Phillips v. Plato — 5 N.Y. St. Rep. 124

Majority

p. 124

Peter Phillips, Resp’t. v. Sarah Plato, Appl’t.

(Supreme Court, General Term, Fourth Department,

Filed November, 1886.)

Headnote

Bills and notes — Guabantob — When liability ceases.

The note of a third party was endorsed by Phillips, and afterwards unknown to him, was guaranteed by Sarah Plato. The note being dishonored was paid by Phillips who seeks in this suit to make S. Plato contribute one half. _Held, that the guarantor’s liability ceased when the note was paid.

2. Same.

The difference between an endorser and guarantor is slight. The former becomes liable on condition of notice of dishonor if the note is not paid by the maker when due, the latter becomes absolutely liable to pay if the note is not paid when due.

Appeal from judgment in favor of plaintiff by the court without a jury.

Bently & Jones, for resp’t; Olney & Powers, for appl’t.

This is an appeal from a judgment upon a decision by the court without a jury. The action was upon a guarantee of payment of a promissory note for the amount of the note. The complaint was amended on the trial so as to constitute an action by plaintiff, as endorser, who had paid the note, against the defendant who had guaranteed its payment, for one half of the amount paid. G. H. Plato, defendant’s son, was indebted to one

p. 125

Olney, and to pay tbe same, made this note, and procured the plaintiff to endorse it. It was then offered to Olney, who refused to accept it unless G. H. Plato would procure the defendant’s signature. Soon after, the defendant, with full knowledge of the facts, executed on the back of the note over plaintiff’s endorsement an absolute guarantee of the payment of the note. The note was then delivered by G. H. Plato to Olney. When it became due it was dishonored and plaintiff paid it. He now brings this action against the guarantor and claims that she, as a co-surety for G. H. Plato, the principal debtor, is liable for contribution, and a recovery for one half of the amount paid by plaintiff is given against the defendant. G. H. Plato is insolvent. The plaintiff had no knowledge of, or participation in, the procuring of defendants guarantee nor did he require it.

It is plain that the defendant’s guaranty was given without consideration and as an accommodation to her son, the principal debtor. By the instrument she became absolutely liable to pay the debt. She did not assume this liability at the request or in the interest of the plaintiff. Indeed his position as endorser was complete before the necessity of any other security became known. He doubtless supposed the creditor would accept the note with this endorsement alone. The defendant knew these facts and signed for the purpose of giving to the note as it then existed, the security of her name. In the language of TaícOTT, P. J. in Deck v. Works, 18 Hun, 266 -272 “ the guarantor of a note, on which there is a prior endorsement, undertakes for the performance of each contract which he has guaranteed, that of the maker and that of the endorser. If either fails to perform the contract which is guaranteed, a cause of action arises to the holder of the guaranty for such fault.” As a corollary it must be true that if either the maker or endorser shall pay the note the guarantor’s liability ceases.

Again until the note had been endorsed by the plaintiff it had no commercial or negotiable existence. When it was so endorsed its use was followed by liability, but before such endorsement it was incapable of being used to create an obligation. When the note was presented to defendant it was complete and perfect in its form. Such perfect and complete note she guaranteed payment of. It has been paid by the parties to it or one of them. That is what she agreed should happen and her obligation is at an end. There is no reason to believe the plaintiff required or expected defendant to sign the note as his co-surety. or for his protection in whole or in part. Her signature was placed there with the purpose of becoming in effect a second endorser but was modified because she was a married woman. The difference between an endorser and guarantor is slight. The former becomes liable on condition of notice of dishonor if the note is not paid by the maker when due ; the latter becomes

p. 126

absolutely liable to pay if the note is not paid when due. Brown v. Curtis, 2 N. Y., 230 . McMurray v. Noyes, 72 N. Y., 523 , 525. The defendant by her guaranty made under the circumstances of this case became the surety of the maker and endorser. She did not intend to become the co-surety of the plaintiff and equally liable with him for the debt but only for his default. In this respect the case is brought within Hanis v. Warner, 13 Wend. 400 . Belloni v. Freeborne, 68 N. Y. 383 , 388. No importance is attached to the position of the guaranty above plaintiff’s endorsement upon the note.

For these reasons we are constrained to differ with the learned Judge who decided this case below. Nor do we think the case of Wells v. Miller, 66 N. Y., 255 , is controlling although the decision was mainly founded upon it. The parties to that action were in fact sureties for the principal debtor and both signed the note beneath his signature. The question was whether the plaintiff, who was a partner of the debtor, had not so acted as to deceive the defendant into the belief that he was signing as surety for both the partners, and hence not entitled to contribution in equity. No such question is presented in the present case. This is an action by an endorser against a guarantor, where the purposes and intent of the parties, their mutual relations to each other, to the note and its maker, the possible liabilities of each and the actual liability of the defendant after payment of the note by plaintiff are open for consideration. In Wells v. Miller, supra, the court consider only whether contribution should be enforced between actual and recognized co-sureties in equity by reason of the peculiar facts in the case.

The judgment should be reversed and a new trial granted, costs to abide the event.

Follett, J., concurs.

Plaintiff’s contract of endorsement was made without reference to the defendant: it was to pay if the maker did not and the holder gave notice of the dishonor.

Defendants undertaking was that if the note was not paid by the maker or endorser, she would pay it. Moakley v. Riggs, 19 John., 69 . The endorser has paid. it. He has no more claim upon the defendant than though she had in form, as was her intent (aside from binding herself as a married woman), become a second endorser. I concur.

Cases cited

Harris v. Warner 13 Wend. 400 N.Y. Sup. Ct. p. 126