Seidman v. Finkelstein

Seabtjry,. J. This is a common-law action upon an undertaking given on appeal. The respondent recovered a judgment by default against one Adelman, and the undertaking upon which this action is brought was given when Adelman appealed from the judgment and from an order denying his motion to open his default. This order was affirmed on appeal, and the appeal from the judgment was dismissed. The undertaking was signed by Adelman, and by the appellant and one Punie as joint and several sureties. The present action was brought against both the appellant and Punie. The complaint was dismissed as against Punie, on the ground that his failure to justify discharged him from liability. — 550 — When the appeal was taken by Adelman - and the undertaking given, the plaintiff excepted to the sufficiency of 'the sureties, and on March 6, 1911, Adelman’s attorney served notice of justification. The justification of sureties was adjourned from time to time until March twenty-second. On March fifteenth the appellant made an affidavit as to his qualifications as .a surety. On March twenty-second, the attorneys for the respective parties entered into the following stipulation “It is .hereby stipulated and consented by and between the attorneys for the respective parties heretofore that, upon the examination of Herman .Fi'nkelstein and upon all the. papers and proceedings had herein, the respondent’s exceptions to the sureties on the undertaking herein be and the same hereby are withdrawn, and the undertaking- on appeal herein be and hereby is approved.” It will be observed that, under this stipulation, "the plaintiff withdrew his exceptions, to the sureties, and that these exceptions were withdrawn before the time within which the sureties were required to justify had expired, arid that op the same day the undertalcing was approved by the court. The.record presented a sharp conflict of fact as to whether or not Punie refused to justify before the expiration of the time .allowed by law, and made his refusal known to the attorney for the respondent. The appellant made no objection to the granting of the motion dismissing the complaint as to Punie, nor did he ask that the question as to whether or not' Punie refused to justify be submitted to the jury, nor does the appellant upon this appeal make any point based upon, the evidence tending to show that Punie refused to- justify before' the exemptions were withdrawn. IN either the respondent nor the appellant has appealed from the' judgment dismissing the complaint against Punie. If the issue of fact as to whether Punie had refused to justify before the expiration of the time for justification had been submitted to_ the jury, and if the jury had determined that Punie did so- refuse, a different question would be presented from that which we regard as presented by the record before us. As that •issue was not submitted to the jury and was not determined, we do not decide the legal result attending it.' The facts which — 551 — we deem established by the record before us, are these; namely, Punie did not justify, the plaintiff’s exception to him as a surety was withdrawn before the time for his justification fexpired, and the complaint herein against Punie had been dismissed, because he failed to justify, from which dismissal no appeal has been taken. It thus appears that Punie was originally a cosurety with the appellant, and that Punie, by the dismissal of the complaint against him, has: been discharged from further liability to the respondent. If Punie never became a surety, or if the facts were such as to justify-■a holding that, although originally proposed as a surety, he was rejected or withdrew, so that for all legal purposes he should be considered never to have been a surety, there not only could have been no recovery against him by this respondent, but he would not be liable to this appellant for any contribution, in case the appellant was held for the full amount of the undertaking. But if he did become a surety, and if thereafter he was discharged so far as any obligation to this' appellant is concerned, such discharge, under the circumstances of this case, would not (as we show hereafter) destroy the respondent’s right to enforce the undertaking as against this appellant, nor the appellant’s right to enforce contribution from Punie for anything the appellant might pay on account of such undertaking. While the question-is not before us, so far as it involves any disturbance of the judgment dismissing the complaint as to Punie, we have the right and it becomes necessary for us to consider the facts disclosed by the record, to determine their effect, in conjunction with the judgment of dismissal, so far as the rights, of this appellant and this respondent are concerned. Upon this record, we think that Punie was not discharged ab initio1 upon the undertaking merely by reason of his failure to justify. It is true that section 1335 of the Code of Civil Procedure provides that: “ The effect of a failure so to justify and procure an allowance, is the same as if the undertaking had not been given.” This section of the present Code is derived from section 431 of the Code of Civil Procedure, which contained specific references to sections 195 and 196 of that — 552 — Code. These sections of the Code of Procedure, so far as the allowance of the undertaking by the court is concerned, are substantially the same as those contained in section 1335 of the Code of Civil Procedure”. Chamberlain v. Dempsey, 13 Abb. Pr. 421; Kelsey v. Campbell, 38 Barb. 238. The question as to whether or not a surety is to be deemed to be discharged or to be treated as if he had never become a surety, because of his failure to justify, is not dependent upon the approval of the undertaking by the court. The.determinative factor in ascertaining whether the surety is absolved ah initio from all liability on the undertaking is, whether or not the surety has justified within the time allowed -by law, unless the excepting party shall, before the expiration of such time, waive or withdraw his exception to. the surety. An examination of the cases in this state upon this subject reveals the fact that this distinction has been continuously observed. In People v. Superior Court of New York, 20 Wend. 607, the court pointed out that in the People v. Judges of Onondaga, 1 Cow. 54, and in Thorp v. Faulkner, 2 Cow. 514, it does not appear whether the waiver of the exception was before or after the time for justification had expired. In that case,. Helson, Ch. J., said: “ It was well settled that the bail cease and are to be deemed out of court, if they do not justify within the time allowed; and after this, it may well be that the plaintiff cannot waive the exception, and that even the attorneys cannot do so without the assent of the bail, (9 Wend. 478;) their .contract is at an end. But if the waiver takes place before the time for justification has expired, I am unable to discover any reason against giving it effect, either in respect to the bail themselves or their principal ; nor can I find any case deciding the contrary.” McIntyre v. Borst 26 How. Pr. 111, had to do with an undertaking in replevin, as to which it is now settled that a different rule is to be applied from that which relates to an undertaking given on appeal. Manning v. Gould, 90 N. Y. 476. notwithstanding the distinction which now .exists as to undertakings given on appeal and undertakings given upon replevin, Brady, J., discussed the question generally, and said: “ The rule is well settled that, if bail do — 553 — not justify within the time allowed by the rules of the court; they cease to.be bail, and the plaintiff capnot hold them by giving notice that he waives the exception. * * * It is otherwise if the notice of waiver be served before the period for justification has expired.” In Manning v. Gould, 90 N. Y. 476, it was held that, where the sureties • to an undertaking are excepted to, and fail or refuse to justify and the justification is not waived by the respondent the sureties are discharged from liability. In that case the court said: “ It is unnecessary to determine whether or not the exceptant might have waived her exception at any time before the refusal of the sureties to justify. Yo waiver in this case was made or attempted.” In Hoffman v. Smith, 34 Hun, 485, Daniels, J., said: “ The effect of a failure to justify by the sureties was held, in Manning v. Gould (90 N. Y. 476), to relieve them from liability upon the undertaking and to entitle the respondent to proceed upon the judgment the same as though no undertalcing had in fact been given. And this authority seems to control the disposition which should be made of this appeal, for before the notice withdrawing the exception and waiving the justification of the sureties was served, they had positively refused to justify.” These authorities make it evident that the failure of Punie to justify did not, under the circumstances disclosed; discharge him ab initio from his obligation upon the undertaking. If, in view of the waiver of the exception before the expiration of Punie’s time within which to justify, Punie is to be regarded as surety, then the appellant and Punie were cosureties, and the plaintiff could sue either one or both upon the undertaking. If, however, the dismissal of the complaint as against Punie, and the failure of the respondent to appeal from such dismissal operates, as we think it must be held to operate, as a discharge of Punie from liability to the respondent, it is, nevertheless, true that this discharge did not defeat the appellant’s right of contribution against Punie. The discharge of Punie as cosurety from his obligation on the undertaking did not release him from his liability to contribute to the appellant his share of the — 554 — obligation which the appellant was required to pay. Stevens v. Cooper, 1 Johns. Ch. 425; Hoyt v. Tuthill, 33 Hun, 196; Ellsworth v. Caldwell, 27 How. Pr. 188; Clapp v. Rice, 15 Gray (18 Mass.) 557; Penn v. Bohnson, 89 Va. 253; Boardman v. Paige, 11 N. H. 431; Conover v. Hill, 76 Ill. 342; Bachelder v. Fiske, 17 Mass. 464; Aiken v. Peay, 5 Strob. 15; 53 Am. Dec. 186. In Waggoner v. Walrath, 24 Hun, 443, 447, it is laid down broadly that,' where one surety is discharged from his obligation to answer for the demand against the principal, he is not-liable to his surety for contribution. This statement is made solely on the supposed authority of Tobias v. Rogers, 13 N. Y. 59, which was a case where the surety was discharged in bankruptcy upon proceedings instituted on his own petition. The case of a surety discharged in bankruptcy is an exception to, and not an illustration of, the general rule. • In Boardman v. Paige, supra, Woods, J., reviewed the authorities,'and made a clear statement of the general rule and the recognized exception existing in bankruptcy cases. ITe said: “ Generally, if the contract or other ground of relief relied upon be not ’ of á character tb operate as a discharge of the debt or liability to the promisee as to all the promisors, it will not avail, we apprehend, as a discharge of the liability for the contribution, among the co-promisors, existing in favor- of such as may be compelled to pay or discharge such debt, or other liability, against the others. An exception to this general rule may be found to exist in the provisions of special statutes, as in the case of Acts of Bankruptcy or Insolvency, in which, at the same time that it is provided that the direct liability of the' bankrupt or insolvent, to the promisee, shall be discharged, provision is made for the limitation of the remedy of sureties or co-promisors, to the assets in the hands of the assignees.” In 9 Cyc. 795, the rule is stated as follows: “As a general rule, discharge or release of the direct liability of one co-obligor to the obligee will 'not avail him as a discharge from his liability for contribution to the other co-obligors, unless the discharge be of a character to release the others — 555 — also, but this is not true of a discharge under the bankruptcy laws.” We do not regard Morgan v. Smith, 70 N. Y. 537, as opposed to the view here expressed. The opinion in that cáse is based on the assumption that, upon the facts then before the court, the appellant had no right of contribution against his cosurety. That assumption cannot be indulged here. To indulge it, is. to beg the question in issue. If the appellant, in the event of his being required to pay the full amount of the undertaking, cannot have contribution against Punie, then justice would require that the principle asserted in Morgan v. Smith, supra, and the other cases to the same effect should be applied. If, however, the appellant may in such a case have contribution against Punie, then the principle asserted in Morgan v. Smith, supra, does not touch the question in issue. The original obligation of the appellant and Punie was joint and several. The appellant’s obligation was incurred under circumstances 'which, apparently, justified him in believing that Punie would be his cosurety upon the undertaking. The respondent accepted the undertaking after the justification of the appellant, and withdrew his exceptions to Punie before Punie’s time to justify had expired. It is reasonable to suppose that the respondent did this, not because he was satisfied with security for one-half ■ the amount specified in the undertaking, but because he'was satisfied that the appellant was of sufficient financial ability to pay the full amount of the undertaking. The appellant knew that, under the terms of the undertaking, he was liable individually for the full amount named in it, and it is no injustice to him that he should be held to this measure of responsibility. It may truly be urged that, when the appellant signed the undertaking, he contemplated that his cosurety would continue to be liable to the respondent. The fact that Punie, by reason of the dismissal of the complaint against him, -and the failure of the respondent to appeal from such dismissal, was discharged from further liability to- the -respondent, did not operate to deprive the appellant of his right of contribution against his cosurety. The application of this rule does not. do violence to the intention of any of — 556 — the parties; whereas, a contrary rule makes for the parties an agreement radically different from that which they contemplated when the undertaking was given. The appellant knew that, under the terms of the undertaking, he was liable for the full amount named therein. To assume that the appellant only contemplated that he would be liable for one-half of the amount specified in the undertaking, is to indulge in a supposition which is directly contrary, to the terms of the appellant’s obligation. The appellant had the right to rely upon being able to compel his cosurety to reimburse him for any amount in excess of his share of the obligation which he was required to pay. The application of the rule here applied gives, full effect,to this right of the appellant. If the appellant pays the full amount of the undertaking, he may then, upon the facts now disclosed by this record, have contribution against his cosurety, hut he cannot limit the right of the obligee of the bond to. recover one-half of the amount due. . For these reasons, we are of the opinion that the judgment should he affirmed, with costs. Gerard and Hotchkiss, JJ., concur. . Judgment affirmed, with costs.