#### Gunn vs. Madigan.

GUARANTY. (1) *Guaranty of note*overdue, *to pay it*wlien due.

Pleading. (2, 3) *Liberal rule of construction.*(4) *Pleading counterclaim.*

Trial — Equitable Issue. (5) *Equitable issue triable by the eowrt alone.*(6) *May be tried after assessment of damages by ju/ry.*(7, 8) *When evidence relating thw'eto must be offered.*

1. A guaranty to pay a note *when due*is not void because the note is overdue when such guaranty is endorsed thereon; but the guarantor’s liability begins from the delivery of the note with such endorsement to the guarantee.

2. For the former rule that a pleading must be construed most strictly against the pleader, the code has substituted the rule that pleadings must be liberally construed with a view to substantial justice between the parties.

3. The complaint in this case *held*to state a cause of action on a guaranty-

*1594. Where the answer in an action upon a written guaranty alleges that the writing does not express the intention of the party and was signed hy mistake, and also shows what the true intention was, hut does not state that such allegations are made as a counterclaim, nor demand any further relief, it cannot he treated as a counterclaim.

5. The facts thus averred constitute an equitable defense, and the issue (raised hy the statute without any reply) is an equitable issue, and triable hy the court.

6. It was not error to take an assessment of damages by a jury (if one was required under the proceedings), *before*such equitable issue was tried, where the convenience of the court so required.

7. Upon such jury trial, defendant was not entitled to make proof of the alleged mistake, hut could avail himself of that proof only upon, trial of the equitable issue, the court not submitting the question of fact therein to the jury.

8. Where the defendant, after moving to set aside the verdict assessing damages, and after a stay of proceedings thereon, refused, at the trial of the equitable issue by the court, to introduce evidence of the alleged mistake, it was not error to render judgment in plaintiff’s favor upon the verdict.

APPEAL from tbe Circuit Court for *Dodge*County.

Action upon a guaranty of a promissory note. Tbe facts are stated in tbe opinion. Tbe defendant appealed from a' judgment for tbe plaintiff.

*F.*Hamilton, for appellant,

argued tbat tbe complaint does not state a cause of action under sec. 24, cb. 125, R. S., because it fails to allege tbat tbe sum stated to be due on tbe *note*is due on tbe note *and guaranty,*or on tbe guaranty itself, or *from the defendant to the plaintiff;*and tbat it is not sufficient under subd. 2, sec. 3 of tbat chapter, because it does not allege tbat tbe three makers of tbe note jointly and severally made it, or by it jointly and severally promised to pay, etc., or even tbat they promised to pay at all; neither does it allege tbat neither tbe makers of tbe note nor *any of them*bad paid tbe same; nor does it state tbat defendant either signed, or made, or executed bis written guaranty. Again, tbe guaranty being indorsed eight days after tbe maturity of tbe note, and being in terms a guaranty of its payment “ when due,” counsel argued tbat if *160these words were understood as referring back to the daj when tbe note matured, the contract was *impossible of performance,*and therefore null (Ohitty on Con., 59 ; 2 Parsons on Con., 186 and note a; 1 id., 885-86 and 882, note e); and if not so understood, as they were obviously intended to limit the obligation in *some*way, and it does not appear to what date they refer, they render the contract too *uncertain*to be valid. *Leonard v.*Carter, 16 Wis., 607. 2. Defendant was entitled to judgment for want of a reply, under sec. 81, ch. 125, R. S. 8. There are only two kinds of issues, to wit, of law and fact (R. S., ch. 182, sec. 1); and, by section 6 of said ch. 182, an issue of fact in an action for the recovery of money only (such as this is) *must*be tried by a jury, unless a jury trial be waived in the manner provided by sec. 18. By sec. 5, art. I of the constitution of this state, *“*the right of trial by jury shall extend to all cases at law without regard to the amount in controversy, unless a jury be waived in the manner prescribed bylaw.” It is the character of the facts set forth *in the complaint*which *alone*distinguishes the action as legal or equitable; and as the defendant may set forth as many defenses or counterclaims as he may have, whether legal or equitable or both (R. S., ch. 125, sec. 12), he does' not thereby change the character of the action.

*LRweTl &*Lander, for respondent:

. The note was *prima facie*due when the guaranty was made, and, without proof of some agreement to extend the time of payment, was due at any and all times since, and in that case the guaranty was due presently, and in legal effect due and payable immediately. *Gaylord v.*VanLoan, 15 Wend., 808; *Cornell v.*Moulton, 8 Denio, 12. If defendant had simply indorsed the note, even after due, he would have been liable after proper demand and notice. This guaranty is an absolute and unconditional engagement to pay the note at maturity. 2. The admissions of the answer do away with all question as to the time when the guaranty was to be performed. 3. The answer sets up the mistake as a defense merely. *McConihe v.*Hollister, *16119 Wis., 260. Tbe offer of parol evidence to sustain tbis defense was in violation of tbe rule tbat evidence of a contemporaneous parol agreement is inadmissible to contradict or vary tbe terms of a written instrument, and tbat all prior negotiations between tbe parties are merged in tbe written agreement. *Brown v. Gurtiss,*2 Corns., 225; *Taylor v. Pratt,*8 Wis., 674; *Heath v. VanOott,*9 Wis., 516. Tbe rule in equity is tbe same as at law, except *in actions to reform the instrument.*Willard’s Eq., 286; 2 Starkie, 555; 1 Greenl. Ev., sec. 296a; *Bush v. Til-ley,*49 Barb., 599 ; *Follett v. Heath,*15 Wis., 601; *Bawnie v. White,*12 id., 176; *Cooler v. Tappan,*4 id., 862; 7 id., 338, 532. 4. Tbe order in tbis case directing tbe equitable issue to be tried before tbe court alone is sustained by *Harrison v. Juneau, Banlc*(17 Wis., 340), except, perhaps, tbat tbe equitable issue should have been tried *first*If tbis issue bad been submitted to a jury, their verdict must have been special, and tbe court would not have been bound by it. E. S., ch. 132, secs. 11, 14, 15.

LyoN, J.

Tbe complaint alleges tbat James Erancis and Henry G-ormley, on tbe 9th day of April, 1867, made, executed, stamped and delivered to tbe defendant their promissory note in writing, a copy of which is inserted in tbe complaint. Tbe note is dated April 9th, 1867, is for $201.66 and ten per cent-interest, and was payable October 1st, 1867.

Tbe complaint further states that on tbe 9th day of October, 1867, tbe defendant, for value reeeived, sold, transferred, assigned and delivered said note to tbe plaintiff, and then and there guarantied tbe payment thereof to tbe plaintiff by bis written guaranty, duly stamped, endorsed on tbe back of said note as follows:

> “ Eor value received, I guaranty tbe payment of tbe within note when due.

> “ Dated October 9th, 1867.

> , His

> “John x Madigan.”

> mark

*162It concludes as follows:

> “ And although said note became due and payable before the commencement of this action, yet the said maker's of said note, nor the said defendant, have paid the same or any part thereof, except the interest to October 9th, 1867 ; that the plaintiff is now the owner and holder of said note and guaranty; and that there is now due on said note the sum of $201.66 with interest from October 9th, 1867, at ten per cent”

Demand for judgment in the usual form.

The answer of the defendant denies the making of the guaranty in the form stated in the complaint, but admits the sale and delivery of the note to the plaintiff, and the signing, by making his mark, of a written guaranty endorsed thereon. It further states that at the time of such sale and transfer, the time for the payment of such note was extended by agreement between the plaintiff and the makers of the note, in consideration of the payment by them of the interest thereon to that date ; * that the agreement between the plaintiff and the defendant was, that the defendant should guaranty the *collection*of the note; that when he signed the guaranty he supposed and intended the same to be a guaranty of the *collection*thereof pursuant to such agreement; and that “ by mistake of Arie Banta, the person who wrote said guaranty, the word *1 payment,'*if written by him therein, was used instead of the word collection, contrary to said agreement and the intention of the parties thereto.” The defendant denies the making of any other or different guaranty.

The answer does not state that any defense therein contained is set up by way of counterclaim, and no demand is therein made for affirmative relief.

The complaint and answer are the only pleadings in the action.

On the trial, the plaintiff, under objection by the defendant, which the court overruled, read in evidence the note and guar*163anty, and there rested Ms case. A motion by tbe defendant for judgment of nonsuit was overruled, and tbe defendant offered himself as a witness in bis own behalf. Tbe plaintiff objected to tbe admission of any evidence on tbe part of tbe defendant, under Ms answer, relating to tbe mistake therein alleged, and tbe court sustained tbe objection. The defendant offered no other evidence, and tbe court directed tbe jury to return a verdict for tbe plaintiff for tbe amount of tbe principal and interest due on tbe note, which was accordingly done.

A motion having been made to set aside such verdict and for a new trial, tbe court, during tbe same term at which such verdict was found, stayed all proceedings thereupon until tbe further order of tbe court, and ordered further “that tbe equitable issue formed by tbe answer of tbe defendant in said action be tried before this court at a general or special term, upon tbe usual notice.” Afterwards, at a special term of tbe court, tbe plaintiff having duly noticed such issue for trial, and tbe cause being upon tbe calendar, tbe defendant moved to strike it from tbe calendar, and objected to tbe trial thereof without a jury; but such motion was demed and such objection overruled by tbe court. Tbe defendant thereupon declined to give any evidence relating to such alleged mistake or such equitable issue; and thereupon tbe court vacated tbe former order staying proceedings upon tbe verdict, and gave judgment upon such verdict for tbe plaintiff.

Erom that judgment tbe defendant has appealed to tMs court.

I. Tbe objection to tbe admission of tbe note and guaranty in evidence, and tbe motion for a nonsuit, were based upon two grounds: “ first, that it appears upon tbe face of tbe complaint that it does not contain facts sufficient to constitute a cause of action; and second, that tbe guaranty is void for ambiguity, and on its face appears impossible to be performed.”

Tbe objection to tbe guaranty is, that it is a contract to guaranty tbe payment of tbe note *when due,*and tbe note was past due when such contract was made. Tbe reason for using this *164form of expression is quite satisfactorily explained by tbe statement in tbe answer tbat tbe time for tbe payment of tbe note was extended to a future day wben tbe guaranty was made. But independently of tbat fact, there can be no doubt of tbe validity of tbe guaranty in tbat form. It is not unlike tbe case where an overdue note is transferred by indorsement. Tbe contract of an indorser is, tbat if due demand of payment be made of tbe, maker wben tbe note falls due, and proper notice of non-payment be given to tbe indorser, be will pay tbe note. Now where a note is indorsed and transferred after due, this cannot be done, yet tbe law permits such demand, tobé made and such notice to be given within a reasonable time after tbe transfer of tbe note, and, if tbat be done, bolds tbe indorser liable. Tbe guaranty of tbe defendant is to pay tbe note *when due.*It was due wben transferred to tbe plaintiff. Hence, but for the extension of time of payment, it was due and an action could have been maintained upon tbe guaranty as soon as tbe note was delivered to tbe plaintiff, tbe same as tbe liability of tbe indorser of an overdue note or bill may be fixed by demand, and notice of non-payment, immediately after be transfers such note or bill.

But it is claimed tbat tbe complaint does not state a cause of action. Tbe counsel for tbe defendant has submitted in bis brief a most acute and searching criticism of tbe complaint, and has pointed out many alleged defects in it, some of which be contends are so vital tbat a general demurrer reaches them. It is not necessary to examine in detail these alleged defects in tbe complaint, for tbe reason tbat it is very evident tbat we must decide upon tbe sufficiency of it by tbe application of tests differing radically from those employed by tbe learned counsel. Tbe rule practically applied by him is, tbat a pleading must be construed most strictly against tbe pleader. Hé seems to have forgotten tbat this stern rule is repealed by tbe code, and in its place a more humane and beneficent one has been enacted. “ In tbe construction of a pleading, for tbe pur*165pose of determining its effect, its allegations shall be liberally construed with a view to substantial justice between tbe parties.” E. S., cb. 125, sec. 21. Looting at this complaint in tbe light of this new rule, it really seems to us that it states a cause of action. Indeed we are not quite sure that it is necessary to invoke tbe aid of that rule to enable us to bold that it is a good pleading. It sets out tbe contract and tbe alleged breach thereof, tbe interest of tbe plaintiff, and tbe liability of tbe defendant, and demands tbe proper judgment, and all this in tbe usual and approved forms of pleading under tbe code. Ought we to demand more ?

II. Tbe next point made by tbe counsel for defendant is, that tbe answer contains a counterclaim, and that tbe defendant was entitled to judgment thereon for want of a reply, by virtue of tbe provisions of tbe code on that subject. E. S., cb. 125, sec. 81.

That tbe allegations of tbe answer in respect to tbe mistake in the contract of guaranty constitute tbe proper subject matter of a counterclaim, must be conceded, because those allegations constitute a distinct cause of action in favor of tbe defendant and against tbe plaintiff; and such cause of action is clearly available as a counterclaim in this action, if pleaded as such.

But tbe difficulty is that it is not so pleaded. There is nothing in tbe answer Lorn which we can infer that it was intended to interpose tbe defense as a counterclaim. Tbe liberal rulé for tbe construction of pleadings before mentioned would doubtless excuse tbe pleader from using any particular form of words in order to make bis pleading a counterclaim; but be must by some reasonable language indicate that be so intends it. Tbe usual form of giving such intimation is by inserting therein a prayer for relief, or a statement that tbe pleading is a counterclaim. We find nothing of tbe kind in this answer, and tbe law is well settled that in such case tbe pleading cannot be considered a counterclaim. *McConihe v.*
      *166
      *Hollister,*19 Wis., 269; *Bates v. Rosekrans,*37 N. Y., 409; *Clough v. Murray,*19 Abb. Pr. R., *97; Wright v. Delafield,*25 N. Y., 266; *Burrall v. De Groot,*5 Duer, 379.

Tbe allegations of tbe answer being stated merely as a defense and not as a counterclaim, no reply was necessary. E. S., cbap. 125, sec. 32.

III. The remaining question to be determined is, whether the court erred in excluding all evidence on the part of the defendant concerning the mistake set forth in the answer, from the consideration of the jury.

Beyond all question the answer in this respect states an equitable cause of action against the plaintiff. Had the defendant commenced an action against the plaintiff, averring the same facts and demanding judgment that the contract of guaranty be reformed in accordance with the alleged contract between the parties, such action would have been an equitible one, and neither party would have been entitled to a jury trial as a matter of right. Clearly the nature of such cause of aqtion is not changed, if, instead of bringing an action thereon, the defendant pleads the same facts as a defense to an action brought against him on the guaranty. These facts, being pleaded as a defense and not as a counterclaim, are deemed to be denied by the plaintiff, without a reply, and thus an issue is made upon them by operation of the statute. E. S., ch. 125, sec. 32. Such issue is necessarily an equitable one.

It is not a good answer to these views to say that the code abolishes the distinction between actions at law and suits in equity, and that therefore this defense stands on the same footing with any other defense in a civil action. Eor there are inherent differences between actions at law and suits in equity, which cannot be abolished, and which are constantly recognized by the legislature and the courts. *Wiggins v. Silverthorn,*10 Wis., 492; *Mowry v. Hill,*11 Wis., 146; *Stillwell v. Kellogg,*14 Wis., 461; *Truman v. McCollom,*20 Wis., 360.

The issue thus made by the answer, being an equitable one, *167was properly triable by tbe court, and there was no error in talc-ing an assessment of damages by a jury before snob issue was tried. *Harrison v. The Juneau Bank,*17 Wis., 340. It is said in tbat case tbat tbe correct practice in such cases is to try tbe equitable issue first, and afterwards tbe legal issue. This is doubtless true as a general rule, but it not unfrequently happens at tbe circuit tbat it becomes desirable to dispose of tbe legal issue first, in order to avoid delay, and for tbe convenience of tbe court. Tbe order in which tbe issues are tried, may, I think, be left to tbe discretion of tbe cbcuit judge. In this case no defense was interposed except tbe alleged mistake. Tbe answer substantially admits tbe signing of tbe guaranty, and it is doubtful whether an assessment of damages was necessary. The only way in which tbe defendant could have obtained any benefit under bis answer, was to proceed to tbe trial of tbe equitable issue, and there establish by evidence tbe truth of its averments. Had be proved tbe mistake in tbe guaranty, as alleged, doubtless tbe court would have required tbe plaintiff to amend bis complaint to correspond with tbe contract actually made by tbe parties, and, in default of making such amendment, would have dismissed bis action

Clearly it was not competent for tbe defendant to show this alleged mistake by oral testimony in any other way. Tbe written guaranty is presumed to express tbe real contract between tbe parties; and in an action upon it, evidence to show tbat an agreement or understanding existed, at tbe time of its execution, which changes its terms or controls its legal effect, is inadmissible. Such evidence can only be received in a direct proceeding to reform tbe contract. These principles are elementary and of universal application, and it is quite unnecessary to cite authorities in support of them.

Tbe circuit court treated tbe averments of tbe answer in tbat behalf as equivalent to a direct proceeding to reform tbe contract of guaranty, and gave tbe defendant an opportunity, in strict accordance with tbe rules of law and tbe practice of tbe *168court, to try the issue and prove Ms defense if he could. The defendant refused to avail himself of the opportunity thus given, and left Ms defense entirely unproved. Under these circumstances the court could do no less than give judgment for the plamtiff on the verdict.

We find no error in-the proceedmgs and rulings in the circuit court, and are of the opinion that the judgment should be affirmed.

*By the Court.*— Judgment affirmed.