Case Name: First National Bank of Helena v. Solomon
Court: Arkansas Supreme Court
Jurisdiction: Arkansas
Decision Date: 1926-02-22
Citations: 170 Ark. 555
Docket Number: 
Parties: First National Bank of Helena v. Solomon.
Judges: 
Reporter: Arkansas Reports
Volume: 170
Pages: 555–560

Head Matter:
First National Bank of Helena v. Solomon.
Opinion delivered February 22, 1926.
Breiver £ Cracraft and W. G. Dinning, for appellant.
Moore, Walker £ Moore and J. G. Burke, for appellee.

Opinion:
Hart, J.,
(after stating the facts). Appellant was the plaintiff in the circuit court, and its counsel asks for a reversal of the judgment on the ground that the circuit court erred in not instructing a verdict in its favor.
In this contention we think counsel ^ are correct. Under the rule announced in Friend v. Smith Gin Co., 59 Ark. 86, and Bank of Morrilton v. Skipper, Tucker & Co., 165 Ark. 49, the contract of guaranty was absolute, and carried with it all the liability of an original undertaking. It follows that, the contract of guaranty being an original undertaking by the signers thereof to pay the debt of the Arkansas 'Crushed Stone Company, the liability of the signers matured upon the failure of the Arkansas Crushed Stone Company to pay the note" <?r the renewals thereof which it executed to the First National Bank, and it was not essential that suit be commenced against the Arkansas Crushed Stone Company and the claim reduced to judgment before, suit could be brought against the guarantors.
Amos Jarman and B. B. Campbell were insolvent, and the record shows that they had entire charge of the business of tlie Arkansas Crushed Stone Company. They had intended to organize it as a corporation, and the other signers of the contract of guaranty were subscribers of stock in the contemplated corporation. It is not important for the purposes of this decision to determine whether all of the signers of the contract of guaranty became partners in the business 'conducted under the name of the Arkansas Crushed Stone Company, for their liability in the present case is measured by the terms of the contract of guaranty.
In making the loan to the Arkansas Crushed Stone Company, the First National Bank relied entirely upon the terms of the guaranty. The names of the guarantors were not signed to the note, and the contract of guaranty which was signed by them was written upon a separate piece of paper before the note was ever executed. So it will be seen that the circumstances under which the contract of guaranty was executed makes it an original obligation and the liability of the signers absolute and unconditional.
The rule is well settled that the guarantor of a promissory note, whose name does not appear on the note, is bound without notice, where the maker of the note was insolvent at its maturity, unless he can show that he has sustained some prejudice by wantmf notice of a demand on the maker of the note and notice of nonpayment. Reynolds v. Douglas, 12 Pet. (U. S.) 497.
In the case before us there is no pretense that appellees have sustained any injury from the neglect of appellant to sue the maker of the note sooner. The facts of this case bring it within the general rule that mere delay by a creditor to collect of the principal debtor, or to proceed against a fund pledged by him for the payment of the debt, will not exonerate the surety or affect his liability. There is nothing in the contract of guaranty which required the bank to proceed with diligence to collect from the principal debtor. The contract of guaranty was not entered into for the benefit of the Arkansas Crushed Stone Company or the signers thereof, but was executed for the benefit of the First National Bank. By the terms of the contract of guaranty, appellees bound themselves absolutely to pay any note or notes to the amount of $15,000, which might be executed to the First National Bank for the Arkansas Crushed Stone Company by Amos Jarman. It is true that, after the death of Amos Jarman, a renewal note was executed in the name of the Arkansas ¡Stone Company by B. B. Campbell, but the bank still retained the note signed by Amos Jarman for the Arkansas Crushed Stone Company, and the execution of the renewal note by B. B. Campbell did not have the effect to discharge the original indebtedness. The contract of guaranty was to pay the note or notes of the Arkansas Crushed Stone Company to the First National Bank, and it did not make any difference whether that concern was a corporation or a partnership composed of Amos Jar-man and B. B. Campbell, or a joint stock association composed of all the signers of the contract of guaranty.
The result of our views is that the court erred in not directing a verdict for the appellant, and for that error the judgment must be reversed, and the cause remanded for a new trial.