Read v. Cutts

The opinion of the Court was read at the ensuing September term, as drawn up by Mellen C. J. Strictly speaking, guarantors, indorsers and co-obligors or co-promissors, are all sureties for others who are the principals ; but still, in common parlance, the word surety is used in a more limited sense, to mean a co-obligor or co-promissor, entering into a contract with the principal jointly, or jointly and severally, and at the same time. He may in all cases be sued jointly with the principal. No demand of the debt or notice of its non-payment by the principal, need be proved in an action against such surety in any case. But the contract of a guarantor is entered into by him before or after that of the principal generally, and has, in terms, a special reference thereto. His contract always being of this peculiar character, he must always be sued seperately; and in many cases he cannot be made chargeable, unless a seasonable demand of payment be made on the principal and notice of non-payment given to the guarantor, where a pre-existing debt is the subject of the guaranty. In support of the above positions the following cases may be cited : — 190 — Hunt v. Adams, 5 Mass. 358; Carver v. Warren, 5 Mass. 545 ; Moies v. Bird, 11 Mass. 436 ; White v. Howland, 9 Mass. 314; Upham v. Prince, 12 Mass. 14; Oxford Bank v. Haynes, 8 Pick. 423; Sage v. Wilcox, 6 Conn. 81; Phillips v. Astling, 2 Taunt. 206; Warrington v. Furber, 8 East. 242; Sivinyard v. Bowes, 5 M. & S. 62; Cannon v. Gibbs, 9 Serg & Rawle, 202. Another distinction between a surety and a guarantor is that a promise of a surety is supported by the consideration on which the promise of the principal is founded; and no other need be proved ; but the engagement of a guarantor must be founded on some new or independent consideration, except in those cases where the guaranty is given at the time tire debt is contracted by the principal; and so may be considered as connected with it. In support of the above principle in relation to a guarantor are the cases of Leonard v. Vredenburgh, 8 Johns. 29; D’Wolf v. Rabaud, 1 Peters, 476; Bailey v. Freeman, 11 Johns. 221; Hunt v. Adams, and Sage v. Wilcox, cited before; 3 Kent’s Com. 86, 87; Oxford Bank v. Haynes, before cited ; and Packard v. Richardson, 17 Mass. 122. With respect to the question of demand and notice, in order to charge a guarantor of the payment of a pre-existing debt, there seems to be less certainty than might have reasonably been expected, considering the importance of the subject, especially in the commercial community. In the before mentioned cases of Warrington v. Furber, Phillips v. Astling, Cannon v. Gibbs, Sage v. Wilcox, and Oxford Bank v. Haynes, and some others, demand and notice were decided to be necessary, unless in case of the insolvency of the principal. In Redhead v. Carter, Goring v. Edwards, Allen v. Brightmore, 20 Johns. 365, Williams v. Grainger, Cobb v. Little, and some others, such demand and notice were decided not to be necessary. It is important to ascertain the true grounds of these apparently opposing decisions; and we apprehend that the principle on which they rest, when carefully examined, will explain their seeming contradictions, and show their consistency. The essence of the engagement of a guarantor, of the character we are considering, we apprehend, is, that the'debt shall be paid, if the creditor shall take the usual and legal steps, to secure it or render the principal’s lia — 191 — bility absolute. In Warrington v. Furber, Phillips v. Astling, Cannon v. Gibbs, and Oxford Bank v. Haynes, the guaranty was that certain debts arising on bills of exchange or promissory notes, but which were not then payable, should be duly honored and paid. The case of Bank of New York v. Livingston, 2 Johns. Ca. 409, and Cumston v. McNair, 1 Wend. 457, are of the same character ; and demand and notice were held necessary. In the case of Sage v. Wilcox, it does not appear when the note, the payment of which was guarantied, was made payable; besides, in addition to the want of notice in due season, the court in their opinion say lite promise alleged was absolute, but that which was proved was conditional. It is true that want of demand and of season-ble notice was one ground of the decision; but when we take into consideration the terms of guaranty, viz : “ J hereby guaranty the payment of the within note one year from this date, whether a suit is brought against the signer, Jacob Wilcox, or not,” — it seems somewhat singular that the court considered a demand on the signer as essential. The decision is at variance with Williams v. Granger, and several other important cases, among which is that of Allen v. Brightmore, above cited. In most of the other cases before named, where demand and notice were held necessary, the plaintiff had not taken the legal steps to charge the principal debtor and obtain tbe money; and the omision so to do was not excused on account of insolvency. In all these and similar cases, it is evident that certain measures are to be pursued by the creditor to give effect to the guaranty, cases of insolvency excepted. But when the debt, which is the subject of the guaranty has become due and payable and absolute before the guaranty is given, the creditor has nothing to do to perfect his legal claim on the principal; it has become perfect, and the guarantor must be deemed conusant of that fact; and when a creditor’s rights upon a bill of exchange or an indorsed note have become absolute as against all parties chargeable upon it; or when, from the absolute character of the debt guarantied, nothing of a preliminary nature on the part of the creditor is by law required to perfect his rights, why should demand and notice be essential to entitle him to maintain his action against the guarantor? We apprehend — 192 — that upon examination it will be found that the cases cited, as well as others, in which demand and notice have been held to be unnecessary, were decided upon the foregoing distinction. In Cobb v. Little, Crague's note was dated April 30, 1817, payable in six months; on the back of the note the defendant wrote these words: “ I guaranty the payment of the within note in six months. Thomas Little. June 3, 1817.” Here the guaranty was absolute, extending Little's term of payment beyond the six months named in the body of the note; and nothing was by law required to be done by Cobb to perfect his claim against Crague. The court held that a demand on Crague and notice to Little, were not necessary. The court proceeded on the same principle in Breed v. Hillhouse, 7 Conn. 523, in which the payee of a promissory note, after it became due, received a guaranty of a third person in tírese words : “ I hereby guaranty the payment of this note within four years.” The court held it an absolute guaranty; and that demand and notice were unnecessary. Here the note being due at the time of the guaranty, nothing was required to be done to perfect the payee’s rights against the promissor. So in the case of Norton v. Eastman, 4 Greenl. 421, the court say, “ if A holds a note against B for $100 payable in one year, and C guaranties the payment of it when due, in such a case notice is superfluous.” So in Allen v. Brightmore, before cited, the court decided that no demand and notice were necessary, considering the promise of the guarantor as absolute that the maker of the note should pay it or that he himself would. In Boyd v. Cleaveland, 4 Pick. 525, the defendant, an indorser, declared to the plaintiffs, who had no confidence in the other parties to the note, that he should be in New York when the note would become due, and would take it up, if not paid by any other party to it; and the court held that the plaintiffs were not bound to give notice of the non-payment by the maker, as in those cases where an imr plied promise is relied on. In Redhead v. Carter, no notice was given; but the cause was decided on another ground, namely, that the undertaking or engagement was absolute, and so no notice was necessary. It was a case at nisi prius, and the promise of the de — 193 — fendant seems to have been considered as an independent and original contract on his part. The case of Jones v. Cooper, Cowp. 228, was different from the present; it merely presented the question whether the defendant’s promise was a collateral one, and so was within the statute of frauds. And JLdney’s case also was one of a collateral and contingent nature, and so not proveable before commissioners of bankrupt. hi the case at bar, it appears that Hooper, on the 25th of Nov. 1824, gave his promissory note to the plaintiffs for $689,11, andori the next day gave them another note for $1106,64; both payable on demand; and that the defendant on the 14th of January, 1825, signed the agreement on which the present action is founded; and he states that in consideration of a conveyance of a tract of land to him by Hooper, and of the plaintiffs’ promise to forbear to sue Hooper on said notes of hand for and during the term of twelve months from the date of his contract, and of their actual forbearance during that term, he would pay the plaintiff's the sum of thirteen hundred dollars at the end of said twelve months unless the same should then have been paid by said Hooper. The consideration of this promise is a legal one; and no question is made as to its sufficiency. No demand was made on Hooper at the end of the twelve months, though for many months after that time he remained solvent and amply able to pay the notes. And it is not denied that the plaintiffs did forbear to sue Hooper during the twelve months. On these facts it is contended that this action is not maintainable, on account of the omission to demand payment of Hooper at the end of the term of credit to the defendant, and to give notice of non-payment by him; and also on account of the laches of the plaintiffs in not collecting the money of Hooper in his life time. With respect to this latter objection we would observe that it has been repeatedly decided that mere delay to pursue the principal and collect the money of him, does not discharge a surety or guarantor, provided such delay be unaccompanied by fraud, or an agreement not to prosecute the principal, made without the assent of such surety. Lock v. U. States, 3 Mason 446 ; Hunt v. Bridgham, 2 Pick. 583; U. States v. Kirkpatrick, 9 Wheat. 724; Kennebec Bank v. Tuckerman 5 Greenl — 194 — 130. As to the objection that no demand was made on Hooper, or notice of non-payment given to the defendant, the cases before cited as applicable to such a guaranty as the present furnish an answer. The liability of Hooper on his notes to the plaintiff was an absolute one at the time he signed the guaranty; they had then a perfect right of action upon them against Hooper, without any demand upon him. The defendant did not employ the language made use of in the case of Sage v. Wilcox, “ I guaranty the payment of the note but it is, “ I promise to pay the sum of thirteen hundred dollars at that time,” (the end of twelve months) “ unless the same shall have been paid by said Hooper.” If the defendant at that time had called on the plaintiffs to pay the notes according to his promise, he would have learned that they had not been paid, and that he must pay them. Nothing being necessary to be done on the part of the plaintiffs to perfect their rights as against Hooper, this case does not come within the principle of the decisions before mentioned in which demand and notice were held necessary. The plaintiffs knew that Cutis had received a conveyance of a tract of land from Hooper by way of indemnity against loss in consequence of the guaranty; and the land thus conveyed, was stated at the argument to be worth $1300 or more, and this fact was not denied. This very circumstance naturally lulled the attention of the plaintiffs, and led them to the conclusion that the defendant would promptly fulfil his engagement, attend to his own interest, and take notice of those facts which might seriously affect it. Instead of all which, within less than six months aftel’ giving the guaranty, he conveyed the land, and permitted Hooper to receive the avails of it. He has thus voluntarily given up his indemnity, and has placed himself in his present situation and there is no one but himself on whom to cast any blame. There is no proof tha,t the defendant ever informed the plaintiffs of the above faot until after the commencement of the present action. As to the question of damages, we are of opinion that the defendant is answerable to the extent of thirteen hundred dollars, and interest thereon, from January 14, 1826, unless the payments which have been made by Hooper, have reduced the sum now actually due, below the amount. It does not appear that those payments — 195 — were specially directed to be applied in part discharge of the defendant’s liability ; and such being tlie case, the plaintiffs had the right to make the appropriation, and consider the sums paid as going to extinguish, pro tanto, the portion of the two notes not collaterally secured by the guaranty of the defendant. Brewer v. Knapp & al. Pick. 332. According to the agreement of the parties, a default must be entered.