Court Opinion

ID: 8740381
Source: CourtListenerOpinion
Date Created: 2022-11-26 10:45:54.892532+00
Date Added: 2024-06-11T17:00:22.373625
License: Public Domain

BUNN, District Judge,
upon- the above statement of the case, delivered the opinion of the court.
We think there is no error in the record upon which the judgment can be reversed, and that the instruction of the court directing a verdict in favor of the defendants was correct. The evidence shows conclusively that the plaintiff did not exercise the proper degree of diligence, or any diligence, to charge the guarantors for collection of the note. The guaranty was not one of payment, .but for collection, and in such case the timely and diligent prosecution of the principal debtor by the usual legal remedies is a condition precedent to the right to look to the guarantors. Daniel, Neg. Inst. § 1769; French v. Marsh, 29 Wis. 654; Day v. Elmore, 4 Wis. 190; Dyer v. Dibson, 16 Wis. 580; Cottrell v. Furniture Co., 94 Wis. 176, 68 N. W. 874; Bank v. Sloan, 135 N. Y. 371, 32 N. E. 231; Borden v. Gilbert, 13 Wis. 670. A guaranty of the payment of a note is an absolute undertaking on the part of the guarantor, for a valuable-consideration, to pay the debt at maturity in case the principal •debtor does not; and the guarantee in such case may sue the guarantor at once, if the debt is not paid at maturity. But the contract of guaranty for collection differs from one of payment, in this: that the guarantor undertakes Only to pay the debt upon the condition that the guarantee shall diligently prosecute the principal debtors without avail. And this means the prosecution of a suit-against the principal debtor to judgment and execution. The legal remedies are only exhausted upon the proper return of an execution unsatisfied for want of goods whereon to levy. Day v. Elmore, 4 Wis. 190; Dyer v. Gibson, 16 Wis. 557; French v. Marsh, 29 Wis. 649; Cottrell v. Furniture Co., 94 Wis. 176, 68 N. W. 874; Borden v. Gilbert, 13 Wis. 670. It was no excuse for not bringing a suit at law upon the -notes that a foreclosure proceeding was begun for the foreclosure of the .mortgage. Of course, both remedies were *579open to the plaintiff. But, by bringing suit to foreclose, a personal judgment for deficiency could only be obtained after foreclosure of Hie mortgage and sale of the mortgaged property, and that required much time. The first note became due on June 1, 1892, and might have been sued upon. The second became due by the exercise of the option September 19, 1893. Foreclosure suit was begun October 12, 1893, and judgment of foreclosure entered November tí, 1893. The mortgaged property was sold under the prior mortgage January 18, 1895. No sale was ever made under* the mortgage securing the notes in question, so that the foreclosure was mainly a nullity. The sale under the first mortgage was confirmed by order of the court on March 15, 1895, that mortgage satisfied, and Hie surplus of fi325.46 was applied on the second mortgage on application of plaintiff. The amount of the deficiency was then determined, but it was not until June 18, 1895, that judgment for deficiency was entered, and no execution was issued until December of 1890. This great delay was caused by the plaintiffs electing to bring suit to foreclose, and trusting to obtain a judgment for any deficiency that might occur at the close of the proceeding, which necessarily took much time, instead of bringing an action at law upon the notes as they became due. And the question is whether this constituted proper diligence, and, as there is no dispute about the facts, the question is one of law; and we are clearly of opinion that the action of the court in directing a verdict was correct, and that due diligence to collect the notes at law was not exercised. The plaintiffs reliance upon the obtaining of a judgment for deficiency at the end of foreclosure proceedings necessarily caused a delay of some 14 months in the obtaining of a personal judgment. This was wholly unwarranted, and had the effect to release the guarantors from their conditional obligation to pay. It was not suing the maker at law within the proper time, and diligently prosecuting the suit to judgment and execution. The proceeding to foreclose, which wa.s a. proceeding in equity, accompanied by the statutory privilege of entering up a judgment for deficiency after the sale, did not take the place of a prompt and timely prosecution at law upon the notes. The statute allowing a judgment for deficiency did. not change the nature of the foreclosure suit as a proceeding in equity, but was made incident and auxiliary to that proceeding. The provision was intended to make the proceeding in equity more perfect and effective, but does not change, and was not intended to change, the rule or degree of diligence as between the holder and payee of a note and the guarantor for collection. The proceeding to foreclose would have been no obstacle to an action at law' on the notes, if the plaintiff had not asked for a deficiency judgment. And the failure to prosecute such action at law had the effect to discharge the guarantors. Getty v. Schantz, 101 Wis. 229, 77 N. W. 191; Witter v. Neeves, 78 Wis. 547, 47 N. W. 938. By demanding a judgment for deficiency in his bill for foreclosure, the plaintiff [Raced lierseif in a position where she could not sue at law on the notes. There was no need of this, and the proceeding, while it had the effect to prevent a timely action at law on the notes, was useless *580in itself, in view of the former foreclosure. As stated in the opinion of the supreme court of Wisconsin (101 Wis. 285, 77 N. W. 193):
“In the light of the circumstances, the commencement of the foreclosure action cannot be called diligent prosecution of legal remedies. In fact, it was little, if any, better than no action at all. The plaintiff already had a prior mortgage upon the entire property in process of foreclosure and ready for judgment. The mortgage here was the second lien upon the property. Upon a sale under the first mortgage, the surplus could be immediately applied for, and, when obtained, indorsed upon the second mortgage, and thus the security would be exhausted. Thus, the foreclosure of the second mortgage was of no practical use.”
And it seems quite clear, whatever else may be said of it, that it constituted no justification for a failure to proceed at law upon the notes. The many months’ delay in bringing suit at law was inexcusable, unless it clearly appeared that a proceeding at law would have been of no avail, which is not the case. The presumption is strong, unless the contrary clearly appear, that an action at law might have availed to exonerate the guarantors from their obligation to pay. If the plaintiff could delay 14 months the bringing of suit, there is no reason why she could not for many years. The general rule, no doubt, is that the action should be brought within some short and reasonable time, according to circumstances, and prosecuted, not with the utmost diligence possible, but with that diligence which would be reasonable in the circumstances. Where the courts have undertaken to limit the time, they have usually adopted the rule that the action should be commenced and brought on at the first term of the court after the default in payment. Dillman v. Nadelhoffer, 160 Ill. 121, 42 N. E. 378; Voorhies v. Atlee, 29 Iowa, 49; Graft v. Dodd, 15 Ind. 380. Possibly circumstances might give rise to exceptions to such a rule. Possibly it may be that the reason why suit was not brought at law was that the plaintiff supposed she would collect her debt without resorting to the guarantors, or because plaintiff considered the guarantors liable on their guaranty, for the debt, notwithstanding her default. There was a further delay in entering judgment for deficiency and in issuing execution thereon, which is quite inexcusable. The amount of the deficiency was determined on March 15, 1895. The judgment was entered on June 18th, making a delay of over 8 months, for which no excuse is rendered. After the judgment was entered there was another delay of 18 months before execution was issued, which delay is also wholly unexplained.
Whether this question is not res judicata, in view of the decision of the supreme court of Wisconsin in Cottrell v. Furniture Co., reported in 94 Wis. 176, 68 N. W. 874, we do not find it necessary to determine. The judgment of the circuit court is affirmed.