Stone v. Rockefeller

Gilmore, J. In stating the two causes of action, the notes set out in the petition are duplicates of each other in. [628] every respect, except that one matures in four and the other1 five years from date, and the questions raised, are thereforeapjjlicable alike to both causes of action. The note set out in the first cause of action only need be given. It reads as follows: “ $5,500. Cleveland, Ohio, September 14,1874. “ Four years after date, we promise to pay to John D. Rockefeller or order, five thousand five hundred dollars,, with eight per cent, interest, payable annually. Value received. Payable at Henry "Wick & Co.’s banking-house,. Cleveland. Mart R. Montgomery, “M. W. Montgomery.” The contract upon which the action is brought is indorsed upon the back of the note, and signed by the indorser, and is in these words: “ Pay A. Stone or order. I guarantee the collection of the within note.” This, in legal effect, is a warranty that the note will be collectible at maturity by the use of due diligence, which means that the guarantor will be liable only after a failure to collect by the ordinary process of law — i. e. by obtaining-judgment against the makers of the note, causing execution to be issued, and a return thereon of “ no property.” But it is not necessary under all circumstances to go to this extremity in order to fix the liability of the guarantor. In Camden v. Doremus, 3 Howard (U. S.) 515, it is said : “The diligent and honest prosecution of a suit to judgment, with a return of nulla bona, has always been regarded as one of the extreme tests of due diligence. This phrase,, aud the obligation it imparts, may be satisfied, however, by other means. The ascertainment, upon correct and sufficient proof, of entire or notorious insolvency, is recognized by the law as answering the demand of due diligence and as dispensing, under such circumstances, with the more dilatory evidence of a suit — evidence which, in instances-that it may be easy to imagine, might prove prejudicial alike to him who should exact, and to him who would sup~ ply it.” [629] If the fact of notorious insolvency is admitted in the pleadings, it will have the same effect as if ascertained by proof upon the trial. The petition in the case distinctly avers the notorious insolvency of both the makers at the maturity of the note. Without this, or some equivalent .averment, the petition would have been bad on demurrer. None of the averments of the petition are denied by the answer. The entire insolvency of the makers of the note is therefore admitted. This being so, the plaintiff was relieved from the necessity of prosecuting the makers befox’e proceeding against the guarantor upon his contract. It follows that the petition states a good cause of action against the defendant. As a defense, the answer alleges, in substance, the fact that at the time of the making of the guaranty by Rockefeller, it formed part of the consideration therefor, that .Stone agreed to take security for the payment of said notes, .and in pursuance thereof, a mortgage was then and there executed on the propei’ty of the pxúncipal, which was duly • deposited for record and became and now remains the first lien on the property moi’tgaged; and that the value is thx’ee times the amount of the notes so guaranteed. Was there error in sustaining a general demurrer to this .answer ? In eonsidexing this question it is to be kept in mind that the plaintiff sues upon a contract of guaranty, relating alone to the collectibility of the note, upon the back of which it is indorsed. The terms of such a contract are to be construed strictly ; .and the words being those of the guarantor, are to be taken most strongly against him. The law will not supply any condition which is not incorporated into the agi’eement, or to be fairly implied from the language used ; and in the absence of fraud, accident, or mistake, it is presumed conclusively that the terms of the contract, as agreed upon between the parties at the time, are fully expressed in the written guaranty. It can not be said that the contract sued upon, and that [630] set up by way of defense, have any such necessary connection with each other as to require them to be read and construed together as constituting but one contract. They are neither of the same nature, nor between the same parties. They are therefore wholly independent of each other,, and must be so regarded. As independent contracts, each must be susceptible of performance according to its terms- and legal effect. These contracts are respectively susceptible of such performance or enforcement. The guarantor is bound to perform according to the terms of the guaranty sued upon — i, e., to pay the note at maturity if the maker fails to do so, and is then entirely insolvent and bankrupt. When he pays the note in accordance with the terms of his guaranty, the contract set up in the answer will, in equity, at once inure to his benefit by substitution. The contract set up in the answer, therefore, constituted: no defense to the action. In the last clause of the answer, it is averred “that, by the usual and ordinary process in such cases, the said claim-of the plaintiff can be collected, but the said plaintiff has-wholly omitted to take the usual and ordinary steps in such cases, or any steps -whatever, to collect his said notes from-* the makers or from said property.” It is suggested that this allegation rendered the answer-good, as against a general demurrer. We think otherwise.The petition contained a statement of facts as to the notorious insolvency, bankruptcy, and non-i’esidence of the makers, which, if true, relieved the plaintiff from the necessity of prosecuting the makers to judgment and a return of no property, before resorting to his remedy upon the guaranty. The facts thus stated are not denied by the answer; consequently the petition shows that the plaintiff’s right of action was perfect without having first i’esorted to the-ordinary process in such cases. The averment quoted can not be regarded either as a de [631] nial of the facts stated in the petition, or as new matter constituting a defense to the action. The court of common pleas did not err in sustaining the demurrer to the answer, and rendering judgment for the ^plaintiff; and therefore the district/court erred in reversing the judgment. Motion granted. The judgment of the district court is reversed, and that of the common pleas affirmed. Judgment accordingly.