Opinion
Argued March 30
Decided April 11th, 1871
N.C. Moak, for appellant.
L. Tremain, for respondent.
It was held in Paine v. Packard (13 J., 174), in an action by the payee against the makers of a joint note, which was signed by the defendant Packard as surety for his co-contractor, that a surety is discharged from liability by the neglect of the creditor to proceed to collect the debt of the principal debtor upon the request of the surety where by reason of such neglect and the subsequent insolvency of the principal the debt as to him is lost.
This case was regarded as introducing a new rule, and while the rule has been adhered to in cases strictly analogous, the courts have been disinclined to extend it. ( Tremble v. Thorn, 16 J., 151; King v. Baldwin, 17 J., 384; Herrick v. Borst, 4 Hill, 650; Pitts v. Congdon, 2 Comst., 352.)
In Tremble v. Thorn the court refused to apply it in an action by the holder of a promissory note against an indorser, who had indorsed and transferred it for value, on the ground that although an indorser is in the nature of a surety, he is answerable upon an independent contract.
Nor has it been extended to engagements which, though collateral in form, were entered into for the benefit of the surety, subsequent to the original transaction, and upon a new or independent consideration.
The argument from natural equity and the presumed intention of the parties, upon which the doctrine in Paine v. Packard is sustained, has but slight application in such cases. It is the right of a surety to pay the debt and prosecute the principal, and one who for value transfers a debt or security, and thereupon becomes guarantor or indorser, can protect himself against the consequence of delay in enforcing the principal obligation, and cannot, we think, by notice impose upon the creditor or holder the duty of active diligence at the risk of discharging the surety by omitting it.
The defendant in this case took the note from Vrooman in payment of a debt and then transferred it in part payment for a farm purchased by him, and at the time of the transfer signed it.
It is unnecessary to determine the nature of his obligation. Whether he is regarded as a maker or guarantor ( 27 N.Y., 39; 29 id., 408), he was not a surety within the rule in Paine v. Packard, and the omission of the holder to prosecute Vrooman, upon his request, although Vrooman subsequently became insolvent, did not discharge him from liability.
If, therefore, the defendant requested Wells to defend the suit of Watson upon the ground that Cameron had neglected to prosecute Vrooman and promised to pay the costs of that defence, such promise was not supported by any consideration beneficial to the defendant.
But the consideration of a promise may be found as well in any loss, trouble or inconvenience to, or charge upon the person to whom it is made, as in a benefit to the person making it. (Smith's Law of Cont., 52; 1 Sel. N.P., 43.)
And if Wells defended the suit of Watson upon Mann's promise to indemnify him against the costs of the defence, and the defence was made in good faith, it was a good consideration for the promise, although Mann was mistaken as to the validity of the defence.
The court directed a verdict for the defendant, and this direction was erroneous, if upon the most favorable consideration of the evidence the jury could have found that the suit of Watson was defended at the request of Mann and upon his promise to pay the costs.
There is no proof of an express promise, but an agreement may result as a legal inference from the facts and circumstances of the case, although not formally stated in words. (Story on Cont., § 11.)
It was assumed in the conversation between Mann and Wells in respect to the defence of the Watson suit, not only that the proposed defence, if proved, would exonerate Wells from liability, but that a judgment upon the issue in his favor would be a bar to a subsequent action against Mann.
This assumption in both respects was unfounded, but it is a material circumstance, in interpreting the language of the parties, that they acted upon it.
When the Watson suit was commenced Wells had a remedy against Mann in case he paid the note, unless Mann was discharged by the neglect of Cameron.
Wells testified that he informed Mann that he should pay the note and save costs, unless the latter thought best to defend the suit, and that Mann after some hesitation directed him to "go on and defend it."
The defence was then interposed, and the plaintiff recovered a judgment for damages and costs.
Upon this evidence, in connection with the other circumstances, the jury might have found a promise by Mann to pay the costs of the defence, and the case should have been left to them upon that issue.
It is not material to the rights of the parties whether the recovery in the suit of Watson was upon the loan or upon the note held as collateral security for it. The complaint in that suit was framed so as to have allowed a recovery for either cause of action.
If the recovery was for the loan, it negatives any claim that the defence to the note prevailed. Any act or omission of duty on the part of Cameron, whereby the security of the note was lost, was a good defence in an action to recover the money loaned to the extent at least of the value of the security. (Story's Eq. Jur., § 326; Story on Notes, § 284; Schroeppel v. Shaw, 3 Comst., 446.)
The judgment should be reversed and new trial granted, with costs to abide the event.
All agree. Judgment reversed. New trial granted.