235 Pa. Super. 252 | Pa. Super. Ct. | 1975
Lead Opinion
Opinion by
William Jules Sanft, hereinafter Jules Sanft, was President of Highland Crest Homes, Inc., hereinafter Highland. Highland wished to borrow money from Industrial Valley Bank and Trust Company, hereinafter IVB. It is unclear if this money was to be used personally by Jules Sanft or by Highland. IVB would not lend Highland the money unless Highland obtained a surety. Philadelphia Bond and Mortgage Company, hereinafter PBM, agreed to act as surety if Highland could get a creditworthy co-maker on a judgment note to PBM. Sarah Sanft, Jules Sanft’s mother, agreed to sign the note to PBM. The relevant parts of the note are as follows:
Judgment Note
$15,000.00 Philadelphia Pennsylvania March 1, 1968 City or Town State Date
One day [sic] after date, the undersigned (and if they be more than one, each of them jointly and severally) promise to pay, without defalcation to the order of:
Philadelphia Bond and Mortgage Company
Fifteen Thousand Dollars plus 8% per annum.
Dollars ($15,000.00)
The undersigned do hereby authorize . . . The undersigned and each endorser hereby waive presentment, demand, protest and notice of protest and non-payment.
HIGHLAND CREST HOMES, INC.
/S/ . (SEAL)
William J. Sanft, President
/s/ . (SEAL)
Joy E. Sanft, Secretary
*255 /s/ . (SEAL)
Sarah Sanft
This note is collateral for a note bearing even date and like amount in favor of INDUSTRIAL VALLEY BANK.
In September, 1969, Jules Sanft sold Highland to Morton G. Friedberg and his wife. The agreement of sale specifically made the IVB debt the responsibility of Jules Sanft. The Friedbergs sold Highland to Winifred B. Johnson who in turn sold it to James Hamilton, Inc., the present owner.
Subsequently Jules Sanft became delinquent in payment to IVB and in October, 1970, IVB made demand for payment upon PBM. In November, 1970, PBM paid IVB $13,519.09. PBM then made demand for payment from Sarah Sanft and Highland. Highland refused to pay because it contended the note was not a corporate debt but a personal debt of Jules Sanft individually. Sarah Sanft refused to pay because she contended that she was only a “surety” and that PBM should therefore be required to proceed against Highland before obtaining judgment against her. Judgment was thereafter entered against Highland and Sarah Sanft on the note.
Sarah Sanft petitioned the Court of Common Pleas of Philadelphia County to open the judgment and to exonerate her as the surety. The order of that court was as follows:
“Ordered that the Petition to Open Judgment, to Stay
Execution and to Exonerate the Surety, is granted.”
PBM then appealed to this court in 1971 contending that the judgment should not have been granted for Sarah Sanft and that the judgment should, not have been opened. This court held that the lower court did not abuse its discretion in opening the judgment but did err in entering judgment in favor of Sarah Sanft. See Philadelphia Bond and Mortgage Company v. Highland
Sarah Sanft has now appealed this lower court ruling contending first that she was a surety, and, secondly that where a surety gives notice to a creditor, as she did, to sue the principal debtor and the creditor fails to do so, even though the principal debtor has sufficient assets, the surety is discharged and exonerated. Therefore, the first question which we must now decide is whether Sarah Sanft was a surety. The Uniform Commercial Code
Nevertheless we must still determine if Sarah Sanft is a surety because her second argument is based on that premise. On the face of the PBM note it appears that Sarah Sanft signed as a co-maker. The note states “the undersigned . . . jointly and severally promise to pay.” In light of this language it seems that Sarah Sanft is making the contract of a maker as set forth in Section 3-413(1).
“Thus by long established practice judicially noticed or otherwise established a signature in the lower right hand corner of an instrument indicates an intent to sign as the maker of a note or the drawer of a draft.”
But simply because one appears to be a maker does not preclude that person from also being an accommodation
“An accommodation party is one who signs the instrument in any capacity for the purpose of lending his name to another party to it.”
While it is true that Sarah Sanft signed the note in the capacity of a co-maker it is also true that she signed her name for the purpose of lending her name to another party to it, namely Highland. Therefore, we can conclude that although Sarah Sanft is a co-maker she is also an accommodation party.
Having determined that Sarah Sanft is a surety we can now address her second issue which she frames as follows: “Where a surety gives notice to a creditor to sue the principal debtor and the creditor fails to do so, even though the principal debtor has sufficient assets, is not the surety discharged and exonerated?” As was stated above, the word “surety” is a broad general term which encompasses many concepts, i.e., accommodation party, guarantor, and indorser; and, because each of these concepts differs significantly, we must narrow the appellant’s issue in order to fit the facts of this case. Since we have already determined that Sarah Sanft is an accommoda
“ ‘Collection guaranteed’ or equivalent words added to a signature mean that the signer engages that if the instrument is not paid when due he will pay it according to its tenor, but only after the holder has reduced his claim against the maker or acceptor to judgment and execution has been returned unsatisfied, or after the maker or acceptor has become insolvent or it is otherwise apparent that it is useless to proceed against him.”
This relief would have been available to Sarah Sanft had she simply added the words “collection guaranteed” to her signature and thereby placed herself in the category of a Section 3-416(2) guarantor. Because these words were not used we can only assume that the parties to the note did not intend the procedure set forth in Section 3-416(2) to govern their agreement. It can now be seen why the question of whether Sarah Sanft was a “surety” was of little importance, because while she was in the general category of a surety, the type of relief she wanted (or at least similar relief) would only become available
Because the specific relief desired by Sarah Sanft is not provided for in the Code is not to say that she is totally without any remedy. Section 3-415 which sets out the contract of an accommodation party gives Sarah Sanft the following remedy in subsection (5) :
“An accommodation party is not liable to the party accommodated, and if he pays the instrument has a right of recourse on the instrument against such party.”
Therefore, if PBM elects to proceed against Sarah Sanft, and she pays on the instrument, she then has a right of recourse against Highland.
Having determined that the relief sought by Sarah Sanft is not provided for under the Code, we now turn to see if such relief can be found outside the Code. A short discussion of this area is necessary because such specific relief did exist under the early pre-Code doctrine of Pain v. Packard.
“Concisely stated, the doctrine of Pain v. Packard is, that after the debt is due the surety may notify the creditor to sue the principal immediately, the penalty for noncompliance being the discharge of the surety, either absolutely or to the extent such noncompliance prejudiced him.”9
Such doctrine was judicially adopted in this Commonwealth in the case of Lichenthaler v. Thompson, 13 S. & R. 157 (Pa. 1825). Since its adoption Pennsylvania courts have sporadically used the doctrine and in so doing have
Accordingly the order in favor of PBM against Sarah Sanft is affirmed.
Jacobs, J., concurs in the result.
. Appellee, PBM, attempts to raise an issue of its own which was not raised by the appellant concerning Highland’s liability on the note. An appellee who files no counter-appeal cannot raise issues not raised by the appellant. Swarb v. Lennox, 405 U.S. 191, 201 (1971); Philadelphia Tax Review Board v. Manheim Laundry Co., 398 Pa. 265 (1960); Exner v. Gangewere, 397 Pa. 58 (1959).
. Act of April 6, 1953, P.L. 3, §§ 1-101 et seq., eff. July 1, 1954. Reenacted Act of October 2, 1959, P.L. 1023, §§ 1 et seq., eff. January 1, 1960. 12A P.S. §§ 1-101 et seq. Hereinafter referred to as the Code or simply referred to by section number only.
. See Section 3-415, Comment 1, which states that an accommodation party is always a surety.
. See Section 1-201 (40) which states, “ ‘Surety’ includes guarantor.”
. This is due to the fact that an “indorser makes the engagement of Section 3-414 that he will pay if the instrument to which he has subscribed is dishonored by its designated payor.” [For example: the routine indorsement of a personal check.] Peters, Suretyship Under Article 3 of the UCC, 77 Yale L.J. 833, 837 (1968).
. Section 3-413(1) states: “The maker or acceptor engages that he will pay the instrument according to its tenor at the time of his engagement or as completed pursuant to Section 3-115 on incomplete instruments.”
. The concept that one can be both a maker and an accommodation party is amply supported. Comment 1 to Section 3-415 uses the term “accommodation maker.” J. White and R. Summers, Handbook of the Law Under the Uniform Commercial Code (1972) at 426 states: “It is common practice for a surety to appear on a note either as a co-maker or as an indorser.” Peters, Suretyship Under Article 3 of the UCC, 77 Yale L.J. 833, 838 (1968) referring to Section 3-415(1) states: “‘In any capacity’ means that an accommodator may sign as maker, drawer, acceptor or endorser, but the last words of the definition require that the accommodation act for a debtor who is himself on the instrument.”
. The doctrine obtained its name from the case of Pain v. Packard, 13 Johns 174 (N.Y. 1816).
. Comment, The Doctrine of Pain v. Packard, 37 Yale L.J. 971, 971-972 (1928). See also L. Simpson, Handbook on the Law of Suretyship, §42, at 173-180 (1950).
. For those interested in the manner this doctrine has been used in Pennsylvania, see Pennsylvania Annotations to the Restatement of Security, §130, at 100-102 (1944).
. Section 1-103 states as follows: “Unless displaced by the particular provisions of this Act, the principles of law and equity, including the law merchant and the law relative to capacity to contract, principal and agent, estoppel, fraud, misrepresentation, duress, coercion, mistake, bankruptcy, or other validating or invalidating cause shall supplement its provisions.”
. Section 3-415(5) states as follows: “An accommodation party is not liable to the party accommodated, and if he pays the instrument has a right of recourse on the instrument against such party.”
. See Section 3-415, Comment 5.
Concurrence Opinion
Concurring Opinion by
I agree with the conclusion of the majority but believe it may be reached somewhat more directly.
The face of the note indicates that appellant is a comaker. She has signed “in the lower right hand corner.” This “indicates an intent to sign as the maker of a note.” 12A P.S. §3-402, Comment 1. Although nothing in appellant’s signature suggests that she is an accommodation party, the trial court found that she is. I accept this finding, but it does not change' appellant’s liability. According to 12A P.'S. §3-415 (2). “the accommodation party