Opinion
December, 1905.
Clarence P. Moser, for the appellant.
Franklin H. Mills, for the respondent.
The complaint alleges that the plaintiff is a foreign corporation organized under the laws of the United States and engaged in business as a national bank, and that the defendant is a resident of this State; that at the city of New York on the 17th day of July, 1903, the Southern Textile Company, a corporation, made and delivered to plaintiff its promissory note for $28,000 with interest at six per cent, payable to the order of plaintiff at Chester, Pa., one year after date; that simultaneously with the execution and delivery of said note, and to induce the plaintiff to accept the same and to part with value therefor, the defendant and George E. Fisher, Ernest C. Brown and Tracy W. Pratt, for a valuable consideration, executed and delivered to the plaintiff an agreement in writing, whereby they guaranteed to the plaintiff, each to the amount of $5,000, the payment of said note with interest at maturity. The complaint alleges presentment, non-payment and protest and continues: "V. That the plaintiff is the true and lawful owner and holder of said note and that the same has not been paid either in whole or in part, excepting that there was paid on account thereof on October 27th, 1904, the sum of Ten thousand four hundred dollars and ninety-five cents ($10,400.95).
"VI. That by reason of the facts aforesaid, the defendant is justly and truly indebted to the plaintiff in the sum of Five thousand dollars ($5,000) with interest thereon from July 17th, 1904, no part of which has been paid, though duly demanded."
Defendant demurred upon the ground of defects of parties defendant, in that George E. Fisher, Ernest C. Brown and Tracy W. Pratt were not made parties defendant, and upon the ground that the complaint did not state facts sufficient to constitute a cause of action. The demurrer was overruled and the defendant appeals.
It seems to me that the guarantors entered into a joint agreement with the plaintiff whereby they jointly guaranteed the payment of the note at maturity, their obligation being that if the note was not so paid, they would be liable therefor, each to the amount of $5,000. If the note had been paid, with the exception of one sum of $5,000, a right of action would not have existed to have compelled any one of the guarantors to have paid this amount. Each would have been liable only for his proportional share thereof. The guaranty was joint, but the amount of liability was limited. Where several persons execute an instrument upon the same consideration at the same time and for the same purpose, and which takes effect from a single delivery, it is a joint promise. Promises of several persons are presumed to be joint and not several, unless a contrary intention is shown in the instrument. I am unable to spell out any such intention from the phrase, "each to the amount of" $5,000. There is no difficulty with the rule of law. Parties may make a joint obligation, or a several obligation, or a joint and several obligation, as they will. It is the construction to be placed upon the peculiar words of the instrument itself which causes the difficulty.
In Muzzy v. Whitney (10 Johns. 226) it was held that an obligation was joint although one-half was to be taken from one obligor's share and the other half from the share of two other obligors, the court saying: "This latter part of the memorandum was only a designated mode of distribution of the debt as between the defendants."
In Alpaugh v. Wood ( 53 N.J. Law, 638) the Court of Errors and Appeals of New Jersey said: "The inference of a joint obligation is not defeated by the fact that it appears, either in the terms of the contract or from the circumstances of the transaction, that each promisor is to contribute separately to the entire result for which they bargain." These guarantors chose to create a joint obligation, but wished to divide and limit the liability equally among themselves. That being so, they are all necessary parties defendant. "Where other parties are jointly liable upon a claim they should all be made parties, so that the rights of all may be determined. At law a joint debt cannot be set off against a separate debt, or conversely, a separate debt against a joint debt." ( Spofford v. Rowan, 124 N.Y. 113.)
If this were a several obligation the complaint would be bad. The defendant in that view would be liable only in case there was a breach of his specific agreement to pay $5,000 due by him. His breach must be pleaded or a cause of action against him has not been set forth. ( Van Giesen v. Van Giesen, 10 N.Y. 316; Lent v. N.Y. M.R. Co., 130 id. 504.) The breach of the promise by the maker of the note is not sufficient. That was not defendant's breach. He may well have paid under his guaranty or his obligation may have been otherwise extinguished. In this complaint payment of $10,400 is admitted. The whole complaint must be considered, including those allegations which tend to discharge the defendant. ( Calvo v. Davies, 73 N.Y. 211, 218.) The receipt of the $10,400 unexplained does tend to discharge this defendant, because a payment on account must first be applied to such portion of a debt as is secured. ( Pond v. Harwood, 139 N.Y. 125.) So non constat that defendant's particular and several obligation was discharged.
The only allegation of breach is that contained in the 6th paragraph of the complaint quoted supra. It begins: "That by reason of the facts aforesaid," an allegation which would be a statement of fact when standing alone, when thus qualified becomes a mere conclusion of law.
When an allegation contained in a complaint is a conclusion from the other facts therein stated it is not to be deemed admitted by a demurrer. ( Masterson v. Townshend, 123 N.Y. 461; Burdick v. Chesebrough, 94 App. Div. 535.) Therefore, as matter of fact, no breach is pleaded.
The judgment should be reversed, with costs, and the demurrer sustained, with costs, with leave to the plaintiff to amend on payment of costs in this court and in the court below.
O'BRIEN, P.J., McLAUGHLIN and HOUGHTON, JJ., concurred; PATTERSON, J., dissented.
Judgment reversed, with costs, and demurrer sustained, with costs, with leave to plaintiff to amend on payment of costs in this court and in the court below.