5 Barb. 520 | N.Y. Sup. Ct. | 1849
I think the fair import of the instruments executed by the plaintiffs on the 21st of August, 1845, is, that in transferring the judgment against Ellis to McCumber, the plaintiffs intended to reserve such amount of the judgment as should be necessary to enable them to collect the judgment against Carpenter. And although they stipulated that they would refrain from all further proceedings for the collection of the amount of the judgment so reserved, from Ellis, it was understood that such stipulation should not interfere with, their right to collect what they could of Carpenter. It was not denied, upon the argument, that the transaction was binding upon the parties; and the question is thus presented whether a creditor, after the recovery of a judgment against his principal debtor and his surety, may enter into such an arrangement as shall, in effect, release the former, without affecting his right to recover his debt of the latter.
This question came before the supreme court of Pennsylvania, in the case of The Manufacturers’ and Mechanics’ Bank v. Bank of Pennsylvania, (7 Watts & Serg. 335.) In an elaborate opinion delivered by Chief Justice Gibson, he examines the position which had been contended for in that case, that the relation of surety which the endorser of a note had borne to the maker was extinguished by the judgment against him. “ The engagement of the endorser,” he says, “ is to pay, if the maker do not. And the holder should not be allowed to compel him to pay after having first deprived him of the chance of being relieved by payment by the maker. It may be that his engagement ceases to be conditional at the rendition of the judgment; but he is not the less a surety and may yet be injured by the conduct of his principal. The root of the error seems to consist in taking for granted that when the engagement of the endorser ceases to be conditional he necessarily ceases to be a surety. The engagement of a surety in a bond is unconditional from the first; and his right to compel the obligee to sue would be of little avail were the latter bound to proceed no further than judgment. The surety might pay the debt, it is true, but it has- been gravely doubted whether the judgment would not, ipso facto, be discharged. He is not, however, bound to pay it before he can at least indirectly originate an action on the security; it being clear, as was held in Wright v. Simpson, (6 Ves. 734,) that on depositing a sum sufficient to cover the expense he may compel the creditorto do the best he can for him by collecting the debt of his principal. And in that respect equity falls even behind the civil law, which
In Dixon v. Ewing's Administrators, (3 Ohio Rep. 280,) a judgment had been recovered upon a bond executed by a principal and two sureties. Execution having been levied upon the property of the principal, it was released. An attempt having been made, subsequently, to collect the judgment, of the sureties, -they filed their bill to restrain the collection. The court say, “ the judgment creditor was bound at least to let the law take its course without interfering to exempt the principal debtor or to relieve his property in such a way as to increase the risk of the sureties.' He had no right to interpose for the protection of the principal or his property, by discharging either from the debt, to the injury of the sureties.” A perpetual injunction was granted. The same question came before the court again in the case of The Commercial Bank of Lake Erie v. The Western Reserve Bank, (11 Ohio Rep. 444.) In that case judgment had been recovered against two principal debtors and one Clarke as surety. Lane, Ch. J. says, “ Whether a surety can claim his privilege after judgment, is a point which has given rise to conflicting opinions, and in recent eases the doctrine is doubted or denied. (Pole v. Ford, 16 Eng. Com. Law, 273. Bay v. Tallmadge, 5 John. Ch. 305. Lenox v. Prout, 3 Wheat. 520.) But I am instructed by my brethren to announce it as the opinion of a majority of the court,
The same doctrine has, I think, been substantially held by the court of chancery of this state, and concurred in by the court for the correction of errors. Bangs v. Strong, (10 Paige, 11,) was a creditor’s bill filed against two judgment debtors, J. Strong and M. Strong. The defendant M. Strong interposed a plea in bar, alleging that the judgment was recovered upon a bond in which he was merely a surety for J. Strong. And that after the recovery of the judgment an agreement had been entered into between the plaintiffs and J. Strong, the principal debtor, whereby the plaintiffs were to receive the conveyance of certain land, the price of which was to be ascertained by subsequent appraisal, in part payment of the judgment, and giving ten month’s further time for the payment of the balance. The chancellor held, upon the state of facts presented by the plea, that the surety was discharged, upon the ground that the agreement had the effect to prejudice his right to substitution. Justice Bronson, in pronouncing the unanimous decision of the court of errors, affirming the decree of the chancellor, says: “ Where time is thus given to the principal debtor, by a valid agreement, which ties up the hands of the creditor, though it be but for a single day, it is quite clear that the surety is discharged.” It is true, as was remarked by the learned justice whose opinion is the subject of this review, that the distinction between the rights of a surety, before and after judgment, does not seem to have been taken by the counsel for the plaintiffs in that case; nor is it discussed in the opinion either of the chancellor or Justice Bronson. Yet it must also be admitted that the precise question was there involved, and if the distinction sustained by my learned brother exists, that case was erroneously decided. I should be unwilling to come to this conclusion until constrained by opposing authority entitled to equal respect. Such authority is supposed to be found in three cases which I propose briefly to examine.
The first, in point of time, is that of Lenox v. Prout, (3 Wheat. 520.) In that case Prout was endorser of a note made
The next case is Bay v. Tallmadge, (5 John. Ch. 305.) There Tallmadge had sued one Plainer, and Bay and Bach-man had become bail to the arrest. Special bail not being put in, Tallmadge brought a suit against Bay and Bachman upon their bond, and recovered judgment against them for the amount of his debt against Plainer, with interest and costs. Upon this judgment an execution was issued, and levied upon the property of the defendants. It was then agreed between the parties to the bail bond suit, that a judgment should be perfected against Plainer, and that proceedings in the bail bond suit should be stayed, until the event of the measures taken to recover the debt of Plainer should be ascertained. Under this agreement an execution was issued against Plainer, and his property advertised for sale. The sale was once postponed, with the consent of the bail, and against the will of the plaintiff. Subsequently a further postponement was agreed to by Tallmadge, without the assent of the bail, who filed their bill against the plaintiff in the judgment, praying that he might be restrained from further proceedings against them, on the ground that by the postponement of the sale without their consent they were discharged from their obligation to pay the debt. Chancellor Kent held that the bail had lost their privileges and had become fixed as principal debtors; that all they had a right to require was the fulfilment of the agreement in good faith, which implied nothing more than reasonable diligence in making efforts to collect the debt of Plainer; that such efforts were to be made under the guidance of a reasonable discretion, and as it appeared that the postponement of the sale was granted in good faith and from humane motives towards the debtor, it would not be consonant to the principles of a court of equity to punish the creditor with the loss of his debt for a reasonable forbearance to the debtor; that “ it would he giving too severe and rigorous a construction to the agreement ” The chancellor adds, “ if Bay and Bachman were dissatisfied with the second adjournment, they should have come forward and offered
One other case deserves to be noticed. It is that of Findlay,s Executors v. The Bank of the United States, (2 McLean, 44.) There a judgment was recovered by the bank against Sutherland and Findlay—against the former as maker and the latter as endorser of a note. The judgment bad become a lien and an execution had been levied upon the real property of Sutherland. After this, by an arrangement between Sutherland and the bank, his property was conveyed to the bank and applied upon his other indebtedness to the bank, leaving the property of Findlay liable for the judgment against him. Upon a bill filed by the executors of Findlay, for relief, Mr. Justice McLean held that, though Findlay had been an accommodation endorser for Sutherland, his character as surety was merged in the judgment, and that the only equity remaining in his favor was the right of substitution, on the payment of the judgment. That case undoubtedly goes the entire length of deciding that, after judgment, the liability of the surety is in no respect affected by the acts of the creditor; and that, whatever may have been done to impair his security, he is bound, absolutely bound, to pay the judgment.
I certainly am not disposed to undervalue the decision of a judge so enlightened, presiding in a court of such eminence, and I might feel inclined to bow to the authority, were it not as I conceive, opposed to the opinions of other judges, equally distinguished, as well as contrary to my own views of common justice. The doctrine of every other case with which I have met in my researches, which have been somewhat diligent, is, that on the one hand there is no duty of active diligence imposed upon the creditor for the protection of the surety; and on
So far as he relies upon adjudged cases, Judge McLean, after first expressing his dissent to the opinion of the supreme court of his own state in the case of Dixon v. Ewing’s Adm’rs before noticed, confines himself to the cases of Lenox v. Prout and Bay v. Tallmadge. In respect to the former he says, “ it is a case similar in principle and not dissimilar in fact.” And in Bay v. Tallmadge, he says Chancellor Kent has decided the same principle. But I must be permitted to say that I have entirely misapprehended as well the facts as the principle involved in both those cases if they contain any thing which sustains the decision in Findlay v. The Bank of the United States. Whether right or wrong, I think that decision must be regarded as standing unsupported by any other authority either in England or this country.
Since my examination of this question I have met with an
The application of the principles, thus deduced, to the case at bar is obvious. By the arrangement between the plaintiffs and Ellis and McCumber, on the 21st of August, 1845, they abandoned the means in their hands which might have proved available for the indemnity of Carpenter. They did more. They not only relinquished their levy, but they in effect released Ellis from all further obligation to pay that part of their debt for which Carpenter had become liable as endorser. Suppose, after this transaction Carpenter had come to the plaintiffs and paid their debt and claimed his right to be substituted in their place as against Ellis, the principal debtor. What could he have acquired by an assignment from the plaintiffs? They had bound themselves not to collect the debt of Ellis, and of course they could not confer upon another the power of doing what they had bound themselves not to do. Having thus disabled themselves from collecting their debt of the principal debtor, or transferring the right to enforce collection to the surety upon his paying the debt, they must be held to have exonerated the surety also. The bill should therefore be dismissed with costs.
Watson, J. concurred. Parker, J. dissented.