Opinion
October 17, 1928.
December 13, 1928.
Suretyship — Contract of — Action on — Promissory note — Sections 70 and 71 of Uniform Negotiable Instruments Law of 1901, P.L. 194 — Act of June 24, 1913, P.L. 971 — Necessity of applying collateral before suing surety — Affidavit of defense — Insufficiency.
In an action of assumpsit on a written contract of suretyship under seal, which guaranteed the payment of a promissory note payable on demand, it appeared that the note and the contract were separate instruments. It was expressly provided in the contract that the time of payment of the note might be extended without notice to the defendant without affecting his obligation to pay, and demand of payment from the maker, protest and notice of protest, were all waived.
Defendant averred in his affidavit of defense that no demand for payment of the note had been made on the maker; that it was not presented for payment within a reasonable time and that plaintiff failed to reduce and apply the collateral deposited with the note as security. The affidavit of defense did not aver a demand by defendant on plaintiff to dispose of the collateral, nor did it contain an averment as to its value or that it had been disposed of by plaintiff.
Under such circumstances plaintiff was not bound to apply the collateral to the payment of the note before proceeding against the surety and the affidavit was insufficient to prevent judgment.
The contract of suretyship, being a separate instrument, did not constitute the defendant an endorser of the note and the provisions of Sections 70 and 71 of the Negotiable Instrument Act of 1901, P.L. 194, relating to the discharge of an endorser on a demand note, unless it is presented within a reasonable time were not applicable.
Appeal No. 167, October T., 1928, by defendant from judgment of C.P., No. 3, Philadelphia County, September T., 1927, No. 3306, in the case of The Quaker City National Bank v. Michael J. O'Callaghan.
Before HENDERSON, TREXLER, KELLER, LINN, GAWTHROP and CUNNINGHAM, JJ. Affirmed.
Assumpsit on a written contract of suretyship under seal. Before FERGUSON, J.
The facts are stated in the opinion of the Superior Court.
Rule for judgment for want of a sufficient affidavit of defense. The rule was made absolute. Defendant appealed.
Error assigned was the order of the court.
Albert T. Bauerle, for appellant.
Stanley B. Rice, and with him Sloan, White Sloan, for appellee.
Argued October 17, 1928.
This was an action of assumpsit on a written contract of suretyship under seal. See Lorah v. Nissley, 156 Pa. 329. The court below entered judgment for want of a sufficient affidavit of defense.
Since the passage of the Act of July 24, 1913, P.L. 971, the contract must be construed as one of suretyship, not guaranty: Miners State Bank v. Auksztokalnis, 283 Pa. 18; Sullivan Smythfield Co. v. Welsh, 91 Pa. Super. 413. It was not necessary, therefore, to proceed against the principal before bringing suit against the surety: Supplee v. Herrman, 16 Pa. Super. 45.
The contract of suretyship, though it related to a promissory note payable on demand, was a separate instrument and did not constitute the defendant an endorser of that note; hence the rule discharging an endorser on a demand note unless it is presented for payment within a reasonable time (Murray v. Grover, 80 Pa. Super. 56; Negotiable Inst. Law of 1901, P.L. 194, Secs. 70, 71) does not apply to this defendant. Furthermore, it was expressly provided in the contract that the time of payment of the note might be extended without notice to the defendant or further assent by him, without affecting his obligation to pay, and demand of payment from the maker, protest, and notice of protest, were all waived. Averments in the affidavit of defense that no demand for payment of the note had been made on the maker are, therefore, ineffectual: Bolles Penna. Law of Negotiable Instruments, p. 151. The averments as to the failure of the plaintiff to reduce and apply the collateral deposited with the note as security are insufficient. The affidavit does not aver that the collateral was surrendered to the maker as in Franklin Savings Trust Co. v. Clark, 283 Pa. 212, 215, and Fegley v. McDonald, 89 Pa. 128, or that it had been sold and money realized from it, but only that the plaintiff has failed to apply it in payment of the note. This it was not bound to do, before proceeding against the surety. If defendant pays the obligation he will be subrogated to the note and collateral: Denny v. Lyon, 38 Pa. 98, 102. The affidavit does not aver any demand by the defendant on the plaintiff to dispose of the collateral, nor any loss resulting from a refusal following such demand. In fact, it contains no averment at all as to the value of the collateral.
On the whole it was insufficient to prevent judgment. The judgment is affirmed.