The terms of an oral contract of guaranty, and not the note and mortgage given as collateral security for its performance, measure the extent of the obligation assumed by the guarantor. A contract of guaranty, like any other, is to be construed according to what is fairly presumed to have been the understanding and intent of the parties; and the language used will not be extended by any strained construction for the purpose of enlarging the guarantor's liability. For the purpose of discovering the intent of the parties, their situation and the circumstances connected with the transaction may be considered, and their language interpreted in the light of such evidence. In the present case A agreed to loan B $450 and also to furnish him with certain merchandise to start in business, provided he should be indemnified against loss; whereupon C agreed to guarantee payment of the merchandise to be furnished to B and the repayment of the $450 loan, "not exceeding the sum of $750." Held that the obligation thereby incurred was not one of a continuing character, but one which was limited to the specific loan and to merchandise furnished, the total amount of both of which should not exceed $750; and therefore the guarantor was entitled to be credited with any payments specifically made by the debtor to be applied on the loan, notwithstanding that at the time such payments were made the total indebtedness on both items exceeded the amount of $750.
PRENTICE, J.
The plaintiff confessedly is entitled to recover back from the defendant any excess of the payment made to it by McMahon over and above the sum which it was then entitled to receive by virtue of the guaranty obligation entered into by Ellen Corr and Mamie Finnucan, together with the interest on such overpayment. This obligation was created by a parol agreement, in pursuance of which the note and mortgage given by the guarantors were made and delivered to the defendant as collateral security for the performance of the obligation assumed. These instruments do not express the principal contract entered into. They embody an incidental contract only. The court has found the terms of the parol guaranty contract, the circumstances which led up to its creation, and the situation surrounding the parties at the time of its creation. This contract, which measures the extent of the obligation of Ellen Corr and her coguarantor, is to be construed, like other contracts, according to what is fairly to be presumed to have been the understanding and intent of the parties, and the language used will not be extended by any strained construction for the purpose of enlarging the guarantors' liability. Gay v. Ward, 67 Conn. 147, 161, 34 A. 1025; Lewis v. Dwight, 10 Conn. 95, 100; White v. Reed, 15 id. 457, 467. For the purpose of discovering the intent of the parties, their situation and the circumstances connected with the transaction may be considered, and their language interpreted with the help of that evidence. Bartholomew v. Muzzy, 61 Conn. 387, 393, 23 A. 604. Reading the language used by these parties in this way, it cannot be fairly said that it embodies a continuing guaranty. Its fair import is that the obligors agreed to guarantee the repayment by Finnucan of the $450 cash advanced, and the payment by him of the purchase price of merchandise to be furnished for the business, in a further amount which would bring the total of cash and goods up to $750. Upon two occasions strikingly similar guaranty contracts have had a similar construction. Hall v. Rand, 8 Conn. 560; White v. Reed, 15 id. 457.
The court was therefore not in error in holding that the payments made by Finnucan to the defendant, all of which were made on account of the $450 loan, were in reduction of the indebtedness which was the subject of the guaranty, and that the payment by McMahon, being for the whole amount of $750 and the interest thereon, was an overpayment of the amount actually due from the guarantors, by the amount of the several Finnucan payments and the interest thereon since they were made.