Field v. Cutler

By the Court Miller, P. J. The defence inteiposcd to the plaintiff’s demand is put upon the ground that the defendant was merely a surety on the note, and that the plaintiff failed to prosecute the principal after notice; and that, by means of the delay, the defendant was exonerated from liability. ■It is claimed that the defendant’s position was similar to that of a guarantor of collection, which obligated the plaintiff to tiommence a suit'against the debtor within a reasonable time after the debt became due, and that, upon a failure to do so, the surety is released. The defendant relies upon the case of Craig v. Parkis (1 Hand, 181), to sustain this position. This was an action upon a guaranty incorporated in an assignment of a bond and mortgage, by which the defendant guaranteed the collection of the amount “ as it becomes dueand it was held to be an undertaking that the debt would be paid if the principal was prosecuted with reasonable diligence, and that [197] a delay of six months after the debt has become due is not reasonable diligence, where all the principals reside within the State, and discharges the guarantor. This construction of the contract is put, as I understand it, upon the ground that the defendant guaranteed the collection, and not the payment, of the amount, and does not interfere with the principle which is applicable to the relationship existing between a principal and surety to a promissory note. In Remsen v. Beekman (25 N. Y., 552), the rule is laid down, as one of long standing, “ that, if a surety request the creditor to collect the debt from the principal, and the creditor refuse or neglect to do so, at the time when it is collectible, and, from a subsequent change of circumstances, it becomes uncollectible, the surety is, by such conduct of the creditor, exonerated from his liability.” (See also King v. Baldwin, 17 Johns., 384; Pain v. Packard, 13 id., 174.) This is, undoubtedly, the correct rule; but, in order to bring the surety within this rule, it must, I think, be made to appear that the debt was collectible, and, by the delay to collect, it became uncollectible. As laid down in 13 Johns., 174, and 17 id., 384, the principal must be solvent at the time. The surety will not be discharged on the neglect of the creditor to prosecute the principal debtor, if the principal was insolvent at the time, and unable to pay ins debts, and continued so ever afterward. (Thompson v. Hall, 45 Barb., 214; Frost v. Benedict, 21 id., 247.) Mere indulgence on the part of the creditor, and neglect to prosecute the principal, will not discharge the surety. (Fulton v. Matthews, 15 Johns., 433; Schroeppell v. Shaw, 3 N. Y., 446; Dorlon v. Christie, 39 Barb., 610; Thompson v. Hall, 45 id., 217.) In the case at bar, the referee found that, at the time of the direction to prosecute, the principal’s indebtedness was two or three times as much as his property, and he was insolvent and wholly unable to pay his debts. There is sufficient evidence to sustain this finding, which was substantially the same as in Thompson v. Hall (supra), and the conclusion of law, that, being insolvent at the time of the request, the surety was not [198] discharged. Under such circumstances, it is quite apparent that the debt is not collectible, within the rule laid down in Remsen v. Beekman; and I think it would be in conflict with the whole current of authority to hold that a mere notice to collect, when the party is insolvent, relieves the surety. I am unable to discover any distinction in the present case from those cited, which relieves the defendant from liability, and am of the opinion that there was no error in the decision of the referee on this point. Independently of the question discussed, there may be some doubt whether the defendant is not liable on other grounds; but it is unnecessary to consider them, if I am right in the conclusion to which I have already arrived. The evidence of the principal’s indebtedness at the time of the assignment made by him was competent in connection with other testimony which established that it had existed at the time the notice to collect the note was given. So, also, the assignment of the principal for the benefit of creditors was competent, for the same reason. The other evidence, tending to show the insolvency, was equally admissible for the purposes for which it was offered. There was no error on the trial, and the judgment must be affirmed, with costs. Judgment affirmed.