Cunningham v. Jones/Opinion of the Court
In Douglass v. Reynolds, 7 Peters' Reports, the Court decided that 'a party giving a letter of credit, has a right to know whether it be accepted, and whether credit is given on it or not:' indeed, until such notice, there is no contract. The Court in that case say, such notice is most material, not only as to his responsibility, but as to future rights and proceedings. It may regulate his course of conduct, and his exercise of vigilance in regard to the party in whose favour it is given.'
That case also decides, that a demand of payment of the principal should be first made, before the guarantor is resorted to. The guaranty in that case was stronger than this; the guarantors bound themselves jointly and severally to be responsible for all advances, &c.
The principle of the case in 7 Peters, is applicable to continuing guarantors, or to guarantors of a single transaction; as was decided in Lee v. Dick, 10 Peters' Reports, 432. The Court in this last case, says: 'there are many cases where the guaranty is of a specific, existing demand, by a promissory note, or other evidence of a debt, and such guaranty is given upon the note itself, or with a reference to it, and recognition of it, when no notice would be necessary. The guarantor, in such cases, knows precisely what he guaranties, and the extent of his responsibility. But when the guaranty is prospective, and to attach upon future transactions, and the guarantor uninformed whether his guaranty has been accepted and acted upon, or not, the fitness and justice of the rule, requiring notice, is supported by considerations that are unanswerable.'
It is believed the above authorities are decisive of this case.
Mr. Justice STORY delivered the opinion of the Court.
This cause comes before us upon a certificate of division of opinion of the judges of the circuit court of West Tennessee. The plaintiffs, Adams and others, brought an action against the defendant, Jones, for the amount of certain goods supplied by them, upon the credit of the following letter of guaranty:--
'Raleigh, September 25th, 1832.
'MR. WILLIAM A. WILLIAMS:
'SIR,-On this sheet you have the list of articles wanted for Miss Betsey Miller's millinery establishment, which you were so very good as to offer to purchase for her. I will be security for the payment, either to you, or to the merchants in New York, of whom you may purchase, and you may leave this in their hands, or otherwise, as may be proper. I hope, to your favour and view, will be added all possible favour by the merchants, to the young lady, in quality and prices of goods, as I have no doubt she merits as much, by her late knowledge of her business, industry, and pure conduct and principles, as any whatever.
'After the compliment that is paid me above, I should hardly be willing to place my name so near it, was I not told it was necessary and proper the merchants should know my handwriting generally, and particularly my signature.
'ELIZABETH A. MILLER.'
The list of the articles was appended to the letter.
Upon the trial of the cause upon the general issue before the jury, it occurred as a question, 'whether the plaintiffs were bound to give notice to the defendant, that they had accepted or acted upon the guaranty, and given credit on the faith of it.' Upon which question the opinions of the judges were ooposed; and thereupon, according to the act of congress, on motion of the plaintiffs, by their attorney, the point has been cretified to this Court. A statement of the pleadings, and also a statement of facts made under the direction of the judges, have been certified as a part of the record. Some diversity of opinion has existed among the judges, as to the true nature and extent of the question certified; whether it meant to ask the opinion of this Court, whether, under all the circumstances disclosed in the evidence, any personal notice to the defendant, or any other notice than what was made known to Williams, was necessary to fix the liability of the defendant; or whether it meant only to put the general question of the necessity of notice in cases of guaranty. If the former interpretation were adopted, it would call upon this Court to express an opinion upon the whole facts of the case, instead of particular points of law growing out of the same; a practice which is not deemed by the majority of the Court to be correct, under the act of congress on this subject. Act of 1802, ch. 31 sec. 6. The latter is the interpretation which we are disposed to adopt; and the question, which, under this view, is presented, is, whether upon a letter of guaranty addressed to a particular person, or to persons generally, for a future credit to be given to the party in whose favour the guaranty is drawn, notice is necessary to be given to the guarantor, that the person giving the credit has accepted or acted upon the guaranty, and given the credit on the faith of it. We are all of opinion that it is necessary; and that this is not now an open question in this Court, after the decisions which have been made in Russell v. Clarke, 7 Cranch, 69; Edmondson v. Drake, 5 Peters' Rep. 624; Douglass v. Reynolds, 7 Peters' Rep. 113; Lee v. Dick, 10 Peters, 482; and again recognised at the present term, in the case of Reynolds v. Douglass. It is in itself a reasonable rule, enabling the guarantor to know the nature and extent of his liability; to exercise due vigilance in guarding himself against losses which might otherwise be unknown to him; and to avail himself of the appropriate means in law and equity, to compel the other parties to discharge him from future responsibility. The reason applies with still greater force to cases of a general letter of guaranty; for it might otherwise be impracticable for the guarantor to know to whom, and under what circumstances the guaranty attached; and to what period it might be protracted. Transactions between the other parties, to a great extent, might from time to time exist, in which credits might be given, and payments might be made, the existence and due appropriation of which might materially affect his own rights and security. If, therefore, the question were entirely new, we should not be disposed to hold a different doctrine; and we think the English decisions are in entire conformity to our own.
It is highly probable, that the real questions intended to be raised before this Court, upon the certificate of division, were, whether, upon the whole evidence, Williams was not to be treated as the agent of the defendant, as well as of Miss Miller, in the procurement of this credit from the plaintiffs; and if so, whether the knowledge of Williams of the credit by the plaintiffs to Miss Miller, upon the faith of the guaranty, was not full notice also to the defendant, and thus dispensed with any further and other notice to the defendant. These were matters of fact, very proper for the consideration of the jury at the trial; and, if satisfactorily established, would have dispensed with any farther notice: but are by no means matters of law upon which we are called, on the present occasion, to give any opinion.
A certificate will be sent to the circuit court, in conformity to this opinion.
Mr. Justice BALDWIN dissented.
This cause came on to be heard on the transcript of the record from the circuit court of the United States for the district of West Tennessee; and on the point and question on which the judges of the said circuit court were opposed in opinion, and which was certified to this Court for its opinion, agreeably to the act of congress in such case made and provided; and was argued by counsel. On consideration whereof, it is the opinion of this Court, 'That the plaintiffs were bound to give notice to the defendant that they had accepted or acted upon the guaranty, and given credit on the faith of it.' Whereupon it is now here adjudged and ordered by this Court, that it be so certified to the said circuit court.