Summary
In Morgan v. Smith (70 N.Y. 537) it was held that the defendant was not discharged by virtue of an agreement between the principal and creditor.
Summary of this case from Spies v. National City BankOpinion
Submitted June 22, 1877
Decided September 25, 1877
William Allen Butler, for the appellant. Joseph R. Flanders, for the respondent.
The appellant makes in this court substantially but two points. One arises out of the fact that the contract of suretyship was joint on the part of the two defendants. It is claimed that if the plaintiff retains her judgment against the appellant, and fails to recover against the other defendant on the new trial which has been ordered, the appellant will lose his right of contribution from his co-defendant. It is not needed that we determine whether that is so. If he should retain his right to seek contribution, the most that he could recover would be any sum which he had paid more than a moiety of the whole debt. The obligation of one of two co-sureties is to pay the whole debt. His right is, if he pays the whole debt, to recover one-half from his co-surety, or the whole from the principal. If he pays less than the whole debt, he cannot recover from his co-surety, though he may from the principal, more than the amount which he has paid in excess of the moiety which, as between him and his co-surety, it was his duty to pay. ( Lowell v. Edwards, 2 Bos. P., 268; Browne v. Lee, 6 Barnw. Cress., 689; Peter v. Rich, 1 Ch. Rep., 34; Deering v. Earl of Winchelsea, 2 Bos. P., 270.) It follows, then, that though the appellant should have lost his right of contribution against the co-surety, by the act or neglect of the plaintiff relieving the co-surety from his obligation, that would not itself relieve the appellant from his obligation in its full extent. The rule in equity is, that when a co-surety has, by the conduct of the creditor, been released from his liability, the remaining co-surety will be held exonerated only as to so much of the original debt as the discharged co-surety could have been compelled to pay, had his obligation continued. ( Stirling v. Forrester, 2 Bligh, 575; Ex parte Gifford, 6 Ves., 805; Mayhew v. Crickett, 2 Swanst., 185; Hodgson v. Hodgson, 2 Keen, 704.) In this view, the appellant might have asked the learned justice at the trial court to instruct the jury, that if they found that the plaintiff had made a false and fraudulent representation to the co-surety, the plaintiff knowing it to be such, on which the co-surety relied and was thereby induced to make the contract of guaranty, then the plaintiff could recover no more of the appellant than one-half of the rent due and payable and unpaid; or what might have been equivalent to that request. We say that he might have so asked, not that we so decide at this time; but on the law of the case as it now stands, upon the adjudication of the General Term as appealed from, directing a new trial in behalf of the other defendant. The appellant made a much broader proposition. He asked the court to dismiss the complaint; which was, in effect, asking a ruling that he was liable in no sum to the plaintiff. He asked the court to leave to the jury, whether he signed the contract relying on the representation of the plaintiff which was untrue — as to which there was no testimony in the case. There was no error in the trial court in refusing these requests, so far as the principle of the right to contribution is concerned.
The ground upon which the General Term ordered a new trial in behalf of the co-surety was personal to himself. It was, in substance, that there was a failure of the consideration upon which he entered into the contract. The failure alleged was the non-performance by the plaintiff of an alleged parol promise to the co-surety that the principals should have the vertical light. That promise was no part of the consideration which moved the appellant to contract, and he cannot avail himself of it; to bar a recovery against him. The joint contract was binding upon both sureties at the time of the execution of it, what has discharged the co-surety, if he is discharged, is something subsequent thereto. It is no more in effect, than any subsequent act or conduct of the plaintiff ex pais which would discharge the co-surety. It has been held in England, that an act of the creditor, though by parol, which discharges one of two or more joint debtors, will discharge both or all, though the contract be in writing. ( Nicholson v. Revill, 4 Ad. Ell., 675.) The rule is different in this country; here a release by parol to one joint debtor will not operate as a discharge to other debtors jointly liable, and can only be pleaded by the debtor to whom it is given. ( Harrison v. Close, 2 J.R., 448; Rowley v. Stoddard, 7 id., 209; De Zeng v. Bailey, 9 Wend., 336.) Here, to discharge both or all, the release must be under seal, in such case as this, or the discharge must arise by operation of law, which is tantamount to a release under seal. A distinction is made, too, in England between matter in discharge arising after the making of the contract, and that which shows that it was never valid. (1 Chitty, 35.) This distinction does not prevail in this State. ( Pell v. Pell, 20 J.R., 126.) In this view, also, there was no error in the trial court.
It is further claimed, that the only consideration of the suretyship was the letting of the premises; and that the plaintiff was not able to perform her contract of letting. We do not perceive from the case, that she did not do all that she agreed to do by the lease, when she had put the lessees in possession. We see nothing in the lease to Phelan Collender, nor in the mutual action of them and the plaintiff as to the removal of the raised sky-light, and the substitution of the floor-light, which gave to them the right to cover the latter, and exclude the light from the principals of the defendant; and the acts of Phelan Collender might have been prevented by the principals, or damages recovered therefor.
The case of Morgan v. Smith (5 Hun., 220), is not an adjudication controlling in this case. The judgment of the court there was passed solely upon an offer of testimony, which was refused by the trial court in that case. That offer included that the plaintiff had given to Phelan Collender the right to cover the floor-light. That proven would have made a different state of facts there. But it was not proven there, nor do we perceive the evidence in this case by which the principals of the defendant will prove it on a new trial.
At the trial the defendants asked for a dismissal of the complaint, on the ground that the agreement of 29th March, 1873, and the acts of the plaintiff as landlord, and the principals of the defendants as tenants, operated to discharge the defendants as sureties, they having no knowledge or notice of the agreement.
It was a provision of the lease that the lessees should not assign it, nor let or underlet the whole or any part of the premises without the written consent of the plaintiff. There was implied thereby that with that written consent there might be an assignment, or letting or underletting by the lessees. The sureties knew, or were bound to know this, when they executed their guaranty. Hence it would not operate to discharge them from their liability, that the plaintiff should give such a written consent. That consent having been obtained at any time, it did not matter whether the lessees let or underlet themselves or by agent, nor did it matter whether the agent was the plaintiff or other person. Hence, without the clause in the plaintiff's agreement of twenty-ninth March, which we will presently notice, that agreement was no more in effect than a written consent by the plaintiff that the lessees might underlet the premises.
But the plaintiff was more wary than that. To her consent she added a condition that her action should not impair the lease, nor the security thereunder, nor the relation of landlord and tenant, nor the security for the rent, nor the covenants thereunder. This was tantamount to a condition that the agreement between the plaintiff and her lessees should not operate to discharge the sureties. It will be observed that the lessees were not, by the terms of the agreement, discharged from the payment of the rent; nor was there an extension of time of payment. The sureties had left to them all the rights they ever had to pay up the rent as it fell due, and to go against their principals for repayment, which right was also preserved to the sureties by the condition put into the agreement. Under such a stipulation, the surety's liability will remain, notwithstanding the arrangement between the creditor and the principal, even though it be more lax and favorable to the principal than the agreement in this case. The ground upon which a surety is held discharged when further time for payment is given to the principal debtor, is that the rights of the surety are varied, as he cannot then, when the debt is due and payable, make payment, and thus put himself in the place of the creditor, according to the original implied contract, and enforce repayment from the principal. Where the remedies of the creditor are reserved against the sureties, notwithstanding the new agreement with the principal, the situation of the sureties is not varied, and the rule does not apply. ( Boultbee v. Stubbs, 18 Ves., 20, 22.) When the creditor proceeds against the surety in such case, and the surety pays, he is then entitled to the place of the creditor as it was originally, and may in turn enforce the principal, who may not set up against the surety the new arrangement with the creditor, in which the remedies against the surety were expressly reserved, and in consequence his resulting rights also reserved. ( Burke's Case, cited Ex parte Gifford, 6 Vesey, 805-809; Webb v. Hewitt, 3 Kay. J., 338; Kearsley v. Cole, 16 M. W., 126.) Though the stipulation to reserve the rights of the creditor against the surety must be seen plainly ( Boultbee v. Stubbs, supra), there can be no doubt in this case; for the language of the agreement is labored, to prevent an alteration in this respect of the rights, obligations, and relations of all the parties interested.
Stress is put by the appellant upon the delivery of the key to the plaintiff by the lessees. It is styled a surrender by the lessees, and a taking of possession by the plaintiff. It was an act done under the agreement of the 29th of March, and must be characterized by that. The delivery and reception of the key was not a surrender or taking possession of the premises, but an intrusting to the plaintiff of the control of them for the purpose of letting them in behalf of the lessees, they all the while remaining tenants and liable for the rent, according to the terms of the lease. We do not think that this point can be sustained.
We are of the opinion that the judgment, so much of it as is appealed, should be affirmed; and so much of it as is not appealed, remains of course.
All concur, except RAPALLO, J., dissenting; CHURCH, Ch. J., and ANDREWS, J., not voting.
Judgment affirmed.