Opinion
No. 28089.
November 4, 1929.
1. GUARANTY. Under guaranty agreement limiting guarantor's liability to two thousand dollars, guarantor was liable for two thousand dollars, where debt was five thousand two hundred thirty-nine dollars and six cents and one thousand seven hundred seventy-six dollars and thirty-five cents was paid.
Where guaranty agreement limited guarantor's liability to two thousand dollars but guaranty contained no restriction on amount of credit to be extended to principal and expressly guaranteed payment of any unpaid balance on account, guarantor was liable for full amount of guaranty, where indebtedness was five thousand two hundred thirty-nine dollars and six cents, and creditor received one thousand seven hundred seventy-six dollars and thirty-five cents in bankruptcy proceedings.
2. GUARANTY. Guarantor held liable for six per cent interest on guaranty from date of declaration, where no demand was made before ( Hemingway's Code 1927, section 2223).
Under Hemingway's Code 1927, section 2223, Code 1906, section 2678 guarantor held liable for six per cent interest on guaranty from date of plaintiff's declaration in circuit court, where no demand was made prior thereto.
APPEAL from chancery court of Humphreys county. HON. J.L. WILLIAMS, Chancellor.
R.H. Nason, of Ackerman, for appellant.
Appellant contends, that first the doctrine of subrogation could not possibly apply in this case, and second, if it does apply or could apply, it has been extinguished by the express contract and agreement of the parties.
37 Cyc. 402-D; 37 Cyc. 402-E.
Appellee cannot raise in this court for the first time the plea of a set-off. Appellee's answer in the lower court was that he was subrogated to the extent of the amount of money that appellant received from Powell Co., Inc., in the bankruptcy matter and not that he was entitled to a set-off as he now states.
34 Cyc. 625; 34 Cyc. 758; M. O.R.R. Co. v. Campbell, 114 Miss. 803, 75 So. 554; Watkins v. McDonald, 41 So. 376; Evans v. Sharbrough, 64 So. 466; Yazoo M.V.R.R. Co. v. Sebulsky, 68 So. 164; Shelton v. State, 107 So. 553; Marx v. Logue, 15 So. 890; Gilliam v. McLemore, 106 So. 99, Burrough Land Co. v. Murphey, 95 So. 519; Binnis v. Stokes, 27 Miss. 239.
H.F. Jones, of Belzoni, for appellee.
The guarantor is only liable in case the principal debtor fails to pay, and when the principal debtor, the party primarily liable for the debt, pays the debt up to the point covered by the limitation the obligation of the guarantor ceases, and any amount paid by the principal debtor, primarily liable, automatically cancels the obligation of the guarantor pro tanto.
Richmond Paper Co. v. Bradley, 115 Miss. 534, 76 So. 544.
Under the fourth clause in the contract the payment by the principal debtor of one thousand seven hundred seventy-six dollars and thirty-five cents is to be credited upon the sum guaranteed, (two thousand dollars) by the appellee.
The Guaranty Agreement.
The guaranty agreement referred to in the opinion follows:
"Ely Walker Dry Goods Company, St. Louis, Mo. Gentlemen: In compliance with your request for a guaranty to establish with you credit for Powell Co., Inc., of Belzoni, Miss. (hereinafter called 'party') and in consideration of one dollar and other good and valuable considerations, the receipt and sufficiency of which is hereby acknowledged, we (I) hereby unconditionally, jointly and severally, guarantee payment to you at St. Louis, Missouri of whatever said party, shall at any time, be owing you, whether heretofore or hereafter contracted on any open or stated account, promissory note or acceptance, or for any unpaid balance on any account, promissory note or acceptance of said party and with eight per cent interest from the due date of such account, note or acceptance, after said party's indebtedness to you has been credited with any and all sums of money paid or received by you under any voluntary or involuntary settlement with creditors or from any distribution of said party's property.
"Notification of said party's default is hereby waived and after default it shall not be necessary for you to first endeavor to collect from said party before requiring the undersigned to pay the full amount of the liability hereby created.
"This guaranty is to take effect without notice of its acceptance, which is hereby waived, and it is to be an open guaranty and to continue in full force, notwithstanding renewals or extensions granted by you on such account, note or acceptance or the acceptance by you of any settlement or compromise offered by said party without obtaining our previous consent thereto and until expressly revoked by notice to that effect delivered to you, in writing, from each of the undersigned. Upon receipt of such notice the liability of the undersigned shall cease, except as to the amount then due you under this guaranty.
"Our (my) liability under this guaranty is not to exceed the sums of two thousand ($2,000) dollars at any one time.
"It is mutually understood that this guaranty is to bind the party who signs it, whether the same be signed by any other party or not and that it may be proceeded on against the undersigned independently of any action against said party.
"It is agreed that in the event of the death of either or both of the undersigned, we (I) hereby bind our (my) heir, executors and administrators until actual knowledge of such death shall reach the said Ely Walker Dry Goods Company.
"Dated at Belzoni, Miss., this 12th day of June, 1922.
"J.M. POWELL. [Seal.]
"Witness: L. BARGER."
The appellant brought an action at law against the appellee on a written instrument by which the appellee guaranteed the payment of any indebtedness that might become due from Powell Co., a corporation, to the extent of two thousand dollars. The case was transferred to the court below, where the pleadings were reshaped in accordance with equity practice, and the case was tried on bill and answer, resulting in a decree for the appellant for less than the amount sued for, from which it has brought the case to this court. The facts, in substance, are as follows:
The appellant is engaged in the wholesale, and Powell Co. was engaged in the retail, mercantile business. The appellee executed and delivered to the appellant a written guaranty as hereinbefore referred to, which the reporter will set out in full. Powell Co. purchased from the appellant merchandise to the amount of seven thousand one hundred five dollars and forty-one cents. An involuntary petition in bankruptcy was filed against Powell Co., and it was adjudged a bankrupt, and, in a composition with its creditors, it was adjudged to pay them twenty-five per cent. of their claims, resulting in the appellant being paid one thousand seven hundred seventy-six dollars and thirty-five cents on its claim, leaving a balance thereon unpaid of five thousand two hundred thirty-nine dollars and six cents. This suit was then brought by the appellant to recover from the appellee the amount of his guaranty. The court below credited the one thousand seven hundred seventy-six dollars and thirty-five cents received by the appellant in the bankruptcy proceedings on the guaranty of two thousand dollars and awarded the appellant a decree for the balance of two hundred twenty-three dollars and sixty-five cents with interest thereon.
The contention of the appellee is that any payments made on the debt originally due by Powell Co., to the appellant inured to his benefit, and when payments thereon to the amount of his guaranty have been made the guaranty becomes thereby canceled, and the court below erroneously so held.
The guaranty contains no restriction upon the amount of the credit that was extended to Powell Co. by the appellant, but limits only the amount the appellee is liable therefor, and expressly guarantees the payment of "any unpaid balance due on any account." It follows therefore, necessarily, that any payments by Powell Co. on the amount due by it to the appellant do not affect the appellee's liability, to the extent of his guaranty, for any balance due by Powell Co. on the account. The one thousand seven hundred seventy-six dollars and thirty-five cents collected by the appellant in the bankruptcy proceedings should, of course, be credited on the amount due by Powell Co., both under the provisions therefor in the guaranty, and the general law. Richmond Paper Co. v. Bradley, 115 Miss. 534, 76 So. 544. But, when this is done, there will remain a balance due it in excess of the appellee's guaranty, and he is liable therefore to the appellant to the full amount of his guaranty.
The guaranty covers eight per cent. interest on any balance that may be due to the appellant by Powell Co., but limits the appellee's liability thereon to two thousand dollars to which interest, at the rate of six per cent. per annum, under section 2223, Hemingway's 1927 Code, section 2678, Code of 1906, should be added from the day on which the appellee defaulted in the payment thereof. 28 C.J. 966; Manry v. Waxelbaum Co., 108 Ga. 14, 33 S.E. 701.
It does not appear from this record that any demand was made on the appellee for the payment of his guaranty prior to the filing of the appellant's declaration in the circuit court on December 2, 1927; consequently, interest on the guaranty must be calculated from that date.
The judgment of the court below will be reversed, and judgment will be rendered here for the appellant in the sum of two thousand dollars with six per cent. interest thereon from December 2, 1927.
Reversed, and judgment here for the appellant.