Tidioute Savings Bank v. Libbey

BaRdeen, J. A guaranty is defined to be “ a separate, independent contract, by which the guarantor undertakes, for a valuable consideration, to be answerable for the payment of some particular debt, or future debts, or the performance of some duty, in case of the failure of another person primarily liable to pay or perform; ” and it is said that such guaranty is assignable, with the obligation secured thereby, and that it goes with the principal obligation, and is enforceable by the same persons who can enforce that. Colebrooke, Collateral Securities, § 253; Ellsworth v. Harmon, 101 Ill. 274; Claflin v. Ostrom, 54 N. Y. 581; Stillman v. Northrup, 109 N. Y. 475; Everson v. Gere, 122 N. Y. 290; Lane v. Duchac, 73 Wis. 655; W. W. Kimball Co. v. Mellon, 80 Wis. 143. The rule is that the transfer of a note carries with it all security without any formal assignment or delivery, or even mention of the latter. Carpenter v. Longan, 16 Wall. 271; Croft v. Bunster, 9 Wis. 503. A general guaranty is one open for acceptance by the public generally. A special guaranty is -limited to the person to whom it is addressed, and usually contemplates a trust or reposes a confidence in such person. Such a guaranty may not be assignable until the right of action has arisen thereon. Jex v. Straus, 122 N. Y. 293, distinguishing Evansville Nat. Bank v. Kaufmann, 93 N. Y. 273. The main contention of the defendants in the present case is that the guaranty upon which the action is founded is special, and limited to W. T. Richards & Co., and was not available to the plaintiffs, their assignees. We do not think'that the construction of the guaranty in question can be thus fairly restricted. We think that the guaranty, except as expressly limited by its terms, [197] was a general, continuing one. The defendants executed the contract of guaranty “ in consideration of the sum of one dollar to each of us in hand paid, and in consideration of the granting of credit and discount by ~W. T. Richards & Co. to the Farson & Libbey Company,” in which the defendants were jointly and severally interested as owners of all or of a large proportion of the capital stock thereof, and in whose success they were, and each of them was, particularly and financially interested. In other words, they gave the guaranty to secure the indebtedness on which the action is founded, for the benefit and advantage of a company in which they were themselves thus interested. The Farson & Libbey Company were anxious to realize on the notes in suit; took the same to "W. T. Rickards & Co., and negotiated, sold, and delivered the same to that company; and it granted to said Farson & Libbey Company credit, discounted such notes, and paid it therefor the full value and amount thereof, less interest and brokerage. The transfer of these notos to the plaintiffs carried with it, by operation of law, all securities for their payment. The debt is the .principal thing, and the securities are only an incident. The transfer Of the former, therefore, carries with it the right to the securities, and amounts to an equitable assignment of them. Ho matter what the form of the security is, whether a real-estate or" chattel mortgage, or a pledge of collateral notes, bonds, or other personal property, the purchaser of the principal takes with it the right to resort to these securities; and this is so, although the assignment or transfer does not mention them. The reason of this rule, within all the authorities, seems to be that when the mortgagee transfers the debt, without assigning the mortgage or other security, he becomes a trustee, and holds the security for the benefit of the owner of the note, and the latter may enforce the trust. The debtor is in no wise injured by such rule. He has agreed that the security shall stand for the payment of the debt, and it is of [198] no consequence to him to whom it is paid. He has to pay it but once. The guaranty is to pay any and all indebtedness to said W. T. Rickards & Co., their heirs, executors, administrators, and “ assigns,” incurred by Farson & Libbey Company. It is said that the word “ assigns ” means substantially nothing in this connection; that it is a mere formal phrase. We cannot’ so regard it. It either means that the defendants were to guaranty this paper in the hands of any assignee .of Rickards & Go., or it means absolutely nothing. Rickards & Co. were bankers and brokers. Their business was dealing in commercial paper, both buying and selling it, all of which defendants well 'knew. Their purpose in giving this guaranty was to give to the Farson & Libbey Company a credit of $20,000 with these brokers. It was perfectly natural, therefore, that the brokers desired to have this paper protected, not only in their hands, but in the hands of their customers. We conclude, therefore, that this phrase was an apt one to express the real intention of the parties, and that it means-precisely what it says. Rickards & Co. hold the security for these notes in trust, and the purchasers of the notes are entitled to enforce the trust. The guaranty was given for the payment of these notes, among others, and, within the rule of the authorities, it would seem that the purchasers from Rickards & Co. have the right to resort to the gnaranty. The fact that the Ticlioute Savings Banlc did not know of the existence of this guaranty at the time it purchased the City Sash & Door Company note is of no significance. The securities pledged for a debt follow it, in equity, no matter how the debt be modified or into whose hands it may come. Until the debt is paid, the pledge accompanies it, and remains for its payment', and is available to all who may acquire title thereto. Colebrooke, Collateral Securities, § 79; Stearns v. Bates, 46 Conn. 306. The guaranty in question was given to secure the payment of any and all indebtedness [199] due, or thereafter to become due, to Bickards & Co., or their assigns, “ growing out of or occasioned by any or through any act or acts of the said Farson & Libbey Company.” The defendant used apt words to make the guaranty impersonal, so far as the holders of the debts so created are concerned. They executed and delivered a contract as security for all the debts Qreated by the Farson & Libbey Company to Kickards & Co. within the amount limited, which became añ incident to each such debt, and which passed to the bank pro rata, upon its purchase of the note, even though it may not have known of its existence at that time. Keyes v. Wood, 21 Vt. 331; Evertson v. Booth, 19 Johns. 486. To require the defendants to pay these notes is but to require them to fulfill their promise. It entails no hardship and creates no obligation beyond the plain tenor of their contract. The argument that the guaranty was personal with Richards & Go., as imposing special trust and confidence in the members of that firm, falls of its own weight. A bare reference to the paper itself would seem to dispel any such illusion. The case of Evansville Nat. Bank v. Kaufmann, 93 N. Y. 274, falls far short of sustaining their contention. On the whole case, the conclusion of the trial court meets with our entire approval. The greater portion of this opinion was prepared by Mr. Justice Pintjey before his sickness and resignation. To him credit is due accordingly. By the Court.— The judgment of the circuit court in both cases is affirmed.