Bennett v. Draper

The ground upon which the defendant’s liability was in this action was a bond executed by her as a surety in January, 1881. And this is a copy of that bond:

“ Know all men by these presents: That, we, John H. Draper and George T. Kellock, composing the firm of John H. Draper & Company, of the city of New York, as principals, and Frances S. Draper of the same place, widow, as surety, are held and firmly bound unto H. C. Bennett & Company in the sum of forty thousand dollars, lawful money of the United' States o£ America, to be paid to the said H. C. Bennett & Company, their successors or assigns ; for which payment well and truly to be made, we bind ourselves, our heirs, executors and administrators, jointly and severally, firmly by these presents. Sealed with our seal and dated the 15th and 28th days of January, in the year one thousand eight hundred and eighty-one.

“ Whereas, the said John H. Draper & Co. have borrowed and ■expect, from time to time, to borrow divers sums of money from the said H. C. Bennett & Co., and are desirous of giving to H. C. Bennett & Co., a continuing security for any moneys that the said firm of John H. Draper & Co. now owes or shall at any time owe said H. C. Bennett & Co., their successors and assigns, not exceeding the sum of twenty thousand dollars at any one time, and said H. C. Bennett & Co. having required said firm of John H. Draper & Co. to furnish such security:

“Now the condition of this obligation is such that if the above bounden obligors, their heirs, administrators or executors, shall well and truly pay or cause to be paid to the above named obligees, their successors or assigns, all sums and every sum of money, not however exceeding in the aggregate the sum of $20,000, which shall at any time be due or owing from the said John H. Draper & Co. to the said obligees for or on account of any loans or advances made or any credit granted by the said obligees,

their successors or assigns, to the said John H. Draper & Co... then the above obligation to be void, otherwise to remain in full force and virtue.

“ It being expressly understood that this obligation is a continuing security for the sum of $20;000, but that nothing herein contained shall be so construed as to require said obligees, their successors or assigns to allow the indebtedness of John H. Draper &. Co. to reach said sum of $20,000 or to require said obligees, their-successors or assigns, to loan or advance to said firm any sum whatever or to grant them any credit or accommodation whatever.’’

When it was given, the firm of H. C. Bennett & Company, named in the bond, consisted of Hiram C. and Daniel H. Bennett. Hiram C. Bennett died on the 30th of Hovember, 1884, and another person of the same name was then brought into the firm, and that firm continued to exist down to the time of the commencement of this action. The money, for the recovery of which the action was brought, amounting to the sum of $13,500, and interest thereon, was loaned and advanced by this new firm to the firm of John H. Draper & Company, the principal debtors, mentioned in the bond. And whether the firm advancing this-, money is entitled to recover it under the terms of the bond is the legal point presented for decision in this action.

There is no doubt as to the legal principles which each party has appealed to, that the obligation of the defendant as a surety in the bond must appear to a reasonable degree of certainty to-have been created by its language or provisions. And that while the bond is to be strictly construed for the protection of the surety, it is still to have the fair import of its language ascertained for the benefit of the plaintiffs. These principles have been enunciated repeatedly in the authorities, and may be said to be thoroughly well settled. People v. Pennock, 60 N. Y., 421 ; Ward v. Stahl, 81 id., 406; Schmitz v. Langhaar, 88 id., 503, 506; Douglass v. Reynolds, 7 Peters, 113.

And it is equally as well settled that the contract of a surety entered into for the benefit of one or more ascertained parties cannot, without language contained in it indicating that to have been the intention, be so far extended as to become a security for the-benefit of others. Barns v. Barrow, 61 N. Y., 39 .

This bond, it is true, by the repeated use of the phrase “ successors or assigns,” does in a measure sustain the contention of the-plaintiffs that it was not only intended to be a security to the firm of Draper & Company as it was then constituted, but also as it. might afterwards be changed in its membership. But still the-controlling purpose of the instrument appears to be to secure loans-of money made by the firm of H. C. Bennett & Company as that firm was constituted at the time when the bond was executed and delivered. In the first paragraph of the bond this limitation or restriction is clearly indicated. Por the other obligors, as well as. this surety, declared themselves to be held and bound to the firm of H. C. Bennett & Company, and no other firm, even though engaged in business under that name, when it should be constituted.

This was not an obligation to pay money advanced by the successors or assigns of the firm, but it was an obligation to pay these successors or assigns such money as should be advanced by the. firm of H. C. Bennett & Company. And that was designed to include only that company as it then existed. In this respect this paragraph of the bond is clear and explicit, disclosing the intention of the surety at least to have been to become obligated to the firm for the money that it might advance to the other obligors, and to pay that money to that firm, or to its success'ors or assigns. ' And this expressed restriction, in this manner made, is an important circumstance indicating the intention which should govern the construction of this instrument. For, as a general proposition, it has been stated to be the law, and seems to be well sustained by the authorities, where there may be repugnance or incompatible provisions or clauses contained in an agreement, that the earlier shall prevail, the rule in this respect differing from that which is • applied to the construction of a will. 2 Parsons on Contracts, 6th ed., 513, and cases cited in the note.

The recital following the first paragraph of the bond is equally as restricted, for it states the fact to be that the firm of Draper & Company had borrowed, and expected from time to time to borrow, money from the firm of H. C. Bennett & Company, and were desirous of giving to this latter firm a continuing security for any moneys that Draper & Co. then owned, or should at any time owe, the firm of H. C. Bennett & Co., their successors and assigns, not exceeding the sum of $20,000 at any one time, and that H. C. Bennett & Co. had required Draper & Co. to furnish this security. This recital is further evidence that the parties intendded to deliver the bond only as a security for the moneys which H. C. Bennet & Co. should loan or advance to Draper & Co. And in case of a liability arising in favor of Bennett & Co., that then the liability should still continue in their favor, or might be passed over by them to their successors and assigns. The intention evinced is still to restrict the security to such loans as should be made by H. C. Bennett & Company. And the condition of the bond, although somewhat differently expressed, is required to be restricted within the operation and effect of these preceding provisions in order to maintain and carry out the intention of these parties. By this condition the obligors in the bond bound themselves to pay to the obligees, their successors or assigns, all and every sum of money, not exceeding the aggregate mentioned, which should at any time be due or owing from Draper & Co. to the obligees for or on account of any loans or advances made, or credit granted by the obligees, their successor or assigns. An extended construction of this language, without reference to what was previously made a part of the bond, would

The design which the parties appear to have had in view waste secure the loans or advances which Bennett & Co., as that firm existed at the time when the bond was delivered, should make to-Draper & Co., and to obligate the surety, as well as the principal debtors, to repay those advances either to the firm of Bennett & Co„ as it then existed, or to their successors or assigns, which might become entitled to demand and receive the money so* advanced. It would be an unauthorized extension of the controlling paragraphs contained in this bond toso enlarge it by anything; in this ambiguous and uncertain manner expressed in the condition as to include within the security the advances made to the-principal debtors by the new firm.

The judgment sustaining the demurrer accordingly appears to-be right, and it should be affirmed, with costs.

Yah Bruht, P. J., concurs.

By the bond upon which the liability of the-respondent depends, this respondent with her co-obligors were “held and firmly bound.unto H. C. Bennett & Co. in the sum of $40,000, lawful money of the United States, to be paid to the said. H. C. Bennett & Co., their successors or assigns.

The obligation was to H. C. Bennett & Co., as that firm then existed, and that amount due to that firm the defendant agreed to pay to that firm, their successors or assigns.”

There is no indication of an intention that this respondent, who executed as surety for her co-obligors, assumed any obligation to any other firm or individual except as to the amount due to the-firm of U.

The liability of the defendant thus depends upon the existence-of a debt due or owing from John H. Draper & Co. to the obligees named in the bond (H. C. Bennett & Co., as then existing). If there was no sum of money due or owing from John H. Draper & Co. to the obligees then the bond was void. If such sum of money was due and owing to the obligees, whether that indebtedness existed by reason of loans or advances made by the obligees or their successors or assigns, then the bond was to remain-in full force and effect, but the liability by the condition of the bond must be to the obligees named in the bond, that is, to the said firm of H. C. Bennett &Co., and unless the complaint alleged that a sum of money was due from John H. Draper & Co. to the obligees (the then existing firm of H. C. Bennett & Co.), the complaint stated no cause of action upon the bond.

By the death of one of the partners of H. C. Bennett & Co. that firm became dissolved and the subsequent advances made by the plaintiffs, who may be called the successors to the obligees, created no obligation to the firm that had become dissolved by the death of one of its members. Such advances created a debt which became due to the new firm, but the surviving partner of the dissolved firm, the obligees in the bond, could not have maintained an action to recover for the advances made to John H. Draper & Co. by the new firm.

The complaint does not allege that there is any sum of money-due or owing from the said John H. Draper & Co. to the obligees named in the bond, and according to the express terms of the condition the obligation was void.

I concur, therefore, in the opinion of Mr. Justice Daniels, and the judgment should be affirmed, with costs.