Court Opinion

ID: 6234520
Source: CourtListenerOpinion
Date Created: 2022-02-17 20:29:24.390442+00
Date Added: 2024-06-11T08:57:57.574655
License: Public Domain

The opinion of the court was delivered, by
Sharswood, J.
— That the relation of principal and surety exists with all the equities to which the latter is entitled in full force, not only after the liability of both parties is fixed, but even after judgment against them, is well settled in this state. It will he sufficient to refer to the case of The Manufacturers’ and Mechanics’ Bank v. The Bank of Pennsylvania, 7 W. & S. 343, in which it was distinctly decided that the rule of general equity, recognised perhaps in England and elsewhere, that a judgment against the principal and surety extinguishes the relation between them, as to every one but themselves, has no place in the jurisprudence of Pennsylvania; and that hence, if after judgment the creditors agree for a sufficient consideration to give time to the principal, the surety will be discharged.
It may be that after the liability on the contract where it is executory, is fixed, an agreement between the principal and the creditor to submit their variances to arbitration without the consent of the sureties will not have the effect of discharging them. If an action were instituted by the creditor against the principal, it would certainly seem that a reference of the cause in court would not have that effect, and if so, it is not easy to perceive why an amicable arbitration out of court could do so.
In the case before us, however, there was much more than a reference of the dispute between the principal and the creditor. That would have been to determine whether the principal had or had not performed his contract, and if not, what damage the cred*375itor should recover. The agreement here was a very special one. It gave the arbitrators power to decide whether the principal should pull down and rebuild the house in question if found not to have been built according to the contract — and if they should so find, then to determine the time when the work of pulling down should be begun, and when the work of rebuilding should be completed. By the original contract the work was to be finished by the 1st of April 1870, and the award made in pursuance of the submission directed that the walls should be taken down and the work completed by the 1st of September 1870. Certainly here was time given without the consent of the sureties. The creditor’s hands were tied from pursuing the principal until the expiration of the last-named period. The surety could not secure himself.'by discharging the claim of the creditor upon the original contract, and then proceeding against the principal for indemnity. Wherever this is the case, the surety is necessarily discharged. “ If,” says Mr. Justice Rogers, “ notwithstanding such contract, it was competent to sue the surety, the latter would immediately have his remedy over against the debtor. This would be in fraud of the contract of forbearance which the creditor would thereby indirectly defeat. The doctrine, that if the creditor gives time to the principal debtor, the surety is discharged, was first introduced in courts of equity. It was founded on this principle, that every surety has a right to come into a court of equity, and require to be permitted to sue in the name of the creditor. If then the creditor gives time to the principal debtor or does any act which alters the situation of the parties, he prevents the surety from using his name with effect. And the law is the same even when the arrangement may be for the benefit of the surety, for he stands upon his contract and is discharged from all obligation, if any alteration is made in it without his consent:” Clippinger v. Creps, 2 Watts 45. The ease of Blaine v. Hubbard, 4 Barr 183, well illustrates this doctrine, and bears some resemblance to that before us. There, upon an execution in the hands of a sheriff, the defendant, Hubbard, became surety for the -delivery of the goods levied on to the sheriff at a day certain. After that day the original award on which the execution was issued was referred to the arbitrators on exceptions filed and afterwards confirmed under an agreement that three months’ stay of execution should be given. . It was held that the bail to the sheriff was discharged. That Brown and Taggart were sureties on the contract in question, not guarantors, is ruled in effect in Reigart v. White, 2 P. F. Smith 438 — where the cases are discussed and it is held that an engagement to be responsible for the performance of a contract is an absolute undertaking —not merely a guaranty of the ability of the principal.
Judgment affirmed.