Yager v. Kentucky Title Co.

Opinion of tiie court by JUDGE BUR.NAM — Affirming. On the 2d of September, 1897, the appellant, W. J. Yager, sold and conveyed to Lola M. Gauss certain real estate in Louisville in consideration of the execution by her of four bonds for $500 'each, due in one, two, three and four years, respectively, which were made payable to the Kentucky Title Company or bearer, and which bore interest at the rate of six per cent, per annum, payable semi-annually; and to secure the payment of each of the bonds a lien was retained in the deed upon the property. These bonds were transferred by Yager to the Kentucky Title Company, with this indorsement: “I hereby guaranty the payment of the principal and interest and of the within bond ajt maturity. Sept. 2, 1897. W. J. Yager.” It was provided by the deed that, if Lola M. Gauss failed to pay any one of the bonds when it became due, the holder of such overdue bond or coupon migbt declare all the bonds secured by the deed to be immediately due and payable. In January, 1S99, the title company instituted this suit, in which it alleges that none of the bonds or interest thereon had been paid since the 2d of March, 1898, and asked for a personal judgment against the payor, and also against W. J. Yager upon his indorsement, and for an enforcement of its lien. The appellant, Ya [935] ger, answered that he was only a guarantor on the bonds, and that he had been released from all liability by the failure of the title company to institute suit formore than four months after the principal obligors had defaulted in payment, although he alleged he notified it that he would not consent to any indulgence upon the bonds. The trial court overruled a general demurrer to this answer, and the title company replied, denying the alleged negligence, or that Yager had ever notified it to institute suit" against the principal obligors on the bond: and it also denies that, if suit had been instituted, the amount could have been made out of the principal obligors, or that fhe appellant was prejudiced by such failure. The chancellor held Yager liable upon his contract of guaranty because the proof failed to show that he was damaged by reason of the title company’s failure to sue promptly, and, the proceeds of the property being insufficient to pay the lien debts, gave the title company a. personal judgment against him for the deficit of $673.93, with interest and cost; afid from this judgment appellant appeals. We do not deem it important to consider' the proof introduced upon the trial of the case, as, in our opinion, the answer of appellant did not state facts sufficient to support a defense, and the chancellor erred in overruling the demurrer filed thereto. “A guaranty is either absolute or conditional. An absolute guaranty is an unconditional' promise of payment or performance on default of the principal. To bind the guarantor, it is not necessalry that there should be notice of acceptance of the guaranty and default of the principal, or that any steps should be taken to enforce the contract guarantied against the principal. The guarantee may proceed against the guarantor at once on default of the principal. The guarantor’s liability is [936] dependent upon tire same rules of law by which the liability of one who has broken his contract is determined. A guaranty is conditional when there is some extraneous event beyond the mere default of the principal by which the guaranty becomes binding. Liability does not attach immediately upon nonpayment or non performance by the principal. In general it is necessary to fix the liability of the guarantor that there should be notice of the guaranty and notice of the principal’s default, and reasonable diligence in exhausting reasonable remedies against the principal. The most usual form of absolute guaranty is a promise to pay the debt at maturity if not paid by the principal debtor, and the guarantee may bring an action on default of payment at the date named against the guarantor.” See Am. & Eng. Ency. Law, 1141. Brandt. Sur. p. 119, section 86, says: “When the terms of a guaranty of payment fix the time within which the payment shall be made, if the payment isnot madewithin the time prescribed,there is abreach of guaranty, and no steps need be taken against the principal, nor need his insolvency be shown, to charge the guarantor.” See numerous cases cited in notes to support text. Yeates v. Walker, 1 Duv., 84, the payee of a note assigned it in the following words: “For value received, I assign this note to Owen W. Walker, and, if not paid, I bind myself to pay it.” The assignee instituted a - joint action against the payors and the assignor. Judgment was rendered by default against the assignor. Upon appeal he .sought to reverse the judgment upon the ground that the petition failed to show that the appellee had sued the payors of the note, and had been unable to coerce the payment of the debt from them. The court held that, if the assignment was made before the maturity of the note, the assignor^ liability accrued at its maturity. And in Thompson v. [937] Glover, 78 Ky., 195, 39 Am. Rep., 220, this court said: “Where the whole transaction is of such a nature as to give the guarantor full information as to his liability, and the agreement to accept is contemporaneous with the guaranty, and was the consideration therefor, all the parties being privy to the whole transaction, no specific notice is necessary.” The guaranty in this case was an absolute undertaking- on the part of appellant, Yager, to pay the principal and interest' of the bonds at the maturity thereof, and the title company had the right to look to- the appellant, as guarantor, for the payment of its debt, immediately upon the default of the principal. As this is the effect of the judgment appealed from, it is affirmed.