Jones v. . Ashford

Faircloth, J. The defendant held a promissory note against one Scott, secured by a mortgage on real estate. He transferred said note for value to the plaintiff without endorsement, and at the same time agreed in writing “ to guarantee the payment of the aforesaid note to the said Jones, and in case she fails to recover the money on said note, that I (he) will pay to her the principal and interest and costs due thereon.” At the time of the transfer, the defendant proposed to plaintiff to transfer the note and mortgage without any guaranty, but the plaintiff declined this arrangement, saying, that she preferred the guaranty of defendant to the mortgage. Judgment and execution were had on the note against Scott, under which only $84 *175 could be realized, and this amount is credited by plaintiff on -her claim- She now demands payment from the guarantor, and he insists that she was bound to foreclose "said mortgage before calling on him. ■ The first question discussed in this Court was whether the mortgage, under the circumstances in this case, passed to the plaintiff with the transfer of the note. It is well settled that the assignment of a note passes to the assignee^ the mortgage or any other collateral security, unless the parties agree otherwise. Hyman v. Devereux, 63 N. C., 624. Without discussing the question, we will assume that the mortgage and all the rights and remedies thereunder did pass to the guarantee and consider the main question, which is, — has the "guarantee performed the condition precedent to her right to sue the guarantor ? In contracts of this kind the distinction between the guaranty of the payment of a note, and the guaranty for the collection of a note, or debt, is well marked out in the books and adjudications on this subject. The former is an absolute promise to pay the debt at maturity if not paid by the principal debtor, and the guarantee may begin an action at once against the-guarantor. The latter is a promise to pay the debt upon the condition that the guarantee shall diligently prosecute the principal debtor without success. We think the present case belongs to the latter of the' above classes, and that the rule applicable to the case' derived from the contract, is that if the guarantee can not collect by due and reasonable diligence, the guarantor will pay. What amounts to due diligence, is a question for the-Court to decide in each case upon the facts found or admitted. Suppose a case, of guaranty for collection, and before the maturity of the debt, the principle debtor should reside- and remain in a distant State. It would not be reasonable-to require the guarantee to go there and pursue the collection. Suppose the principal debtor can be shown by suffic- *176 lent proof to be entirely and utterly insolvent at the maturity of the debt, and to continue so. This would seem to satisfy the demand of due diligence and excuse any legal proceeding whatever. To sue would benefit no one. It would be a vain thing, and would incur .useless expense and trouble. The usual mode of collecting money on a note is by judgment, and execution, and there is nothing in the agreement to indicate that the plaintiff was to pursue more than the usual remedies. Foreclosure of a mortgage is generally dilatory and troublesome, and this may have been the reason why the plaintiff would not purchase without .defendant’s guaranty. In Camden v. Doremus, 3 Howard, 515, it is held that “ the diligent and honest prosecution of a suit to judgment with a return of nuda lona has always been regarded as one of the extreme tests of due diligence.” 'The guarantee is only required to employ the usual legal means of collecting, and this is all that is implied in the .agreement if “ she fails to recover the money on said note.” The only case we find directly in point is reported in 4 Wisconsin, 214, Day v. Elmore, where it is said “ that the return of the execution unsatisfied is evidence of the exhaustion of the legal means of collection. The guarantee is not obliged to pursue rights, credits, &c., by collateral or unusual remedies.” In this case it was expressly decided that the guarantee was not compelled to foreclose a chattel mortgage after judgment and execution unsatisfied before his right of action arose against the guarantor. 2 Parson’s on Notes and Bills, 142; Brockett v. Rich, 23 Amer., 703. 'v Our opinion then is that plaintiff may recover, and that ■the defendant will be subrogated to the rights and remedies of plaintiff under the mortgage. Let judgment be entered here for plaintiff. No error. PER Curiam. Judgment affirmed.