Case Name: John Craig, Appellant, v. James Parkis, Respondent
Court: New York Court of Appeals
Jurisdiction: New York
Decision Date: 1869-03-22
Citations: 40 N.Y. 181
Docket Number: 
Parties: John Craig, Appellant, v. James Parkis, Respondent.
Judges: 
Reporter: New York Reports
Volume: 40
Pages: 181–191

Head Matter:
John Craig, Appellant, v. James Parkis, Respondent.
The transfer of a debt or obligation carries with it as an incident, all securities for its payment. The assignment of a bond and mortgage gives to the assignee the benefit of, and the right to sue upon a guaranty by a previous assignor of their collection, although such guaranty is not, in terms, transferred with the principal obligations.
A guaranty of the collection of the amount, as “ it becomes due,” is but an undertaking on the part of the guarantor, that the debt will be paid, if the principal be prosecuted with reasonable diligence, and the former is discharged by want of such diligence, on the part of the creditor, to prosecute the principal debtor to judgment and execution.
Where the facts are undisputed, the question of what is reasonable diligence, is a question of law for the court; and a delay of prosecution for six months after the debt has become due, where all the principals reside in the State and can be personally served, is not reasonable diligence, and discharges the guarantor.
Where, during the whole period of such delay, the principals were entirely and hopelessly insolvent—Reid (Mason, Woodruff and Jambs, JJ., contra), that this did not excuse the failure of the creditor to prosecute, or dispense with such prosecution, as a condition precedent to his right of recovery against the guarantor.
(This cause was argued on the 16th day of January, 1869,
and decided on the 22d day of March, 1869.)
It was an appeal from a judgment of the General Term of the Supreme Court, in the eight judicial district, affirming a nonsuit of the plaintiff, granted at circuit.
The action was upon a guaranty.
August 18, 1857, Frederick Root executed his hond, and a mortgage, on land in Badaxe county, Wisconsin, to Willard Herrick, to secure the sum of $300, and interest, in three equal amounts, annually.
The first payment was to be made November 1, 1858.
The second payment to be made November 1, 1859.
The third payment November 1, 1860.
On the 24th of August, 1857, E. H. Burgess, by a writing, indorsed on the bond, guaranteed the payment of the bond and mortgage. On the same day, Willard Herrick assigned the bond and mortgage to the defendant, James Parkis, and guaranteed their payment, hy a writing, indorsed on the bond. August 28, 1857, James Parkis, the defendant, assigned the bond and mortgage, and guaranteed the collection of the same to Orson Tousley, by the following writing, indorsed on the mortgage:
“ For value received, I hereby sell, assign, and set over to Orson Tousley, all my right, title, and interest to the within mortgage, and the bond accompanying the same, and hereby guctramby the collection of the within amount, as it becomes due, waiving all notice. Dated Albion, August 28, 1857.
(Signed) JAMES PARKIS.”
This action was commenced upon this last guaranty. On the 3d of January, 1859, Orson Tousley assigned the said bond and mortgage to A. L. Oady, and, on the 1st of January, 1859, Oady assigned the same to the plaintiff, neither assignment in terms carrying with it the defendant’s guaranty. April 5, 1859, an action was commenced against Willard Herrick, upon his guaranty, and judgment recovered, for penalty in the bond, execution to collect $141.19,' which was returned unsatisfied. Ho execution has since been issued.
On the 15th of Hovember, 1859, an action was commenced, to foreclose said mortgage. Judgment was obtained, May, 1860, for $254.46, and $30.95 costs. It appeared, by the record, that personal service was not made on Frederick Boot. The premises were sold, October 1, 1860, for $28.90; the fees and expenses of sale were $27.90; and the deficiency on the sale was $291.42, for which execution was issued in Wisconsin, and returned unsatisfied. Frederick Boot resided in Orleans county, New York.
May 13, 1861, an action was commenced against Frederick Boot, upon said bond. Judgment recovered, July 6, 1861. Execution issued, and returned unsatisfied, May 4, 1861. Action commenced against E. H. Burgess, upon his guaranty judgment recovered, July 6, 1861, and execution issued and returned unsatisfied. To excuse the delay in prosecuting the foregoing obligation, the plaintiff, before resting Ms case, offered to prove that Root; Herrick, and Burgess, were, and had been, since the first, payment became due, utterly and hopelessly insolvent, and that nothing could have been collected of them, by proceedings at law. This was objected to, the objection sustained, the evidence excluded, and the plaintiff excepted.
The plaintiff was nonsuited.
George F. Da/nforth, for the appellant,
cited Cady v. Sheldon (38 Barb., 102); Gallagher v. White (31 Barb., 92); Mains v. Haight (14 Barb., 76, 78); Thomas v. Wood (4 Cow., 473); Schroeppel v. Shaw (3 Comst., 446); Daniels v. Patterson (Id., 50); Brown v. Curtis (2 Comst., 225); Merritt v. Lincoln (21 Barb., 249); Newell v. Fowler (23 Barb., 628); 13 Wend., 545; 8 Watts, 361; 11 Vermont, 265; 1 Wend., 462; 10 Bosw., 208; 1 Cush., 413; 30 Vermont, 127; Id., 246; 3 How. U. S. R., 515; 11 Conn., 213; 26 Conn., 437; 2 Parsons on Contr., 174 and 47; Story on Contr., § 970 and 970a; also, 1 Caines, 127; 4 Cow., 181.
Sanford F. Church, for the respondent,
cited, as to delay to prosecute, Moakley v. Riggs (19 J. R., 69); Burt v. Horner (5 Barb., 501); Penniman v. Hudson (14 Barb., 579); Kies v. Tifft (1 Cow., 68); Morris v. Haight (14 Barb., 76); Graham v. Bradley (5 Humph., 476); Battle v. Little (1 Dev., 381). As to the insolvency of principals, as an excuse for delay, he cited Vanderveer v. Wright (6 Barb., 544); Moakley v. Riggs (supra); Burt v. Horner (supra); Birkhead v. Brown (5 Hill, 635, 641); Gates v. McKee (3 Kern., 232, 237); 17 Wend., 422, 425; 8 Wend., 512, 516; 10 Johns., 312, 327; 23 Barb., 628, 632; 6 Cow., 624.

Opinion:
Lott, J.
The defendant, by assignment, bearing date the 28th day of August, 1851, assigned to Orson Tousley a mortgage on real estate, in the State of Wisconsin, and the bond accompanying the same, executed by Frederick Root to Willard Herrick, and guaranteed the collection of the amount, .secured thereby, as it became due, waiving all notice.
The bond and mortgage bear date the 18th day of August, 1857, and were .given to secure the payment of the sum of three hundred dollars, with interest, in three equal annual payments of one hundred dollars each, with interest; the first of which was to he made on the 1st day of ¡November, 1858. Indorsed on the bond, was a guaranty by G. H. Burgess, dated August 24, 1857, guaranteeing the payment thereof, and the said Willard Herrick, by an assignment of the last mentioned date, assigned the bond and mortgage to James Parkis, the defendant, or hearer, and also guaranteed the payment thereof. The said bond and mortgage, and all the right of Tousley in them, were afterwards assigned by him, on the 3d day of January, 1859, to A. L. Cady, and he assigned them, and all money due and to grow due thereon, as collateral security for a debt due from him to the plaintiff, by assignment dated February 1, of the same year.
On the fifth day of April following, the plaintiff commenced an action in the Supreme Court of this State against Herrick, on his guaranty, which was duly prosecuted to judgment, and an execution issued thereon, was returned wholly unsatisfied.
Subsequent to the, return of the execution, and on the 15th day of ¡November, 1859, a suit for the foreclosure of the mortgage was commenced in the Circuit Court of the State of Wisconsin against Frederick Boot, in which a- decree for the sale of the mortgaged premises, and for the payment of any deficiency, was entered, on the 10th day of May, 1860.
The property was sold on the 1st day of October, 1860, and the sum of one dollar, over and above the costs, was realized from such sale and credited on the decree.
An execution for the collection of the deficiency was issued, on the 4th day of December, 1860, and afterwards returned wholly unsatisfied. On the 4th- day of May,, 1861, an action was commenced by the plaintiff, in the Supreme Court of this State, against the said Burgess, on his guaranty, in which judgment was rendered on the- 6th- day of July thereafter, for the whole amount payable on the said bond, and on the 13th day of the month of Hay, an action was commenced by the plaintiff, in the Supreme Court of this State, against Frederick Eoot, the mortgagor, in which judgment was also recovered, on the said 6th day of July, for the whole amount due. Executions on both of the last mentioned judgments were issued on the 9th of the same month, and were each returned wholly unsatisfied, before the commencement of the present action.
After these facts were proven, the plaintiff offered to prove that, at the time the first installment of the bond became due, November 1, 1858, the said Frederick Eoot, William Herrick and E. H. Burgess were and have ever since been, each of them, entirely and hopelessly insolvent, and that nothing could have been collected of them, by proceedings at law then or since.
The court excluded that evidence, and then, no further evidence being introduced, a nonsuit was ordered.
The motion for the nonsuit was based on three grounds ;
1st. That the proofs did not show the guaranty in the suit to be owned by the plaintiff.
. 2d. That it did not appear, that the plaintiff had used due and proper diligence, in the prosecution of the principal debtor, and the several guarantors.
3d. That there were not sufficient facts stated in the complaint to constitute a cause of action.
' The first ground for the nonsuit will be first considered. Although the guaranty of the defendant was not, in terms, assigned to the plaintiff, he became entitled to the benefit of it, under the assignment of the bond, and the money secured thereby. The transfer of the debt to him, carried with it, as an incident, all the securities for its payment. He, therefore, had a right to maintain the action.
The exception to the exclusion of the evidence offered, and the other grounds of the motion for a nonsuit, present, substantially, the same question, and that involves the construction of the defendant's contract.
He guaranteed the collection, and not the payment, of the amount secured by the hond and mortgage, when it became due.
The mere fact of its non-payment, at that time, was, therefore, not sufficient to give the plaintiff the right of action. He was hound to take proper measures to collect the debt, within a reasonable time after the whole of it became payable, conceding, for the present, that such duty did not arise on the previous defaults.
His obligation will be first considered, on the assumption, that all of the parties liable were then able to pay, and that such ability continued for six months thereafter.
The last installment became payable on the 1st day of November, 1860, and legal proceedings could have been immediately taken against Boot the obligor, on his hond, and against Burgess and Herrick, the previous guarantors, on their guaranty of payment. Hone were, however, taken, until in Hay, 1861, and then, only against Boot and Burgess.
A judgment had, previously, been recovered against Herrick for the penalty of the bond, after default was made in the payment of the first installment, and assuming that no further suit against him was necessary, that did not dispense with the necessity of issuing an execution, after the other installments became payable.
It also appears, by the case, that all of the debtors, at the time of the recovery of the judgment, and the issuing of the executions against them, resided in this State, and there is nothing to show, that either of them was, at any time, a non-resident,or that a suit could not have been commenced against them, by a personal service of the summons. A delay for upwards of six months was, under the assumption of the solvency of the parties, not the exercise of proper and due diligence.
Does their insolvency excuse that delay ?
I see no principle upon which that can be claimed.
When a creditor agrees with a surety for his debtor, that he will commence a suit against such debtor within a reasonable time after the debts fall due, and, in default thereof, that the surety shall be released, it is a condition precedent to his right of action against the guarantor, that such suit shall not only he so commenced, hut that it shall he carried to consummation.
The plaintiff had no right to determine, on his own responsibility, whether the debt was collectible. That was a question which the defendant had made it incumbent on him to ascertain, by recourse to the ordinary rules provided by the , law for the collection of debts.
If the debtor's insolvency is an excuse for the delay, at all, there is no reason why it should not be such, as long as the insolvency continues, and thus the liability of the surety would be, for an indefinite period, controlled by the opinion of witnesses, as to the ability of the principal to pay the debt, and not by the standard, or means, fixed by the parties themselves, for ascertaining that fact.
These views lead us to the conclusion, that the proof of the debtor's insolvency was properly rejected.
It follows, therefore, that the nonsuit was proper, and that the judgment should be affirmed, with costs.