Omaha National Bank v. Johnson

Dodge, J. Two propositions were decided by the circuit court, both of which are vigorously assailed by the appellant. The first is that it appeared by the plaintiff’s own evidence that the defendant, Johnson, to the knowledge of the plaintiff, bore the relation of surety to the indebtedness-originally evidenced by the notes signed by him and here sued upon; second, that by the taking of the several renewal notes the plaintiff extended the time of payment of that indebtedness, and thereby discharged the defendant. The rule is well settled that wherever, as between joint or several obligors to a contract, the duty of the one is primary and of the other secondary, so that, as between themselves,, the obligation or the debt is properly that of the former, who thus owes to the latter the duty of exoneration, the relationship of principal and surety exists, no matter what the form of the contract or how absolute may be the undertaking of him who is in fact the surety. This relationship cannot vary or diminish the rights of the creditor upon the original contract. He may even ignore the principal debtor and sue the surety alone, at his will or convenience, if the form of the contract warrants. But, if the fact of the true relationship between the debtors is brought to his knowledge, he owes to him who is only secondarily liable that duty which the creditor uniformly owes to the surety, of having no transactions or dealings with the principal debtor which shall vary the surety’s position or jeopardize him. This duty rests'upon the actual relation between the parties, and cannot be obscured or excused by any considerations of [375] form or manner of contracting. Harris v. Brooks, 21 Pick. 195; Guild v. Butler, 127 Mass. 386; Canadian Bank v. Coumbe, 47 Mich. 358, 362; Riley v. Gregg, 16 Wis. 666; Gates v. Hughes, 44 Wis. 332, 338; Irvine v. Adams, 48 Wis. 468; Breitengross v. Farr, 100 Wis. 215; Brandt, Suretyship & G. §§ 29-37. In the light of this rule of law, we are convinced that the circuit court decided rightly that the defendant here was hut a surety. The testimony offered by the plaintiff from the mouths of its own officers was open to no other reasonable construction than that, the parties all being present, it was understood and explained that the defendant was not the beneficiary of the loans, nor the primary debtor for their repayment, but that he was pledging his liability upon a specific written contract as security for the debt of some one else. Uo other possible significance can be accorded the statement that in signing such papers he was to “ back up ” and “ stand behind ” the others,— a meaning which is emphasized and rendered all the more clear by the expression that he was understood to be signing merely as a security. Thus we reach the conclusion, as did the circuit court, that the defendant was a surety merely for the indebtedness evidenced by the four notes which are the basis of this action, although, by reason of the form of such notes, he made himself absolutely liable in the' first instance. Among the acts by which a creditor will release a non-consenting surety, none has been more frequently or more universally declared effective than a binding extension of the time of payment of the indebtedness. Riley v. Gregg, 16 Wis. 666; Hallock v. Yankey, 102 Wis. 41, 43. The reasons for the efficacy of such act are that during the time of the extension the creditor has disabled himself from proceeding to collect from the principal debtor, and has subjected himself to an increased peril of such debtor’s becoming insolvent and unable to pay, thus protracting the period of peril to [376] the surety beyond that to which he had assented. It seems too plain for debate that the plaintiff here has effectively extended the time of payment of the indebtedness for which defendant originally made himself liable. When the notes which he had signed became due, new notes, with specified time of payment,— sometimes sixty and sometimes ninety days,— were taken, the notes signed by the defendant were canceled and given up, and this was done upon a consideration uniformly held sufficient to make the extension binding upon the creditor, namely, upon the payment of interest in advance. Batavian Bank v. McDonald, 77 Wis. 486; Hallock v. Yankey, supra. The only answer which appellant is able to suggest to this obvious conclusion is that in some instances the renewal or extension notes were not the notes of any of the parties whose names" appeared upon the original notes, from which he argues that the giving of the new notes of itself raises no presumption of extension of the original indebtedness. It is pretty apparent that the parties recognized no distinction between Karr and Davidson, the individuals engaged in the coal business, and the Karr & Davidson Company, the corporation under which it was conducted; and that the indebtedness was understood by all to be the indebtedness of that business, namely, of the corporation conducting it. It is unnecessary, however, to discuss the effect of the testimony in this respect, for plaintiff, in its complaint, has expressly set up and asserted the relationship between the new notes taken and the pre-existing indebtedness. Thus it is alleged in each instance that the renewal or extension notes made by the Karr & Davidson Company were “ delivered to the plaintiff to represent the said indebtedness of the defendant and said Davidson and said Karr,” and to evidence the sum of money due to it from the makers of the original notes. This leaves no uncertainty as to the transaction had by the bank with both the individuals, Karr and Davidson, or with the corporation, nor as to their relation [377] to the indebtedness for which the defendant was surety. By thus repeatedly extending the time at which payment of the indebtedness could be enforced from those primarily and equitably liable therefor until, by reason of insolvency, the indebtedness was not collectible at all, the plaintiff has discharged the defendant from his liability thereon. The circuit court properly entered judgment of nonsuit. By the Court.— Judgment affirmed.