Barnett v. Wing — 41 N.Y. St. Rep. 799

Majority

p. 799

John M. Barnett, Resp’t, v. Asahel B. Wing et al., Ex’rs, App’lts.

(Supreme Court, General Term, Third Department,

Filed November 30, 1891.)

Headnote

GUARANTY—WHEN IT IS NOT CONTINUING—RENEWAL OF A NOTE.

The defendant's testator orally requested the plaintiff to endorse an accommodation note of one Nash in order to have it discounted, and promised him that if Nash failed to pay it, he would, and would hold the plaintiff harmless. Relying on this promise, the plaintiff endorsed a note for said Nash. It was not paid, and was several times renewed in the same form. In an action to recover a balance paid by plaintiff upon the last renewal note, Held, that the testator’s liability was only upon the original note and did not attach to said renewals.

Appeal from a judgment entered upon the report of a referee in favor of the plaintiff.

The action was prosecuted by the plaintiff to recover upon an alleged paroi agreement by defendant’s testator, that if plaintiff would endorse a note for $1,500 for Melvin A. Hash, and Melvin A. did not pay it, he, the testator, would. The note was solely for the benefit of the maker, Melvin A. Hash. At maturity it was renewed, the plaintiff endorsing the renewal note, on which at maturity the maker paid $500, and the note of the maker endorsed by the plaintiff was given for the unpaid balance. Other notes were given on which the maker paid small payments. The maker on the last renewal note paid $280.73, when due, and the plaintiff paid the balance.

The defendant’s testator having died, the plaintiff brought this action to recover the amount so paid by him.

Potter & Little, for resp’t; Edgar Hull (C. A. Sturges, of counsel), for app’lts.

The referee found as facts the making of the note by Melvin

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fore the endorsement Edwin A. Nash requested the plaintiff to endorse the note, promising him that if he would do so he, Edwin, would pay the same when due if Melvin did not, that he would indemnify and hold the plaintiff unharmed on account thereof, and that, relying on said promise, plaintiff did then endorse said note.

The appellants insist that this finding is not supported by the evidence. The only evidence in support of this finding is found in the testimony of Melvin A. Nash, and his testimony upon that subject is as follows: “ I had a conversation with my father, Edwin B. Nash, at or about the date of the original note, a few days after. He told me ho had asked Mr. Barnett to sign a note for me, or he would not have done it. He said he asked Mr. Barnett to sign the note, and if I did not pay it he-would; or Barnett would not have signed it.”

It is insisted by the appellants that this language does not,, upon the most favorable construction, or interpretation of it, for the plaintiff, prove a promise by the testator to guarantee or indemnify the plaintiff or keep him unharmed by signing or endorsing this note, and I am quite inclined to agree with that contention. It would certainly require a forced and unnatural construction of these words to give them the force of a contract of guarantee or indemnity against the legal consequence of signing or endorsing this note. The most that would fairly be claimed for the language used was an agreement of the decedent to pay this note if the maker failed to do so.

There was nothing in the language to justify the conclusion that the testator intended to pay any other or future notes, made by Melvin A. Nash and endorsed by the plaintiff, upon the failure of the maker to pay, and if it could be held that an agreement by the testator to pay that note, if not paid by the-maker, was in the nature of a guarantee that the endorser would not be called on to pay that note, still, such a guarantee could not be made to extend to other and subsequent notes made by Melvin and endorsed by the plaintiff, to which no reference was-made by the decedent.

If, as matter of law, the statement of the deceased proved to have been made can be construed as evidence of a guarantee against the first note, still, within the well settled rules of construction of guarantees, it could not be extended to other and subsequent notes not referred to in that statement or in existence at that time.

In the case of Evansville National Bank v. Kaufmann et al., 93 N. Y., 281 , the court says : “But when the meaning of the language used in a guarantee is ascertained, the surety is entitled to the application of the strict rule of construction, and cannot be held beyond the precise terms of the contract.”

Applying this rule, it is difficult to see how the defendant’s testator can be held, even by the most liberal interpretation of the words imputed to him, to have guaranteed the plaintiff against the consequence of bis endorsement of these renewal notes. A guarantor has a right to prescribe the exact terms upon which he-

p. 801

will enter into the obligation, and insist upon his discharge in case those terms are not observed. Barns v. Barrow, 61 N. Y., 39 .

But it is further insisted upon the part of the appellant that in. any aspect of this case the promise claimed to have been made by the defendant’s testator was but a paroi collateral promise to answer for the debt, default or miscarriage of another, and not being in writing and subscribed by him was void by the statute of frauds.

If this position is true, then the plaintiff could not recover in this action and the judgment should be reversed. It will be borne-in mind that the only promise proved was that if Melvin A. Bash, the maker, did not pay the note, he, Edwin B. Bash, would. Melvin A. Bash was the maker of the note and the principal debtor. James B. Barnett was the payee and the person to whom, or to whose order, the payment was to be made. Edwin B. Bash agreed with the payee that if Melvin A. did not pay the note he would. If, therefore, he was liable on that agreement, it was as-the guarantor that Melvin A. would pay the note. If Melvin A. had paid the note, Edwin B.’s obligation would have been discharged, and hence bis agreement was collateral to the performance by Melvin A.

His was not an original agreement to pay this note in any event, but only in the event that Melvin A. did not pay it, and therefore collateral to the agreement of Melvin A. Collateral is defined by Webster as “ security given in addition to the principal promise or bond.” In this case Melvin A. had, by his promissory note, agreed to pay this plaintiff, or to his' order, $1,500.

This was the principal promise, and collateral to that promise Edwin B. promised that if Melvin A. failed to perform, as he agreed, to pay the note, he, Edwin B., would pay it He was, therefore, the verbal guarantor of Melvin A.’s agreement in the note. A guarantor is one who agrees to see the engagement of another performed, and that is all that can be fairly claimed the defendant’s testator assumed to do in this case. Bouvier defines a guarantee as “ an undertaking to answer for another’s liability and collateral thereto; a collateral undertaking to pay the debt of another in case he does not pay.” 1 Bouvier P., 640. In Gallagher v. Nichols, 60 N. Y., 444 , the court of appeals says: “ A .guarantee is defined by elementary writers to be a promise to answer for the payment of some debt or the performance of some duty in case of the failure of another person who in the first instance is liable for such payment, or performance.” Citing 3 Kent’s Com., 121.

If this were a legal guarantee of the payment of this note by the maker it would have passed on the endorsement of the note to the bank, and would have been enforcible by it. Everson v. Gere, 122 N. Y., 290 ; 33 St. Rep., 462 .

But if .we are right in our conclusion that it was only a paroi collateral promise by Edwin B. Bash to answer for the debt or default of Melvin A. Bash, it comes clearly within the definition of a contract void by the statute of frauds.

The respondent insists that as between Barnett, to whom it is-

p. 802

alleged the promise was made, and Edwin B. Hash, by whom it was made, it is not a collateral but a direct promise, and that there was a sufficient consideration of harm to the promisee to take it ■out of the operation of the statute. In support of this theory the respondent cites Mallory v. Gillett, 21 N. Y., 412 ; Tighe v. Morrison, 116 id., 263 ; 26 St Rep., 178 ; Leonard v. Vredenburgh, 8 Johns., 29 ; Chapin v. Merrill, 4 Wend., 657 ; Emerson v. Slater, 22 How., U. S., 28; McCreary v. Van Hook, 35 Texas, 631, and Tisdale v. Morgan, 7 Hun, 583 . In Mallory v. Gillett, supra, the plaintiff was in possession of a boat on which he had a lien for repairs, and the defendant promised by paroi that if the plaintiff would surrender the boat to the owner he would pay the charges, some of which he paid at the time. It was held to be an original and not a collateral promise and not within the statute, and the reason .for it seems to be that, though the debt of another may have been the original cause of the promise, yet, if the person to whom it is made relinquish some right or advantage which he possesses which might have enabled him to obtain, satisfaction of his debt, the promise of a third person to pay the debt in consideration of such relinquishment is an original and not a collateral promise. Ho such reason exists in the case at bar, and the cases are therefore clearly distinguishable upon principle.

In Tighe v. Morrison, 116 N. Y., 263 ; 26 St. Rep., 178 , the defendant applied to the plaintiff to sign an administrator’s bond, claiming that he had an interest in the estate, and that it was indebted to him, and upon his oral guarantee to save the plaintiff from loss he executed the bond. The principal in the bond defaulted, and plaintiff suffered loss. In an action on this guarantee, it was held that the case was not within the statute, that the promise was an original one, and legally beneficial to the defendant only, and the court lay down what seems to be the real distinction between a collateral and original undertaking, and hold that to bring a promise within the statute it must be made to persons entitled to enforce the liability assumed by the promisor. In this case the court says: “ In órder to attain a position which he represented would be of pecuniary value to himself, the defendant promised to indemnify the plaintiff against the consequences of an act necessary to enablé him to enjoy said position. One of the consequences was his own possible default. * * * Within all these authorities the promise was clearly original.” And the court adds: “Moreover, the rule seems well settled that .a promise not made to a person entitled to enforce the liability assumed by the promisor is not within the statute.” In the case at bar the promise was made to the payee of the note, the one primarily entitled to enforce the liability. The note was payable to him or order. Without stopping to denote the distinguishing features of the case at bar from those cited and relied upon by the learned counsel for the respondent, we think them all distinguishable upon principle. In Kingsley v. Balcome, 4 Barb., 138 , the court, in discussing this statute, says: “ The true rule is that the new original consideration spoken of must be such as to shift the actual indebtedness to the new promisor, so that as between him

p. 803

and the original debtor he must be bound to pay the debt as his own, the latter standing to him in the relation of surety. Farley v. Cleveland, 4 Cow., 432 ; Barker v. Bucklin, 2 Denio, 45 ; Baker v. Dillman, 21 How., 444 ; Carville v. Crane, 5 Hill, 483 .

Upon the facts in this case we are clearly of the opinion that the promise proved if capable of being construed into an agreement to indemnify the plaintiff against his endorsement of this note, was within the statute of frauds, and, therefore, void. If right in this conclusion, it is unnecessary to discuss the other points raised by the appellant on this appeal.

The judgment should be reversed.

Judgment reversed, referee discharged and a new trial ordered, costs to abide the event.

The referee finds that the testator, Edwin B. Hash, verbally requested plaintiff to endorse an accommodation note of Melvin A. Hash, in order to have it discounted at the bank, and promised him that if Melvin A. failed to pay he would pay, and would hold plaintiff harmless; that, relying upon that promise, plaintiff on the 16th of May, 1888, endorsed a note of Melvin A. for $1,500. That this note was not paid, but was renewed several times in the same form. On the trial the plaintiff called Melvin A. as a witness, and then executed and delivered to him a general release which specially released Melvin A. from any liability on account of paying the note or the existing renewal thereof.

Without discussing the validity of the indemnity, I am of the opinion that Edwin B. was discharged by the renewals. If, as plaintiff claims, the testator’s liability became fixed when the first note became payable, still the plaintiff extended the time by making a new note. After he had done this, if Edwin B. had paid the plaintiff he could not have sued Melvin A. until the new note became payable. Melvin A. had then taken up the original note and was no longer liable thereon. Edwin B. had agreed to indemnify plaintiff for endorsing the first note, not for endorsing numerous renewals thereof. He might be willing to take the note that Melvin A. would pay, the first note, which came due August, 1888, but not that he would pay, or would be liable to pay, anote which came due in March, 1890.

Furthermore, I think that by releasing in open court Melvin A. from all liability on the original note and on the existing renewals thereof, the plaintiff discharged the testator’s estate. Melvin A. was the principal debtor, and a release of the principal debtor is a discharge of the surety or guarantor. There was no longer anything to guaranty. This defense could not have been pleaded, the act took place on the trial.

For these reasons I concur in the result of my brother May-ham’s opinion.