
USCA1 Opinion

	




                            UNITED STATES COURT OF APPEALS                                FOR THE FIRST CIRCUIT                                 ____________________          No. 94-2104                         WESTCHESTER FIRE INSURANCE COMPANY,                                Plaintiff - Appellee,                                          v.                      RICHARD H. CAMPBELL & DEBORAH D. CAMPBELL,                               Defendants - Appellants.                                 ____________________                     APPEAL FROM THE UNITED STATES DISTRICT COURT                              FOR THE DISTRICT OF MAINE                     [Hon. Morton A. Brody, U.S. District Judge]                                            ___________________                                 ____________________                                        Before                                Boudin, Circuit Judge,                                        _____________                 John R. Gibson* and Campbell, Senior Circuit Judges.                                               _____________________                                _____________________               Stephen  G. Morrell,  with whom  Laurie A.  Dart and  Eaton,               ___________________              _______________      ______          Peabody, Bradford & Veague, P.A., were on brief for appellants.          ________________________________               Keith R.  Jacques, with whom  Jensen Baird Gardner  & Henry,               _________________             _____________________________          was on brief for appellee.                                 ____________________                                     June 1, 1995                                 ____________________                                        ____________________          *  Of the Eighth Circuit, sitting by designation.                    JOHN  R. GIBSON,  Senior  Circuit Judge.   Richard  and                                      _____________________          Deborah Campbell appeal the summary judgment entered against them          in  favor of Westchester Fire Insurance Company on a guaranty the          Campbells executed for the benefit of their family-owned company,          R. H.  Campbell, Inc.   We  affirm the  judgment of  the district          court.                    The facts are undisputed.  In 1987 the Campbells signed          an  agreement   with  Universal  Bonding  Insurance   Company  to          indemnify Universal  against loss  on any  surety bonds  it might          execute on behalf of R. H. Campbell, Inc.1  The  agreement had no          termination date, and neither party terminated it.  The agreement                                        ____________________          1  The operative language of the agreement provided:                      [S]hould the  [Universal Bonding] Company                      execute  or procure the  execution of the                      suretyship for which  application is  now                      pending,  or  which   may  be   hereafter                      applied for . . . the  undersigned [i.e.,                      the Campbells] . . . hereby undertake and                      agree:                                        . . .                      That the  indemnitor  will . . .  at  all                      times indemnify and  save the  [Universal                      Bonding]   Company   harmless  from   and                      against  every  claim, demand,  liability                      [or]  loss . . . sustained or incurred by                      the Company by  reason of having executed                      or  procured the execution  of said bonds                      or obligations . . . .            The agreement also stated:                      The indemnitor and  his successors  agree                      to indemnify and save harmless the Surety                      from  and  against any  and  all demands,                      liabilities,  loss,   costs,  damages  or                      expenses    of    whatever   nature    or                      kind. . . .                                         -2-          defined as  the "Surety" entitled to  indemnification: "Universal          Bonding Insurance  Company, its reinsurers, and  any other person          or entity  which the surety may  procure to act as  Surety or co-          surety on any bond or any other person or entity who executes any          bond at its  request."   In 1990 Westchester  issued payment  and          performance  bonds  for  R.  H. Campbell,  Inc.,  at  Universal's          request, in reliance on the guaranty  Universal had obtained from          the Campbells.   Richard Campbell was aware that  his corporation          was  obtaining the  bonds at  the time  Westchester issued  them,          since  he signed the bonds in his  capacity as president of R. H.          Campbell, Inc.                    Westchester  was eventually  required  to pay  almost a          million  dollars in claims, expenses,  and attorneys' fees on its          surety bonds.   Consequently,  Westchester sued the  Campbells on          the guaranty  agreement.  The district  court granted Westchester          summary  judgment.  Westchester Fire Ins. Co. v. Campbell, 863 F.                              _________________________    ________          Supp. 32 (D. Maine 1994).                    The Campbells argue that under Maine  law, specifically          Norton v. Eastman, 4 Me. 521  (1827), a guarantor on a continuing          ______    _______          guaranty  is entitled  to notice  of acceptance  of his  offer of          guaranty.    They argue  that they  did  not receive  notice that          Westchester  issued its bonds in reliance on their guaranty.  The          Campbells  quote  from  American  Agricultural  Chemical  Co.  v.                                  _____________________________________          Ellsworth, 83 A. 546  (Me. 1912):  "Until acceptance  and notice,          _________          the writing of  guaranty is merely  a proposal, making  necessary                                         -3-          acceptance by the other party to complete the contract."  Id.  at                                                                    ___          547.                    However, there are  several situations in which  notice          of acceptance  is unnecessary,  since acceptance can  be inferred          from  the circumstances of the  offer of guaranty.   In Ellsworth                                                                  _________          the Maine Supreme Judicial Court stated:                           There  are  some  exceptions to  the                      general rule [requiring notice], three of                      which  the plaintiff relies  upon in this                      case.   One is when  the consideration of                      the guaranty  is a valuable  one, moving,                      directly or indirectly  to the  guarantor                      from the creditor.   Another is when  the                      guaranty is  made at  the request of  the                      creditor.    And  a  third  is  when  the                      agreement  to  accept,  or  the  contract                      guaranteed,  is contemporaneous  with the                      guaranty.    In  such  cases   notice  of                      acceptance    of    the    guaranty    is                      unnecessary.          Id. at 547.          ___                    This  case  presents  the  first  exception  listed  in          Ellsworth,  since  the Campbells  agreed  in  the 1987  guaranty:          _________          "Undersigned  warrant  that  each  of them  is  specifically  and          beneficially interested  in  the obtaining  of each  Bond."   The          import  of this  language  is  that  the  consideration  for  the          guaranty--that  is,  the  Surety's  issuance  of  the  bonds--was          valuable  consideration  benefitting  the  Campbells  themselves.          This exception  makes perfect  sense, because when  the guarantor          benefits  from the surety's execution of the bond, he has already          received something under  the arrangement and is  not entitled to          withdraw from it.   Moreover,  the very receipt  of that  benefit          functions as notice of acceptance of the guaranty, making further                                         -4-          notice superfluous.   Here, the Campbells  were sole shareholders          of R. H. Campbell, Inc.,  and as such had an obvious  interest in          the  issuance  of  bonds enabling  R.  H.  Campbell,  Inc. to  do          business.    Under these  circumstances,  the  Campbells are  not          entitled  to  insist  on   further  notice  of  acceptance  under          Ellsworth.2          _________                     Westchester  also  states without  objection  from the          Campbells,  that  the  Campbells  executed the  guaranty  at  the          request of the creditor, thus  coming within the second exception          to  the notice  requirement.   See Ellsworth,  83 A. at  547; see                                         ___ _________                  ___          generally, Annotation,  Necessity  of Giving  Creditor Notice  of          _________               _________________________________________          Acceptance  of Guaranty,  6 A.L.R.  3d 355,    10 (1966  and 1994          _______________________          Supp.); Restatement  (Second) of  Contracts   54, cmt.  d (1981).          Westchester's  assertion is  corroborated  by the  fact that  the          guaranty agreement consists of a Universal Bonding form signed by          the Campbells.  Thus, the Campbells' arguments based on Maine law          are unavailing.                                        ____________________          2    These  facts  also establish  another  generally  recognized          proviso  to  the  notice  of  acceptance  requirement:    when  a          guarantor is an  insider of the principal  corporation, notice of          acceptance  to the  guarantor  is considered  redundant once  the          corporation  has received  notice.   See  Richard  F. Dole,  Jr.,                                               ___          Notice Requirements of  Guaranty Contracts, 62 Mich. L.  Rev. 57,          __________________________________________          79-80 (1963); Annotation, Necessity  of Creditor Giving Guarantor                                    _______________________________________          Notice of  Acceptance of   Guaranty, 6 A.L.R. 3d  355,   13 (1966          ___________________________________          and 1994 Supp.); Restatement (Second)  of Contracts   54, cmt.  d          (1981).  In this  case, the Campbells were the  sole shareholders          and  were officers  and directors  of the  principal corporation.          Richard Campbell was aware that the corporation was obtaining the          bonds.   Campbell's knowledge  of the transaction  between debtor          and  creditor  is  an  adequate  basis  for  inferring notice  of          acceptance.   See, e.g., Cobb v. Texas Distrib., Inc., 524 S.W.2d                        ___  ____  ____    ____________________          342, 345 (Tex. Civ. App. 1975).                                         -5-                    Finally, to  the extent the Campbells  are arguing that          Westchester  should have  notified  them  about each  transaction          concluded in  reliance on their  guaranty, they have  waived such          notice.   Their  guaranty agreement  states:   "Undersigned waive          notice of . . . Surety's  loaning funds to Principal."   Since in          executing the payment and  performance bonds the surety lent  its          credit to  R. H. Campbell, Inc.,  it was in effect  lending R. H.          Campbell  funds.     Certainly,  this  was  the  effect   of  the          transaction  from  the  guarantor's  point  of  view,  since  the          guarantor's concern is whether the principal will contract a debt          he cannot repay.   Therefore,  our decision is  bolstered by  the          fact  that  the  Campbells  waived  notice  of   principal-surety          transactions in their  guaranty agreement.   See Davis v.  Wells,                                                       ___ _____     _____          104 U.S. 159, 169 (1881).                    We affirm the judgment of the district court.                    Affirmed.                    ________                                         -6-
