French v. Marsh

Cole, J. This is an action upon a contract of guaranty, which is in the following words: “ Eor a valuable consideration to us in hand paid by Alvin G. French, we hereby guarantee the collection of one-half a note given by S. Park Coon to said A. G. French for the sum of one thousand dollars, which note bears date the 2d day of May, 1864, and is secured by a mortgage; and if, said note is collectible, this obligation becomes null and void.” “ Bristol, January 13, 1865. This guaranty was signed by the defendants. The defense was, that the guaranty was without consideration, and that the plaintiff had failed to prosecute Coon, the original debtor, with due legal diligence. The action was tried by the court. The facts found were, that the defendants made the guaranty, and that the note, the collection of which was guaranteed, became due on the second day of May, 1865; that the plaintiff commenced an action against the original debtor on the note on the 9th day of April, 1869 ; and that, under all the circumstances, this was not a diligent prosecution of Coon to collect the note. And as a conclusion of law the court held, that the diligent prosecution of Coon on the note by the usual legal remedies without effect was a condition precedent to the right to maintain an action on the guaranty against the defendants, and that [653] as the plaintiff did not prosecute his action against Coon upon the note diligently, but was guilty of negligence in that respect, he could not recover on the guaranty. It is now insisted, upon the part of the plaintiff, that this conclusion of law is erroneous, because it is claimed that the evidence abundantly showed that the principal debtor was, when the note matured, hopelessly insolvent, and has so remained, so that nothing could possibly be collected by an action against him. So that the simple question is presented— assuming the fact of Coon’s insolvency to have been established — whether this excused the plaintiff for not commencing a suit against him and prosecuting the same to judgment and execution, within a reasonable túne after the 2d day of May, 1865, when the note became due. And upon this question there is a great conflict of opinion in the adjudged cases, and upon the point as to what is the proper construction of such a guaranty. Some of the authorities hold that it is implied bv the contract that the creditor should commence his suit against the principal debtor within a reasonable time after the debt falls due, and should prosecute the same to final judgment and execution, and that this is a condition precedent to his right to recover against the guarantor; while others hold that the guaranty merely imports a promise to pay if recompense cannot be obtained of the principal debtor, and that when it appears that such debtor is utterly insolvent when the debt falls due, and that an action against him would be entirely fruitless, then no suit is requisite to make the guarantor liable. The former view of the true terms of the contract is the one adopted by the courts of New York, and this court has approved of those decisions as laying down the better rule upon this subject. Day v. Elmore, 4 Wis., 190 ; and Dyer v. Gibson, 16 id.; 557. We are therefore disposed to hold — adopting the language of the majority opinion in Craig v. Parkis, 40 N. Y, 181— that “ when a creditor agrees with a surety for his debtor that [654] be will commence a suit against sucb debtor witbin a reasonable time after tbe debt falls due, and, in default thereof, that tbe surety shall be released, it is a condition precedent to bis right of action against the guarantor, that sucb suit shall not only be so commenced, but that it shall be carried to consummation. Tbe plaintiff bad no right to determine on bis own responsibility whether tbe debt was collectible. That was a question which the defendant had made it incumbent on him to ascertain, by recourse to the ordinary rules provided by the law for the collection of debts,” pp. 186 and 187. It is objected that this rule, which requires the principal debtor to be prosecuted to judgment and execution with all diligence, imposes upon the creditor the doing of a vain and idle thing where the principal debtor is insolvent and has no property out of which anything could be collected. But this objection does not remove the real difficulty presented by the failure of the creditor to resort to legal proceedings against the principal debtor, within a reasonable time after the debt falls due, in order to render the guarantor liable on his undertaking. The real question is, Does the guarantor only undertake to pay when it is ascertained that the debt cannot be collected by due course of law out of the principal debtor ? If this is the nature and condition of his contract, then the creditor must comply with it or the surety will be discharged. It is obvious that the whole discussion turns upon the interpretation of the contract. And, if the contract be that the creditor shall exercise proper diligence to collect of the principal debtor by due course of law, and if this is a condition precedent to the right of action against the surety, then the creditor must comply with this condition. In this case there would not seem to be room for doubt that the plaintiff was guilty of negligence by failing for so long a time to commence his action against Coon. It was nearly four years after the debt became due before an action was commenced upon the note. It is idle to contend that this was a diligent prosecution of an action against Coon, if legal proceed [655] ings against Rim were necessary to render the defendants liable, as we have intimated they were. But it is further insisted by the counsel for the plaintiff that, though the action cannot be maintained upon the guaranty, still, upon the evidence, the plaintiff was entitled to judgment for $500 loaned and advanced to the defendants January 18th, 1865. It is obvious that this action was brought upon the written guaranty, and not for money loaned and advanced by the plaintiff to the defendants. If it were proper under the circumstances to go into the inquiry, it would be very difficult to say upon the evidence that the plaintiff had established a cause of action on that ground. But the case is disposed of on the ground on which the plaintiff stated his action in the complaint. By the Court.— The judgment of the circuit court is affirmed. Lyon, J., took no part in the decision of this case.