Court Opinion

ID: 3609630
Source: CourtListenerOpinion
Date Created: 2016-07-05 23:54:10.536449+00
Date Added: 2024-06-11T12:45:36.144337
License: Public Domain

There has been a very great deal of discussion, in the courts of this country, as to the legal construction of such a guaranty as this. The real difference of opinion has been as to what was implied in such a guaranty. All agree that, unless the terms of the guaranty imply that the liability of the guarantor depends upon the failure to obtain payment of the principal, by proceedings at law, such proceedings are not a condition precedent. In most of the States, it has been regarded as an undertaking to pay, if recompense could not be obtained of the principal debtor; and that, where clear proof of the principal debtor's insolvency could be made, no suit against him was required. The following cases will be found to hold this: (McDoal v. Yeomans, 8 Watts R., 361; McClurg v. Fryer,
15 Penn. St. R., 3 Harris, 293; Bull v. Bliss, 30 Vermont R., 127; Dana v. Conant, Id., 246; Perkins v. Catlin,
11 Conn. R., 213; Ranson v. Sherwood, 26 Conn. R., 437;Sanford v. Allen, 1 Cush., 473; Gillighan v. Boardman,
29 Maine R., 16 Shep., *Page 188 
79; Thompson v. Armstrong, 1 Breese Ill. R., 23; Wren v.Pierce, 4 Smedes  Marsh, 91; 2 Appl. R., 28.) The rule with us seems to be different.
The rule to be deduced from the adjudged cases in this State, is, that such a guaranty is an undertaking, that the demand is collectible, by due course of law, and that the guarantor only undertakes to pay, when it is ascertained that it cannot be collected by suit, prosecuted to judgment and execution against the principal; and that the endeavor to collect of the principal, by due course of law, is a condition precedent to the right of action against the guarantor. (Moakley v. Riggs, 19 J.R., 69;White v. Case, 13 W.R., 543; Eddy v. Stanton, 21 W.R., 255; Taylor v. Bullen, 6 Cow. R., 624; Burt v. Fowler, 5 Barb. R., 501; Loveland v. Shepherd, 2 Hill R., 139;Manning v. Haight, 14 Barb. R., 76; Newell v. Fowler, 23 Barb. R., 628; Van Derveer v. Wright, 6 Barb. R., 547;Gallagher v. White, 31 Barb. R., 92; Cady v. Sheldon, 38 Barb. R., 102.) It must be admitted, also, that the decided weight of authority, in the Supreme Court of this State, is, that a still further condition is implied in such a guaranty, and which is, that due diligence must be used in bringing the suit against the principal, and in prosecuting the same to judgment and execution; and that any laches in this respect will discharge the surety. (See cases above cited.)
I cannot find that this question has ever been passed upon in this court, or in the late Court of Errors. But, as a general rule, its soundness cannot be doubted, I think, and it seems unquestioned from the adjudged cases. The rule, which requires the creditor, in such case, to use due diligence to collect the debt of the principal, is just and reasonable, and should be enforced, as well for its reasonableness as for the unbroken current of authority with which it is supported. The rule is not, however, in my judgment, inflexible. It is like most general rules; it has its exceptions. It cannot be maintained upon principle, as the unbending rule, under all conceivable circumstances. If the principal debtor is and has *Page 189 
been, from the time the right to bring suit against him has accrued, utterly and hopelessly insolvent, with no property, out of which anything could be collected, then the reason of the rule, which requires the principal debtor to be prosecuted to judgment and execution with all diligence ceases, and the familiar maxim of the law, "cessante ratione legis, cessat ipselex," steps in and relieves the creditor from the rule of diligence in prosecuting his suit. The reason of the rule ceasing, the rule itself must cease. This must be so, unless we are prepared to hold, that the creditor should lose his debt for the want of due diligence in doing a vain, idle and useless thing. The law is said to be the perfection of human reason, and should not be subject to such a reproach. Is it insisted that the judgment and the issuing and return of an execution nulla bona
is, under all circumstances, the best evidence of the debtor's inability to pay? If it is, it cannot be maintained. His recent discharge under the bankrupt act of congress, or under the insolvent laws of the State, on the petition of two-thirds of his creditors, is better evidence of his insolvency than the sheriff's certificate upon the execution, that he has no goods or chattels, lands or tenement. The one is preceded by a full and complete judicial investigation into the property and affairs of the bankrupt, and the certificate of discharge is only issued, when the property of the debtor has been made over to the assignee for the benefit of the creditors. The other is the certificate of a ministerial officer, often made upon the very slightest investigation, and never more than prima facie
evidence.
What the plaintiff offered to prove, in the case at bar, would have been quite as satisfactory evidence of the inability to collect anything of the principal debtor, as the return of the sheriff, upon an execution; and, it seems to me more so. The plaintiff offered to prove, that these principal debtors were, at the time this debt fell due, and, that each of them, ever since, had been entirely and hopelessly insolvent, and, that nothing could have been collected of them, by proceeding at law, then or since. This evidence was objected to, and *Page 190 
rejected by the court. Under this ruling, we must hold, that the creditor is compelled to proceed to judgment and execution against the principal debtors, where they are concededly, entirely and hopelessly insolvent, and have nothing out of which the execution could be collected, and that he must do this with all diligence, or lose his debt. There is no other principle upon which such a proposition can be maintained, than that it is so provided in the bond, and that the party must stand to his contract. The argument must be, that the condition of the guaranty made due diligence, in such a case, a condition precedent to the right of action against this guarantor. The decided weight of authority in the Supreme Court of this State is certainly to this effect. The rule, however, has been seriously questioned by some of the judges in that court, and was distinctly repudiated in the recent case of Cady v. Sheldon
(3 Barb. R., 103). All that such a guaranty implies is, that the evidence of debt is good, and collectible by due course of law. The courts have said the law imposes this duty to prosecute the principal debtor with reasonable diligence; and this is for the purpose of insuring the collection of the debt out of the principal, and that no opportunity shall be lost to do so. This is very well, and is all right, as a general rule, as we have already said; but when the principal debtors are utterly and hopelessly insolvent, and have nothing out of which an execution could be collected, then the law excuses the want of diligence, as it would have been idle and useless in accomplishing any purpose whatever. Due diligence in prosecuting the principal debtor, who is proved to be utterly insolvent and without any property, should never be implied in such a guaranty, as a condition precedent to the right of action against this guarantor. There is, certainly, no express undertaking of the kind in the contract of guaranty under consideration; and, as none will be implied, it is not required. The terms, "good and collectible," used in such a guaranty, mean nothing more than"capable of being collected." (Marsh v. Day, 18 Pick. R., 321; Sanford v. Allen, 1 Cush. R., 474, 475.) The rule, *Page 191 
which would require the creditor to prosecute with diligence, in such a case, a hopelessly insolvent debtor, without any property out of which to collect the same, ought not to obtain, for the further reason, that it would be at war with the general analogies of the law.
The judgment of the Supreme Court should be reversed and a new trial granted.
HUNT, Ch. J., GROVER, MURRAY and DANIELS, JJ., concurred with LOTT for affirmance. WOODRUFF and JAMES, JJ., concurred with MASON, J., for reversal.
Judgment affirmed.