and upon that
judgment and the exceptions taken at the trial the present writ of
error has been brought.
Some remarks have been made on the argument here upon the point
in what manner letters of guarantee are to be construed -- whether
they are to receive a strict or a liberal interpretation. We have
no difficulty whatsoever in saying that instruments of this sort
ought to receive a liberal interpretation. By a liberal
interpretation we do not mean that the words should be forced out
of their natural meaning, but simply that the words should receive
a fair and reasonable interpretation, so as to attain the objects
for which the instrument is designed and the purposes to which it
is applied. We should never forget that letters of guarantee are
commercial instruments -- generally drawn up by merchants in brief
language -- sometimes inartificial, and often loose in their
structure and form, and to construe the words
Page 43 U. S. 450
of such instruments with a nice and technical care would not
only defeat the intentions of the parties, but render them too
unsafe a basis to rely on for extensive credits, so often sought in
the present active business of commerce throughout the world. The
remarks made by this Court in the case of
Bell v.
Bruen, 1 How. 169,
42 U. S. 186,
meet our entire approbation. The same doctrine was asserted in
Mason v. Pritchard, 12 East 227, where a guarantee was
given for any goods he hath or may supply W. P. with to the amount
of �100, and it was held by the court to be a continuing
guarantee for goods supplied at any time to W. P. until the credit
was recalled, although goods to more than �100 had been
first supplied and paid for, and the court on that occasion
distinctly stated that the words were to be taken as strongly
against the guarantor as the sense of them would admit of. The same
doctrine was fully recognized in
Haigh v. Brooks, 10 Ad.
& E. 309, and in
Mayer v. Isaac, 6 Mees. & W. 605,
and especially expounded in the opinion of Mr. Baron Alderson. It
was the very ground, in connection with the accompanying
circumstances, upon which this Court acted in
Lee v.
Dick, 10 Pet. 482, and in
Mauran v.
Bullus, 16 Pet. 528. Indeed, if the language used
be ambiguous and admits of two fair interpretations, and the
guarantee has advanced his money upon the faith of the
interpretation most favorable to his rights, that interpretation
will prevail in his favor, for it does not lie in the mouth of the
guarantor to say that he may without peril scatter ambiguous words
by which the other party is misled to his injury.
Passing from these general considerations, let us now address
ourselves to the points made at the argument. The first point is
that the second advance was made upon terms and under an agreement
materially variant from that on which the guarantee was given,
without any communication with the guarantor or her consent
thereto. The variances insisted on are two -- first in requiring
the bills to be drawn by or in favor of parties permanently
resident in Europe, secondly that if the bills were drawn from the
continent of Europe, they should be made at the customary date, say
three months. We think that there is no variance whatsoever which
is not fairly within the scope of the original guarantee and was so
contemplated by J. & A. Lawrence, as well as by the agents of
the London house. This is explicitly proved by the evidence, for
upon the question's arising, both the Lawrences and the agents
agreed that it was a continuing guarantee, and as such no new
letter of guarantee was needed. It is
Page 43 U. S. 451
true that Mrs. Lawrence was no party to this interpretation of
the instrument, but then it is strong evidence to establish that it
was neither a forced nor unnatural interpretation of the words, and
the agents of the London house agreed to make the second advance
upon the faith of it.
Now looking to the very words of the guarantee, we see that it
contemplated not a single advance and then it was to end, but a
continuing guarantee, and the very words are found in it. It also
contemplated not only agreements which had been already made
between J. & A. Lawrence and the agents, but also future
agreements. The guarantor says: "I engage that they shall fulfill
the agreements they have made, and shall make with you for meeting
and reimbursing the payments which you may assume." And again:
"You are to consider this a standing and continuing guarantee
without the necessity of apprizing me from time to time of your
engagements and advances for the house. . . . So that new
engagements and new advances were contemplated to be made to which
the guarantee should attach without notice thereof."
And this is not all, for the guarantee goes on to provide for
its continuance in case of a change in the partners of either firm
(a change which would ordinarily be fatal to a guarantee), and that
the guarantee should apply to and continue upon transactions
afterwards between the firms so changed until notified by her to
the contrary. It seems plain from all this language that a series
of new transactions, new agreements, and new engagements were
within the contemplation of the parties, not advances for six
months alone, but advances from time to time for an indefinite
period, until notice to the contrary should be given by the
guarantor. It is difficult to conceive of any language more
definite and more full to express the real intention of the
parties. The original advance was indeed agreed to be made in the
manner stated in the first letter of credit, and if there be any
variance between the terms of the first and the second letter of
credit, that was left solely and exclusively for the immediate
parties J. & A. Lawrence and the agents to adjust and consider.
They might enter into any new engagements as to the mode of drawing
the bill, and the time which they were to run at their pleasure,
without breaking in upon the true intention of the guarantee. All
the stipulations of the first letter of credit were retained in the
second, and an additional provision made that if bills were drawn
from the continent of Europe, they should be made at the customary
date and by a permanent resident. But this
Page 43 U. S. 452
left J. & A. Lawrence at full liberty to draw direct on
London at four months if they chose, and in point of fact no bills
were ever drawn by them except direct on London, and not from the
continent. The additional liberty given or condition imposed was
not availed of, and if it had been, it would not have in any manner
exonerated the guarantor from her responsibility. Without,
therefore, looking to the question whether these variances might or
might not have been material if new arrangements and engagements
had not been within the scope of the guarantee, we are of opinion
that the objection is, in the present case, not maintainable.
This view of the matter disposes also of the second, third, and
fourth points made at the argument.
The fifth point is that there is no valid consideration to
support the guarantee. This is pressed under two aspects; the first
is that the consideration was past and not present, for the letter
of credit had been already delivered to J. & A. Lawrence by the
agents of the London house. The second is that the payment of the
one dollar is merely nominal, and not sufficient to sustain the
guarantee if it had been received, and it is urged that it was not
received. As to this last point we feel no difficulty. The
guarantor acknowledged the receipt of the one dollar, and is now
estopped to deny it. If she has not received it, she would now be
entitled to recover it. A valuable consideration, however small or
nominal, if given or stipulated for in good faith, is, in the
absence of fraud, sufficient to support an action on any parol
contract, and this is equally true as to contracts of guarantee as
to other contracts. A stipulation in consideration of one dollar is
just as effectual and valuable a consideration as a larger sum
stipulated for or paid. The very point arose in
Dutchman v.
Troth, 5 Bing. 577, where the guarantor gave a guarantee for
the payment of the proceeds of the goods the guarantee had
consigned to his brother, and also all future shipments the
guarantee might make in consideration of two shillings and sixpence
paid him, the guarantor. And the court held the guarantee good and
the consideration sufficient. In
Brooks v. Haigh, 10 Ad.
& E. 309, 323, the court held that a surrender by the guarantee
of a former guarantee, even if it was not of itself binding upon
the guarantor, was a sufficient consideration to take the case out
of the statute of frauds and to sustain a promise made on the
footing thereof. But independently of all authority, we should
arrive at the same conclusion. The receipt of the one dollar is
acknowledged; no
Page 43 U. S. 453
fraud is pretended or shown, and the consideration, if standing
alone in a
bona fide transaction, would sustain the
present suit.
As to the other point, that the consideration was past, it
admits of several answers, each of which is equally decisive. In
the first place, although the Messrs. Lawrence had received the
letter of credit before the guarantee was given, yet it was a part
of the original agreement contemporaneous with the letter of credit
that it should be given, and if the guarantee had not been given,
the whole advance might have been recalled as a fraud upon the
London house. In the next place, it does not appear that all the
bills for the �10,000, under the first letter of credit,
were drawn before the guarantee was actually given, and if they
were not, certainly it would attach upon the bills drawn under the
first credit after it was actually given. The contract was then a
continuing contract on both, and partially performed only by one.
In the next place, the guarantee itself uses language susceptible
of being treated as a present continuing consideration
in
fieri. It is "in consideration of Messrs. J. & A. Lawrence
having a credit with your house;" now, the word "having" imports a
present or future advance just as much as a past. The word "having"
is in the present tense, and if the parties then understood the
letter of credit to be
in fieri and to be absolute only
upon a condition subsequent,
viz., the giving of the
guarantee, the word is the most appropriate which could be used.
The case of
Haigh v. Brooks, 10 Ad. & E. 309,
approaches very near to the present. There, the guarantee was "in
consideration of being in advance to L. &c., I guarantee
&c." The Court of King's Bench though that the words "being in
advance" did not necessarily import a past advance, but might be
applied to a present or future advance.
But that which puts the whole matter in the clearest light and
beyond the reach of legal controversy is that the advances now sued
for were all made after the second letter of credit was given, and
if the guarantee applied (as we hold it did) to those subsequent
advances under the new engagements, then the consideration was
complete as upon a present, and not as upon a past, consideration.
In every view, therefore, in which we can contemplate the
objection, it has no just foundation in law.
As to the sixth point on the question, whether due notice of the
failure of Messrs. J. & A. Lawrence to repay the advances had
been given, it was a mere question of fact for the consideration of
the jury as to whether the guarantor had reasonable notice or
not.
Page 43 U. S. 454
They have found a verdict for the plaintiffs, and we are not at
liberty to disturb it in a court of error.
As to the seventh point, the notes having been left for
collection only with the agents of the London house, although
endorsed by the Messrs. Lawrence, they do not fall within the
strict rules of commercial law applicable to negotiable paper.
Admitting for the sake of the argument that notice was not
punctiliously given by the agents, still it resolves itself into a
mere question of due diligence on the part of the agents to collect
the notes, and falls under the general law of agency. No evidence
was shown at the trial to establish any loss or damage on the part
of Mrs. Lawrence for want of due protest and notice, (if they were
not made), and in the absence of such proof we are not at liberty
to presume that the agents did not do their duty.
The case of
Swift v. Tyson,
16 Pet. 1, is entirely distinguishable from the present in its
leading circumstances. There, the question was not whether a person
receiving a note as collateral security or for an antecedent debt
was not bound to due diligence in its collection, otherwise he made
it his own, which was not doubted, but whether, taking it as
collateral security or in payment of an antecedent debt, he was not
to be treated as a
bona fide holder for a valuable
consideration, unaffected by any unknown equities between the
original parties. This Court held that he was.
Upon the whole, we are all of opinion that there was no error in
the rulings of the court, and the judgment is therefore
Affirmed with costs.
Order
This cause came on to be heard on the transcript of the record
from the Circuit Court of the United States for the Southern
District of New York, and was argued by counsel. On consideration
whereof it is now here ordered and adjudged by this Court that the
judgment of the said circuit court in this cause be and the same is
hereby affirmed with costs and damages at the rate of six percent
per annum.
