Salt Springs National Bank v. Sloan

February 19, 1887, plaintiff held drafts under discount •drawn by Austin & Co., of Oswego, upon Baker & Clark, of New York city, which had been accepted and grown overdue, and the defendant on that day •delivered to the plaintiff his bond conditioned to pay up to the sum of $5,000 ■of said debt, providing the plaintiff should use due diligence to collect the ■same of the acceptors or their assignee. A claim was filed with the assignee by the plaintiff. Plaintiff took no proceedings against the assignee, and in no manner sought to coerce the final settlement of his accounts. No such final settlement has been had. Plaintiff brought a suit against Baker & Clark upon the drafts, and obtained personal service on the-day of August, on one of the defendants, and on the 7th of September, 1887, upon the other defendant. In that suit judgment was not taken and entered until -the 4th day of January, 1888. An execution was issued on the 17th day of .February, 1888, but the same had not been returned when the action was 'brought on the 17th day of March, 1888. It was returned, however^miZZ® Lbona on the 12th day of April, 1888. The answer of the defendant sufficiently - -alleges the negligence, loches, and failure of the plaintiff to use diligence in •collecting the debt held by it mentioned in the bond executed by the defendant. When he delivered the bond he became a surety, a guarantor of the collection of the debt, or so much thereof as mentioned in the bond. Reading the bond in the light of the surrounding circumstances, and construing the same with the receipt or agreement made by the plaintiff when it took the bond, (Bank v. Kaufmann, 93 N. Y. 273,) we are of the opinion that the defendant stipulated as a condition precedent to his promise to pay that the plaintiff should use due diligence to collect the debt of the acceptors .and their assignee. When Griffith v. Robertson, 15 Hun, 344, was before «this court attention was given to an instrument containing a guaranty of «collection, and speaking for the court in that case, I said: “We think the ■Instrument executed by the defendant Robertson must be construed and ■held to be a guaranty of collection. In such a guaranty it is a condition precedent that the creditor shall diligently endeavor to collect the amount of the principal debtor, by exhausting the ordinary legal remedies for that purpose*, and a failure to do so works a discharge of the guarantor. ” This doctrine was laid down by Talcott, J., in Insurance Co. v. Wright, 13 Hun, 166, affirmed 76 N. Y. 445, and cases sustaining the doctrine are cited. .Kies v. Tifft, 1 Cow. 98; Craig v. Parkis, 40 N. Y. 181; Moakley v. Riggs, 19 Johns. 69; Loveland v. Shepard, 2 Hill, 139. In delivering the opinion .«of the court of appeals in Insurance Co. v. Wright, affirming the same case án 13 Hun, 168, Church, C. J., said: “The law is well settled in this state ■Shat such a guaranty is an undertaking to pay the sum secured by the obligation, guarantied, provided the principal is prosecuted to judgment and execution with due diligence, and the same cannot be collected of lum. Due diliigence in exhausting the legal remedies against the principal is a condition ,precedent to any liability against the guarantor. Nor will proof of insolvency, -.or inability to pay on the part of the principal, avail as a substitute for a fail-are to pursue the legal remedies. Craig v. Parkis, 40 N. Y. 181. It follows «that this condition is a part of the contract, and must be shown to have been performed, as a demand and protest of a note must be shown, in order to fix the • liability of an indorser.’ ” The case from which we have just quoted .was decided in 1879. It was referred to and followed by this court in Tiffany v. Willis, 30 Hun, 266, decided in 1883. The same doctrine is reiterated by -.the court of appeals in Schmitz v. Langhaar, 88 N. Y. 506, viz.: “In such a •asase the law in this state construes the obligation as an undertaking that ¿the demand is collectible by due course of law, and the guarantor bound to *35pay the sum specified in the original contract, ‘provided the principalis prosecuted to judgment and execution with due diligence, and the same cannot be collected of him.’ Craig v. Parkis, 40 N. Y. 181.. We have come to regard those proceedings, and the return of the proper officer, that the writ cannot be enforced, as the best evidence that the method of procedure prescribed by law for the collection of debts has been followed, and of the debt- or’s inability to pay.” In the case from which we have just quoted the guaranty was of the collection of a claim against a deceased party, and the court took occasion to point out “the difference between this case and that of a guaranty of a collection of a claim against a living debtor;” and probably the doctrine of that case is sufficient to warrant us in supposing the diligence due from the plaintiff, so far as the assignee of Baker & Clark was concerned, was indicated by a presentment of the claim to the assignee, but we find nothing in that case whicii absolves the plaintiff from exercising due diligence against Baker & Clark, the acceptors. A non-performance of the duty of the plaintiff to prosecute to judgment and execution, and a return thereof, the claim against the acceptors, cannot be excused by showing that the debtors were insolvent, and that apparently or probably nothing, would have been obtained from them by means of a judgment and execution. Craig v. Parkis, 40 N. Y. 181. The diligence which the defendant exacted was required to be shown during the year mentioned in bis bond. The plaintiff did not enter judgment as soon as the defendant’s time to answer had expired in the action brought against the acceptors; on the contrary it gave several stipulations extending the time to answer, and postponing its right to enter up judgment. It appears that the extensions voluntarily given by the plaintiff allowed 99 days more time to the debtors to answer than by due process of law they were entitled to. When this action was brought the plaintiff had not used or exhibited that diligence required by the conditions of the bond executed by the defendant, therefore its right of recovery did not exist according to the terms of the defendant’s contract. As we have already observed, defendant was entitled, as he was a surety, to have the exact terms of his bond complied with before he was called upon, under the terms of the bond, for a fultillment of the promise on his part in respect to the payment of the sum of $5,000 stated in the bond. There is nothing in the evidence indicating any waiver of the terms of the bond. To make out such waiver there must be clear and convincing evidence. Insurance Co. v. Wright, 13 Hun, 168, affirmed 76 N. Y. 445. On the contrary we think the plaintiff’s attorney or agent was from time to time notified that thedefendant would not pay unless plaintiff used due and legal diligence. Clear intimations to that effect were given. We are of the opinion that the evidence offered by the plaintiff, when read with the evidence offered by the defendant, did not establish that the plaintiff had used due diligence “within the time limited in the bond,” and that the loches and negligence of the plaintiff appearing in the case were such that the trial court ought not to have held as matter of law that plaintiff was free from negligence and loches, and had fully complied with the tenor and terms of the bond executed by the defendant. We think it was error to direct a verdict in favor of the plaintiff. Thomas v. Woods, 4 Cow. 173; Backus v. Shipherd, 11 Wend. 634. We think a new trial should be ordered. Judgment reversed on the exceptions, and a new trial ordered, with costs to abide the event. All concur.