Case ID: pen-w_3/html/0018-01.html
Source: Caselaw Access Project
Author: {"author": "Rogers,J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

JOHNSTON against CHAPMAN.
    Art assignment and guarantee -of a bond is an engagement of the assignor’ to pay tfie money, on the insolvency of the obligor ; provided the assignee use due diligence ' to obtain payment from the 'obligor.
    What is the due diligence which is required, is a.matter of fact for the determination • of the jury.
    An assignee cannot maintain an action- on the covenant of guarantee, against the assignor, upon proof alone of a demand of payment upon, the obligor. He must prove the insolvency of the obligor, and that he used due diligence to collect the money from him.
    Whether the assignment was made before or after the bond became due, makes no> difference : that principle is only applicable to the indorsement of negotiable paper.
    Writ of error to the Common Pleas- of Indiana county.
    
      Peter Yarnell executed a single bill by whieh he promised tc? pay Thomas Johnston, on the first of December, one thousand eight hundred and twenty-nine, two hundred barrels of salt. Ther payment of which, together with other single bills, was secured by a mortgage on a tract of land. Thomas Johnston on the twenty-first of July, one thousand eight hundred and twenty-eight, made th'e following assignment of this single bill to Thomas Chapmanr the plaintiff below ■: “l .do hereby assign- and guarantee the pay-ment of the within bond to Thomas Chapman, his heirs or legal representatives for value received/’ Yarnell did not reside in Pennsylvania, but Chapman made a demand of the- salt of the person who represented the obligor at the time and place when, by the agreement of the parties, it was made payable. Payment having been refused, this action on the case was brought by Chapman against Johnston on the guarantee.
    The defendant requested the court below to charge the jury —-. “ That the plaintiff could not recover, he never having attempted to enforce the collection of the single bill from Peter Yarnell and “ That the assignment of the single hill to the plaintiff was an assignment, pro tanto, of the mortgage, which secured its payment ; and. if the jury believed the mortgaged premises were ample security-for-the payment of the single bill, the plaintiff could not recover. ”
    The court answered both these propositions in the negative ; and instructed the jury, that the plaintiff was entitled to recover, upon the evidence which‘he had given.
    The same question ivas argued in this court by
    
      White for the plaintiff in error..
    An assignment and guarantee of a bond, is an implied undertaking by the assignor, that it is good and recoverable and the acceptance thereof by the assignee, is an implied engagement on his part that he will Use due diligence to enforce the payment by the obligor ; and such is the legal construction of the contract. Philip v
      JLston, 2 Taun. 206. Overton v. Tracey, 14 Serg. §• Rawle, 327. Gibbs v. Cannon, 9 Serg. fy Ratole, 202. Harwood v. Ramsey, 15 Serg. 8r Rawle, 34. Moakly v. Riggs, 19 Johns. 71. Reed v. Garwin, 12 Serg. Sr Razóle, 100.
    If we are right in this position, then the plaintiff cannot recover, for the proof was that the mortgaged premises were abundantly sufficient to pay the single bill. That the assignment of the single bill was an assignment pro tanto of the mortgage, were cited Green v. Hart, 1 Johns. 590. Mersereau v. Runyan, 11 John. 538. Wentz v. Dehaven, 1 Serg. 8? Razóle, 317. McCall v. Lenox, 9 Serg. 8? Razóle, 312. Betz <§* Hebner, 1 Penna. Rep. 280.
    
      Foster for defendant in error.
    The contract of the obligor in a bond is, that he will pay on or before a certain time, to the obligee ; the contract of the assignor Is that the obligation is good and the terms of it will be observed. A failure to pay on or before the time, is a breach of the contract of the obligor, and of course the assignor also. If, therefore, there Is a breach of the engagement by the assignor, a right of action accrues. It is not necessary to sue the debtor in order to establish a right of action against tire assignor. 3 Wheat. 154. Banlc of New York v. Livingston, 2 Johns. Ca. 409. Harzoood v.' Ramsey, 15 Serg.,8f Razóle, 33, 34. F'olwell v. Beaver, 13 Serg. Sr Rawle, 311. Why construe a contract, absolute in its terms, to mean one conditional in its effect ? Why “ malte the word of promise to the ear, and break it to our hope }” An absolute guarantee is different from a promise to pay, if another does not. Coxe’s Dig. 729, No. 19.
    
   The opinion of the court was delivered by

Rogers,J.

If an obligor on assigning a bond, enter into a covenant with the assignee, to stand surety for its payment, this is an engagement to pay the money, on the insolvency of the obligor, provided the assignee use due diligence to obtain payment from the obligor. There is no distinction between the case referred to, Rudy v. Wolf, 16 Serg. & Rawle, 79, and the present, except in the phraseology of the agreeement, and this can make no essential difference. The legal import of the term guarantee” is 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. 3 Kent’s Com. 85. In Rudy v. Wolf the same rule was applied to an express covenant, as had been adopted in Virginia, on the covenant implied from, the assignment.

In 2 Wash. 266 ; 2 Hen. & Mun. 119, and in Rudy v. Wolf, 16 Serg. & Rawle, 79, it was settled, that due diligence to recover the money from the obligor must be used, and that what is due diligence, is a fact for the decision of the jury, on the whole evidence submitted to them. In a cause like the present, two things are indispensable to the maintenance of the suit. The plaintiff must prove, first, the insolvency of the obligor, and, secondly, that he used due diligence to obtain payment from him. Was there evidence either that Yctrnell was insolvent, or that the necessary diligence had been used to collect the .debt ? I have looked through the testimony in vain for proof of these essential pre-requisites to the maintenance of the plaintiff’s action. A demand of payment, alone, is not sufficient. It must-be followed up with proof from which the jury can reasonably infer the insolvency of the obligor, and that the requisite attention has been paid to the collection of the debt. Besides, here a mortgage was given as a collateral security ; and to this fund the plaintiff might have resorted, on the refusal to deliver the salt according to contract. An ejectment on the mortgage would be' a most efficacious mode of compelling payment, as it is in proof, that the mortgaged premises are of a value amply sufficient to cover the whole demand. Had suit been brought against Yar.nell, or some proceedings instituted on the mortgage, non constat,,but that the assignee would have had ample redress for the breach of the covenant. We think this rule a necessary one; as otherwise assignees would be careless when no doubts were entertained of the solvency of the assignor.

- The court of Common Pleas ruled this case on the ground that there is an absolute agreement to pay on the refusal to deliver the salt. In this we conceive there was error. It was a conditional and not an absolute engagement.

I at onetime doubted whether the fact that the assignment was executed before the day of payment, 'made a distinction : on reflection I am convinced it does not. After a careful search into the authorities, I have found no ease, except in that of negotiable paper, where any distinction has been taken, whether the assignment was made before or after the time fixed for payment. In cither case the assignor, is liable on the assignment, only when the obligqa is insolvent, and due diligence has been used by the assignee to enforce payment. What is evidence of the insolvency of the obligor, it is unnecessary to decide. We are, however, of the opinion that a demand of paj-mentand a refusal to pay, is not such evidence, although coupled with the fact of the non-residence of the obligor; particularly when a mortgage has been given as collateral security.

Judgment reversed and a venire dc novo awarded.