Court Opinion

ID: 5494785
Source: CourtListenerOpinion
Date Created: 2022-01-10 02:50:42.737253+00
Date Added: 2024-06-11T08:33:46.562638
License: Public Domain

Van Brunt, P. J.
It is difficult to see upon what theory the conclusion of the learned referee can be sustained. Both the counsel for the plaintiffs and the referee seem to have fallen into an error in the construction of the papers which were signed by the defendant. The counsel claims that the first paper signed, made the defendant liable to the same extent as a principal debtor, because it was a separate and independent covenant to pay. The language of the instrument, however, is at variance with this claim. The paper is a guaranty, and nothing more. It is a collateral, agreement to pay, such as would have been void under the statute of frauds if .not in writing. It created no original obligation. Liability was dependent upon the breach of its obligation by the principal debtor. It was simply a guaranty of payment, not an absolute promise. The agreement by the defendant was: “If it does not pay, I will;” and he entered into no further or other obligation. The principal debtor must make default before the guarantor became liable.
The learned referee concedes the fact that the first paper signed was a mere guaranty; and that, if that paper only existed, no cause of action remained; but he bases his conclusion upon the claim that the second paper signed by the defendant, of February, 1880, is substantially a new contract, having a valid consideration, and that all parties intended that the defendant should make Mrs. Miller whole to the extent of the $3,000 in bonds held by her. If such'was the intention of the parties, their object has not been accomplished by the instrument executed by them. The paper of February, 1880, after its recital, simply declares that the obligation created and incurred by the first guaranty should remain in full force and effect, notwithstanding what might happen, and declares this paper to be a continuing, running guaranty, for the payment of the sum of $3,000 and interest, according to the original terms of said original guaranty, attached to and belonging to and guarantying any and all securities, acts, paper writings, and proceedings of said association in relation to Mrs. Miller, and of its indebtedness to her, hereafter to be done, continued, or made. This instrument simply continued the original guaranty. There was no obligation entered into other than that of guaranty. This is no promise to pay absolutely. The understanding is, as it was before, collateral to the bonds, and nothing else. It might well have been that if there had been an original indebtedness to which the bonds were held as collateral, that then this last instrument of guaranty might have had some force after the surrender of the bonds with the consent of the guarantor; but the only debt was that represented by the bonds. It is true that the learned referee assumes that these bonds were held as collateral- security to an indebted-, ness of the association to Dr. Miller, but in this he is clearly mistaken, as the complaint alleges the purchase by Dr. Miller of these bonds, which allegation *185Is not denied by the answer, and therefore admitted; and this error may explain, therefore, the erroneous conclusion to which he arrived. There was no debt, therefore, to which the bonds were held as collateral; and, when the bonds were paid, no debt existed to which the guaranty attached. The paper in question speaks of guaranty all the way through. It is a reiteration of the guaranty of the bonds, and nothing more, and it is expressly stated to be a guaranty according to the original terms of said original guaranty. It therefore seems clear that if the bonds, the payment of which was guarantied, have been paid, then no further obligation remains, as that which was guarantied has been done. There cannot be found within the instrument any agreement to pay other than by way of guaranty of the bonds. This is the only obligation created; and, when the principal debtor was discharged, the guarantor was equally released.
These bonds were paid by the transactions between the association and its bondholders. The association agreed to sell certain of its property to its bondholders for a specified price, and to take its bonds in payment therefor. The bondholders agreed to buy, and to pay in bonds. The property contracted for is conveyed by the association, and the bondholders pay for the same by surrendering to the association their bonds at par. By this transaction the bonds were paid, and there was no further claim upon them against the association, and thus was wiped out the original debt guarantied, and nothing remained to which the collateral obligation could attach. It is true that the second guaranty speaks of the cancellation of the bonds; but fails to recognize the fact that, the bonds canceled, there is nothing to guaranty; and hence it omits to provide for such a contingency, but apparently proceeds upon the theory that a guaranty of a debt may be binding after the debt is canceled and paid. We can find nothing in these papers but a guaranty of these bonds; and, although the parties may have intended differently, they have done nothing more by the instrument in question than reassert the guaranty already existing, and there does not seem to have been any other design than that the paper should be considered as a guaranty.
We are of the opinion, therefore, that the judgment must be reversed, and a new trial ordered, with costs to the appellant, to abide the event.
Beady and Daniels, JJ., concur.