National Loan & Building Ass'n v. Lichtenwalner

Mr Justice Paxson delivered the opinion of the court, March 20th 1882. That this is a contract of guaranty is settled by abundant authority: Bank v. Haynes, 8 Pick 423 ; Curtis v. Brown, 2 Barb. 55 ; Isett v. Hoge, 2 Watts 128; Johnston v. Chapman, 3 Penna. R. 18; Hoffman v. Bechtel, 2. P. F. S. 190; Woods v. Sherman, 21 Id. 100. It is equally clear that such contract imposes upon the plaintiff the duty of exercising due diligence to enforce payment from the principal before resort can be had to the guarantor. Campbell v. Baker, 10 Wright 243 ; Reigart v. White, 2. P. F. S. 439 ; Hoffman v. Bechtel, Ibid. 190. 'What is due diligence ? There are many cases upon this point, and the general tenor of them appears to be that the contract for due diligence requires that a suit be brought within a reasonable time after the maturity of the claim and be duly prosecuted to judgment and execution before an action can be sustained against the guarantor, unless it appears that such proceedings [104] could have produced no beneficial results. Brown v. Brooks, 1 Casey 210 ; Kirkpatrick v. White, 5 Id. 177; Gilbert v. Henck, 6 Id. 209, Overton v. Tracy, 14 S. & R. 327. And it must vary with the circumstances of each case, hence it is a question for the jury. Rudy v. Wolfe, 16 S. & R. 79. It may be stated as a general rule sustained by the authorities that the prompt prosecution of the claim against the debtor to judgment, the issuing of an execution and a return of nulla bona would be at least prima facie evidence of his insolvency, and of due diligence on the part of the creditor. So much was asserted in Hoffman v. Bechtel, a case much relied on by the present defendant in error, but the remark was qualified by the further suggestion that the suing out of process simply, and letting it run its course, might not be due diligence. We can readity understand how this may be the case. A return of nulla bona to ■ an execution is prima facie evidence that the defendant has no goods. Tet it is not conclusive and is often untrue, while if true in point of fact the defendant may be the owner of valuable real estate. Upon the trial below, the learned judge negatived the plaintiff’s second and third points, which was practically instructing the jury that it was not enough for the plaintiff to exhaust liis remedies against the bank, but must proceed against the stockholders to enforce their individual liability to depositors under the charter of the bank. Noire of the authorities cited sustains this ruling. It may be, as was suggested in Johnston v. Chapman, supra, that where the creditor held a collateral security, as a mortgage, due diligence would require that he should exhaust the collateral before coming upon the guarantor. We have no such question here. The creditor held no collateral. Under the charter of the bank the stockholders were liable to depositors in double the amount of the stock, but their liability is not that of sureties, but is special and sub modo only. Craig’s Appeal, 11 Norris, 398. It is therefore, secondary and not primary, collateral, and in the nature of a guaranty. Hence it does not accrue until the assets of the bank are exhausted. This bank had made an assignment for the benefit of its creditors. It is not necessary to consider the question whether the plaintiff could have sustained a suit against the stockholders in his own name wdthout the intervention of the assignee, for the reason that as the liability of the stockholders was but secondary they could be sued only for the balance due to the plaintiff after the assets belonging to the bank had been distributed, or at least ascertained. A creditor in order to hold a guarantor may be obliged to exhaust all the property and securities immediately within his grasp, even to such as may be held as collateral, but we do not think he is obliged to pursue every claim which his debtor may have, [105] especially where such claim is contingent and uncertain, and of a character to involve great delay and expense to the creditor. The plaintiff’s second and third points should have been affirmed. What has been said sufficiently covers the remaining assignments. Judgment reversed and a venire facias de novo awarded.