Lawrence v. McCalmont, 43 U.S. 426 (1844)
U.S. Supreme CourtLawrence v. McCalmont, 43 U.S. 2 How. 426 426 (1844)
Lawrence v. McCalmont
43 U.S. (2 How.) 426
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
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
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:
"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. "
"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."
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.
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 16s. 6d. 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 11s. 4d. -- 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
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"
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 8s. 5d. -- 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 8s. 5d. -- 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."
"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. "
"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
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.