ARCADY FARMS MILLING COMPANY v. Wallace

Annotate this Case

89 S.E.2d 413 (1955)

242 N.C. 686

ARCADY FARMS MILLING COMPANY, a corporation, v. J. Frank WALLACE and James E. Wallace, Individually and Trading and Doing Business as Wallace Poultry House, and Bessie Wallace and Helen Wallace.

No. 105.

Supreme Court of North Carolina.

October 12, 1955.

*414 McLean, Gudger, Elmore & Martin, Asheville, for Bessie Wallace and Helen Wallace, defendants, appellants.

Lee & Lee, Asheville, for plaintiff, appellee.

PARKER, Justice.

At the beginning it is to be noted that the male defendants are sued upon their trade acceptances, and that the feme defendants are sued upon their guaranty contract, specially set forth and pleaded.

*415 The obligation of a surety is primary, and the surety becomes bound as an original debtor is bound. He is directly and equally bound with his principal. Wachovia Bank & Trust Co. v. Clifton, 203 N.C. 483, 166 S.E. 334, 84 A.L.R. 725; Lar Heel Bond Co. v. Krider, 218 N.C. 361, 11 S.E.2d 291; Dry v. Reynolds, 205 N.C. 571, 172 S.E. 351; Rouse v. Wooten, 140 N.C. 557, 53 S.E. 430.

A guaranty of payment is an absolute promise to pay the debt at maturity, if not paid by the principal debtor. The obligation of the guarantor is collateral. Wachovia Bank & Trust Co. v. Clifton, supra; American Agricultural Chemical Co. v. Griffin, 202 N.C. 812, 164 S.E. 577; Cowan v. Roberts, 134 N.C. 415, 46 S.E. 979, 65 L.R.A. 729.

The feme defendants, as guarantors of the trade acceptances, cannot be sued as original promisors on the trade acceptances with the male defendants. Wachovia Bank & Trust Co. v. Clifton, supra; 38 C.J.S., Guaranty, § 84. Their contract of guaranty is their own separate contract jointly and severally to pay the debts of the male defendants when due, if not paid by the male defendants, to plaintiff: they are not in any sense parties to the trade acceptances. Coleman v. Fuller, 105 N.C. 328, 11 S.E. 175, 8 L.R.A. 380.

The guaranty in this case is a continuing guaranty, Hickory Novelty Co. v. Andrews, 188 N.C. 59, 123 S.E. 314; 24 Am.Jur., Guaranty, Sec. 18, but it is also an absolute guaranty of "the due and punctual payment when due of such sum or sums of money as at any time and from time to time shall be owed you (plaintiff) by said copartners for merchandise so supplied by you." The right to sue upon this absolute guaranty of payment arises immediately upon the failure of the principal debtors, the male defendants, to pay their trade acceptances at maturity. Wachovia Bank & Trust Co. v. Clifton, supra; American Agricultural Chemical Co. v. Griffin, supra; Jones v. Ashford, 79 N.C. 172.

In 38 C.J.S., Guaranty, § 92, subd. b, p. 1265, it is said: "* * * in some jurisdictions, where a contract of guaranty is considered separate and distinct from, or secondary to, the principal contract, a joint action cannot be maintained against the principal obligor and the guarantor", and in support of the text in note 35 it cites the case of Wachovia Bank & Trust Co. v. Clifton, supra. The pertinent part of the opinion in that case is: "A surety may be sued as a promisor with the principal debtor; a guarantor may not; his contract must be especially set forth or pleaded." The statement of law in the Clifton case is that a guarantor cannot be sued as an original promisor on the principal contract with the principal debtor: it does not state that a joint action cannot be maintained against the principal debtor, as the original promisor on the principal contract, and against the guarantor upon his special contract of guaranty specially declared on. The Clifton case does not support the text quoted above from C.J.S.

In 24 Am.Jur., Guaranty, pp. 880-881, it is said: "The surety may be joined with his principal in an action to enforce the obligation by which both are equally bound; a guarantor, being bound by a contract which is independent of the obligation of the principal debtor, may not be joined as a party to an action against the latter unless his joinder has been authorized by statutory enactment." In support of the statement in the text that a guarantor may not be joined as a party to an action against the principal debtor the case of Wachovia Bank & Trust Co. v. Clifton, supra, is cited in note 18, which case does not support that part of the text as we have set forth above.

It seems that the authorities are not in accord as to whether a joint action can be maintained against the principal debtor and the guarantor. The statutes of the particular jurisdiction are frequently decisive. 38 C.J.S., Guaranty, § 92, subd. b.

G.S. § 1-123 reads in part: "The plaintiff may unite in the same complaint several causes of action, of legal or equitable *416 nature, or both, where they all arise out of1. The same transaction, or transaction connected with the same subject of action."

G.S. § 1-123 will be liberally construed to effectuate its purpose for the judicial determination of actions with reasonable promptness and a minimum of cost to the litigants. Pressley v. Great Atlantic & Pacific Tea Co, 226 N.C. 518, 39 S.E.2d 382.

G.S. § 1-69 reads in part: "All persons may be made defendants, jointly, severally, or in the alternative, who have, or claim, an interest in the controversy adverse to the plaintiff, or who are necessary parties to a complete determination or settlement of the questions involved."

The guaranty of the feme defendants being absolute, the causes of action against the male defendants and the feme defendants arise out of the same transactions, or transactions connected with the same subject of action, rest upon the same proof against all defendants, and may be joined for a complete determination of the questions involved. The complaint does not set forth two independent causes of action. Erickson v. Starling, 233 N.C. 539, 64 S.E.2d 832; Leach v. Page, 211 N.C. 622, 191 S.E. 349; Daniels v. Fowler, 120 N.C. 14, 26 S.E. 635.

The lower court correctly ruled that there was no misjoinder of parties and causes of action.

The feme defendants contend that their contract of guaranty is void, because of a failure to comply with the provisions of G.S. § 52-12, which applies to contracts between husband and wife during their coverture affecting the corpus or income of her estate.

We held in Royal v. Southerland, 168 N.C. 405, 84 S.E. 708, that a wife, by becoming surety on the obligations of her husband, creates a direct and separate liability to the creditor of the husband, which makes her personally responsible without requiring the statutory formalities necessary to the validity of certain contracts made directly between the husband and wife. The rationale of the opinion being that such a contract is not primarily a contract between husband and wife, but so far as G.S. § 52-12 is concerned, is to be properly considered as one between the husband and wife on the one part and the creditor on the other.

In Thrash v. Ould, 172 N.C. 728, 90 S.E. 915, the plaintiff and his wife were controlling owners of a private corporation to whom defendant sold goods, with plaintiff and his wife as guarantors of payment under their letter of credit, given and accepted in good faith. The letter of credit was not executed by the wife in compliance with G.S. § 52-12. This Court, citing Royal v. Southerland, supra, held that the wife was responsible on her contract of guaranty.

The obligation of a surety is primary: the obligation of a guarantor is collateral. The reasoning in Royal v. Southerland, supra, that a wife can bind herself as surety with her husband on his contract without complying with the requirements of G.S. § 52-12, applies with equal force to a wife binding herself as a guarantor of her husband's contract. G.S. § 52-12 has no application to the feme defendants' guaranty of payment of their husbands' trade acceptances.

One of the grounds of the demurrer was a defect of parties. Defendants' counsel in their brief ignore this ground of demurrer. It would seem they have abandoned this contention. No defect of parties is made to appear.

The judgment below overruling the demurrer is

Affirmed.

WINBORNE, JOHNSON and HIGGINS, JJ., took no part in the consideration or decision of this case.