Malanaphy v. Fuller & Johnson Mfg. Co.

125 Iowa 719 | Iowa | 1904

Bishop, J.

1. promise to pay another rights of creditors. The contention of plaintiffs in the court below was that the release of Christen from all further liability upon the judgment now sought to he enforced operated ipso facto to release both Malanaphy and Daly, and such is the argument in this court. A correct understanding of the relations of the several parties, each to the other, will serve to make clear the proper determination of the question thus presented. The defendant company having refused to accept of a note signed by Christen & Gilbertson in payment of the note held by'it against Malanaphy & Daly, the latter, as a matter of course, continued to be bound upon its obligation according to the terms thereof. Now,, as .already stated, when Malanaphy & Daly sold and transferred its property to Christen & Gilbertson, the latter, in consideration thereof, and as part payment of the purchase price, assumed and agreed to pay the debt owing by Malanaphy & Daly to the defendant company. The rights of the parties arising out of this situation may be stated thus: As between Christen & Gilbertson and the defendant company, the implied relation of debtor and creditor arose eo instante by operation of law. Tt is well-settled doctrine that, where one for a sufficient consideration agrees to assume and pay the debt of another, the creditor is impliedly included as within the privity of the promise, and he may single out the promisor and sue him by direct action. Johnson, v. Knapp, 36 Iowa, 616; Poole v. Hintrager, 60 Iowa, 180; Maxfield v. Schwartz, 43 Minn. 221 (45 N. W. Rep. 429). Necessarily the rights of a party for whose benefit a promise is made must be measured by the terms of the agreement between the principal parties, and the right to recover from the promisor is not absolute in all cases. Among other limitations, the ' party to be benefited takes subject to all inherent equities arising out, of the contract, as affecting the principal parties one with the other. This follows naturally from the relation of privity which the law implies. Dunning v. Leavitt, 85 N. Y. 30 (39 Am. Rep. 617); Ellis v. Harrison, 104 Mo. 270 (16 S. W. Rep. 198); Brandon v. Hughes, 22 La. Ann. 360; Trimble v. Strother, 25 Ohio St. 378; 7 Am. & Eng. Enc. Law (2d Ed.) 109.

2. Principal and surety. Turning our attention to the principal parties to the contract, it is quite clear that as between them the promisor became primarily liable for the debt. It assumed the relaa principal, and, as to it, the obligation 0f promisee became that of a surety only. As supporting this conclusion, see Corbett v. Waterman, 11 Iowa, 86; Robertson v. Stuhlmiller, 93 Iowa, 326; Jefferson v. Asch, 25 L. R. A. 257, note; 27 Am. & Eng. Enc. Law (2d Ed.) 433. Now, as a creditor for whose benefit a promise is made takes subject to the equities existing between the principal parties, it follows conclusively that, if he accepts of such promise, he becomes bound to observe the relationship of principal and surety existing between the principal parties, and must act in recognition thereof.

3. release of surety. As we think, the status of the parties to this action was fixed, as of the time of the promise, by the rules of law thus referred to. Wo may proceed, therefore, to inquire what change, if any, resulted from the subsequent execution and delivery of the note signed by both the firms named. x As we have stated, the giving and retention of such note seems to have been without agreement in terms relating thereto. The statement made by the secretary of the <^efendant company that it was held as collateral security was evidently a mere conclusion on his part as to the effect of the situation. However this may be, it is clear that such was not the effect implied by law. As the later note was for the same amount, due at the same time, and upon the same terms, as the original note of Malanaphy & Day, and as Malanaphy & Daly were already liable for the debt represented on a direct promise, and' the firm of Christen & Gilbertson liable in the same measure upon a promise implied by law, it must be evident that the only change in the situation was the substitution, through the medium of the note, of a direct promise on the part of Christen & Gil.bertson in lieu of the implied promise theretofore existing. The defendant company received nothing collateral in character. It simply held the note as written evidence that both firms were obligated for the payment of the debt. It is to be said, however, that the receipt and acceptance of the note had the effect to further apprise the defendant company of the relation existing between the two firms, and of its obligation to respect the same.

Accepting of the situation as we find it, our conclusion is that the release of Christen operated to release his principals, Malanaphy and Daly, who, as to him, and with knowledge on the part of the defendant company, were secondarily bound only for the payment of the judgment. The conclusion thus reached has support further in the following cases: Ames v. Maclay, 14 Iowa, 281; Chambers v. Cochran, 18 Iowa, 159; Taylor v. Short’s Adm’r, 27 Iowa, 361; Roberts v. Richardson, 39 Iowa, 290.

It follows that the decree of the trial court was right, and it is affirmed. ,