Backus v. Shipherd — 11 N.Y. 629

Majority

p. 629

Backus vs. Shipherd.

Headnote

A stipulation by the endorser of a note to waive notice of demand of payment, does not dispense with the demand itself.

Where, however, the payee transfers a negotiable note, and at the same time guaranties its payment if not collected of the maker by due course of law, and also waives notice of demand : demand, as well as notice, is waived.

In an action upon such guaranty, the question of due diligence, in the attempt to collect the money of the principal debtor, being a mixed question of law and fact, should be submitted to the jury.

A judgment and execution are prima facie evidence of an attempt to collect the money of the principal debtor by due course of law; if beyond this, there has been negligence or omission on the part of the assignee of what might reasonably be required to effect the collection of the money, and a loss ensues, the burden of proving such loss is cast upon the defendant.

The omission to ñle a transcript of a justice’s judgment will not discharge a guarantor, unless the defendant had real estate upon which the judgment, when recorded in the county clerk’s office, would be a lien.

Error from the Washington common pleas. Backus sued Shipherd in the Washington common pleas. The declaration contained four counts: First. A count against the defendant, as the endorser of a promissory note made by one W. B. West, bearing date 13th December, 1819, for $40, payable on de

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mand, alleged to have*been transferred by the defendant to the plaintiff, on the 13th January, 1821. Second. A count on a guaranty of the same note, wherein, after alleging its transfer on the 13th January, 1821, the defendant is charged with having engaged that if the plaintiff should not be able to collect the note from the maker in a due course of law, he, the defendant, would consider himself responsible for the same, without requiring notice of non-payment. In this count- the plaintiff avers that on the 21st June, 1821, he sued West, obtained a judgment against him, before a justice of the peace of the ^'county of Warren, for the amount thereof, with costs, procured an execution to be issued thereon, and delivered to a constable; and that West had no goods, &c. whereof the same could be levied, was destitute of property, and wholly unable to pay, &c. by means whereof the defendant became liable, &c. The third count was for books and stationary, &c. and the fourth was for money lent, &c. the indebtedness of the two last counts being laid on the 18th day of March, 1824. The suit was brought in March, 1828. The defendant pleaded non-assumpsit and the statute of limitations, and to the second plea the plaintiff replied that the several causes of action accrued within six years. On the trial of the cause, the plaintiff proved the making of the note, and the endorsement thereof by the defendant was admitted. On the 21st June, 1821, the plaintiff obtained a judgment against West, before a justice of the peace, for the amount of the note, with costs, on which an execution was issued and delivered to a constable on the 27th October, 1821, by virtue of which the constable, on the 23d January, 1822, committed West to the jail of the county, not having been able to find any property out of which to satisfy the execution. The constable, however, testified that previous to 1821, it was reputed that one Derby had title to some real property in trust for West, and that at some time between 1818 and 1825, but at what time he could not say, it was reputed that West sold a piece of land in Warren county, and that Derby, as his trustee, executed the title to the purchaser; and that from 1823 to 1827, West exercised acts of ownership upon, paid taxes for, and was reputed to be the owner of certain real estate, which was afterwards said to be sold by one Ferns to two other individuals. The plaintiff also produced and proved the guaranty set forth in the” second count of the declaration. The defendant, in this stage of the trial, for the purpose of obtaining the opinion of the court upon certain questions of law which he wished to submit, waived, temporarily, his defence of the statute of limitations; and the plaintiff having rested, the defendant moved for a nonsuit, on the following grounds : 1. That the plaintiff was not entitled to recover on the first count of his declaration, not having shown a demand of payment of the maker of the note; and *2. That he was not entitled to recover under his second count, because he had omitted to sue the maker of the note for upwards oí five months after its transfer, and thus was chargeable with negligence, and because, "after obtaining judgment against West, he had omitted to file a transcript of the same, so as to obtain a lien upon the real estate of West, and in this respect had not proceeded in a due course of law to collect the note.

The court decided that the plaintiff could not recover under the first count, for the want of demand of payment, nor under the second, for the want of due diligence in the collection, and also for the omission to file a transcript, and therefore were of opinion that the plaintiff ought to be non-suited. The plaintiff then offered to prove that from 1818 until the time of the trial of the cause, West had been insolvent, neither owning or possessing any real or personal estate from which the debt in question could have been collected: the court refused to receive the testimony, ruling it to be inadmissible and immate

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rial, unless it was shown that a transcript had been filed. The plaintiff then proved that in March, 1824, his attorney exhibited to the defendant the note of West, and informed him that West had been sued upon it and a judgment recovered against him, and exhibited a statement of the judgment, when the amount was calculated, and the defendant promised to pay it, but said it was inconvenient for him to do so then ; and proposed, if the plaintiff would wait six months, that he would give his note, payable at that time; the attorney said he was not authorized to delay the payment, but would advise the plaintiff of his proposition, and presumed he would accommodate him. The attorney accordingly apprised the plaintiff, who directed him to accept the defendant’s proposition. After the expiration of the six months, the attorney wrote the defendant that the plaintiff had accepted his proposition, and directed the time required to be given ; and requested him, as he had had the delay desired, to attend to the payment of the demand. The court adhered to the opinions before expressed, and as to the new promise said, that to make it availing to the plaintiff, it was incumbent upon him to prove affirmatively that it was made by the defendant, with a knowledge of all the facts; *that there was no ground to believe that, at the time of the new promise, the defendant knew that demand had not been made of but maker of the note, or that the transcript had not been filed or recorded ; but inasmuch as the defendant had introduced testimony on his part, it was necessary to take the verdict of the jury. Whereupon the jury, under the instructions of the court, found a verdict for the defendant. The plaintiff having excepted to the several decisions, and obtained a bill of exceptions to be signed, sued out a writ of error.

S. Cheever, for the plaintiff in error.

Where the payee of a negotiable promissory note endorses and guaranties the payment of it, in an action on the guaranty, the assignee of the note need not prove a demand of payment of the maker. 20 Johns. R. 365. Here notice of non-payment was expressly waived, and under the circumstances of the case, a demand should have been dispensed with, for it could not have been intended by the parties, that any demand, other than a suit should be made. The plaintiff was not chargeable with negligence in not sooner suing the maker of the note ; he brought his suit in about jfrue months after the transfer, and there is no pretence that any injury accrued to the defendant from the delay. 15 Johns. R. 437. 4 Cowen, 173. Nor was the plaintiff bound to procure a transcript and have it recorded in the county clerk’s office, for the purpose of creating a lien upon the real estate of the maker of the note, had he in fact possessed real estate. Due course of law means all ordinary legal measures prosecuted with good faith, and those it is insisted were had in this case; the maker of the note was sued, and after judgment an execution was issued, upon which he was imprisoned; the parties did not contemplate any extraordinary proceedings. 1 Caines R. 437. Besides, it is not necessary that extraordinary proceedings should be resorted to, unless it be affirmatively shown that they would have produced a satisfaction of the judgment. The law requires only the ordinary remedies to be pursued. 4 Cowen, 173. Here was nothing but rumor, that the maker of the note had any real estate upon which the transcript could operate, and even that slight circumstance was offered to be rebutted by proof that the party was wholly insolvent since 1818. As to the *plea of the statute of limitations, the new promise is a perfect answer ; it was made with a full knowledge of every circumstance necessary to make it binding.

S. Stevens, for the defendant in error.

The first count was not supported ; a waiver of notice does not dispense with the demand of payment. 6 Mass. R. 524 . The plaintiff did not use due diligence, either in the commencement

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or the prosecution of the suit, or in filing the transcript of the judgment. The insolvency of the maker of the note does not excuse the want of diligence in the prosecution of the suit, or securing the benefit of the judgment by the filing of the transcript, which is an ordinary, and not an extraordinary proceeding. By the terms of the contract, it was only in the event that the money could not be collected by due course of law, that the defendant promised to be accountable. There was no promise to take the case out of the statute. The promise proved was on a condition which was not complied with ; it was, if the plaintiff would wait six months, the defendant would give his note, payable at that time. Notice was not given of the acceptance of this proposition until after the expiration of the six months, and the offer not being accepted, there was no contract. 8 Johns. R. 384. id. 407. 1 Cowen, 397. 3 Johns. R. 230. 4 Esp. N. P. Cases, 36. But if there was a promise, it was made without a knowledge of all the circumstances affecting the defendant’s liability, which must be shown affirmatively and unequivocally, or the promise is not binding. 5 Johns. R. 385. There is no proof that the defendant knew that the transcript had not been filed.

By the Court,

The first question raised in the case, I believe, has not been decided by this court; but as a general proposition, we have no hesitation in saying that a stipulation by the endorser of a note to waive notice of demand upon the maker, does not, according to the law merchant, dispense with the demand itself. They are distinct acts, and each a condition precedent to the right of recovery by the holder. The endorser, in waiving notice, may rely upon an *assurance or conviction that Ihe note will be paid by the maker, if demanded when due. 6 Mass. R. 524 . I cannot, however, entertain a doubt that by the stipulation between these parties, the demand as well as notice was waived. It required the plaintiff to enforce the collection of the note by due course of law, and if unsuccessful the defendant engaged to pay it. If this part of the agreement has been performed according to its legal intendment, and the note not collected, the defendant, by its very terms, is liable without any demand. If it has not been performed, the defence is complete, independently of any question about demand. A reasonable construction of the agreement necessarily excludes it. It is not material, however, to examine whether the first count was sustained, supposing a compliance with the import of the stipulation on the part of the plaintiff.

Whether the proceedings of the plaintiff in the prosecution of the note (the transcript out of question) were commenced and carried on within the meaning of the term “ in due course of law,” is a question I shall not examine in detail, though I am free to declare that in my judgment, under the facts of this case, it should have been submitted to the jury. It was a mixed question of law and fact. This is clearly the view of this court in the case of Thomas v. Wood, 4 Cowen, 173, and in the authorities there referred to. In that case, a verdict was taken for the plaintiff, subject to the opinion of the court upon the facts. The court were substituted for the jury as to the questions of fact.

The court below assumed, that the promise of the defendant to pay the debt to the agent of the plaintiff was inoperative, on the ground that there was nothing in the case tending to prove, that it was made with a full knowledge of all the facts, and particularly nothing to show that the defendant knew that a demand had not been made on the maker, or that the transcript of the judgment had not been filed, and accordingly advised the jury to find a verdict for the defendant. Now, if I am right in the construction of the stipulation between the parties, of which I entertain no doubt, to wit, that there was an implied

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waiver of a demand, then, the court erred in this respect; because, if there was such waiver, the promise was made with knowledge that a demand was not *necessary. The defendant was bound to understand the effeet of his agreement. Further, if I am right in the construction that a demand was waived, the opinion of the court below seems to concede enough to entitle the plaintiff to recover, (the transcript out of the case.) For after the testimony of the attorney for the plaintiff, it does not appear to have been denied by the counsel or the court, that the promise was made with a full knowledge of all the legal proceedings before that time had, in the attempt to collect the note. Indeed, thus far the testimony was full; for a statement of the judgment was exhibited to the defendant at the time which contained the entire history of the proceedings, and the court, therefore, were obliged to confine the want of knowledge, to the fact of demand, and the filing of the transcript.

As to the filing of the transcript: due course of law, when applied to the prosecution of a demand in a court of record, confessedly means no more than a timely and regular proceeding to judgment and execution. An execution is, «emphatically the end and finisher of the law. So in regard to a demand collectable only in a justices’ court, every possible effort need not be made, or means tried. A proceeding to judgment and execution is at least prima facie a compliance with the contract. If beyond this there is negligence, or more than what was done might reasonably have been done to collect the debt, and a loss ensues, it lies on the defendant to show the loss, and that it was occasioned by such negligence or omission. Nothing of the kind appears in this case. To contend that the defendant has suffered from the omission to file in the clerk’s office the transcript of the judgment, it should first appear that West had real estate upon which it would have been a lien. No such fact is proved. Rumor or report should not take the place of fact.. Besides, the plaintiff offered to prove that West had no real estate, which evidence the court rejected.

If, then, the promise was made with a full knowledge of the legal proceedings which had taken place in the endeavor to collect the note, it follows from the above views that the plaintiff should have recovered, whether those proceedings were a strict compliance with the terms of the stipulation or not. Any defect in this respect was waived by the promise, *under a full knowledge of the material facts. The stipulation superseded the necessity of a demand, and the transcript was not important, unless the defendant had real estate.

Upon every view I am able to take of this case, the court erred.

Judgment reversed, and venire de novo.