Case ID: abb-ct-app_3/html/0326-01.html
Source: Caselaw Access Project
Author: {"author": "Leonard, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

MOSHER v. HOTCHKISS.
    September, 1866.
    On appeal from a judgment on the findings of a referee, facts not included in such findings cannot be considered in this court. It was the duty of the party to have procured the referee to find specially on that subject.
    The words “ for value received,” used in guaranteeing a note, are a sufficient statement of the consideration to satisfy the statute of frauds. One who guarantees the collection of a demand, is liable, not only for its amount if uncollectable, but also for the costs of the action brought against the principal debtor for its collection.
    A creditor who collects by action part of a demand on which a surety is liable, is entitled, as against the surety, to apply the money first to the payment of the costs, leaving the residue only to be applied in reduction of the debt.
    John Mosher and others sued Lemon B. Hotchkiss, in the supreme court, as guarantor on a promissory note for two hundred and forty-five dollars, made by Spencer Hildreth and Harvey Carey, dated August 8, 1857, payable three months after date, to the order of Hildreth, at the Ontario County Bank. This note was guaranteed by Hotchkiss, by signing on the back thereof the following guaranty:
    
      
      “ For value received, I guarantee the collection of the within note, and the interest on the same.”
    The note so guaranteed was discounted hy the Ontario County Bank, and afterward transferred, before maturity, to the plaintiffs. The plaintiffs recovered judgment against the makers for the amount of the note, and costs, and after execution partly unsatisfied, brought this action against the guarantor.
    The defense was, that defendant made the guaranty at Hildreth’s request, for him only; that by the discount of the note the bank became the sole owner of it; that on September 5, 1857, defendant paid the bank the amount of the note and interest, and they sold the note to him, whereby his liability as guarantor was extinguished; and that he left the note with them for collection; and that neither they nor the other parties named had any authority to transfer it or the guaranty^to the plaintiff.
    The referee found the fact of the alleged discount, and that the Ontario Bank, being indebted to the plaintiffs, transferred the note and guaranty, before the maturity of the note. That the judgment against the makers was uncollectable, except as to such part as had been satisfied by execution.
    
      Theron P. Strong, for defendant, appellant.
    Plaintiffs are not bona fide holders. Stalkers v. McDonald, 6 Hill, 93; Farrington v. Frankfort Bank, 31 Barb. 183. Defendant is a surety, and not liable beyond the strict terms of the guaranty, which was of the collection of the note and interest, not of the costs against the makers also. Taylor v. Bullen, 6 Cow. 634, 636; He well v. Fowler, 33 Barb. 638.
    
      Amasa J. Parlcer, for plaintiffs, respondents.
    The facts found by the referee cannot be questioned in this court. Macy v. Macy, 30 N. Y. 331; Thompson v. Kessel, Id. 383; Woodruff v. McGrath, 33 Id. 355; Western v. Genesee Mut. Ins. Co., 13 Id. 358; Newton v. Bronson, 13 Id. 587. The guaranty was a valid contract, and the consideration was legally expressed. Miller v. Cook, 33 N. Y. 495; Howard v. Holbrook, 9 Bosw. 237.
    
      The- judgment was affirmed by the court at general term, and the defendant appealed to this court.
   Leonard, J.

There is not a single fact found by the referee in this case that indicates any defense to this action if it had been prosecuted by the Ontario County Bank against the defendant. It is not competent for this court to explore the evidence to ascertain whether there are other facts which might have been found by the referee, and if found, would have authorized a discussion of the questions suggested by the exceptions taken to the conclusions of the referee.

Whether or not the defendant paid any money to the Ontario County Bank, and when, or for what purpose, and with what effect, it is not the province of this court to consider, as the defendant has not procured any report upon these facts. So far as the report speaks, it is adverse to the defendant on these questions. The fact that the Ontario County Bank did not sell and transfer the note to the defendant before the sale to the plaintiffs, as found by the report, is'in direct hostility to the claim of the defendant that he had paid the note and satisfied it, or that it had been transferred to him by the Ontario County Bank in such a manner as to raise any equities in his favor superior to the rights of the plaintiffs. Had the defendant considered these questions important, he could have procured the referee to have found specially upon the subject. Without such findings the questions sought to be raised are not before us. Grant v. Morse, 23 N. Y. 323; Phelps v. McDonald, 26 Id. 82.

It is said that the guaranty is void, by the statute of frauds. A motion was made to dismiss the complaint, and an exception to the referee’s report was taken on that ground. The consideration named in the instrument is “ for value received.” This term has been held by this cdurt to sufficiently express the consideration. Miller v. Cook, 23 N. Y. 495. The point was not argued by the learned counsel for the appellant, and the case referred to above is a sufficient answer to the objection.

Complaint is made that the judgment includes the costs in the action against the makers of the note. The fact, although not so stated in the report, may perhaps he ascertained from the amounts stated. RTo liability arose on this instrument until after a failure to collect the amount due, by an execution against the principal debtors. This is the condition of the agreement by legal inference, unless the principals are shown to be insolvent. A guaranty of the collection of a note is equivalent to a guaranty that it is collectable by due course of law. Cumpston v. McNair, 1 Wend. 457. The effect of it is, that the guarantor requires an action to be brought against the principal as a condition of his becoming liable for the debt. The party guaranteed will not receive the full benefit of the agreement unless the guarantor bears the expense of complying with the condition which he has imposed. The guarantor is liable in such a case for the costs.

There is another sufficient reason for not disturbing the report on this objection. The plaintiffs, having collected a sum of money from the principal debtors more than sufficient for the payment of the costs of the recovery against them, were entitled to apply so much of it as was necessary to cover the costs before crediting anything on account of the debt for which the judgment was recovered. Where a sum of money has been collected by action against the principal debtor, the surety can have no equity to demand that so much of the money as shall be necessary to pay the expense of the collection shall be withheld from that object, and be applied exclusively to satisfy the principal debt. The creditor is entitled to the whole of his demand, and the expenses of collection were legitimately deducted from the sum realized by execution against the principal debtors.

The counsel for the defendant has referred to several exceptions, taken during the trial, as sufficient ground for demanding a reversal of the judgment, although no argument has been offered in support of them.

1. The counsel for defendant moved to dismiss the complaint when the plaintiffs rested their case.

All the facts reported by the referee had then been proved, but none of those set up as a defense. The previous examination of the report has made it appear sufficiently that the motion to dismiss was not well taken, and as the facts relied on as a defense had not then been proved in any manner, no review of the evidence will be necessary. The exception to the denial of this motion was not well taken.

2. The defendant sought to give in evidence the conversations of himself and others with the officers of the Ontario County Bank, and also the acts of those officers occurring after the sale and transfer of the note and guaranty to the plaintiffs.

The evidence was excluded, and the defendant exepted. The authorities applicable to this subject are numerous and plain. The evidence was res inter alios acta, and was properly excluded. It requires no citation of them nor any argument.

The judgment ought to be affirmed, with costs.

All the judges concurred; except J. C. Smith, J., who did not vote.

Judgment affirmed, with costs.