Franklin v. Duncan

Mr. Justice Williams delivered the opinion of the Court. This cause is a general creditors ’ proceeding to wind up The Duncan, a hotel corporation, and the questions to he determined arise on the claim of the Penn Mutual Life Insurance Company against the insolvent company and Oliver J. Timothy, as guarantor for it. The Duncan, as maker, executed a mortgage note for $60,000 to the ¿Life Insurance Company which contained in its body, the following stipulation respecting attorneys ’ fees: “It is stipulated that if this note is placed in the hands of an attorney for collection, has to be sued upon, or if litigation arises in the course of its collection, the [474] undersigned agrees to pay ten (10) per cent attorneys’ fees for such services as may be rendered in connection therewith, the same to be taxed as cost and become a part of any judgment rendered hereon, and said attorneys’ fees are secured by said deed of trust.’* On the back of the note was the following guaranty, signed by appellant, Timothy, before the delivery of the note to the payee: “For value received, we, and each of us, jointly and severally, guarantee payment of principal and interest of the within note, as and when the same shall become due, and of any extension thereof in whole or in part, accepting all its provisions, . . . and waiving protest, demand and notice of protest, ’ ’ etc. The only questions to be treated of are those made by Timothy on his appeal from a decree of the chancellor so far as by it he was held liable for attorneys’ fees allowed the payee company. It is argued that the liability of Timothy is the same in that regard, as if he were a regular endorser in blank. It is said in 1 Daniel, Neg. Ins. (6th Ed.), 62 (a), that such a stipulation for attorneys’ fees becomes a part .of the contract of an indorser, and that rule as relates to a regular indorser appears to be sustained by authority. First Nat. Bank v. Canatsey, 34 Ind., 149; Hubbard v. Harrison, 38 Ind., 323. And certainly the reasons are yet more cogent why this should be true of an indorser who waives demand, protest and notice, thus [475] dispensing with any condition precedent to his liability. 3 R. C. L., 1148, and eases cited. An accommodation indorser is to be held liable for fees so stipulated to be paid. Hall v. Pratt, 103 Ga., 255, 29 S. E., 764. The case of Bank of British N. A. v. Ellis (C. C.), 2 Fed., 44, involved the question of the liability of an accommodation indorser for attorneys ’ fees provided for in the face of a note. It -was there said as to the liability of both lsinds of indorsers: “The maker of these notes having agreed to pay an attorney fee to the holder thereof, if the same were not paid without action, in my judgment each subsequent party thereto assumed a like responsibility to such holders, and therefore the plaintiff is entitled to recover such fee from the defendants in this case. “But I think the defendants are liable to the plaintiff in this action for an attorney fee, even if the stipulation therefor can only be enforced between the immediate parties thereto. The defendants are accommodation indorsers. . . . By their indorsement of them they authorized G-aston, the then holder, to transfer them to the plaintiff, which was done. Every stipulation in them, and every obligation incident thereto, thereby became the stipulation and obligation of the defendants made directly to the plaintiff.” But the appellant in the pending caséis a guarantor, and in case of a guaranty, as a general rule, the extent of the liability of the principal debtor, or maker of the [476] note, measures the liability of the guarantor. 20 Cyc., 1420; 3 R. C. L., 1155. Therefore the maker being' liable for the fees, the guarantor takes that obligation under the measure of his liability to the holder, for reason even stronger than in the case of an indorser of whatever character. In Riverside Milling, etc., Co. v. Bank, 141 Ga., 578, 81 S. E., 892, the guaranty on the back of the note was to the effect that its signers ‘ ‘ guarantee the payment of the same at maturity or at any time thereafter,” and it was held that they were liable on the note according to tenor, including the attorneys ’ fees provided for on the face of the note. Another contention of appellant is: That by the terms of the guaranty he became guarantor of the payment of principal and interest only, and not of the payment of the attorneys’ fees. If we apply the rules of construction applicable to ordinary contracts to the construction of the guaranty, we think it manifest that when the guarantor went further and made use of the phrase “accepting all its provisions” (referring to the provisions of the note), the stipulation as to attorneys’ fees was made a part of his express obligation. But it is said that the insurance company is not entitled to have the fees allowed because its suit on the note was needlessly brought, since a foreclosure out of court was provided for in the mortgage, Clark v. Jones, 93 Tenn., 639, 643, 27 S. W., 1009, 42 Am. St. Rep., 931, being’ cited. [477] The general creditors ’ bill, with the injunction therein granted, operated to enjoin the insurance company from foreclosing the mortgage or trust deed, except in that cause. A foreclosure by means of a trustee’s sale out- of court could only have been had by leave of the court in that case. After the insurance company intervened to set up its claim by cross-bill, the complainant in the original hill filed an answer, denying the validity of cross-complainant’s mortgage, and insisting that that instrument was not authorized by any corporate action of the stockholders, and directors of the corporation, The Duncan. Without meaning to intimate an opinion that but for this last noted fact an allowance of fees would be improper, certainly the insurance company being thus held to support by proof and establish by decree the validity of its lien upon the assets against all other creditors, we think it clear that it has shown good and sufficient reason for not bringing the property to foreclosure sale by the trustee, under the power of sale vested in the trustee by the trust deed. It is therefore entitled to a judgment for attorneys’ fees. Bank v. Woods, 125 Tenn., 6, 17, 140 S. W., 31. The decree of the chancellor awarding same is affirmed.