Hibler v. Shipp

CHIEF JUSTICE PRYOR delivered the opinion of the court. The appellant Hildreth being the 'surety of Hibler on a note for about six thousand dollars, was sued by the payee Shipp, and judgment obtained against him in the Bourbon Circuit Court, at its April term, in the year 1878. The case is brought to this Court for revision, by the surety, and the following errors assigned: 1st. The petition fails to present a cause of action. 2d. A former adjudication of the matter in controversy. 3d. Bad faith on the part of the payee towards the surety,, amounting to fraud. — 66 — The petition as amended presented a cause of action. It is alleged ‘ ‘ that by a writing dated the 24th of December, 1875, which defendants Hibler and Hildreth signed and delivered to the plaintiff, made part of the petition and filed, promised to pay sixty-one hundred and sixty-nine dollars and thirty-seven cents to the plaintiff,” &c. In adhering to the rules of grammar, the verb promised stánds without a nominative; still the note itself is made a part of the petition, and constitutes the basis of the action ; and if not made part of the pleading, it would be technical to hold that the word promised had no reference to the defendants, when it is expressly alleged that they signed the writing upon which the recovery is sought. A former action had been instituted by the appellee against these parties on the same note, and in that proceeding the following order was made: ‘ ‘ Ordered, that this cause be dismissed at defendant’s cost, and leave is given the plaintiff to withdraw the note sued on by leaving a copy in the papers.” This order is claimed by the appellant to be a final judgment, and is pleaded in bar to the present action. It is alleged that the action was dismissed in pursuance of an agreement between the plaintiff and the principal obligor, without the knowledge or consent of the surety (appellant), and that under the agreement the entire subject-matter of the action was disposed of. The legal effect of ah order dismissed agreed will prevent a recovery on the same cause of action between the same parties, and must be regarded as an adjustment of the con-troversy. Such was the opinion of this Court in the case of the Bank of the Commonwealth v. Hopkins, 2 Dana. There is nothing found in such an order or judgment that would lead the mind to any other conclusion than that the — 67 — parties, by an agreement, had adjusted the differences between them. In this case, however, it is plain that the order •of dismissal was not regarded as a judgment' on the merits, •or intended as an abandonment by the appellee of his right to prosecute another action on the same obligation. No •defense had been interposed by the obligor, and the leave .given the plaintiff to withdraw the note (indicates clearly the purpose of the appellee to hold it as the evidence of the indebtedness by the appellant, with the right to coerce payment as if no such action had been instituted. This question is directly decided in the case of Harris v. Tiffany & Co., 8 B. Monroe, page 226. The facts of this case are, that the attorney of the plaintiff undertook and did dismiss the action on the promise of the principal obligor to pay the Interest; and while, if the order could be construed as a judgment on the merits, such evidence would be inadmissible to explain It, it sustains the wisdom of the rule determining the legal effect of such entries by the clerk. An •order like that can be regarded only as a -dismissal of the action without prejudice. The principal defense in the case as, that, prior to the first action instituted by the appellee, the appellant notified him verbally to bring that action, and the suit was brought and afterwards dismissed without the consent or knowledge of the surety; that the fact of bringing the action prevented the appellant from giving the legal notice, and the false promise on the part of the appellee, and Ris conduct in dismissing the action, was a fraud upon the rights of the surety, and exonerated him from all liability. The nth section of chapter 104, General Statutes, provides the manner in which a surety may require the payee to coerce payment, and if the latter fails to sue as required, the surety is released. The notice to sue must be in writing; — 68 — and if the creditor fails to sue to the next term thereafter at which he can obtain judgment, and in good faith prosecute the suit, &c., the surety shall be discharged from alt liability, &c. The statute further provides: ‘ ‘ The written notice herein-required shall not be waived, unless such waiver be in writing, and no waiver of such notice shall be plead as a defense: or given in evidence unless such waiver be in writing.” Prior to the enactment of this last clause of the statute, sureties were often released upon proof showing that the holder of the , note had waived written notice, and thereby-dispensed with this particular provision. Such evidence was. held competent on the ground that the surety had been misled by this parol agreement with the payee. The facility with which this character of proof was obtained induced the Legislature to prescribe a different and higher grade of evidénce on the part of those when seeking-to avoid liability upon written promises to pay. The surety-in this case is relying, as is insisted, not on the promise to-bring the action, but upon the fact that the action was brought in accordance with the promise, and a failure on the part of' the payee to prosecute it in good faith. The surety testifies, that the action was instituted in accordance with the promise made by the payee, and the latter that no such promise was ever made. The evil attempted to be corrected by the-statute must still exist if such evidence is competent, or if the attempt to carry out such a promise is made the basis of a defense by which the surety is released from liability. The-fact of bringing the action may have prevented the appellant-from giving the written notice, but the promise to sue cannot be connected with the action taken by the appellee for the-purpose of showing that his object was to mislead and — 69 — deceive the surety. The appellant had no right to rely on the promise of the appellee, if any such was made, or to connect the promise with the fact that an action was instituted so as to make out his defense. He should have given written notice, and cannot avail himself of the fact that suit was brought as a waiver on the .part of the appellee of the right to such a notice. The promise to sue cannot be given in evidence, and the defense must rest alone on the fact that the appellant was •the surety, and that appellee, knowing this fact, instituted an action against the principal and dismissed it without the consent of the surety. If this releases the surety, the demurrer to this paragraph of the answer should have been ■overruled. The fraud or bad faith alleged consists in the promise to .sue, the bringing of the action, and its dismissal. We have seen that the promise to sue cannot be regarded as any evidence of fraud, and the mere fact that the action was dismissed upon the payment of the interest or on the promise to pay the interest then due, did not prejudice the rights of the surety. No lien had been acquired by the appellee on the property of the principal obligor, or the rights of the surety jeopardized in any other way than the mere indulgence of the principal obligor by his creditor; and this has never been held as releasing the surety. The surety could compel the creditor to sue, or if not, effect his release by complying with the provisions of the statute; and having failed to do so, the mere naked indulgence by the payee until the obligor becomes insolvent will not release the surety. The surety had the right, in this case, to pay the creditor, and at once coerce payment from the party for whom he was liable. This right was never impaired by any agreement be — 70 — tween the payee and the principal debtor; and a mere indulgence, that impairs no rights of the surety, cannot have the effect to release him. It was pleaded in one paragraph of the answer that, in consideration of Hibler agreeing to pay costs, that additional time was given for the payment of the money. This question was submitted to the jury under a proper instruction, and a verdict for the plaintiff The evidence establishes no bad faith on the part of Shipp; and as the case was presented to the jury, and we think properly, there was no. escape from the verdict and judgment against the surety. Judgment affirmed.