Case Name: Solomon Deck, appellant, agt. Leonidas Works, respondent
Court: New York Supreme Court
Jurisdiction: New York
Decision Date: 1879-06
Citations: 57 How. Pr. 292
Docket Number: 
Parties: Solomon Deck, appellant, agt. Leonidas Works, respondent.
Judges: 
Reporter: Howard's Practice Reports
Volume: 57
Pages: 292–310

Head Matter:
SUPREME COURT.
Solomon Deck, appellant, agt. Leonidas Works, respondent.
Promissory note—liability of guarantor, 'where payment was demanded of the makers, but refused, no notice being given to the indorser or gua/ramtor — Guarantee.
H. and A., in consideration of a horse sold and delivered to them by R., made and delivered to R. their promissory note. R. transferred the note to the defendant, W., for value and at the same time indorsed it. Defendant, W., transferred it to D., the plaintiff, for value, with the following guarantee, viz.: "Eor value received, I guarantee the payment of the within note,” signed W. The note, afterwards, became due, and was presented to the makers and payment demanded, but no notice of non-payment or protest was given to R., the indorser, or to W., the guarantor. When the note became due the makers were, and still are, insolvent, and the action is brought on the guarantee:
Held, that the omission of plaintiff, D., the holder, to serve notice of protest upon R., the indorser, or to give notice of non-payment to defendant, W., the guarantor, in sufficient season to enable him to charge the indorser, does not have the effect to discharge the defendant upon his guarantee.
The guarantor of a note on which there is a prior indorsement, undertakes for the performance of each contract which he has guaranteed; that of the maker, and that of the indorser. If either fails to perform the contract which is guaranteed a cause of action arises to the holder of the guarantee for such default.
Where no condition requiring presentment and notice of non-payment, or any diligence of whatever character in order to save or protect the guarantor in any recourse against the indorser is expressed in the guarantee, and no such condition is as matter of law implied, no such condition can be insisted upon to discharge the guarantor.
The doctrine of non-performance applicable to the case of negotiable paper does not govern in the case of guarantees, where the guarantor undertakes positively that his principal shall perform. If it be intended ■that notice shall be given, it must be provided for in the contract, otherwise the guarantor must inquire of his principal.
General Term, Fourth Department, June, 1879,
The action was brought upon the guarantee of a promissory note and indorsement.
On the 18th April, 1874, H. A. Hober and E. H. Austin, in consideration of a horse sold and delivered to them by Spencer Eutherford, made and delivered to him their promissory note, dated on that day, whereby, sixteen months after date, they jointly and severally promised to pay to the order of Spencer Eutherford $150, at their house in Troupsburgh, for value received with use.
Eutherford held this note until the 15th day of November? 1874, when he transferred it to the defendant for value and indorsed and delivered it to defendant.
Defendant held the note until July, 1875, when he transferred it to the plaintiff for value, writing and subscribing upon the back of the same, and below the indorsement of said Spencer Eutherford, “for value received I guarantee the payment of the within note, July 10, 1875, L. Works.”
Wheu the note became due payment was duly demanded of the makers, but no notice of non-payment or protest was given to said Eutherford at all, or said Works, within three months thereafter.
At the time the note became due the makers were, and still are, insolvent and the note remains unpaid.
Eutherford refuses to pay the note, claiming to be discharged because he received no notice of protest or of non-payment, and he was, and still is, solvent.

Opinion:
The cause was tried before Hon. James L. Angle, a trial by jury having been waived and the complaint was dismissed on the merits, the following opinion being rendered :
Angle, J.
The words, ." the within note," used on the guarantee had reference not only to the note written by the makers, but also to the indorsement' by Eutherford. It had reference to the paper including his indorsement, and a payment of the note, by Eutherford to plaintiff, would, I think, have discharged the defendant from liability on the guarantee, although the note as made by the makers remains "unpaid, and their liability on it unaffected by such payment.
The reasoning of Loveland agt. Shepard (2 Hill, 139) appears applicable to this construction of the guarantee before me, although that was a guarantee of collection.
The plaintiff, when he took the note, had notice from the paper itself that defendant was surety for Eutherford as well as for the makers, and the question presented is, whether it was the duty of plaintiff to have the note protested and notice given to Eutherford, failing in which the defendant, as surety for Eutherford, would be discharged.
In Allen agt. Rightmere (20 J. R., 366) it is said that the' guarantee of judgment is a guarantee that the maker shall pay when the note becomes due, and that expression has gone into many opinions since, but, in that case, and most of the cases since in this state, there was no indorser, and it was literally true that the guarantee was only as to what the maker should do.
I need not cite authorities for the principle that the creditor is bound to preserve to the surety the benefit of securities he holds. If they are lost by the act or omission of the creditor, the surety is discharged. Within this principle I hold that it was the duty of the plaintiff to have preserved to the defendant the liability of the indorser by protesting this note and giving the indorser notice thereof.
Judgment for defendant.
From this judgment plaintiff appeals.
J. F. Parhhurst, for plaintiff, appellant.
The plaintiff was not bound to charge Eutherford as indorser and his failure to do so did not discharge the defendant from liability upon his guarantee; because, First. The duty of charging the indorser was not imposed by the terms of the written contract and must be held to contain the entire agreement of the parties. Second. The mere passive omission to charge the indorger was not a release of security within the rule referred to by judge Angle. Third. A guarantor for value is not a surety within the rule above referred to, and can claim no privilege from that rule. The written contract of guarantee contains the entire agreement of the parties, and must be construed like other written contracts. It has long been the settled rule that contracts of guarantee are to be construed like other written instruments, and " the language of the contract must be construed according to the plain and obvious import" ( Whitney agt. Groot, 24 Wend., 82). First. That guarantees are governed by the same rules of construction as other contráete. Second. That in case of ambiguity the language is construed most strongly against the guarantor ( Walrath agt. Thompson, 4 Hill, 200; Christ agt. Burlingame, 62 Barb., 357; Mason agt. Pritchard, 15 East, 227; Mayer agt. Isaac, 6 P. & W., 610; Drummond agt. Prestman, 12 Wheat., 518; Fell on Guarantees [2d ed.], page 130; Farmers and Mechanics' Bank agt. Evans, 4 Barb., 488). The guarantor is bound by his writ-' ten contract and can claim nothing beyond it, and the holder of a guaranteed obligation owes no duty to the • guarantor unless imposed by the terms of the contract of guarantee (Winchel agt. Doty, 15 Hun, 2). Flo case can be found where our courts have imposed any duty upon the holder of the guaranteed obligation which was not expressly stipulated for in the written contract. As stated in Edwards on Bills &c., "the terms of a contract of guarantee are construed strictly, and the law does not supply any condition which is not incorporated into the agreement, or fairly implied from the language " (Wright agt. Johnson, 8 Wend., 512; Hunt agt. Smith, 17 Wend., 179 ; Dobbins agt. Bradley, 17 Wend., 422; Walrath agt. Thompson, 6 Hill, 240; 2 Comst., 185). And " if the very terms of the guarantee do not necessarily imply that the liability of the guarantor is dependent upon the failure to obtain payment after proceedings at law against the principal, a suit at law is not necessary to bind him " (Morris agt. Wadsworth, 11 Wend., 100 ; Morris agt. Wadsworth, 17 Wend., 103; Compston agt. McNair, 1 Wend., 457). It is competent for a1 guarantor to require as a condition.or prerequisite to his obligation to pay, that the holder shall first test the collectibility of the note by proceedings against the maker or indorser, or to require any other duty of the holder. If, however, he requires any such duty of the holder, he must do it by the terms of his contract of guarantee. It is not imposed by the law but by the very word and letter of' the contract itself. For instance, a guarantee that the note is " good," or that it is " collectible of A," or " collectible within one year," or " collectible," imposes such a duty because " if A guarantees the collectibility of B's note to G, he does not absolutely guarantee its payment, but only that he will pay in the event that C shall test the collectibility of goodness of the note by suit, and shall be unable by due and reasonable diligence to enforce payment " (3 Daniels on Neg. Inst., page 648 ; Allen agt. Rightmire, 20 John., 365 ; Dickerson agt. Dickerson, 39 Ill., 575; Arants agt. Commonwealth, 18 Grat., 770; Craig agt. Parkis, 40 N. Y. [1 Hand), 188 and, cases cited). It will be observed that in all these cases something remained to be done by the holder before he could have recourse to the guarantor, and that that service was stipulated for in the contract of guarantee. In such a case the guarantor cannot be required to pay until the holder has performed the condition precedent imposed by the terms of the contract of guarantee (Burt agt. Horner, 5 Barb., 501; Newell agt. Fowler, 23 Barb., 632). If it be intended that notice shall be given, it must be provided for in the contract, otherwise the guarantor must inquire of his principal (Douglass agt. Howland, 23 Wend., 35). The point was decided long ago that a guarantee of payment is not a conditional but an absolute undertaking that the maker will pay the note when due (See, also, Allen agt. Rightmire, 20 John., 365). And the rule is the same in England (Somersal agt. Bamerly, Cro. Jac., 287; Atkins & Wolfe's Cases, 1 Leon, 105 ; Pitman agt. Biddlecome, 4 Mod., 230; Smith agt. Goff, 11 id., 48; Brookbank agt. Taylor, Cro. Jac., 605 ; Warrington agt. Furbor, 8 East, 242). And in Walton agt. Mascall (13 Mees, & Wels, 452) the court say: " It is clear that a request for the payment of a debt is quite immaterial unless the parties to the contract have stipulated that it shall be made. If they have not, the law requires no notice or request" (Brandt on Suretyship, &c., sec. 170). When the contract is an absolute guarantee of payment as in this case, there is no condition whatever, and the liability of the guarantor is commensurate with that of the maker. When the note became due the guarantor was bound to produce his principal at the place where the note was payable, and to see that he paid it, or to pay it himself. The obligation of a guarantor is what the fair import of its language imposes upon him. If his engagement is absolute, he cannot insist upon any condition (Simmons agt. State, 36 N. H., 73; Brandt on Suretyship, 171; Edwards on Bills, p. 243; Breed agt. Hillhouse, 7 Conn., 523; 6 Bar. & Cres., 373; Read agt. Curtis, 7 Greenleaf, 186). So, also, in Illinois and Connecticut the courts adopt the language of Douglass agt. Howland (supra), and say: " It is a general rule that when one guarantees the act of another his liability is commensurate with that of his principal, and he is no more entitled to notice of default than the latter. Both must take notice of the whole at their peril" (Gage agt. Lewis, 68 Ill., 604; 14 Conn., 479; 24 Wend., 35). " The liability of a guarantor is measured by that of his principal, unless he expressly assumes a less or greater liability " (Smith agt. Rogers, 14 Ind., 224). A guarantee of payment is a contract that the money shall be paid at maturity, while a guarantee of collection is simply a warranty that it is collectible (Edwards on Bills, 234 and cases ; Compston agt. McNair, 1 Wend., 457). And the holder of a guarantee of collection must make diligent effort to collect the note or the guarantor will be discharged (Burt agt. Horner, 5 Barb., 501; Fell on Guarantee, p. 320; Craig agt. Parkis, 40 N. Y., 188 and cases ; Moakley agt. Riggs, 19 John., 68 and cases ; Loveland agt Shepard, 2 Hill, 139). But if the contract is a guarantee of pay ment, he is not bound to demand payment, and may even wait until the maker is insolvent without prejudice to his rights against the guarantor, (Brown agt. Curtis, supra). Second. The mere passive omission to charge the indorser was not the release of a security within the rule referred to by judge Angle. The rule refers only to the release by the voluntary act of the creditor of property held as security for the debt. The proposition stated in the opinion of judge Angle, that the'holder was bound to charge the indorser within the principle of the cases, holding that a " creditor is bound to preserve to the surety the benefit of securities he holds," cannot be sustained upon either principle or authority. It is true that a creditor who holds property as security for payment of the debt cannot voluntarily relinquish it without discharge of a surety pro tanto. The creditor in such case becomes a trustee for all parties concerned. But it must be an interest in property of the principal debtor by reason of which the holder is charged with a trust in favor of the surety. The security must be " a mortgage, pledge or lien, some right or interest in property which the creditor can hold in trust for the surety, and to which the surety, if he pay, can be subrogated and the right to apply or hold must be absolute " (Glazier agt. Douglass, 32 Conn., 393 ; Brandt on Suretyship, sec. 374). Hor can it be said that Rutherford has been " released " from liability upon the note. He was never liable except contingently and- he was never charged. There is a wide distinction between a release of a person liable upon an instrument and a passive omission to charge one contingently liable, and even toward a surety in' fact, the rule does not impose such a duty upon the creditor. For instance, if the holder of a note releases the first indorser he cannot recover of the second indorser (Newcomb agt. Raynor and al., 21 Wend., 108). But he may omit to charge the first indorser and still recover of the second (Baker agt. Morris, 25 Barb., 140; Morgen agt. Woodworth, 3 John. Cases, 89). So, also, he may withdraw an execution before levy (Humphrey agt. Hitt, 6 Grat., 509; Lenox agt. Prout, 3 Wheat., 520). But otherwise after levy (Commonwealth agt. Haas, 16 S. & R., 252; Farmers' Bank agt. Reynolds, 13 Ohio, 84; Mayhew agt. Boyd, 5 Md., 102 ; 1 Parsons' N. & B., 242). Such a passive omission will not discharge even a surety. The rule in such case is stated by the court of appeals as follows : " Mere laches on the part of a creditor, or non-performance of some act, which might prevent loss to a surety, will not in the absence of some express covenant or condition, discharge a surety " (Board of Supervisors agt. Otis et al., 62 N. Y., 88; Overruling People agt. Janson, 7 John., 332; Dye agt. Dye, 20 Ohio, 86 and cases cited; Wells agt. Mann, 45 N. Y., 327; Sterling agt. Marietta Co., 11 Serg. & Rawl., 179 ; Hubbell agt. Carpenter and al., 5 Barb., 520; Freeman's Bank agt. Rollins, 13 Maine, 202; Powell agt. Waters, 17 John., 176 ; Daniels on Neg. Inst. S., 1326). The discharge of one of several sureties by the failure of the creditor to sue within thirty days after notice, under the Arkansas statute, is held-not to affect the liability of co-sureties (Willson agt. Tebbetts, 29 Ark., 579). And neglect to present note to administrator of maker until all remedy against estate of maker is lost, will not discharge surety (Villars agt. Palmer, 67 Ill., 204), or failure to have mortgage recorded (Philbrook agt. McEwan, 16 Ind., 347), or omission to prove debt in bankruptcy (Hayes agt. Ward, 4 John. Ch., 132; King agt. Baldwin, 2 John. Ch., 562), or neglect to enroll bond under the statute of Mississippi (Pickens agt. Finney, 20 Miss., 468; McGee agt. Metcalf, 20 Miss., 535). Third. The rule that a surety is discharged if the creditor release a security upon property of the principal debtor, does not apply to a guarantor for value, hi either an indorser nor a guarantor for value is entitled to claim any benefit from that rule (Pitts agt. Congdon, 2 N. Y., 352; Wells agt. Mann, 45 N. Y., 330 ; Colgrove agt. Tallman, 67 N. Y., 99 ; Hurd agt. Little, 12 Mass., 503). In the case of Tremble agt. Thorne (16 John., 151), the court refused to give an indorser for value, the benefit of this rule because he was " answerable upon an independent contract." And in the case of Wells agt. Mann (45 N. Y., 330), and Colgrove agt. Tallmam (67 N. Y., 99), this limitation of the rule was expressly approved, and the rule was held not to include indorsers or guarantors. Where the guarantee, as in this case was in consideration of property purchased by the guarantor at the time of the guarantee and subsequent to the execution of the note, it was held that such a guarantee was an engagement to pay the guarantor's own debt in a particular way and need not be in writing. That the guarantor in such a case " did not undertake as a mere surety for the maker, but on his own account, and for a consideration which had its root in a transaction entirely distinct from the liability of the maker " (Dauber agt. Blackney, 38 Barb., 434; Brown, agt. Curtis, 2 N. Y., 225 ; Leonard agt. Vredenburgh, 8 John., 38; Johnson agt. Gilbert, 4 Hill, 178; Fowler agt. Clearwater, 35 Barb., 143 ; Cardell agt. McNeill, 21 N. Y., 340; Mallory agt. Gillett, 21 N. Y., 418; Nelson agt. Boynton, 3 Metc., 396). " It is a rule, well settled and repeatedly recognized in this court, that taking a note either of the debtor or a third person for a pre-existing debt is no payment unless it be expressly agreed to take the note as payment, and to run the risk of its being paid. The holder is not obliged to sue upon it. He may return it when dishonored and resort to his original demand " (Toby agt. Barber, 5 John., 72; New York State Bank agt. Fletcher, 5 Wend., 88; Hayes agt. Stone, 7 Hill, 130 and cases cited; Davis agt. Allen, 3 Comstock, 170; Heubach Brothers agt. Mollmon, 2 Duer, 259). And the rule is the same where the sale of the chattel is contemporaneous with the transfer of the note (Battle agt Coit, 26 N. Y., 404). It is as if Works had been paid for his horse in counterfeit money or the bills of a broken bank (11 Wend., 19). And Works may recover for the price of the horse, if upon the trial he produces the note (Hughes agt Wheeler, 8 Cowen, 76; 11 Johnson, 519; Johnson agt. Weed et al., 9 John., 310).
A. H. Bu/rrell, for defendant, respondent.
The defendant was discharged from liability npon his guarantee, by reason of the failure of the plaintiff to give the indorser notice of non-payment and his consequent discharge from liability as indorser. The nature of the contract of one who guarantees the payment of the promise to pay of another is well settled. He is a surety ( Washington Bank agt. Shurtleff, 4 Metc., 30, 32 ; Turnure agt. Hohenthal, 4 J. & S., 79). There are differences between the contract of the grantor and that of him who signs the note as surety; such differences being in favor of the grantor; but as he promises to pay the debt of another, he is a surety (2 Parsons on N. and B., 117 [note], 134; Brandt on Guarantee, &c., sec. 1). The agreement of the grantor is absolute, like that of a surety; but not absolute to pay. It is absolute to pay if the maker does not (Brown agt. Curtiss, 2 N. Y., 225,228 ; Brandt on Guarantee, sec. 1). " He does not promise that he will pay the note, but that the maker, who has agreed to pay it, and who is bound to pay it, shall perform his agreement. His agreement is absolute and unconditional that the maker of the note shall pay it, but his liability is contingent upon the failure of the maker to pay it" (Citing Brown agt. Curtiss, supra; Ten Eyck agt. Brown, 3 Pinney, 452, 454; S. C., 4 Chandler, 151; Mallory agt. Lyman, 3 Pinney, 443 ; S. C., 4 Chandler, 143). Whatever may be the niceties of the distinction, it is sufficient that the grantor agrees to answer for the debt of another and is a surety (2 Daniel on Nego. Instr., secs. 1752, 1753 ; Union Bank agt. Coster, 1 Sandf. S. C., 563 ; 3 Kent, 123, 124; authorities cited, supra). There is one distinction, however, which is of importance in this case, and that is that a surety of a note is generally a maker. The debt is his, primarily, and he is not only absolutely bound to pay at maturity, but he is absolutely liable then to pay. The guaram tor, on the contrary, agrees to pay the debt of another. He is absolutely bound to do it, but liable only in case the maker does not (2 Daniel on Nego. Instr., sec. 1753; Brewster agt. Silence, 4 Seld., 207; Brandt on Guarantee, sec. 1). The rule as to the construction of the guarantor's contract was laid down on the argument of the case of Davis agt. Copeland (67 N. Y., 127), thus: " A guarantor is only to be held to strict compliance with his contract. But the contract is to be construed like any other contractnot most strongly against the guarantor, nor most strongly for him." And the same rule is laid down by the authorities (Brandt on (Guarantee, secs. 78, 79): The contract of the defendant was that he guaranteed the payment of the note. As defendant held the note, it was the contract of the makers, supplemented and strengthened by the contract of Rutherford, the indorser. Rutherford sold the note to defendant, indorsed it, and the liability of Rutherford upon the note was prior to that of defendant. Defendant, if he paid the note, could call upon Rutherford to make him good, if Rutherford's liability still existed. The words of the guarantee are: " For value received I guarantee the payment of the within note." The " within note " is the note made by Hober and Austin, and indorsed by Rutherford (Loveland agt. Shepard, 2 Hill, 139). As the note was transferred to the plaintiff, it consisted not only of the absolute agreement of the makers, but of the conditional agreement of the indorser, and the still later agreement of the defendant, which was secondary to both. This agreement of the indorser was available to plaintiff, because he owned the note, and, if defendant paid it, it would also be available to him. But, to make it available, the note must not only have been presented for payment, but Rutherford must have had notice of the default of the maker, and that notice must have been given to him by the next day, or put m the post-office, directed to him at his residence (2 Daniel on Nego. Instr., sec. 1035 et seq.). Unless this was done he was discharged. The contract requires the very greatest good faith on the part of the principal toward the guarantor (Story Eq. Juris., secs. 324, 326; Brandt on Guar., see. 79). When any act has been done by the obligee that may injure the surety, the court is very glad to lay hold of it in favor of the surety (law agt. E. I. Co., 4 Ves., Jr., 824, 833). And if the person guaranteed omits to do any act which he ought to do, and the omission prove injurious to the surety, the surety is discharged. So, also, the surety has a complete right to the benefit of every security held by the creditor, and, if the benefit of it is lost, the guarantor is discharged (Watts agt. Shuttleworth, 5 H. & N., 235, 247; Newton agt. Chorlton, 10 Hare, 646, 651). As Kent puts it, the creditor is bound to preserve his securities unimpaired, when he intends to look to the surety for payment (3 Kent, 124). A learned writer says that " a person holding a guarantee for the payment of a bill, is nevertheless bound in duty to the guarantor to make a proper presentment of it for payment, and give due notice of its dishonor, so as to charge the parties liable thereon " (Edwards on B. and N., 242). The same rule applies to a party holding an indorsed note as a pawn (Edwards on Bailments, secs. 238, 239, 240). Rutherford being, as to defendant a principal debtor, liable before him, and one to whom Works might resort if he was obliged to pay, the failure to keep him liable had the same effect, as to Works, as though the owner of the note had discharged the sole solvent debtor and then tried to hold the guarantor. Such discharge releases the guarantor. The good faith and care required on the part of the creditor are such that, if he fails to give notice of non-payment to the guarantor and he suffers damage thereby, he is discharged to the extent of the damage (3 Kent, 123, 124; Brandt on Guarantee, sec. 168).
Talcott, J.—
This is an appeal from a judgment rendered at the Steuben circuit in an action tried by the court, a jury having been waived.
The action was brought upon a guarantee of the payment of a note which was written by the defendant upon the back of a note made by Hober and Austin and dated April 18, 1874, whereby they promised to pay to the order of Spencer Rutherford $150, "at my house in Troupsburgh," for value received, with interest, payable sixteen months after date. Afterwards, and before the note matured, it was for value received, indorsed by Spencer Rutherford and delivered to the defendant, who, on the 10th of July, 1875, executed the guarantee which was in the following words:
"For value received I guaranty the payment of the within note. Dated July 10, 1875.
L. WORKS."
And thereupon the said defendant, Works, sold and transferred the said note to the plaintiff for a valuable consideration, at the time paid to the defendant by the plaintiff.
When the note became due payment thereof was duly demanded of the makers but it was not paid. ¡No notice of protest or of the non-payment of the note was given to Spencer Rutherford, the indorser, or to the defendant, and the defendant was not informed of the non-payment of the note for three months after its maturity. At the time of the maturity of the note the makers were, and still are, insolvent. Rutherford, the indorser, then was, and still is, solvent, but by mason of the failure to give him notice of the demand and refusal to pay the note, Rutherford claims that he has been discharged as indorser; and the defendant by reason of the omission to notify said Rutherford of the presentation and non-payment, of the note, has lost all remedy as against said Rutherford and has been thereby damnified. And the court found, as a conclusion of law, that by the discharge of Rutherford, and the consequent injury to the defendant, the defendant has been discharged from his liability as a guarantor of the payment of the said note, and ordered a judgment for the defendant.
So the question is presented in the case, whether under such circumstances the holder of the guarantee of payment has lost his claim upon the guarantor by the omission to give a prior indorser notice of the demand of payment on the makers and their refusal.
As singular as it may appear, we have been able to find no case among the reported cases in this state and have, by the elaborate briefs of the respective counsel, been referred to none in which the precise point raised -in this case has been decided.
In Brown agt. Curtiss (2 N. Y., 225) it was held that where one contracts in the form of a guarantee of payment upon the back of a promissory note he cannot be made liable as indorser, nor can he set up in his defense the want of demand and notice, and that the mere neglect of the holder to sue the maker does not discharge the guarantor although the maker becomes insolvent intermediate the maturity of the note and the action against the guarantor.
Bronson, J.,
who delivered one of the opinions in that case, says: " The undertaking of the defendant was not conditional, like that of an indorser, nor was it on any condition whatever. It was an absolute engagement that the note should be paid by the maker at maturity; when the maker failed to pay, the defendant's contract was broken and the plaintiff had a complete right of action against him. It was no part of the agreement that the plaintiff should give notice of the non-payment, nor that he should sue the maker or use any diligence to collect the money from him.
"The cases in Massachusetts, Maine and Pennsylvania are not law in this state. With us proceedings against the maker are only necessary where there is a guarantee of collection." In the same case, in the opinion of Steong, J., it is said: "The direct engagement of the indorser of a negotiable note and of the guarantor of the payment of the note, whether negotiable or not, is the same. Both undertake that the maker shall pay the amount when it becomes due. If there is a failure in such payment both contracts are broken. Ordinarily upon a breach of a contract the party hound for its performance immediately becomes liable for the consequent damages. In the case of the indorser of a negotiable promissory note, however, the liability does not become absolute unless due notice of non-payment is given to the party whom it is intended to charge. That is not because the indorser has thus stipulated in terms, but it is a condition annexed by the rules of the commercial law. In the case of a guarantor there is nothing to exempt him from the ordinary liability of parties who have broken their contracts; when it is direct and not conditional, no condition requiring notice of non-payment is inserted in the contract, nor is any inferred by any rule of law. The guarantor is bound to ascertain for himself whether his contract has been performed, and can easily obtain the requisite information from the party for whose conduct he has assumed the responsibility,"
In the case of Brown agt. Curtiss (supra), there was no prior indorser, and Beonsou, J., in allusion to this fact, says: "If there had been an indorser on the note prior to the guarantee, and the plaintiff had allowed him to be discharged by neglecting to demand payment and give Mm notice, it maybe that the defendant would have a good answer to the action. But it is not necessary to consider tMs question for there was no indorser."
But it will be perceived that both Bbohsok and Stbohg, JJ., put the principle upon which it was held that no notice to the guarantor of presentment and non-payment is necessary in order to maintain the action against him, upon the ground that the contract of guarantee of payment is entirely unconditional and in no manner qualified by any engage-' ment, express or implied, imposing upon the holder of the guarantee the duty of any diligence whatever in regard to a presentment for payment, or notice of the non-payment. This being the principle upon which the decision rests, we do not see how any condition rendering it necessary for the holder of the guarantee to demand payment of the maker, and in case of non-payment to notify the indorser, can be interpolated in the contract, in order to hold the guarantee liable on his guarantee. hTo such duty was imposed by the terms of the written contract, which must be held to consti • tute the agreement between the parties. It is a settled rule that guarantees are to be construed like other written instruments. "The language of the contract must be construed according to the plain and obvious import " (Whitney agt. Groot, 24 Wend., 82; Walrath agt. Thompson, 4 Hill, 200 Winchell agt. Doty, 15 Hun, 2). " If the very terms of the guarantee do not necessarily imply that the liability of the guarantee is dependent upon the failure to obtain payment after the proceedings at law against the principal, the suit at law is not necessary to bind him (Morris agt. Wadsworth 11 Wend., 100; S. C., 17 Wend., 103). Therefore, as no condition requiring presentment and notice of non-payment, or any diligence of whatever character, in order to save or protect the guarantor in any recourse against the indorser in this case is expressed, and no such condition is as matter of law implied, it would seem obvious that no such condition can be insisted upon to discharge the guarantor. In Douglass agt. Howland (24 Wend., 35) it was held that " the doctrine of non-performance applicable to the case of negotiable paper does not govern in the case of guarantees. Where the guarantor undertakes positively that his principal shall perform, if it be intended that notice shall be given it must be provided for in the contract, otherwise the guarantor must inquire of his principal." It may be considered that the guarantor of a note on which there is a prior indorsement undertakes for the performance of each contract which he has guaranteed, that of the maker and that of the indorser. If either fails to perform the contract which is guaranteed a cause of action arises to the holder of the guarantee for such default. And if the guarantee was confined to the indorsement alone it may be possible that any neglect of the holder to see that the indorser was duly charged so as to make him liable by law, would discharge the guarantor, but where the guarantee is as in this case, that the parties who are liable by two" separate contracts, one absolutely as maker, the other conditionally, provided a due demand is made of the maker and if he refuse payment, notice to the indorser, then we see no reason why the holder of the guarantee may not maintain his action for default in the performance of either contract guaranteed. This is not the case of a release of the liability of the indorser, in which case the guarantor might have reason to complain, but of a simple omission to charge the indorser by notice.
If the holder release the first indorser he cannot recover of the second indorser (Newcomb agt. Raynor, 21 Wend., 108). But the holder may omit to charge the first indorser and yet recover against the second (Baker agt. Morris, 25 Barb., 140; Spencer agt. Ballou, 18 N. Y., 327). On the whole, we think if the guarantor desired to have recourse to the indorser in this case, and desired that the holder of the guarantee should take the requisite steps to charge the indorser, he should have so provided in his contract, otherwise he must see to it himself that the indorser is duly notified of the non-payment of the note.
The case of Loveland agt. Shepard (2 Hill, 139), upon the authority of which the justice at the circuit seems to have disposed of this case, was a guarantee of collection in which case there was no breach of guarantee, except upon a failure to collect after the exhaustion of all legal remedies, as provided for by the very terms of the contract of guarantee, as .such contracts have been construed by the courts.
In the case of Green & Co. agt. Thompson (33 Iowa, 293) .the precise question in this case arose. It was there claimed that the defendant, a guarantor of payment, had suffered detriment because he was not notified of the non-payment of the note, the payment of which he had guaranteed in time to enable him to give notice thereof to two indorsers, under whom he had acquired the note, who were thereby discharged from liability, and the following doctrine is laid down in that case: " As there rests no obligation on the holder of the note, when he seeks to charge the guarantor only, to give such notice as will bind an indorser, the- guarantor cannot be relieved if it is not done; any detriment he may thereby suffer the law presumes he assented to assume by entering into a contract which provides no protection against it."
There is another view of the case which may be taken which leads to the result that the guarantor in this case is-liable upon his guarantee notwithstanding the neglect of the holder to charge the indorser. The ground on which the defendant's case seems to have been put at the circuit, and upon which it is sought to be maintained here, is upon the rules applicable to the case of principal and surety. The general rule, as well settled, is, that where a creditor relinquishes to a principal debtor other direct or collateral securities which he might have resorted to for the exoneration of the surety, the surety is, pro tanto, discharged (See case of Ingalls agt. Morgan, 10 N. Y., 87). If this principle had any application to the case of an absolute and unconditional undertaking like a positive guarantee of payment at all events, yet ii, will be remembered that in this case it is expressly found that the defendant received a valuable consideration for his guarantee and for this reason, if for no other, he was not in the condition of a surety for the performance of the contract of the indorser. In Pitts agt. Condon (2 N. Y., 352) it was held that "where a creditor receives from his principal debtor collateral security of sufficient value to pay the debt, the surety is discharged if the security be surrendered without his consent. But where the holder of a promissory note indorses and transfers it for value, in the usual course of business, Tie is not a swretry within the meaning of this rule and, therefore, he will not be discharged although the indorser takes security from the maker and afterwards surrenders it without his consent." In this case, therefore, the defendant cannot claim to have applied the rule existing as between a creditor and a surety for the reason that he transferred and guaranteed the note in question for a valuable consideration received by him from the plaintiff' at the time and as the consideration for the transfer and guarantee.
In view of the whole case, therefore, we think that the judge at the circuit erred in his conclusion that the omission on the part of the plaintiff to charge the indorser or to give notice of non-payment to the guarantor in sufficient season to enable him to charge the indorser had the effect to discharge the defendant from liability on his guarantee of payment.
The judgment is reversed and a new trial ordered, costs to abide the event.