#### HICKORY NOVELTY COMPANY v. D. W. ANDREWS.

(Filed 21 June, 1924.)

1. Contracts — Debtor and Creditor — Debt of Another — Statutes — Guaranty.

C. S., 987, requiring a writing signed, etc., by tbe party to be charged to make him legally responsible for the debt of another, applies to contracts of guaranty.

3. Same — Consideration—Continuing Credit.

The promise to answer for the debt of another (C. S., 987), if made after the credit has been given, without new consideration, is nudem pactum, and unenforcible; but if made before, it is founded upon the consideration existing between the principal parties; and where the promise is to pay out of the debtor’s funds in the possession of the promissor, or is in the nature of his original obligation, the statute has no application.

3. Same — Evidence—Nonsuit.

Where the promise to pay the debt of another is sufficient under the statute (C. S., 987), as to a continuing credit to be extended to the principal debtor, the intent of the promissor to become so bound may be shown by the surrounding circumstances and other transactions or written communications between the creditor .and the promissor; and held, under the evidence of this case, it was reversible error for the trial judge to grant defendant’s motion as of nonsuit.

Civil actioN, beard before Webb, J., at September Term, 1923, of Catawba. From a judgment of nonsuit plaintiff appealed.

Tbe facts material are:

Tbe plaintiff is a corporation, doing business in Hickory, N. 0., prior to and since 1 January, 1920. Tbe defendant is a citizen of Durham, N. C., residing there prior to and since 1 January, 1920. On 3 January, *601920, and prior thereto, C. W. Andrews & Bros, were doing business in Durham, N. C., and, in connection with their business, purchased lumber, boxes and other lumber products, and also sold to the trade such products. The Hickory Novelty Company deals in lumber of various kinds, manufacturing moulding and other wood products for the trade.

The firm of C. W. Andrews & Bros, was composed of C. "W. Andrews and several other sons of the defendant D. W. Andrews.

Plaintiff contends that D. W. Andrews was a member of this firm, which was denied by him. This firm, prior to 3 January, 1920, was doing business with plaintiff and Hutton & Bourbonnais Company, and had become indebted to Hutton & Bourbonnais Company, and contends that “the defendant D. W. Andrews, desiring that the said firm of O. W. Andrews & Bros, should continue to do business with the said plaintiff, and with a view of making the then existing debt secure, did, on 3 January, 1920, guarantee to the Hutton & Bourbonnais Company, the then existing and outstanding account of $3,509.68, as well as to guarantee to the plaintiff and the Hutton & Bourbonnais Company the payment of all debts and obligations of C. "W". Andrews & Bros, that might be created or become due in the future by reason of business transactions to be conducted between the firms.”

The defendant, in answer, says:

“The defendant admits that C. W. Andrews and two of his other sons, under the firm name of C. W. Andrews & Bros., had been doing business with, plaintiff and Hutton & Bourbonnais Company prior to 3 January, 1920, and had become indebted to plaintiff and said company in the sum of $3,509.68, did write the firm of Hutton & Bourbonnais a letter, under date of 3 January, 1920.” The letter is as follows:

“This will advise that I am interested in C. W. Andrews & Bros., and will personally see that all business transactions between C. W. Andrews & Bros, and Hutton & Bourbonnais Company and Hickory Novelty Company are settled and adjusted satisfactorily entirely with your concerns.

“I am enclosing herewith a letter from the Home Savings Bank of Durham, N. O., which will show you that I am personally responsible for all outstanding accounts up to this date, and all accounts which will follow.

“If this is not entirely satisfactory with you, I will forward, as soon as you advise, other letters or credentials, which I am sure will be entirely satisfactory with you.

. “The outstanding account, which amounts to $3,509.68, will be paid 11 January, 1920, and from now on if there is anything pertaining to this business which is questionable, please advise me personally at once, and I will straighten out the matter entirely to your satisfaction.

*61“"We have in view a large volume of business for the future, and trust that you will give it your personal attention upon receipt of same.

“Thanking you for past favors, and trusting that you are enjoying the best of health, Tours very truly,

' D. W. Andrews.”

The Home Savings Rank letter enclosed is as follows:

“Messes. HuttoN & Botjrbonnais,

Hickory, N. G.

“GeNtlemeN: We wish to advise you.in regard to the financial standing of Messrs. C. W. Andrews & Brothers, of this city. We have been doing business with these gentlemen for a number of years, and have always found them to be prompt, reliable and fully able to- carry out their financial obligations. They stand well in our community and can get any reasonable amount of credit they desire. You will be safe in extending them a line of credit to $10,000 for thirty or sixty days, should they ask it. Mr. D. W. Andrews, of the firm, is worth over $30,000. Should you care to have further information regarding these gentlemen, will be glad to have you write me.

“Yery truly yours,

Home Savings Bank,

T. B: Peice, Cashier.”

The plaintiff further contends: “That after said letter of credit, or guarantee, of D. W. Andrews, along with a letter of the Home Savings Bank of Durham, N. O., was received by plaintiff and the Hutton & Bourbonnais Company, the said firm of C. W. Andrews & Bros, continued to do business with plaintiff during the remainder of the year 1920, and continued on through 1921 and for a portion of the year 1922.” That about 10 June, 1922, the firm of C. W. Andrews & Bros, owed plaintiff a balance of $3,924.12 and interest. The total sales of goods to O. W. Andrews & Bros, after the letter of 3 January, 1920, of D. W. Andrews was $15,939.89, with credits left on 10 June, 1922, above amount ($3,924.12) due. A. B. Hutton testified that the amount of the old account mentioned in D. W. Andrews’ letter of $3,509.68 had been paid.

The record shows that A. B. Hutton was interested in the plaintiff, Hickory Novelty Company, and was acting for plaintiff. The amount sued on has never been questioned as being inaccurate, as far as the amount is concerned. O. W. Andrews & Bros, delayed making payment, and plaintiff wrote D. W. Andrews, reminding him of his obligation.

*62On 21 July, 1922, D. W. Andrews wrote from Durham, N. 0., the following letter to A. B. Hutton at Hickory, N. 0. :

“I am in receipt of your letter again calling my attention to the account of 0. W. Andrews & Bros., and have discussed the matter with 0. W. Andrews, and feel that 'they will be in a better position within a short time to cancel this indebtedness. They are to mail you a check for $500, so that you will have it not later than the first of August, and, too, they will mail you a check every fifteen days after xlugust 1st to take care of this account. In the event that they do not carry out the above plans, kindly notify me and I will see' that they are carried out to your satisfaction. This plan will enable them to cancel this indebtedness sooner than the note plan would. I believe and feel that it would be more satisfactory in the long run for them.. With kind personal regards, I am very truly yours.”

On 1 July a check for $500 was paid on the account by 0. W. Andrews & Bros., and on 5 August a check for $250 was paid on the account, reducing the indebtedness to $3,174.12 and interest.

On 1 August, 1922, A. B. Hutton wrote to D. W. Andrews a letter to Durham, N. 0., as follows:

“Tour esteemed favor of July 21st has been received, and I thank you for satisfactory reply.

“I note in your letter that the firm of 0. W. Andrews & Bros, is to send the Hickory Novelty Company $500 August 1st and $500 every fifteen days thereafter until the account is paid and discharged in full. I further note that you will be responsible for this agreement being carried out to my satisfaction, which is in accordance with your former guarantee to us, made on 3 January, 1920, to which I referred in my former letter to you.

“I wish to assure you that I have, and our firms have, the kindest feeling for you, and wish you and your business the greatest success, but you appreciate that we must ask that the arrangement suggested by you be carried out, as we really need the money.

“I will expect the $500 you say will be paid 1 August, by tomorrow, the 2d; so please see that I am not .disappointed, as up to this time we have not had remittance.

“With kind personal regards, I am yours very truly.”

The plaintiff contends that, “by reason of the guarantees of defendant to plaintiff, and that by reason of the guarantees made by defendant, causing plaintiff to delay in the collection of its debt, all of which, taken- together and singly, the plaintiff alleges, makes defendant liable for its debt against O. W. Andrews & Bros., and it asks judgment against defendant accordingly.”

*63Tbe defendant contends tbat tbe firm copartnership doing .business under tbe name of C. "W. Andrews & Bros, was dissolved on 1 February, 1921; tbat C. W. Andrews, being chief stockholder, and several of bis brothers, with D. W. Andrews, organized a corporation as 0. W. Andrews & Bros., Inc., and tbe corporation is due tbe sum contended for by plaintiff and not tbe defendant, and tbat tbe corporation, at tbe time of tbe institution of this suit, was in tbe bands of a receiver and has since been put into bankruptcy, tbat be never guaranteed to plaintiff “any indebtedness due it by said corporation, and is advised, believes and alleges tbat tbe letter written by him on 3 January, 1920, does not in any way make him responsible for tbe debts or' obligations of said corporation.”

Tbe articles of incorporation were filed in tbe office of tbe Secretary of State, 29 January, 1921, and in tbe clerk’s office at Durham, N. 0., 9 February, 1921.

O. W. Andrews. & Bros., and tbe corporation formed, have become insolvent.

It was admitted tbat tbe entire account is filed in tbe bankruptcy proceedings against O. W. Andrews & Bros., Inc.

C. H. Cline, secretary of Hickory Novelty Company, and bookkeeper and office man, testified: “I thought all tbe time I was dealing with C. W. Andrews & Bros., tbe people we started with. I bad no information of any change in tbe firm. I ran tbe account in tbat way — charged everything to C. W. Andrews & Bros., and credited everything as of tbe date of tbe check I received; everything was entered on this book tbat way.”

D. W. Andrews testified, in part: “After I wrote tbat letter to tbe bead of tbe Hutton & Bourbonnais Company, I never received any reply. I have been knowing Mr. Hutton for quite a number of years. I bought boxes and lumber of different kinds while I was with tbe American Tobacco Company. I never knew anything about tbe Hickory Novelty Company until this suit was brought.”

“Q.- Did you ever have any notice from tbe Hickory Novelty Company tbat they bad acknowledged this letter here, and tbat they were extending credit on tbat letter ?”

“A. I did not. To my personal knowledge, tbe first I ever knew tbat tbe Hickory Novelty Company sold 0. W. Andrews & Bros, or 0. W. Andrews & Bros., Incorporated, was when this suit was entered. I didn’t know there was a Hickory Novelty Company until this suit was brought. There was not any copartnership by tbe name of C. W. Andrews & Bros, after 1 February, 1921. I never saw Mr. Johnson or Mr. Hutton when they came down about tbat indebtedness.”

*64At tbe close of all tbe evidence, defendant renewed motion for judgment as of nonsuit, wbicb motion was allowed, tbe court being of tbe opinion that there was not a guarantee, as contended for by tbe plaintiff ; that tbe letter addressed to Hutton & Bourbonnajs Company shows that if tbe defendant be liable at all, be is liable by reason of tbe fact that be was a member of tbe firm of C. W. Andrews & Bros., and not as a guarantor.

Plaintiff excepted, assigned error to this ruling, and appealed to tbe Supreme Court.

Council & Yount for plaintiff'.

Brawley & Gantt and W. A. Self for defendant.

Clarkson, J.,

after stating tbe facts: Tbe only question presented on tbe entire record is: Did tbe defendant guarantee to plaintiff tbe account sued on, $3,174.12 and interest? We are of tbe opinion that be did.

C. S., 987, is as follows: “No action shall be brought whereby to charge an executor, administrator or collector upon a special promise to answer damages out of bis own estate, or to charge any defendant upon a special promise to answer tbe debt, default or miscarriage of another person, unless tbe agreement upon wbicb such action shall be brought, or some memorandum or note thereof, shall be in writing and signed by tbe party charged therewith, or some other person thereunto by him lawfully authorized.”

Tbe statute applies to contracts of guaranty. Gilmer v. Improvement Co., 170 N. C., 452; Partin v. Prince, 159 N. C., 555.

A written promise by one to pay tbe debt of others, that “just as soon as tbe dry kiln gets in operation, I will see that your bill is paid,” is not a continuing guaranty, but, by fair implication, refers to an account already made and stated. Supply Co. v. Finch, 147 N. C., 106.

In Green v. Thornton, 49 N. C., 232, Battle, J., said: “It is not and cannot be denied that a guaranty in writing, made at tbe time of a contract between two or more persons, is binding upon tbe guarantor, because it is founded upon tbe consideration wbicb exists between tbe principal parties. But if it be made afterwards, without any new consideration, then it is not obligatory, and putting it in writing, if not under seal, will not help it. Rann v. Hughes, 7 Term Rep., 350, note a. Tbe statute of frauds does not require tbe consideration to be in writing, and it may therefore be proved by parol. Miller v. Irvine, 1 Dev. and Bat. Rep., 103.” Partin v. Prince, supra.

*65The statute does not apply to a promise to pay the debt of another out of the debtor’s property in the promissor’s hands. Mercantile Co. v. Bryant, 186 N. C., 553.

The statute does not apply where it is in the nature of an original obligation of the promissor. Marrow v. White, 151 N. C., 96; Partin v. Prince, supra.

In 12 R. C. L., 1053, it is said: “A guaranty has been defined by statute to be ‘a promise to answer for the debt, default, or miscarriage of another person.’ This definition substantially conforms to the judicial conception of a guaranty, which may fairly be summed up as a promise to answer for the payment of some debt or the performance of some obligation, on default of such payment or performance, by a third person who is liable or expected to become liable therefor in the first instance.” Grocery Co. v. Early, 181 N. C., 460; Enc. Dig. of N. C., Vol. 14, “Guaranty,” p. 275 et seq.

“If the object of the guaranty is to enable the principal to have credit over an extended time, and to cover successive transactions, it is a continuing one; hut if the intention of the guarantor, as indicated by the language used, is that hut one transaction is to be covered by the guaranty, it is a limited one.” Childs on Suretyship and Guaranty, sec. 23, p. 20. See 12 R. C. L., 1061.

In 12 R. C. L., 1062, part of section 11, it is said: “There seems to he no general rule for determining whether a guaranty is continuing; each must be construed according to its terms and the surrounding circumstances, to show which parol evidence is admissible. If the parties treat an instrument as a continuing guaranty, and its terms are not inconsistent with such construction, the courts will adopt that view.”

In Scovill Mfg. Co. v. Cassidy, A. & E. Anno. Cases (1898 E.), 611 (275 Ill., 462), under “Continuing Guaranties,” it is said: “Where by the terms of the guaranty it is evident that the object is to give a standing credit to the principal to he used from time to time, either indefinitely or for a certain period, it is generally deemed a continuing guaranty. ... It was said in Chester County Nat. Bank v. Thomas, 220 Pa. St., 360; 60 Atl., 813, 'Whether a contract of guaranty is a continuing undertaking is a question of intention which must be gathered from the instrument itself, or from the course of dealings between the parties or from both.’ If it appears that a future course of dealing for an indefinite time, or a succession of credits to be given, was contemplated by the parties, the contract will be construed to be a continuing guaranty,” citing a wealth of authorities.

In First Nat. Bank v. Waddell (74 Ark., 241), 4 A. & E. Anno. Cases, 822, under “Continuing Guaranties,” it is said: “In like manner, a guaranty will he held to be continuing if it is made in lan*66guage which shows that the parties intended that it should cover not only present transactions, but also future transactions for an indefinite length of time,” citing many authorities.

We think the case of Newcomb v. Kloeblen, 77 N. J. L., 291, in point. The head-notes to that case are as follows:

> "The plaintiffs were commission merchants; they refused to make any further sale to the defendant’s son unless his account was guaranteed by defendant. Defendant wrote to the plaintiffs, T will be responsible for any bill that my son James will make’: Held, that use of the word 'any’ did not limit the guarantee to the one bill of goods delivered when the guarantee was given," but that it was a continuing guarantee.

> “In an action on a guarantee, where the issue is whether the guarantee is a continuing one, conversations between the guarantor and his son at the time of executing the guarantee are inadmissible for the purpose of showing the meaning of the guarantee.

> “In construing a contract of guarantee, whatever may be the limitations as to time or amount, the rule of construction is to take the words of the contract together with the surrounding facts as the exponent of the meaning of the parties.”

The Court, in that case, said: “The fact of the previous dealing between James Kloeblen and the plaintiffs there appeared, and the absolute necessity on his part for a general credit for the future, as the plaintiff refused to make him further sales unless his father, the defendant, would guarantee his account with them. Under these circumstances the defendant guaranteed to be responsible for 'any bill that my son James will make,’ and this leads inevitably to the conclusion that the guarantee was to remain continuing until revoked.”

Similar cases are as follows: “Thus, a guaranty, without limitation as to time or amount, of the payment 'of all bills of goods sold or that may be sold,’ is a continuing one.” Conduitt v. Ryan, 3 Ind. App., 1. See, also, Doyle v. Nichols, 15 Colo. App., 458; Boehne v. Murphy, 46 Mo., 57. “A letter of credit stating that 'I will guarantee their engagements, should you think it necessary, for any transaction they may have with your house,’ is a continuing guaranty.” Grant v. Ridsdale, 2 Har. & J. (Md.), 186.

We think that the letters and undisputed facts, as appear from the record, disclose that the transaction was a “continuing guaranty.” The guaranty was in writing, as required by the statute, “To answer the debt, default or miscarriage of another person.” The question of the consideration of the promise or implied promise of the defendant to pay the outstanding account, which amounted to $3,509.68, does not arise on the record, as that- amount has been paid. If it did arise, the fact *67tbat tbe defendant stated tbat be was interested in C. W. Andrews & Eros., and tbe letter of 3 January, 1920, taken in its entirety, would imply tbat be was a partner witb bis sons in tbe business and create liability as a partner. Tbe Home Savings Bank letter, enclosed in D. W. Andrews’ letter of 3 January, 1920, says: “Mr. D. W. Xndrews, of the firm, is worth over $30,000.”

We tbink tbe letter of 3 January, 1920, was a continuing guaranty by defendant to both Hutton & Bourbonnais Co. and Hickory Novelty Co., for tbe future debts or obligations tbat were incurred by C. W. Andrews & Bros. Tbe letter is an effort to get a line of credit for C. W. Andrews & Bros., and enclosed a letter from tbe bank showing bis financial standing. He stated in tbe letter: “I am personally responsible for all outstanding debts up to this time, and all accounts that will follow.” He says: “We have in view a large volume of business for tbe future,” showing tbat be expected C. W. Andrews & Bros, to continue to do business witb tbe two firms, including tbe plaintiff. He knew tbat tbe plaintiff knew bis sons were members of tbe firm of C. W. Andrews & Bros., and in tbe course of business would probably become indebted to it, and be was using every expression be could in bis letter to have plaintiff satisfied tbat tbe defendant would be responsible for tbe obligations of C. W. Andrews & Bros, then existing and to be incurred in tbe future. “I am interested in C. W. Andrews & Bros., and will personally see that all business transactions between C. W. Andrews & Bros, and Hutton & Bourbonnais Co. and Hichory Novelty Company are settled and adjusted satisfactorily entirely with your concerns.” Tbe letter is addressed to Hutton & Bourbonnais Co., but defendant knew tbat tbe Hickory Novelty Company was closely allied witb them, tbat tbe same interests were in charge of tbe two companies. Tbe language in tbe first part of tbe letter in which tbe two firms are referred to as “your concerns.”

In considering tbe letter of 3 January, 1920, and tbat of tbe Home Savings Bank, bearing upon tbe intention and construction, we should consider tbe surrounding circumstances .and should take into consideration tbe letters of 21 July, 1922, and 1 August, 1922, which indicate tbat tbe defendant understood tbe liability be bad created and incurred. These letters all speak for themselves, and a more extended analysis we deem unnecessary to show a “continuing guaranty.” Tbe record shows plaintiff bad no notice of tbe partnership changing to a corporation. Tbe evidence shows tbe account was made in tbe name of C. W. Andrews & Bros. We do not tbink tbat tbe language of tbe letter of 3 January, 1920, calls for notice to be given tbe defendant. Tbe facts in this case are different from cases cited by defendant in bis brief. This was an unfortunate business venture on tbe part of tbe defendant’s sons. *68Humanly, and rightly, the defendant was trying to help his sons to success, and allowed them his 'credit. The defendant says in his evidence: “I stated in my answer that the reason I signed the letter of guarantee was because I wanted to help the boys; I was interested in the boys; any father is in his sons, I presume. I feel that way about mine.”

This statement is laudable on the part of the defendant and, under the facts in this case, he made the “continuing guaranty” to help his boys. They have become insolvent; he must fulfill his obligation.

For the reason given, the judgment of nonsuit is

Beversed.