90 P. 817 | Kan. | 1907
Lead Opinion
The opinion of the court was delivered by
This was an action to enforce the obligation of a surety. It was brought by Martha A. Hier, as administratrix of the estate of John D. Hier, deceased, against Fred Harpster, as surety on a promissory note given by J. F. Harpster to the deceased on September 22, 1898. J. F. Harpster was the cashier of the Wathena State Bank, with which the plaintiff had an account.
On September 22, 1899, when the plaintiff demanded payment of the interest due on the note, amounting to $80, J. F. Harpster made an entry in the pass-book of the plaintiff and credited her with the amount of the interest due on the note, but made no entry on the books of the bank, nor did the bank ever receive anything of value for the entry made in the plaintiff’s pass-book.
On November 30, 1900, payment of the principal and interest then due, amounting to $1083.35, was demanded. J. F. Harpster then entered that amount to the plaintiff’s credit in her pass-book, but no money was deposited in the bank to justify such entry in her pass-book, and there was no record made in the books of the bank showing the receipt of any money for such purpose.
The following January Harpster died. A receiver was appointed for the bank, and upon an examination of the bank the plaintiff was found to have overdrawn her account by the amount of the pretended credits entered in her pass-book. The receiver then brought an action against the plaintiff for the amount of the overdraft, in which it was held that the bank was entitled to recover from her .the amount of money paid on the checks drawn on the faith of the unauthorized entries in the pass-book. That judgment was reviewed and affirmed on January 9, 1904. (Hier v. Miller, 68 Kan. 258, 75 Pac. 77, 63 L. R. A. 952.) She then paid the judgment, and later, on August 24, 1904, brought this action against Fred Harpster, as surety, to recover the amount of the note and interest. He had signed the note for the accommodation of J. F. Harpster, and had received no part of the proceeds, nor benefit of any kind. He knew nothing of the transactions between the plaintiff and J. F. Harpster, above stated, nor of those between the bank and J. F. Harpster. After the note had been surrendered and marked “canceled,” the defendant saw it in J. F. Harpster’s desk, soon after the death of J. F. Harpster, and had every reason to believe, and did believe, that the note had been paid. He had no notice or knowledge of any kind whatsoever from the plaintiff that the note had not been paid, and no demand was ever made of him on account thereof until this action was brought.
Did the conduct of the plaintiff operate to release the surety from the obligation which he assumed? It will be conceded that the mere surrender and cancelation of the note did not extinguish the debt nor release the surety. It is claimed that plaintiff’s subsequent conduct or failure to give the surety notice had the effect of releasing him. There was no misrepresentation nor fraudulent concealment of the facts by the plaintiff. Did her inaction, or her failure to notify the surety in regard to the surrender of the note, relieve him from responsibility? Ordinarily the creditor owes the surety no active diligence, and therefore the mere delay or inaction of the creditor affords no ground for the release of the surety. The general rule is that the obligation to see that the debt is paid rests on the surety and not on the creditor, and so it has been held that “however much the forbearance of the creditor toward the principal debtor may prejudice the surety, it will not discharge him from liability.” (Ray v. Brenner, 12 Kan. 105, syllabus; Halderman v. Woodward, Assignee, &c., 22 Kan. 734.) An il
Any active interference of the creditor, such as the making of an agreement with the principal to extend the time of payment or which operates to increase the risk of the surety and deprives him of the opportunity to protect himself, may effect a discharge. And generally, if the creditor informs the surety that the secured debt has been paid, when in fact it has not, and as a result the surety is injured, he will be discharged, although the creditor may be honestly mistaken in the statement made by him. (Bank v. Haskell, 51 N. H. 116, 12 Am. Rep. 68; High v. Cox, 55 Ga. 662; Thornburgh v. Madren, 33 Iowa, 380; Brandt, Sur. & Guar. §§ 211, 212.)
Here there, was no active interference by the creditor, nor did she make any statement to the surety in regard to the payment of the debt or the surrender of the note. It is true that shortly after the transaction in the bank the surety saw the surrendered note marked “paid,” and from that time rested in the belief that it had been paid, but this information was not given to him by . the plaintiff, nor did she make any misleading statements concerning the transaction. The surrender of the note was accomplished by the fraud of the principal, but there was no fraud or bad faith on the part of the plaintiff in making the sur
In Bank v. Fletcher, 68 Vt. 81, 34 Atl. 38, where a creditor had taken a renewal note with, a forged indorsement, and surrendered the original, on which there was a genuine indorsement, and the indorser, when sued upon the original, insisted that the fraud had been accomplished through the mistake of the creditor and invoked the rule that where one of two innocent parties must suffer the one making the mistake should bear the loss, the court held that there was no such negligence on the part of the creditor as would release the indorser, and that the misrepresentation, made through mistake and fraud, did not create an estoppel.
In another case the creditor obtained security for a debt by attaching property of the principal debtor, and this fact was communicated to the surety. Afterward the creditor dismissed the suit and released the property. The surety claimed that he was lulled into a feeling of security by the statement of the creditor, and therefore should be released, but the court held that, as the creditor had not agreed to rely solely on the attachment, the surety was not discharged. (Barney v. Clark, 46 N. H. 514. See, also, Debenture Co. v. Hopkins, 63 Kan. 678, 66 Pac. 1015; Bangs v. Strong, 10 Paige [N. Y.], 11; 11 A. & E. Encycl. of L. 434.)
The opinion of the court, therefore, is that the surety is not relieved from responsibility, but in this view the writer is unable to concur. In his opinion the omission of the plaintiff to give any notice to the surety of the facts connected with the surrender of the note and of her subsequent controversy as to whether it had in fact been paid, running over a period of more than three years, was such negligence as relieved the surety, at least to the extent of the injury sustained by the lack of such notice. It is true that the plaintiff did not tell him that the note had been paid, but by her negotiations the note was surrendered
The surety is a. favorite debtor. The law requires the creditor to deal candidly and fairly with him. Facts within the knowledge of the creditor affecting the surety should be disclosed, and the withholding of them may be a legal fraud on the surety. The surrender of the note by the plaintiff, under the circumstances, was the equivalent of a declaration by her to the surety that the note had been paid. In my judgment the conduct and negligence of the plaintiff absolved the surety from liability. Some of the authorities sustaining this view are: Kirby v. Landis, 54 Iowa, 150, 6 N. W. 173; Rowley v. Jewett, 56 Iowa, 492, 9 N. W. 353; Harris v. Brooks, 38 Mass. 195, 32 Am. Dec. 254; Struss v. Masonic Savings Bank, 89 Ky. 61, 11 S. W. 769, 12 S. W. 266; Poling v. Maddox, 41
As a majority of the court are of the opinion that the surety was not released, it follows that there must be a modification of the judgment. The cause will therefore be remanded, with directions to enter judgment on the agreed facts for the plaintiff for the amount of the note and accrued interest.
Dissenting Opinion
(dissenting) : I dissent from the opinion of the majority of the court, and concur in the views of the Chief Justice.