Ralph v. Eldridge — 34 N.Y. St. Rep. 191

Majority

p. 191

Murray N. Ralph, App’lt, v. Loren D. Eldridge et al., Resp’ts.

(Supreme Court, General Term, Third Department,

Filed November 28, 1890.)

Headnote

Guaranty—Of collection.

On the dissolution of a partnership and the sale of his interest therein to plaintiff, defendant gave a bond conditioned that he would pay to plaintiff one-half of the amount of the notes and accounts of the firm assigned to plaintiff, “that shall prove to be uncollectible.” Held, that this was a guaranty of collection, and that plaintiff could not recover thereon without showing judgment and executions returned unsatisfied, although the amounts of said notes and accounts were small.

Appeal from judgment in favor of defendant, dismissing the complaint, with costs.

Action upon a bond executed by defendants.

J. 0. Keeler, for app’lt; V. P. Abbott, for resp’ts.

The plaintiff and defendant, Eldridge, had been co-partners. On the 25th of November, 1884, the firm dissolved; plaintiff sold to Eldridge the stock, and Eldridge conveyed to plaintiff his interest in the notes, accounts, and demands owing the firm. At the same time Eldridge executed to plaintiff a bond with defendant Seymour as surety.

p. 192

The condition of the bond was that Eldridge should pay to-plaintiff one-half of the amount of notes, accounts and claims of the late firm assigned by Eldridge to plaintiff “ that shall prove to be uncollectible, if any such there be,” with interest from the-date of the bond.

On the trial the plaintiff produced a list of claims which he-claimed to be uncollectible, and testified, or offered to testify, as. to each, that he was personally acquainted with the financial ability of each, and that since the assignment not'one of them has had sufficient ability to pay the claim.

This testimony was objected to as incompetent, and the referee-so held. And the referee made his report that no right of action arose on the bond until the prosecution of the claims to judgment, and the issue and return unsatisfied of execution thereon.

From the judgment thereupon entered the plaintiff appeals. The question here is whether it was necessary for plaintiff thus to-prosecute to judgment and execution before he could recover on the bond. That question must depend on the meaning of the condition of the bond. Because there is no other liability of either defendant to the plaintiff.

It seems to be settled in this state, that a guarantee of collection-, is an undertaking to pay the sum of money guaranteed, provided the principal debtor is prosecuted to judgment and execution with due diligence and the same cannot be collected of him. Northern Insurance Company v. Wright, 76 N. Y., 445 ; Craig v. Parkis, 40 id., 181. The plaintiff urges that the bond does not guarantee-the collection of these claims, but is only a contract to pay plaintiff one-half of the amount of those which should turn out bad.

But the bond uses the word “ uncollectible,” and the question must be what is the legal meaning of that word. That word has. a definite meaning, as decided in the cases above cited. And that, meaning should be here enforced.

The plaintiff urges that the accounts are small and it could not have been intended that they should be sued. But it would be incorrect to hold that “ uncollectible ” meant one thing as to small accounts and another thing as to large.

The language “prove uncollectible” strengthens this view. Some process was in view by which it should be legally ascertained that the accounts were uncollectible. That process is prosecution to judgment and execution.

The plaintiffs might have bound themselves to pay half of such accounts as should not be voluntarily paid. But they did not do so.

And as they were under no obligation to plaintiff except upon the bond, we think that he cannot recover without showing judgment and executions returned unsatisfied.

To hold otherwise would be contrary to a familiar and settled rule of construction.

Judgment affirmed, with costs.

Landon and Mayham, JJ.,'concur.