Opinion
May Term, 1849
K. Miller, for plaintiff in error.
C.L. Monell, for defendant in error.
It is said on the one side, that the defendant is the maker of a promissory note, and liable as such; and on the other side, that he is an endorser, and has been discharged for the want of demand and notice. And strange as it may seem, there are cases in the books which go to uphold both of these positions. But they are both wrong. The defendant is neither maker nor endorser of a promissory note. On the contrary, he has in very plain terms made a contract of a different kind from either of those — one well known to the law; and by that contract he must either stand or fall. He has guarantied the payment of G.F. Brown's note; and we have no right to turn that contract into one of a different kind. This is so plain a principle that it would seem to be enough to mention it, without saying any thing more. And yet there are cases which hold, that the guarantor of a promissory note may sometimes be treated as maker, and sometimes as endorser. This has usually been allowed for the purpose of giving effect to the supposed intention of the parties, as ascertained from extrinsic evidence; though there has not always been so fair an apology for altering the contract. But on whatever ground the courts may have acted, it is a dangerous proceeding. At the very best, it violates the salutary rule, that all prior negotiations between the parties are to be deemed merged in the final written agreement; and allows that agreement to be overruled by the conversations which preceded it. If the parties have made a mistake in drawing up their contract, the instrument may be reformed in equity, by a direct proceeding for that purpose. But the courts can have no right; under color of construing the agreement, to say that it means something else from what the language of the instrument plainly imports. I have contended earnestly, though not always with success, for this doctrine. ( Seabury v. Hungerford, 2 Hill, 80; Miller v. Gaston, id. 188; Manrow v. Durham, 3 id. 587; Leggett v. Raymond, 6 id. 639.) But the side of truth and principle will sooner or later prevail; and the decisions of the court of errors in Hall v. Newcomb, (7 Hill, 416; 3 id. 233, S.C.) and of this court in Spies v. Gilmore, 1 Comst. 321,) have greatly shaken, if they have not entirely overthrown the cases in which the courts have taken the liberty to remodel the contract of the parties. Those cases have never had any ground of principle to stand on, and I trust they will never again be cited as authority in this state.
I do not mean that the very words of an agreement are always to be followed. Construction is often necessary for the purpose of ascertaining what the parties intended by the words which they used. But when the meaning of the instrument has been ascertained, the office of construction is at an end; and the contract can only be enforced as the parties have made it. The defendant has very plainly contracted as a guarantor. If he is not liable as such, he is not liable at all; and if he is liable as such, he cannot get rid of the obligation by calling himself an endorser, or any thing else.
The undertaking of the defendant was not conditional, like that of an endorser; nor was it upon any condition whatever. It was an absolute agreement that the note should be paid by the maker at maturity. When the maker failed to pay, the defendant's contract was broken, and the plaintiff had a complete right of action against him. It was no part of the agreement that the plaintiff should give notice of the non-payment; nor that he should sue the maker, or use any diligence to get the money from him. The cases in Massachusetts, Maine and Pennsylvania, which hold a different doctrine, ( Oxford Bank v. Haynes, 8 Pick. 423; Talbot v. Gay, 18 id. 534; Gamage v. Hutchins, 23 Maine, 565; Gibbs v. Cannon, 9 Serg. R. 198; Isett v. Hoge, 2 Watts, 128,) are not law in this state. With us proceedings against the maker are only necessary where there is a guaranty of collection. The point was decided long ago that a guaranty of payment, like the one in question, is not conditional, but an absolute undertaking that the maker will pay the note when due. ( Allen v. Rightmere, 20 John. 365.) All of our cases go upon that ground. Some of them go so far as to hold, that the guarantor may be treated as the maker of a promissory note. ( Manrow v. Durham, 3 Hill, 584; Luqueer v. Prosser, 4 Hill, 420; 1 id. 256.) That doctrine cannot be defended. Although the undertaking is absolute, it differs essentially from a promissory note. The guarantor does not promise to pay himself, but that the maker will pay. Still, such cases prove that our courts are far enough from holding the contract to be conditional.
It follows from what has been said, that the evidence offered by the defendant was properly excluded. Proof that when the note became due, and for several years afterwards, the maker was abundantly able to pay, and that he had since become insolvent, would be no answer to this action. The defendant was under an absolute agreement to see that the maker paid the note at maturity.
If there had been an endorser on the note prior to the guaranty, and the plaintiff had allowed him to be discharged by neglecting to demand payment and give him notice, it may be that the defendant would have had a good answer to the action. But it is not necessary to consider that question; for there was no endorser, and nothing has been done or omitted to discharge the maker. If the defendant wished to have him sued, he should have taken up the note, and brought the suit himself. The plaintiff was under no obligation to institute legal proceedings.
The only remaining question is on the statute of frauds. (2 R.S. 135, § 2.) If the case is within the statute, it is impossible to get over the objection that no consideration is expressed in the guaranty. I know it was held in Manrow v. Durham, (3 Hill, 584,) that a guaranty like this was a promissory note, which imports a consideration, and was therefore valid. But that case, which has been questioned elsewhere, ( Story, Prom. Notes, 597,) as well as at home, cannot be law. An undertaking that another man will perform his contract is not a promissory note. It is not within any definition which was ever given of a promissory note, and it cannot be held to be such, without confounding all legal distinctions in relation to the nature of contracts.
But I think the statute of frauds does not apply to this case. Although in form this is a promise to answer for the debt or default of another, in substance it is an engagement to pay the guarantor's own debt, in a particular way. He does not undertake as a mere surety for the maker; but on his own account, and for a consideration which has its root in a transaction entirely distinct from the liability of the maker. The defendant was a debtor to the plaintiff, and gave the note, with the guaranty, to satisfy that debt. This belongs to the third class of cases mentioned by Kent, Ch. J., in Leonard v. Vredenburgh; (8 John. 38, 9;) there was a new and distinct consideration independent of the debt of the maker, and one moving between the parties to the new promise. In such cases, where the party undertakes, for his own benefit, and upon a full consideration received by himself, the promise is not within the statute. It would be good without any writing. The point was decided by the supreme court in Johnson v. Gilbert, (4 Hill, 178,) and I do not think it necessary to refer to other cases holding the same doctrine.
The case of Manrow v. Durham might have been placed upon the same ground on which I have put this, if Durham alone had signed the guaranty. He made the promise upon a new consideration, moving between the plaintiff and himself. But Moulthrop, the other defendant, was a mere surety; and as to him, the case was clearly within the statute.
The direct engagement of the endorser of a negotiable note, and of the guarantor of the payment of a note, whether negotiable or not, is the same. Both undertake that the maker will pay the amount when it shall become due. If there is a failure in such payment, both contracts are broken. Ordinarily, upon the breach of a contract, the party bound for its performance immediately becomes liable for the consequent damages. In the case of the endorser of a negotiable promissory note, however, the liability does not become absolute, unless due notice of non-payment is given to the party whom it is intended to charge. That is not because the endorser has thus stipulated in terms, but it is a condition annexed by the rules of the commercial law. In the case of a guarantor there is nothing to exempt him from the ordinary liability of parties who have broken their contracts, which is direct and not conditional. No condition requiring notice of non-payment is inserted in the contract, nor is any inferred by any rule of law. The guarantor is bound to ascertain for himself whether his contract has been performed, and can easily obtain the requisite information from the party for whose conduct he has assumed the responsibility. If he fails to do that, there is no principle which would authorize him to inflict upon another the consequences of his own neglect.
The rule that no notice of non-payment by the principal is requisite in order to charge the guarantor has been well established in England. ( Somersal v. Bamaly, Cro. Jac. 287; Atkinson Rolfe's case, 1 Leon. 105; Pitman v. Biddlecombe, 4 Mod. R. 230; Smith v. Goff, 11 id. 48, and 2 Salk. 467; Brookbank v. Taylor, Cro. Jac. 605; Com. Dig. tit. Pleader, C. 75; Warrington v. Furbor, 8 East, 242.) There are, however, several cases in the United States courts, and in the courts of some of our sister states, where it has been decided that notice of non-payment was necessary as well to charge guarantors as endorsers. But the English rule has been adopted, and, I believe, uniformly sustained in this state. In Allen v. Rightmere, (20 John. R. 365,) the note was payable to the defendant or order, and he had endorsed and signed a guaranty of payment. The objection was raised, and it was the only point in the cause, that no demand of payment and notice of non-payment had been proved, but it was decided that neither was necessary. The same decision was made in Hugh v. Gray, (19 Wend. 202,) where the guaranty was endorsed on a note payable to bearer. In both of those cases, as in the present case, the defendant would have been considered as an ordinary endorser, and as such, entitled to notice of non-payment, had it not been for the unconditional engagement contained in the guaranty. The various authorities in this country and in England were elaborately examined by the late Mr. Justice Cowen, in Douglass v. Hubbard, (24 Wend. 35,) and he came to the conclusion, and with the court decided, that in such cases notice is not necessary, even as a preliminary to bringing an action; much less to found a right of action. We have no doubt but that the rule dispensing with the notice, conforming as it does with what the parties have said, and no doubt intended, is a sound one, and shall adhere to it.
The principal question in these cases of guaranty which has been raised and discussed in our courts, and which has not yet been clearly and definitively settled, (at any rate not in the court of dernier ressort,) is whether the undertaking is, in the words of the statute, a special promise to answer for the debt, default or miscarriage of another person, or is an original promise of the guarantor? That must depend upon the terms of the instrument which the guarantor has signed, and the object which he intended to accomplish. The note being subscribed by the maker, and by him only, clearly indicates that the amount, which he promises to pay, is his debt. The guaranty as clearly says that the undertaking of the maker in the note shall be performed. In other words, the guarantor engages that the maker of the note shall pay the money. But the written guaranty does not ordinarily, nor so far as I have seen in any case, say for what purpose the party who subscribes it engages that such payment shall be made by another person. That is, I conceive, necessary in order to show whether the engagement was wholly collateral or original, and as it does not appear from the paper, it may be proved by parol evidence. The object in such cases is to apply the terms of the instrument to its designed subject matter. Starkie says in his work on evidence, ( vol. 3, p. 1023,) "it is always necessarily a matter of extrinsic evidence to apply the terms of an instrument to a particular subject matter, the existence of which is also a matter of proof. A difficulty in this case occurs where, although the terms of the instrument be sufficiently definite and distinct, the objects to which it is to be applied are not equally so, and where it is doubtful whether the description applies at all to the particular object pointed out by the evidence, or whether it be not equally applicable to several distinct objects." Judge Cowen remarks in Douglass v. Howland, (24 Wend. 42,) that "some of the most difficult cases on the rule respecting the ambiguitas latens of written contracts have arisen on these guaranties. You are to see what they mean in such cases by looking to collateral facts or surrounding circumstances. You do this in order to sustain the most solemn contracts, such as deeds or wills." Such evidence has been given in most of the cases of guaranty which have come before our courts, and so far as appears from the reports, generally without objection. It was received, and allowed to control the construction of the guaranty as to its being collateral or original, in Johnson v. Gilbert, (4 Hill, 178.) I attach the more consequence to the opinion of the court in that case, as it was given by my brother, Bronson, who had gone farther than any other judge of the late supreme court, (but I am by no means prepared to say too far,) in holding that these contracts were generally collateral.
If it is clear from the evidence that the sole design of the guarantor is to secure the debt of another, and upon a consideration having reference exclusively to the security of such debt, it matters not when the guaranty was made, nor what was the particular consideration; whether it be that the money was advanced to the real debtor at the request of the guarantor and on his promise to secure re-payment, or that the creditor has agreed to extend the time of payment, or that money has been paid for the security, the undertaking is purely collateral and within the statute. There is clearly nothing in the word "guaranty" to import that it is an original undertaking, nor is there any thing in that or in the attending circumstances in the class of cases to which I now allude, which warrants the conclusion that the guarantor is, or may be considered as, a co-promissor with the maker of the note, or an original absolute contractor for the payment of the debt. Some of the cases in the late supreme court have undoubtedly gone thus far, but they have not been uniform. ( Leonard v. Vredenburgh, 8 John. 27; Parker v. Wilson, 15 Wend. 343.) Nor have they received the sanction of the court for the correction of errors, or of this court. Chancellor Walworth intimates a concurring opinion in Prosser v. Luqueer, (4 Hill, 423,) but the decision of that case did not turn on that point, and the opinion, although emanating from an eminent judge, is not a controlling authority.
If it turns out from the evidence that the contract of guaranty is purely collateral, it is of course necessary to its validity that the consideration should be expressed in the writing. The legislature designed to protect parties not only against the loose recollections and uncertain interpretations of witnesses, but also against their own inconsiderateness in entering into obligations for others, which might eventuate in their own ruin. The statute therefore requires that not only the agreement but the consideration should be in writing, and as a necessary consequence that such consideration should be sufficient. If the principal contract and the guaranty are both on the same piece of paper, and written at the same time, they are considered as one transaction, and the signature of the guarantor is deemed a subscription by him not only to the guaranty, but also to the acknowledgment of the consideration expressed in the note, and both taken together are therefore considered as a compliance with the statute. Whether this is not in effect straining what is actually done by the guarantor, in order to meet the equity of particular cases, it is now too late to inquire. The rule has been settled in the court for the correction of errors. If, however, the guaranty is written at a time subsequent to the perfection of the note, the transaction is distinct. The consideration expressed in the note cannot be transferred to the guaranty, and unless that states a valid consideration, it is necessarily void. ( Fisk v. Hutchinson, 2 Wils. R. 94; Charter v. Becket, 7 D. E. 201; Wain v. Walters, 5 East, 10; Leonard v. Vredenburgh, supra.)
But, as I have already intimated, a guaranty may be proved by the attending circumstances, to be an original promise. That depends upon the object which the guarantor designs to accomplish. If he intends, by the payment of the note which he guarantees, to discharge a distinct obligation of his own, one not originally at all connected with, or having reference to, the note, then he in effect contracts for himself, and his undertaking is original and not within the statute, and no consideration need be expressed in the guaranty. He engages to discharge his own obligation through the agency of another. It matters not if he even transfers the note so as to enable the new holder to maintain a suit upon it in his own name. All that, is done as a means of satisfying the debt of the guarantor. The principle is stated very clearly, and illustrated very ably, by Mr Justice Bronson, in Johnson v. Gilbert, (4 Hill, 178.) In Tomlinson v. Gill, ( Amb. R. 330,) Lord Harwicke held that if the consideration for the promise takes its root in a transaction distinct from the original liability, the case is out of the statute. The cases of Gold v. Phillips, (10 John. 412,) Farley v. Cleavland, (4 Cowen, 432,) and Olmstead v. Greenly, (18 John. 12,) are to the same effect.
In the case under consideration, it appeared from the evidence, that Chester Brown, the defendant, owed Curtis, the plaintiff below, on a note for borrowed money. Brown wished to take up the note, and offered in lieu of it a note made by his brother, G.F. Brown: Curtis answered, "I know nothing of your brother's circumstances, but if you will guaranty the note I will take it;" upon which Chester Brown wrote and subscribed the guaranty in question, and delivered it to Curtis. This is a plain and palpable case of a promise of a guarantor to pay his own debt through the note of another, and, what is a material fact to denote the main design of the transaction, the whole credit was given to the guarantor. It is therefore clearly an original undertaking, and neither within the letter of the statute, nor the mischief which it was designed to prevent.
As the liability of the defendant below was that of a principal, and not of a surety merely, he could not (if he could under any circumstances) be exonerated from it by any omission of the plaintiff to institute proceedings for the collection of the note. I think the judgment should be affirmed.
JEWETT, Ch. J., and GARDINER, J., were of opinion that the guaranty was within the statute of frauds, and therefore void.
Judgment affirmed.¹