The authorities are not agreed as to the negotiability of a guaranty. It is held that a guaranty which is a separate and distinct instrument is not negotiable separately ; Ekel v. Snevily, 3 W. & S. (Pa.) 272, 38 Am. Dec. 758; Sandford v. Norton, 14 Vt. 233 ; Irish v. Cutter, 31 Me. 536 ; Gallagher v. White, 31 Barb. (N. Y.) ,92 ; True v. Fuller, 21 Pick. (Mass.) 140. The right of the acceptor of a bill, to the benefit of a guaranty given to him, is not transferable to a holder of the bill, unless it was given for the purpose of being exhibited to other parties ; 3 Ch. App. 756. But if a guaranty is on a negotiable note, it is negotiable with the note ; and if the note is to bearer, the guaranty has been held to be negotiable in itself ; Ketchell v. Burns, 24 Wend. (N. Y.) 456 ; Smith v. Dick inson, 6 Humphr. (Tenn.) 261, 44 Am. Dec. 306. But an equitable interest passes by transfer, and the assignee may sue in the name of the assignor ; Reed v. Garvin, 12 S. & R. 100; Partridge v. Davis, 20 Vt. 506. It has been held that no suit can be maintained upon a guaranty except by the person with whom it was made ; McDoal v. Ydemans, 8 Watts (Pa.) 361; but it has also been held that a guaranty of a note may be sued on by any person who advances money on it, but that it is not negotiable unless made upon the note the payment of which it guarantees ; McLaren v. Watson's Ex'rs, 26 Wend. (N. Y.) 425, 37 Am. Dec. 260.
It is held that a guaranty is not enforce able by others than those to whom it is di rected ; Bleeker v. Hyde, 3 McLean 279, Fed. Cas. No. 1,537 ; Mellen v. Whipple, 1 Gray (Mass.) 317 ; Blymire v. Boistle, 6 Watts (Pa.) 182, 31 Am. Dec. 458 ; although they advance goods thereon ; Grant v. Naylor, 4 Cra. (U. S.) 224, 2 L. Ed. 603.
In one case it was held that the guarantor was not bound where the guaranty was ad dressed to two and acted on by one of them only ; Smith v. Montgomery, 3 Tex. 199. It was held, also, that the guaranty was not enforceable by the survivor of two to whom it was addressed, for causes occurring since the decease of the other ; 7 Term 254.
In the case of promissory notes, a dis tinction has sometimes been made between a guaranty of payment and a guaranty of collectibility ; the latter requiring that the holder shall diligently prosecute the prin cipal debtor without avail ; Day v. Elmore, 4 Wis. 190 ; Clark v. Merriam, 25 Conn. 576 ; Van Derveer v. Wright, 6 Barb. (N. Y.) 547 ; Blanchard v. Wood, 26 Me. 358 ; Crane v. Wheeler, 48 Minn. 207, 50 N. W. 1033.
It has in some cases been held that an in dorsement in blank on a promissory note by a stranger to the note was prima facie a guaranty ; Donovan v. Griswold, 37 I11. App. 616. By Neg. Inst. Act §§ 63, 64, all such signers are liable as indorsers. A second ac ceptance on a bill of exchange may amount to a guaranty ; 2 Camp. 447.
_ A corporation (unless by statutory author ity) cannot guarantee a liability unless it is created in the ordinary course of its busi ness ; Ward v. Joslin, 105 Fed. 224, 44 C. C. A. 456, affirmed 186 U. S. 142, 22 Sup. Ct. 807, 46 L. Ed. 1093. Where a corporation by the unanimous consent of its stockholders guaranteed the debt of another corporation such guaranty was subject to the claims of its creditors ; In re Prospect Worsted Mills, 126 Fed. 1011. A lumber corporation has no pow er to bind itself as a guarantor for the per formance of a building contract ; In re Smith Lumber Co., 132 Fed. 620 ; contra, Central Lumber Co. v. Kelter, 201 Ill. 503, 66 N. E. 543. A corporation may guarantee dividends on its stock ; Wisconsin Lumber Co. v. Tel. Co., 127 Ia. 350, 101 N. W. 742, 69 L. R. A. 968, 109 Am. St. Rep. 387. Guarantees of payment of bonds taken by a trust company in the ordinary course of business are not ultra vires; Broadway Nat. Bank v. Baker, 176 Mass. 294, 57 N. E. 603 ; but it is ultra vires for a manufacturing corporation to guarantee the payment of rent although it was given to induce the lessee to become a customer ; Koehler & Co. v. Reinheimer, 26
App. Div. 1, 49 N. Y. Supp. 755. In Aaronson v. Brewing Co., 26 Misc. 655, 56 N. Y. Supp. 387, it was held that a brewing com pany can guarantee the performance of a lease of one of its customers ; to the same effect, Winterfield v. Brewing Co., 96 Wis. 239, 71 N. W. 101. A corporation, unless or ganized for the express purpose of becoming surety for others, has no power to do so un less the contract is to its manifest advantage ; Monarch Co. v. Bank, 105 Ky. 430, 49 S. W.
317, 88 Am. St. Rep. 310. A brewing com pany may become liable as surety on a li cense bond which it executed to induce the licensee to buy liquor from it ; Horst v. Lew is, 71 Neb. 365, 98 N. W. 1046, 103 N. W. 460.
A guarantor is discharged by a material alteration in the contract without his con sent; Brandt, Sur. & Guar. § 378; Page v. Krekey, 137 N. Y. 307, 33 N. E. 311, 21 L. R. A. 409, 33 Am. St. Rep. 731; Manning, C. & Co. v. Alger, 85 Ia. 617, 52 N. W. 542. Modi fication of a contract made by the contractor and the owner will not release the guaran tor, if they are such as are permitted by the terms of the contract ; Miller v. Eccles, 155 Pa. 36, 25 Atl. 776. See SURETYSHIP.
The guarantor may also be discharged by the neglect of the creditor in pursuing the principal debtor. The same strictness as to demand and notice is not necessary to charge a guarantor as is required to charge an in dorser; but in the case of a guarantied note the demand on the maker must be made in a reasonable time, and if he is solvent at the time of the maturity of the note, and remains so for such reasonable time afterwards, the guarantor does not become liable for his sub sequent insolvency ; 2 H. Bla. 612 ; Talbot v. Gay, 18 Pick. (Mass.) 534. Notice of payment must also be given to the guaran tor ; Greene v. Dodge, 2 Ohio 430 ; but where the name of the guarantor of a promissory note does not appear on the note, such notice is not necessary unless damage is sustained thereby, and in such case the guarantor is discharged only to the extent of such dam age ; Reynolds v. Douglass, 12 Pet. (U. S.) 497, 9 L. Ed. 1171. One who guarantees that another will pay promptly for goods to be purchased is not liable where the purchaser becomes insolvent after the guaranty is giv en, and the seller gives the guarantor no no tice of the purchaser's failure to pay ; Taus sig v. Reid, 145 Ill. 488, 32 N. E. 918, 36 Am. St. Rep. 504. A presentment for payment is not necessary in order to charge one who guarantees the due payment of a bill or note ; 5 M. & G. 559. It is not necessary that an action should be brought agalinst the prin cipal debtor ; Douglass v. Reynolds, 7 Pet. 113, 8 L. Ed. 626. See, also, Isett v. Hoge, 2 Watts (Pa.) 128 ; Backus v. Shipherd, 11 Wend. (N. Y.) 629.
From the close connection of guaranty with suretyship, it is convenient to consider many of the principles common to both under the head of suretyship, which article see.
Where an innocent person acts upon a guaranty, the execution of which was procur ed by misrepresentation, the burden devolves upon the guarantor to show that be was free from negligence ; the rule in such cases be ing the same respect to the execution of guaranties as to that of negotiable instru ments ; Page v. Krekey, 63 Hun 629, 17 N. Y. Supp. 764.
Whether a guaranty is absolute or special is a question of fact ; Donovan v. Griswold, 37 Ill. App. 616.
Where the guaranty of a written contract is executed on the same paper, notice of ac ceptance by the person for whose benefit it is made, is unnecessary ; Bechtold v. Lyon, 130 Ind. 194, 29 N. E. 912. See SURETYSHIP.
It is not within the general scope of a partner's authority to give guaranties in the name of the firm ; Wood's Byles; Bills 48 ; Osborne v. Thompson, 35 Minn. 229, 28 N. W. 260. And an officer of a company cannot bind it as surety or guarantor ; Culver v. Real Es tate Co., 91 Pa. 367.
See SURETYSHIP.