Burt v. Horner

5 Barb. 501

• Court: New York Supreme Court
• Decided: March 5, 1849
• Status: Published

Opinion

By the Court, Sill, J.

1. The objection that the defendants’ undertaking was within the statute of frauds is disposed of by the case of Johnson v. Gilbert, (4 Hill, 178.) The same case, by necessary implication, shows that the objection to the parol testimony, disclosing the character of the transaction, between the defendants and the plaintiff, is also untenable. A written promise, not in conflict with any law, may be upheld when there is a good consideration for it, although it does not appear in the writing itself. It may, in such cases, and this is one, be supported by parol evidence of a consideration, when such proof is consistent with the written instrument.

2. The legal effect of the defendants’ obligation is the same as if it had been written in the following form : “ We guaranty the collection of the within note by due course of law. (Cumpston v. McNair, 1 Wend. 457. Curtiss v. Smallman, 14 Id. 231.)

The obligation assumed by the plaintiff upon accepting this note and guaranty was, that in case the note was not paid at its maturity, he would, within a reasonable time, and with due diligence, institute against Troule legal proceedings for the collection of the note, and prosedute them, without delay, to consummation. This was a condition precedent to the liability of the defendants upon their guaranty, and imposed upon the plaintiff the duty of diligence not only in the manner of the prosecution, but also in its institution.

It was said on the argument, that diligence is a mixed question of law and fact, and was settled in favor of the plaintiff by the finding of the referee, and on this point we are referred to Backus v. Shipherd, (11 Wend. 634,) and Thomas v. Wood, (4 Cowen, 173.) Such was the doctrine there intimated as applicable to those particular cases; for the existence of the facts which it was contended excused the delay in those cases, was a question not decisively settled by the evidence. But where there is no dispute about the situation and circumstances of the parties, and no question as to the steps which have been taken or omitted by the plaintiff, against the principal debtor, the question of due diligence is, by all the authorities, regarded as one of law. In this case there is no dispute about the facts bearing upon the points under examination. The maker of the note lived in Canada from the time it was made until the hearing. He was twice at the plaintiff’s store within one month after it fell due; and was afterwards, and up to Sept. 1848, “ very frequently in Buffalo.” It must also be assumed, from the place where the note is dated, and other unquestioned facts in the case, that the plaintiff knew, when he received the note, that the maker lived in Canada. Here then is a delay of all proceedings against Troule from the 20th of February, 1846, until July, 1847, a period of nearly or quite seventeen months, sought to be excused upon the ground, solely, that he was a non-resident, and that having no property within the jurisdiction of the courts of this state, an earlier prosecution would not have secured the collection of the debt.

In Moakley v. Riggs, (19 John. 69,) the court held that the omission for seventeen months to prosecute the maker of a note, discharged the guarantors. The same question came up again in Kies v. Tifft, (1 Cowen, 98,) and was again decided the same way; the delay, however, in the latter case, being for a much shorter period.

It is said by the plaintiff’s counsel, that these cases are in conflict with the later one of Thomas v. Wood, (4 Cowen, 183.) The defendant in that case guaranteed the collection of a bond and mortgage given February 8, 1809, to secure the payment of $1200 with interest. The interest was to be paid annually, on the 1st day of March in each year, and the principal in three instalments on the 1st day of March in the years 1814, 1818, and 1822. The mortgagor failed to make the payment falling due on the 1st day of March,' 1814, as well as prior instalments of interest. The plaintiff did not sue him on the bond Until after the May term of the supreme court in 1814, but perfected a judgment at the next term, and failing to collect the money, foreclosed the mortgage and sold the land the next December. It appeared that the principal debtor was wholly insolvent in and prior to March, 1814. The proceeds of the land paid what was due at the time of the sale, and part of the instalment falling due in 1818. Immediately after the latter became payable, a new execution was issued on the judgment against the principal debtor and returned Unsatisfied, and the defendant was then prosecuted on his guaranty. It is to be observed, that in the case cited it was the instalment of 1818, not that of 1814, the payment of which the defendant was resisting. The first had already been paid out of the property of the principal debtor, and the defendant was insisting that he was discharged, not by reason of any want of diligence, in proceeding against the principal in 1818, but because the plaintiff had not used the utmost 'possible dispatch, in collecting the payment falling due four years before, and for which no claim was made upon him. The case decides that Suffering the May term to pass without suing the principal debtor, on the first instalment, it appearing that this delay tiould not by possibility prejudice the defendant, did not discharge him from liability upon the second instalment, in reference to which there was no pretence of laches. This is really the point in the case, though much was said aside from it. And when the learned judge said that certain remarks in Kies v. Tifft were obiter, he did not perhaps reflect, that much of what he was then saying was subject to the same criticism.

But it was not intimated even there, that an indefinite delay could be excused by any circumstances. The doctrine of the former cases is not questioned, but fully recognized. It is simply and truly said that they were not applicable to the case of Thomas v. Wood. Mr. Justice Woodworth, in the latter case, remarks, “ whatever may be the effect of letting a, term pass, there is no doubt that seventeen months’ delay would discharge from the guaranty.” Mr. Justice Sutherland says, “ the expression that a term should not be permitted to pass, is to be taken in connection with the facts of those cases. There was great and unnecessary delay in both.” The most that can be claimed even from the obiter remarks in Thomas v. Wood is, that suffering a term to pass which occurs two months after the demand matures, may, under peculiar circumstances, be reconciled with reasonable diligence in the prosecution of the principal; though this is nota question reai ly presented by the facts of that case. It is not perceived thar. these several authorities are in conflict. They all alike have been constantly cited as consistent authority for showing that the guarantee must be early and diligent in prosecuting the principal debtor if he would retain the liability of his guarantor. (See 5 Wend. 509; 1 Id. 461; 21 Id. 258.)

In Backus v. Shipherd, the note was transferred and guaranteed after it matured. Four months after the transfer judgment was obtained against the maker. Some facts being controverted in that case, they, with the question of due diligence, were submitted to the jury, and their finding in favor of the plaintiff was sustained by the court. That the rule by which the question of due diligence is to be tried should be qualified and relaxed, in some degree, where the guaranty is made after the demand is due, need hardly be mentioned. But if this were otherwise, the case of Backus v. Shipherd would not sustain the decision of the referee in this case.

The question is not whether the defendants have been injured by the delay, but whether the plaintiff has performed his contract—the condition precedent to his right to call on them. A compliance on his part with the terms of the guaranty is indispensable. Parties may agree upon such terms as they please, as a condition of liability, and the courts cannot substitute other stipulations for them. None of the cases profess to do this; but where there has been delay the courts have, in some instances, held it to be consistent, under the circumstances disclosed, with reasonable diligence, and hence that there was a performance of the condition precedent.

None of those circumstances which have been supposed to make a short postponement of the prosecution of the principal consistent with reasonable diligence, are found in the present case. Troule was twice at the plaintiff’s store in Buffalo after the note fell due; and the fact of his non-residence, so far from excusing the plaintiff from proceeding against him there, required him promptly to embrace these opportunities for complying with the conditions of the guaranty, and of protecting the interests of the defendant, which had been confided to him, and the duty of maintaining which he had assumed.

But if the omission to proceed against Troule there can be made consistent with the plaintiff’s obligation, how can he get over the subsequent delay of sixteen months? It is said he did not know that Troule had been in Buffalo. But we find him making no exertions to inform himself how this was. And even if such exertions had been made, a failure on his part to learn the facts as they really existed, would be a very ques^ tionable excuse for his negligence. His duty was a very plain one; that is, to place process for Troule in the hands of the sheriff, which would have protected him in any event, and probably in the present case have secured a much earlier judgment. There is, if possible, still less force in the suggestion that the plaintiff was not bound to proceed against the maker of the note because he had no property within reach of the process of the court. This is striking at the very contract itself, and asking us to make new stipulations between the parties. The only reason why a guarantor is ever liable on a contract like this, is that the principal debtor has not property within the reach of the process of the court to satisfy his obligation; and the argument of the plaintiff’s counsel, carried out, would dis pense with prosecution in every such instance, and substitute for it evidence of the maker’s insolvency. Here neither the residence, pecuniary ability, situation of their property, nor any other circumstances of the parties to this paper have changed since the guaranty was made. The parties to the suit understood then what would be the result of a suit against the maker in: Brie county, as well as they know it now. The defendants having then all the light they have now, exacted, and the plaintiff assumed, the responsibility of an early and diligent prosecution of Troule, as a condition precedent to their liability; and it does not lie with him now to say that they exacted, and he undertook to perform, a mere idle ceremony. They had a right ,to make such a contract, and the court cannot assume to make ,one in its stead, which might be supposed more practical and sensible.

It was contended, on the argument, that if the defendants had not been prejudiced by the delay, it constituted no defence, and that the burden of showing that they were prejudiced lay on them. The point is partially involved and has been sufficiently examined in the consideration of those which have preceded it. It only remains briefly to advert to the authorities cited to sustain it. They are all, (with a single exception which is noticed below,) decisions upon the ordinary contract of suretiship, and are not applicable to contracts of guaranty. The distinction between them has been already sufficiently indicated in stating the character of the obligation under consideration. •

In Backus v. Shipherd, (11 Wend. 635,) Mr. Justice Nelson says, “ a proceeding to judgment and execution is at least prima facie a compliance with the contract. If beyond this there was negligence, and more than was done might reasonably have been done to collect th.e debt, and a loss ensues, it lies on the defendant to show the loss, and that it was occasioned by such negligence or omission.” These remarks, a reference to the case will show, as indeed the extract itself shows, were not intended to apply to a question of diligence in commencing a suit. That question had already been examined by the learned justice, and disposed of. What he here said referred to the exertions and diligence which the plaintiff was bound to use to secure the debt, after he had duly perfected a judgment. In that case the judgment against the principal debtor was recovered in a justice’s court, and the guarantor objected that a transcript had not been filed in the county clerk’s office, and an execution issued to the sheriff. The remarks of the judge, quoted above., were made in discussing this point; and he held that the guarantor was pot discharged by this omission, unless it was shown that these steps wopld have secured the collection of the debt. It is hardly necessary to say that they have no application to the present case.

Thus far the examination has proceeded upon the assumption that the plaintiff could comply with the conditions of the guaranty by prosecuting Troule ip this state. We think, however, ho was bound to proceed against him in Canada. White v. Case, (13 Wend. 543,) is cited as an authority the other way. In that case, when the note was made and when the contract of guaranty was entered into, the parties to both contracts resided in this state, and the maker left it about the time the note matured. It was held, under the circumstances of that case, that the plaintiff was not bound to follow the principal debtor to another state and sue him there. It is said there that the guaranty implied not only an obligation that the maker was able to pay, but .that he would be in a situation to be sued in the state where the contract was made. The plaintiff’s counsel understands the court as referring, ip these remarks, to the place where the contract of guaranty was made. We do not think this is what was intended; but that reference is had|to the contract of the party who is to be sued—the maker of the note. When he resides in one state and the guarantee in another, it would be a strange construction of a simple contract of guaranty to hold it to imply that the maker of the note should change his .place of residence and remove to that of the guarantee. That this was not meant, is shown by other remarks of the learned judge in the case referred to. “ The term collection,” he says, “ is alone equivocal, and should receive an interpretation in reference to the subject matter of the contract, and the situation or condition of the maker.” Such we deem a reasonable and correct rule of interpretation, to be .applied to the contract in this case. This note was dated in Canada. The maker resided there when it was made, and when the plaintiff received it, and when he assumed to use the proper means to collect it. Troule’s property is presumed to be at the place of his domicil; indeed, it is proved to be there, and that he is abundantly able to pay this demand. With all these facts in view, at the time the contract between the parties to this suit was made, what was it understood by them that the plaintiff had undertaken to do, by agreeing, to collect the note of the maker “ by due course of law ?•” Was it supposed that the duty would be performed by a nugatory proceeding in the recorder’s court of the city of Buffalo ? Troule’s person was not liable to arrest, and his property was not within reach of the process of the court, and they must have foreseen that a suit here would result in nothing but useless expense., Giving the contract a construction which will make the defendants liable,, upon the performance of this idle ceremony, would change its character, and make it virtually a guaranty of payment, instead of a guaranty of collection—a contract which the parties were competent to make for themselves, if they liad so intended. The terms upon which the note was received by the plaintiff, imposed upon him the duty of looking in good' faith to the interests of the defendants in his attempts to collect the debt of the maker. He was bound, for this purpose, to do for them (the circumstances remaining such as the parties contemplated when the guaranty was made) what a discreet and careful man would have done in this respect for himself. This; we think required the plaintiff to prosecute Troule where his residence and property were—before calling upon the defendants ; and for this reason the suit cannot be maintained.

Although we have found no reported, case presenting this precise question, still there are authorities which we think jjus- . tify the distinction we have made between this case and that of White v. Case. It has been held that in order to fix an. endorser of a promissory note not payable at a particular place, it was not necessary to demand it of the maker who, after it toas made and before it matured, removed from the state; but that a demand at his last place of residence in this state was sufficient. (Cumming v. Fisher, Anthohs N. P. 1, and notes. And see a reference to an unreported case, 14 John. 117.) But where the maker resides out of the state when the note is made, the demand must be made at his residence. (Gilmore v. Spies, 1 Barb. Sup. Court Rep. 158.) The principle which distinguishes those cases we think applies to this, and distinguishes it from that of White v. Case. The case of Shultz v. Palmer, (11 Wend. 367,) bears somewhat, though mofe remotely, upon the same point.

The motion to set aside the report of the referee must be granted; the costs to abide the event of the suit.