Summary
In Phillips v. Lindley, 112 App. Div. 283 [98 N.Y. Supp. 423], the defendant made an agreement "to collect said note without cost or expense to said Phillips". It was held to be a conditional guarantee.
Summary of this case from Citizens Bank v. Seaboard Surety Corp.Opinion
April 20, 1906.
William H. Harris, for the appellant.
John Ewen, for the respondent.
In Cumpston v. McNair (1 Wend. 457) the words were: "I guarantee the collection of this note to George Leitch," and the court held that the very terms implied "that measures to collect it from the principals were first to be used, and the defendant's contract or guaranty was, that those measures should be successful; if not, that he would pay the note and costs." (See, too, Craig v. Parkis, 40 N.Y. 181; Jackson v. Decker, 14 App. Div. 415.) I think that as the guaranty was one of collection, not payment, it was incumbent on the plaintiff to show due diligence against the principal debtors before he could hold the defendant, and that the insolvency of the principal debtors was no excuse for failure to pursue them. ( Salt Springs Nat. Bank v. Sloan, 135 N.Y. 371, and authorities cited.)
The appellant contends that plaintiff has failed to show a breach of the contract, in that if plaintiff desired his services he should have sent the note to him and demanded such services, and that only a refusal thereupon could establish the breach. The plaintiff testifies that he had several interviews with the defendant after the note became due; that after the fire of 1894 he asked defendant "about the payment of this note" and that the defendant told him to "rest easy, * * * there is enough insurance to take care of it and not only that but several others; and he said, they will all be looked after, and he was then going to Europe," and thereupon the defendant went to Europe for several months. The plaintiff then proceeded to put his cognovit note in judgment. The plaintiff testifies that during the course of the United States court litigation, in several conversations with the defendant the plaintiff referred to the guaranty, saying that he was tired of waiting for his money and that he did not wish to go through with the suit because "he had guaranteed me the payment of that note," and defendant told him to resort to the makers of the note first, and afterwards if he did not get it, defendant "would take care of me." If up to that time the plaintiff had omitted the formal demand for action by the defendant, I think that this testimony is sufficient to establish a waiver by the defendant. (See Sigourney v. Wetherell, 6 Metc. 553; Mead v. Parker, 111 N.Y. 259; Ege v. Barnitz, 8 Penn. St. 304.) In Sigourney v. Wetherell ( supra) the court say (p. 563): "A new promise or unequivocal act of recognition of his continued liability, made with full knowledge of the laches of the holder of the note guaranteed, will continue the liability of the guarantor." It is also urged that the defendant had extended the note so that it could not be enforced until December, 1894, and that if so, it was the duty of the plaintiff to make the demand upon the defendant when it became due, whereas plaintiff had proceeded to collect it himself before it became due under the extension. But the conversation last narrated, wherein defendant told plaintiff to resort to the makers first, and if he failed the defendant "would take care of me" took place long after the note fell due, even by the extension. The evidence is sufficient to hold the defendant to his guaranty despite the extension, for he wrote the following letter to the plaintiff, which, if we may not assume to have been the moving cause of such extension, at least, in the absence of evidence contra, indicates acquiescence and consent:
"DEAR SIR. — The note, $2,500 National Cotton Seed Oil and Huller Company, which you hold, matures on the 23rd inst. The Company are now in the midst of their crushing season, and could use the funds for 90 days longer. Will of course get you 8% inst. payable in advance. Advise me."
Even if after his first conversation after the fire with the defendant as to the payment of the note, the plaintiff took steps to protect himself by entry of judgment on the cognovit note, while the defendant was absent in Europe, it is hard to see how the defendant was prejudiced as to his guaranty. Despite the extension plaintiff obtained judgment, which apparently stands in full force and effect. Even if no formal demand was made at the time the extension expired, and the plaintiff had taken the matter in his own hands, he was but pursuing the course required of him before he could proceed against the defendant, and the defendant fails to suggest in what way he was thereby prejudiced in any steps that defendant could have taken to collect the note. In any event the doctrine of waiver would apply, for the reasons heretofore stated.
The appellant also contends that there was failure of proof of due diligence. The note was primarily a corporate note, payable at Chillicothe, O., and the individual makers were evidently upon the paper for the reason that they were directors and stockholders of that corporation. When the note fell due (I exclude the extension in this discussion) the plaintiff entered judgment thereon in the Ross County Common Pleas Court. We will take judicial notice that Chillicothe, O., is a city, and the county seat of Ross county, O. (1 Rice Ev. 26.) It appears that executions issued in that county and two other counties, against all the defendants, were returned unsatisfied. This proceeding was "at least prima facie a compliance with the contract." ( Backus v. Shipherd, 11 Wend. 629.) And in Camden v. Doremus (3 How. [U.S.] 515) at page 533, the court say: "The diligent and honest prosecution of a suit to judgment, with a return of nulla bona, has always been regarded as one of the extreme tests of due diligence." "If beyond this there is negligence, or more than what was done might reasonably have been done to collect the debt, and a loss ensues, it lies on the defendant to show the loss, and that it was occasioned by such negligence or omission." ( Backus v. Shipherd, supra, 636.) The appellant points out that the corporation received a large sum for insurance, and complains that the plaintiff did not realize from that, but the evidence shows that the defendant alone testifies to the fact that he "saw a good deal of insurance money paid," about $100,000, which was paid "to them or their creditors." It does not appear that he ever informed the plaintiff in response to his inquiries how plaintiff would realize, and he does not suggest now any legal way then known to the plaintiff by which he could have laid hand upon any part of this money, or that any part was available to discharge the note. The court has found upon sufficient evidence that after the fire of November 9, 1894, the corporation became and has remained insolvent, and that at the time of the recovery of the judgment on November 28, 1894, and thereafter, all of the makers were insolvent. I think that so far as the liability of the defendant is concerned, the plaintiff is entitled to the finding that he pursued due diligence. In White v. Case (13 Wend. 543) the court, per NELSON, J., say: "So in the common case, where by the guaranty the party is obliged to pay after due course of law, the contract reasonably and fairly implies an undertaking on the part of the guarantor, that the principal will be in a situation to be sued, or, in other words, within the jurisdiction of the State, so that he may be sued when the demand becomes due." So far as the suit in the United States court is concerned, the plaintiff did not institute it; he was made a party defendant. It does not appear that his delay in appearance therein in any way prejudiced the defendant.
The further point is made that as it appears that the attorney for the plaintiff in that suit was paid $1,500 out of the total recovery therein of $6,000, therefore the defendant in any event should have been credited with that sum as a recovery on the note as against his liability in this action. The defendant concludes that as $1,500 was paid to the attorney who appeared for the plaintiff when a defendant in the United States court suit, therefore the client received $1,500 as his part of the recovery of $6,000. He is not entitled to that conclusion because it appears that the said attorney was also one of the attorneys for the Thompson bank, the plaintiff in that action. Hence this sum presumably was paid to him also as attorney for the plaintiff. How can we determine, when the record is silent, what was his quotient as an attorney for the plaintiff and as attorney for the defendant uniting with the plaintiff? Generally as an attorney for the plaintiff he would naturally tender more services and so be entitled to greater consideration. As between his two clients, his client, the plaintiff, in the action was a creditor in double the sum owed to his client, this plaintiff. There is a further consideration. The scheme of the order was to divide the $6,000 equally between four attorneys, one representing both the plaintiff in that action and this plaintiff as a defendant. This plaintiff, as such defendant, sued on a judgment of $2,500. The judgments of the various creditors represented in that suit amounted to nearly $50,000. They were all anterior to that of this plaintiff. What, then, justifies the conclusion that this plaintiff, with a claim of one-twentieth, received an allowance of one-fourth? Of the other attorneys representing defendants and receiving $1,500 each, Douglas represented defendants with judgments of $15,000 and Jewett $10,000. All that we can logically conclude is that whatever dividend the plaintiff received in that suit was, under the order of the court, entered on consent, paid to the plaintiff's attorney for his services therein. The terms of the guaranty expressly absolved the plaintiff from all costs of collection. There is evidence that the defendant knew of these legal proceedings and approved of them. Moreover, the plaintiff was entitled to charge up his costs in pursuing the principal debtor. ( Mosher v. Hotchkiss, 2 Keyes, 589; 1 Brandt Surety. Guar. [3d ed.] § 111.) Finally, it does not appear that this point was raised by pleading or at the trial.
The defendant pleads that he resides in the city, county and State of New York, and that any cause of action by reason of the facts alleged in the complaint did not accrue within six years before this action was begun. The cause of action arose outside of this State. Under section 390a of the Code of Civil Procedure the Statute of Limitations of the State where the cause of action arose would apply, unless the cause of action originally accrued in favor of a resident of this State. The plaintiff testified that he resided in this State at the time this action was begun. We can only consider this plea of our Statute of Limitations on the theory that the cause of action originally accrued to a resident of this State. The defendant contends that as the note fell due in 1894 and this action was begun August 7, 1903, the New York statute is a bar. The court found that defendant resided at Chillicothe, O., and Cincinnati, O., and in Campbell county, Ky., and was without the State from 1892 to October 8, 1897, and thereafter. The defendant, in the guaranty executed in March, 1894, described himself as of Chillicothe, O. He testifies that in September or November, 1894, he was in his office at Chillicothe, O., and that he was a law student engaged in the business of selling commercial paper; that he maintained an office there for several years after that, and also one in Cincinnati. In a deposition read in evidence, taken January 12, 1897, in answer to a question of his residence, he testifies: "I live in Campbell County, Kentucky." He also testifies that he resided, he thought, at Chillicothe in the years 1892, 1893 and 1894. In a deposition taken February 17, 1899, read in evidence, he testifies that he resided in Campbell county, Ky. The plaintiff testifies that the defendant resided at Cincinnati, O., on February 10, 1897. These answers of the defendant in such proceedings were competent as admissions. (Chase's Stephen's Dig. Ev. [2d ed.] 58, note, and authorities cited, 74, note 2, and authorities cited; 1 Greenl. Ev. [15th ed.] § 193.) No testimony was offered by the defendant as to his residence in this State. Thus, there was evidence to establish that when the cause of action accrued the defendant was without the State; the burden of showing the time of his residence in the State was upon him. (See Code Civ. Proc. § 401; Mayer v. Friedman, 7 Hun, 218; affd., 69 N.Y. 608; Palmer v. Bennett, 83 Hun, 220; affd., 152 N.Y. 621.) The appellant contends that the court regarded the writing sued on as a guaranty of payment; that it was not, and, therefore, the judgment in any event should not stand. Although the court did make a remark at the close of the trial which may indicate that such was its view, the complaint, the proof and the findings are sufficient to sustain the judgment upon the agreement pleaded, even though we construe it as a guaranty of collection. The judgment is affirmed, with costs.
HOOKER, GAYNOR, RICH and MILLER, JJ., concurred.
Judgment affirmed, with costs.