Lane v. Levillian

By the Court, Lacy, J. There can, we think, be no question but that the demurrer in this case was improperly sustained. It was a general demurrer to the whole declaration, which contained three counts: two of them are unquestionably good, and the demurrer as to them should have been overruled. The action was commenced and determined under our Territorial statutes; and, of, course, the common law rule upon the subject stood then in full force. And the doctrine upon the point is well settled, that where there are good and bad counts in the same declaration, and there is a general demurrer filed, judgment shall be taken upon the good counts, without regard to the bad. Duppa vs. Nayo, 1 Saund. Rep. 226. Bressey vs. Humphries, Cro. Jac. 557. Com. Dig. Pleader, 2, 3. The most important question in this cause arises upon the first count, which charges the defendant below upon a guaranty, in which no demand or notice is alleged to have been given. On the 27th January, 1829, Thomas B. Franklin executed his note to B. Lane & Co. for $809 61, payable upon the 1st of May following. And the declaration alleges, that the defendant, upon the 17th of June, 1829, by his endorsement upon the back of the note, in consideration of one dollar, guaranteed the payment of said note. The guaranty was entered into in the city of New-Orleans. It is well settled, that the law of the forum where the contract was made, must govern its obligations. Upon this state of facts, the point to be decided is, could the plaintiff charge the defendant, without averring demand upon the original debtor, or showing some legal excuse for failing to make such‘demand, and notifying the guarantor of the non-payment of the debt? or, in other words, is this a conditional or absolute guaranty? In the authorities on the subject of guaranties, there is a good deal of seeming, and some irreconcilable, contradiction in the cases. The difficulty does not seem to lie so much in the principles as stated, as in their application tt^jhe facts in controversy. By the general principles of law, the guarantor is only collaterally liable, upon the failure of the principal debtor to pay the obligation. A demand upon him, and a failure upon his part to perform his engagements, are indispensable in such cases, to constitute a.cause of action; and the authorities upon this point are full, and can admit of no question. In such cases, the guaranty is held to be a collateral or conditional contract, arising out of the original obligation. Douglass et al. vs. Reynolds et al. 7 Peters, 113. Hunt vs. Adams, 5 Mass. 358. Oxford Bank vs. Hayne, 8 Pick. 423. Phillips vs. Astling, 2 Taunt. 206. The engagement of a guarantor is generally founded on some new or independent consideration, growing out of the original obligation, except in those cases where ittis given at the time of the contracting of the principal debt, and is necessarily connected with it. Seward vs. Vrederburg, 8 John. 29. Dewolver vs. Debaurd. 1 Peters, 476. 3 Kent's Com. 86. Where, a party gives a continuing guaranty, or where it relates to future transactions, the general rule upon the subject is, that the guarantor has a right to know whether his guaranty has been accepted, or to what extent he may be liable; and, in such cases, demand and notice are necessary, to charge him. The reason is, that his agreement is collateral or conditional, and so both parties understand it to be; and his liability does not accrue, unless he who receives the benefit from it, fixes it by demand and notice. The guarantor is liable upon the expressed or implied condition, that due and proper diligence would be used to promote payment from the original obligor. Warrington vs. Furlur, 8 East. 340; Phillips vs, Astling, 2 Taunt. 206; Oxford Bank vs. Hayne; Bank of New-York vs. Livingston, 2 J. R. 409; and Cumston vs. McNair, 1 Wend. 457 — all establish this principle, and turned upon guaranties on bills of exchange or promissory notes not then payable, but which would be duly honored and paid thereafter. In these cases, demand and notice wére held necessary, upon the principle that certain legal steps were to be taken and pursued by the creditor, (cases of insolvency excepted), to give effect to his guaranty. The rule, however, is changed, when the debt which is the subject of the guaranty, has become due and absolute before the guaranty is given. The creditor is not required then to take any legal steps to perfect his claim on the principal debtor. It was made perfect before the guaranty given, and the law holds the guarantor cognizant of that fact. His undertaking is not treated or considered as a secondary or collateral liability, but as a primary and positive agreement, by which he binds himself to see that the principal debt is paid. This dispenses with the necessity of demand and notice. It is upon this principle, that when a guaranty is entered into that the original debt shall be paid upon a particular day, it is the duty of the guarantor to see that it is paid upon that day; and, in such cases, he is chargeable, without demand and notice. And so it was held in Breed vs. Hillhouse, 7 Col. Rep. 523, where the guaranty was held for the payment of the note within four years from its date; and in Lee vs. Dicks, 10 Peters, 496, the Supreme Court of the United States says: “There are many cases where the guaranty is of a.specific existing demand, by a promissory note or othqr evidence of debt; and in such cases, the guaranty is given upon the note itself, or with reference to it, or recognition of it, where no notice would be necessary. The guarantor, in such cases, knows positively what he guarantees, and the extent of his responsibility; and any further notice to him would be useless.” The whole doctrine upon this subject will be found reviewed in Reed vs. Cutts, 2 Green. 189, in which most of the leading cases are collated and commented upon; and the rule there established is in accordance with the one we have before stated. Indeed, all the later cases seem to tend to dispense with demand and notice, unless the guarantor’s liability is shown, either by his express contract or by its necessary implication, to be a collateral agreement: provided, the creditor’s delay be unaccompanied by fraud, or an agreement not to prosecute the principal debtor without the assent of the security. This is the doctrine of the common law upon the subject; and the civil law certainly does not hold a party, we think, to greater strictness as to demand or notice. According to the Louisiana code, suretyship is an accessary promise, by which a person binds himself for another already bound, and agrees with the creditor to satisfy the obligation, if the debtor does not. Hayne vs. Manfield, 9 Mar. 385. Aslor vs. Morgan, 2 Mar. 353. The obligation of a security towards a creditor, is, to pay in case the debtor does not satisfy the debt; and the property of such debtor is to be previously discussed and seized, unless the security should have renounced the plea of discussion, or should be bound in solido. Lou. Code, Art. 3014. That the creditor is not bound to discuss the principal debtor’s property, unless he should be required to do so by the surety, on the institution of proceedings against the latter, ib. 3015. From these provisions of the civil code of Louisiana, and the principles applicable to them, as settled by the Supreme Court of that ■State, we entertain little or no doubt that, upon a guaranty after the ■note has become due, and the right of action being perfect against the original debtor, the surety’s obligation is an absolute agreement to ■.pay the debt, in case the original debtor does not; and, in such case, he will be held liable, without demand or notice. The principle here statedf \ye think, is clearly distinguishable from the rule laid down in the case of Ringgold vs. Newkirk & Oldem, decided at the July term of this Court, 1840. 3 Ark. Rep. 107. That case must be construed, like all others, in reference to the particular facts before the court; and any general or unqualified expressions found in the opinion, must be restricted and limited to the sense in which they were intended to be used by the court, in relation to the subject matter before it. The court, in that case, considered the guaranty given, as looking to a future transaction, in securing the payment of a bill of goods delivered, but which was to be paid at some future period; and, therefore, they held demand and notice necessary to charge the guarantors. Whether or not the two cases are reconcilable with each other, is a matter of but little moment, in comparison with our desire to find out and establish the true rule upon the subject. We feel ourselves constrained, by the weight of authority, to affirm the principle before laid down, that where a party guarantees a note already due, and the creditor has committed no act either of fraud or culpable negligence, whereby he discharges the guarantor, that, in such a case, both common and civil law hold demand and notice to be unnecessary. This rule unquestionably proves that the court below erred in sustaining the demurrer to the first court. Judgment reversed.