Barber v. Gillson

By the Court, Belknap, J.: . The parties hereto composed, a copartnership of mei’chants. Upon the twenty-fifth day of February, 1881, the copartnership was dissolved by mutual consent. Appellant purchased from respondent his interest in the property and effects, giving promissory notes therefor aggregating in value the sum of six thousand two hundred and twenty-eight dollars. In consideration of the transfer, appellant assumed the outstanding indebtedness of the firm, amounting to upwards of forty thousand dollars. This indebtedness remained unpaid until the latter part of the month of May succeeding, at which time appellant entered into negotiations with the view of obtaining a settlement by compromise. At this time respondent, at the request of the creditors, and in order to procure his personal release from the firm indebtedness, surrendered the promissory notes to them. Thereafter he brought this action to recover, as damages, the sum of six thousand two hundred and twenty-eight dollars, the value of the notes, exclusive of interest. He recovered judgment. Defendant appeals therefrom, and from an order overruling a motion for new trial. The questions of law presented for review arise principally upon the rulings of the court in giving and refusing instructions requested. A determination of the legal status of the parties, and of their relative rights and liabilities, will determine the questions arising under the rulings in this regard. The dissolution of the copartnership, and the agreement that Gillson should pay the debts of the firm, rendered Barber the surety of Gillson, as between themselves and all others dealing with them with knowledge of the facts. (Brandt, Sur. sec. 23, and cases there cited.) As such surety Barber had the right to protect himself by settling at any time the indebtedness for which he was liable. Upon this subject Chief Justice Gibson said : “As to the position taken, that payment before the bonds fell [97] due would be essentially voluntary, it is proper to remark that the principle was ruled differently in Armstrong v. Gilchrist, 2 Johns. Cas. 429, where-it was held that a guarantee of a note, who had compromised and paid it for his own indemnity before it had .become due, was entitled to recover. That a surety is to wait until payment is extorted of him is not pretended ; but it is said that payment before maturity is necessarily voluntary, and that eventual liability is not equivalent to a precedent request. There is no authority for that, and it seems not to be defensible on principle. Why may 'not a surety take measures of precaution against loss from a change in the circumstances of his principal, and accept terms of compromise before the day which may not be obtainable after it. He may ultimately have to bear the burden of the debt, and may therefore provide for the contingency by reducing the weight of it. Nor is he bound to subject himself to the risk of an action by waiting till the creditor has a cause of action. He may, in short, consult his own safety, and resort to any measure calculated to assure him of it, which does not involve a wanton sacrifice of the interest of his principal. ’ ’ (Craig v. Craig, 5 Rawle 98; Williams’ Adm’rs v. Williams, 5 Ohio 444; Odlin v. Greenleaf, 3 N. H. 270; Goodall v. Wentworth, 20 Me. 322; Brandt, Sur. secs. 176-177.) The instructions allowed were in accordance with these views. At the trial, the court overruled an offer of defendant to show that at the time of the assumption of the firm indebtedness by Gillson, neither of the parties contemplated that he should pay the debts immediately. Under the authority of the foregoing and all other cases to which we have been referred, it was immaterial whether the indebtedness-,, as between the parties themselves or the creditors, was due or not. Nor was Barber’s conduct in'compromising the claims against himself, an interference with the affairs of the partnership contrary to the contents of the notice of dissolution. That notice provided that all indebtedness due the firm should be paid to Gillson, and that all claims against the [98] firm would be paid by Mm. But Barber’s settlement was not for the firm, but for himself. It is claimed that Gillson compromised the firm indebtedness before Barber surrendered the notes to the creditors. If this position of appellant is correct, no recovery can be had against him. In one view of the testimony, Gillson settled with the creditors about the twenty-sixth day of May, 1881; in another view, the settlement was not made until the latter part of the month of June. If the settlement occurred in the month of May, Barber was expressly excluded from its operation by the terms of the written release. He was then still liable, and was justified in' procuring his own release. In the meantime, and before the adjustment of matters with the creditors by Gillson in the month of June, Barber surrendered the notes. So, whether Gillson’s compromise was effected in the month of May or in the month of June, Barber was justified in his action. Appellant objected to the admission in evidence of a paper writing purporting to release Barber from the payment of the firm indebtedness, upon the ground that the instrument is not a release, because not under seal. If it is not a release, (a point we do not decide), and was treated as such at the trial, this fact could not have prejudiced appellant’s case. It is, at least, a receipt for the notes surrendered, and was admissible for this purpose, for the reason that Barber was entitled to recover from Gillson whatever he may have paid on account of the firm indebtedness, whether he did or did not procure his release thereby. Another question presented is whether Gillson should have been allowed to have shown the value of his own promissory notes. The compensation to be recovered must be the actual loss sustained by the plaintiff. He gave full consideration for the uotes. In consequence of the failure of defendant to pay the firm indebtedness he has been deprived of them. He lost the value which they represented and this is the measure of his recovery. His loss is not to be measured by the ability of defendant to pay. If this [99] were so, no recovery in damages could be had against an insolvent. The judgment and order of the district court are affirmed.