Case Name: First National Bank of Lancaster versus Shreiner et al.
Court: Supreme Court of Pennsylvania
Jurisdiction: Pennsylvania
Decision Date: 1885-10-05
Citations: 110 Pa. 188
Docket Number: 
Parties: First National Bank of Lancaster versus Shreiner et al.
Judges: Before Meecur, C. J., Gordon, Teunkey, Green and Clark, JJ., Paxson and Steerbtt, JJ., absent, Error to the Court of Common Pleas of Lancaster county: Of January Term 1885, No. 82.
Reporter: Pennsylvania State Reports
Volume: 110
Pages: 188–195

Head Matter:
First National Bank of Lancaster versus Shreiner et al.
1. Where payment of a promissory note has been guaranteed “without protest ” by one not a party thereto, the giving of an additional guarantee by an indorser who has been discharged for want of proper notice of non-payment, will not revive his liability as indorser.
2. In a suit on a promissory note the plaintiff’s evidence was to the effect that on the day of the maturity of the note, of which C. & D. were the makers, A., a stranger thereto, signed a guarantee of payment of the same “without protest,” in consequence of which protest was not made, payment having been refused; that two weeks after this B., an accommodation indorser, who had been informed of the non-payment a day or two afterwards by the cashier of the bank holding the note, at the request of that cashier signed a guarantee of the “ payment of all notes drawn by C. & I), and indorsed by me now held by the-Bank [holder of the note in suit], either matured or to mature,” on the express understanding that this was to be additional to the prior guarantee. C. & I), becoming insolvent, and having made an assignment, and this suit having been brought by the bank against the executors of A., the court below directed the jury that “ under all the evidence in the case the verdict must be for the defendants: ”
Held, that this was error, and that the evidence should have been submitted to the jury, with instructions that A.’s guarantee impliedly discharges the indorsers, and that B. was therefore discharged ; that the notice to B. of non-payment was insufficient to continue his liability as indorser, and that his subsequent guarantee, if made on good consideration, though enforceable if the bank, having used reasonable diligence. had failed to collect the note from the makers or prior guarantor, did not in anyway revive his original liability or amount to a waiver of protest.
S. A bank holding a promissory note at maturity, has no right to appropriate in satisfaction thereof any part of the account of a mere guarantor, whose liability is postponed until other parties have been exhausted; contra, of an indorser who has not been discharged.
4. Where at the maturity of a note held by a bank the maker’s balance on deposit is insufficient to pay the note, the bank is not bound for the protection of a guarantor to apply any subsequent deposits to the payment thereof, especially where it is unlikely that they are intended by the maker to be so applied, the balance on hand at any time being much less than the value of (she note. It is admissible, however, to put in evidence the state ol the account of the maker with the bank at the time of the maturity of the note and afterwards.
5, Where error is assigned in excluding a deposition, such assignment will not be considered, unless such deposition is printed in full in the paper books.
May 20th, 1885.
Before Meecur, C. J., Gordon, Teunkey, Green and Clark, JJ., Paxson and Steerbtt, JJ., absent, Error to the Court of Common Pleas of Lancaster county: Of January Term 1885, No. 82.
Assumpsit by the First National Bank of Lancaster against H. M. Shreiner et al., executors of Michael Zahm, deceased, on a promissory note for §1,350, payment of which the defendants’ testator had guaranteed “ without protest.” Defendants pleaded payment, with leave, etc.
The facts of the ease as they appeared on the trial, before Patterson, J., were as follows: The note on which suit was brought was as follows :—
§1,350. Lancaster, Pa., May 9th, 1877.
Sixty days after date we promise to pay to the order of Samuel Groff, at the First National Bank of Lancaster, thirteen hundred and fifty dollars, without defalcation. Value received. Samuel Groee. Diller & Groee.
[Indorsed.]
Samuel Groee.
II. D. Groee.
D. G. Swartz.
I hereby guarantee payment of the within note without protest. Michael Zahm.
This note was the second renewal of a note for §1500, made by Diller & Groff, and indorsed by Swartz, which was discounted and credited to Diller & Groff, by the First National Bank of Lancaster, but at the request of that firm, as Harner, the cashier, testified, was subsequently run through Swartz’s account. At its maturity it was charged to Swartz’s account, ■and a renewal note was discounted by the bank, the proceeds of which were also placed to Swartz’s credit. This second note matured on May 9th, 1877, and on May 10th was charged to Swartz’s account, the note in suit having been given on the previous day, and discounted on May 10th, the proceeds again being credited to Swartz on his bank account. The cashier of the bank testified that he had been told by H. D. Groff, that the latter had paid the discounts and handed the renewals to Swartz.
On July 11th, 1877, when the note matured, H. D. Groff, the second indorser, and one of the makers, and the defendants’ testator, came into the bank together, and the latter having asked to guarantee the note to save it from going to protest, Harner, the cashier, wrote the above guarantee, which was signed by Zahm in his presence. In consequence of this, the' cashier testified, the note was not protested, and the costs of protest were saved to the parties on the note. A day or two after maturity, D. G. Swartz, the third indorser, was informed that it was not paid, and on July 25th he was asked by Harner to sign an additional guarantee. In response to that request he handed the cashier the following paper: — .
“H. D. Groff’s note, $1,350, due July 11th, 1876 (1877), if he renews 90 days date July 11th for $1,250, indorsed by S. Groff, charge old note to me and credit new note to my account, and I promise to indorse it.
“ Lancaster, July 25th, 1877. D. G. Swaktz.”
The cashier testified that he then asked Swartz for a guarantee of the note of July 11th, instead of that paper, which provided only for a renewal, and that Swartz said he was satisfied that the guarantee of July 11th was good, and that he was willing to sign an additional guarantee. He accordingly signed this paper:—
“I hereby guarantee the payment of all notes drawn by Diller & Groff and indorsed by me, now held by First National Bank, Lancaster, Pa., either matured or to mature.
July 25th, 1877. D. G. Swaktz.”
Diller & Groff made an assignment on August 14th, 1877, being then insolvent and continuing so.
The case came before the Supreme Court in Zahm v. Fir National Bank of Lancaster (7 Out., 576), where it was decid" ed that Zahm was a technical guarantor and not liable if any of the indorsers remained so until the latter were exhausted.
Counsel for the defendants asked H. C. Harner the following questions on the witness stand:—
“Had Diller & Groff any account at your bank on the 25th of July, 1877? ” Objected to. Objection overruled. Exception. (First assignment of error.)
“Were there any deposits made by Diller & Groff subsequent to July 11th, 1877, and prior to the 10lb of August, 1877?” Objected to. Objection overruled. Exception. (Second assignment of error.)
Plaintiff offei’ed in evidence the deposition of D. G. Swartz, a resident of Chicago. Objected to by defendants as incompetent and inadmissible under the Act of Assembly. Objection sustained. Exception. (Fourth assignment of error.)
Plaintiff presented, inter alia, the following points:—
(1) If the jury believe that the note in suit was not protested in consequence of the guarantee of Michael Zahm, their verdict must be for the plaintiff. Refused. Exception. (Fifth assignment of error.)
(2) If the jury believe the evidence that Mr. Swartz signed the guarantee of July 25th, 1877, drawn by H. C. Ilamer, at the request of Mr. Harner, as an additional guarantor after Mr. Zalnn — -in that case Mr. Swartz would be a technical guarantor after Mr. Zalnn, and would not be liable unless the bank was unable to recover from the first guarantor, Mr. Zahm. Refused. Exception. (Sixth assignment of error.)
The defendants presented, inter alia, the following points:—
(3) “ Under all the evidence in the case the verdict must be for the defendants.” Affirmed. Exception. (Eighth assignment of error.)
(4) “It'D. G. Swartz, the indorser of the note offered in evidence, had notice within a reasonable time after July 11th, 1877, of the non-payment of the note offered in evidence, he still remains liable thereon, and there can be no recovery against the defendants; no effort having been made by the plaintiff to compel payment by him.” Affirmed. Exception. (Ninth assignment of error.)
(5) “As D. G. Swartz was an indorser of the note offered in evidence and on July 25th, 1877, by the paper marked D. W. P. No. 1, as follows: ‘I hereby guarantee the payment all notes drawn by Diller & Groff, and iudorsed by me, now held by the First National Bank, Lancaster, Pa., either matured or-to mature. July 25th, 1877,’ D. G. Swartz guaranteed the payment of the same, he still remains liable upon the said note, and there can be no recovery against the defendants, no effort having been made by plaintiff to compel pajuneut by him.” Affirmed. Exception. (Tenth assignment of error.)
(6) “ The corporation plaintiff was bound to appropriate in relief of Michael Zahm all deposits made by or standing to the credit of Diller & Groff at and after the maturity of the note offered in evidence, to the payment thereof, and these deposits, amounting to $901.57, must in any event be credited on the amount claimed in this suit.” Affirmed. Exception. (Eleventh assignment of error.)
(7) “That as D. G. Swartz had at various times between July 25th, 1877, and the bringing of this suit, enough money deposited to his credit with the corporation plaintiff to pay the note offered in evidence, the verdict must be for the defendant.”
Answer. “Yes, if the jury find from all the evidence that D. G. Swartz had enough of money deposited to his credit in the bank — the plaintiff — to pay the note offered in evidence, then the verdict must be for the defendants.” Exception. (Twelfth assignment of error.)
Verdict for defendants and judgment thereon.
Plaintiff thereupon took this writ, assigning for error, inter alia, the admission of evidence and- the answers to the points as above.
D. G. Eshleman (A. Herr Smith with him), for plaintiff in error.
— Where at the maturity of a note held by a bank, the maker’s deposit in. said bank is insufficient to pay the note, and the note has been protested for non-payment, the bank is not bound to apply the maker’s subsequent deposits, in payment of the note in relief of indorsers, although such deposits were sufficient for the purpose. It was therefore error to permit defendant to show the condition of the maker’s account from the time of the maturity of the note to that of the commencement of the suit: Peoples’ Bank v. Legrand, 7 Out., 309. Mr. Zahm, as guarantor, had no higher rights in this respect than an indorser.
The court erred in taking the case from the jury and in instructing them to find for the defendant. Their evidence fell far short of the offer of evidence which was held good when the case was last in this court: See Zahm v. Bank, 7 Out., 576. If Swartz was discharged as indorser by the defendants’ guarantee, as was there held, a subsequent notice of non-payment and guarantee was insufficient to revive his liability as indorser. The notice was in any event insufficient: Story on Promissory Notes, §§ 348, 350, et seq. Mere notice of the non-payment of a note is not a sufficient notice of dishonor: Id. § 350. The question of its sufficiency and as to whether it was made within a reasonable time was left to the jury, which was error, for these are questions of law and solely within the province of the court: Sherer v. Bank, 9 Casey, 134, 140.
Greorge Na-uman and Philip B. Baker for the defendants in error.
— Swartz was never discharged, as he received notice of non-payment on the day of maturity or the day thereafter, and if the notice is made in a reasonable time, it is sufficient: Rahm v. Bank, 1 Rawle, 335. But assuming that he was discharged, it is clear that by guaranteeing the notes upon which he was indorser, he thereby revived his liability as such: Levy v. Peters, 9 S. & R., 127; Barclay v. Weaver, 7 Harris, 401; Sherer v. Bank, 9 Casey, 141; Loose v. Loose, 12 Casey, 538; McCamant v. Bank, 15 W. N. C., 122.
There was no error in the admission of the accounts of Diller & Groff and D. G. Swartz with the bank, showing the actual history of this note and the amounts that these parties had to their credit between the maturity of the paper and the time of bringing suit, and that Diller & Groff deposited money after the maturity of the note, and that, even from them, the bank had some means of satisfaction. .Peoples’ Bank of Wilkes- Barre v. Legrand, 7 Out., 309, was qualified in Commercial National Bank of Reading v. Henninger, 9 Out., 496, aud was the ease of an indorser, not of a guarantor. The rule is well settled that when a creditor has in his hands the means of paying his debt out of the property of his principal debtor and does not use it and gives it up, the surety is discharged. It need not be actually in the hands of the creditor, if it be within his control, so that by the exercise of reasonable diligence he may have realized his pay out of it, yet if he voluntarily and by supine negligence relinquishes it the surety is discharged: Bank v. Henninger, supra. The law will not do less for a guarantor than for a surety.

Opinion:
Mr. Justice Tetjnkey
delivered the opinion of the court, October 5th, 1885.
When this cause was first tried the plaintiff put in evidence the note, the guaranty and the fact of Diller & Groffs insolvency, and rested; thereupon, having first rejected the defendant's offers of testimony, the court directed a verdict for the plaintiff. The testimony so rejected was, that on the day the note became due, July 11th, 1877, before Zahm'executed the guaranty, Swartz, who was an indorser on the note, gave the Bank a written direction and promise respecting the note in case of its renewal; that said Swartz on that day and after-wards had a deposit in the Bank sufficient to pay the note ; that the note had been discounted by the Bank and the proceeds placed to his credit; and that on July 25th, 1877, said Swartz gave to the Bank a guaranty of payment of all notes drawn by Diller & Groff and indorsed by himself held by said Bank, whether matured or to mature. It was ruled by this court that the testimony was admissible and proper for the consideration of the jury on the question whether the indorsers were released; and that if " either of the indorsers waived protest, or by any other act remained liable on the note, the guarantor is entitled to the beuefit thereof." The Bank is bound to pursue any solvent party who remained liable on the note, before resorting to the guarantor. And it was further ruled that it was incumbent on the Bank to prove its averment that in consequence of the guaranty the note was not protested, and that the indorsers were released from paymeut of the same: Zahm v. The Bank, 103 Pa. St., 576. The principles there stated need not be repeated.
On the second trial, had the testimony been submitted to and believed by the jury, they would likely have found that on July 11th, 1877, the da.y the note matured, Zahm went to the Bank and asked to guarantee the note to save protest, that he did guarantee it and in consideration thereof the note was not protested; that one of the makers of the note went with him to the Bank; that Diller & Groff were the principal debtors and got the money on the note for tbeir-own use, and that Swartz had no knowledge or information o.f the non-payment of the note till after the date of its maturity. Now there is no pretence that Swartz gave any written promise respecting the note until July 25th, 1877. On that date lie gave the Bank a writing containing the following: "H. D. Groff's note, $1,350, due July 11th, 1876, if he renews 90 days date July 11th, for $1,250, indorsed by S. Groff, charge old note to me and Cr. new note to my account, and I promise to indorse it." This paper also contained a promise respecting two other notes. The same date he gave the Bank a guaranty as follows: "I hereby guarantee the payment of all notes drawn by Diller & Groff, and indorsed by me, now held by First National Bank, Lancaster, Pa., either matured or to mature, July 25th, 1877." The cashier testifies that he asked for the second paper, told Swartz who were the guarantors 'of these notes, and then he signed the additional guaranty. The accounts were given in evidence, and oral testimony respecting the accounts.
No reason appears why the testimony of Mr. Harner should be disbelieved; if believed, in connection with the written testimony, the jury ought to have found, that in consideration of Zahm's guaranty the Bank did not protest the note, and that Swartz neither waived protest nor did any act to continue his liability as indorser. The ease differs from its former aspect. Material allegations by the defendant are either not proved or disproved. Acts by Swartz, done aftm- the guaranty by Zahm, do not affect him or others as if they had been done before.
In the general charge the court properly remarked that the facts were to be found by the jury from tire evidence submitted; but followed by affirming the defendant's third point: "Under all the evidence in the case, the verdict must be for the defendants." It is quite immaterial whether the evidence was submitted when the jury were instructed to render a verdict for defendants. As it was the duty of the court to permit the jury to find the facts, that instruction was error.
If the note was not protested in consequence of the guaranty of Zahm, and if the guaranty by Swartz was given at the request of Harner as an additional guaranty after Zahm's, the plaintiff is entitled to recover. The plaintiff asked instruction to this effect by its first and second [joints, but so framed them that the court was justified in the refusal. It did not follow from the fact alone that the note was not protested in consequence of Zahm's guaranty, that the plaintiff could recover, and therefore its first point was denied. So, the assumed fact in its second point might be true and not absolutely control, the veidiet. Had adequate instruction been given upon the material facts referred to in these points, the first and second assignments would be passed without remark.
Zahm guaranteed the note without protest, and by acceptance thereof the implied agreement was that the indorsers should be released. There is no evidence to warrant a finding that such notice was given to Swartz as continued his liability as indorser. Mere knowledge of non-payment is not notice— the Bank took no steps to hold the defendant as indorser by protest of the note or otherwise. The- subsequent guaranty by Swartz, if supported by a good consideration, created a liability that could be enforced in case the Bank, having used reasonable diligence, had failed to collect the note from the makers or prior guarantor. Only in the event that Swartz should be found liable as indorser, was it the right of the Bank to appropriate any part of his account to payment of the note. The ninth, tenth and twelfth assignments are sustained.
As it does not appear in the paper book whether the deposition of Swartz contained anything pertinent to the issue, the fourth assignment is not considered.
The first and second assignments are not sustained. The questions objected to were calculated to elicit the state of Oilier & Groff's account at the date of the maturity of the note and afterwards. It appeared that when the note matured the balance to their credit was $25.82, and the total amount of the deposits afterwards was much less than the note. These deposits, numbering six, were made at intervals within thirty days from the maturity of the note, and' were paid out on a larger number of checks, at intervals, within the same time. At no date after July 11th, 1877, at the close of business hours, did they have a balance exceeding $800. It is unlikely that those small deposits were intended by Diller & Groff to apply on the note. Had payment of their checks been refused, would they have continued making the deposits? We think the circumstances clearly bring this case within the doctrine of Peoples' Bank v. Legrand, 103 Pa. St., 309. Here, though the action is against a guarantor, as respects appropriation of deposits by the principal debtor in the bank, his claims are not superior to those of an indorser. The ruling in the Commercial N. Bank v. Henninger, 105 Pa. St., 496, was upon dissimilar facts.
The defendants' sixth point should have been refused.
Judgment reversed and venire facias de novo awarded.