Continental & Commercial Nat. Bank of Chicago v. Cobb

Decision Date27 November 1912
Docket Number996.
PartiesCONTINENTAL & COMMERCIAL NAT. BANK OF CHICAGO v. COBB.
CourtU.S. Court of Appeals — First Circuit

Hollis R. Bailey, of Boston, Mass., and Abraham Meyer, of Chicago Ill. (Currier, Rollins, Young & Pillsbury, of Boston, Mass and Mayer, Meyer, Austrian & Platt, of Chicago, Ill., on the brief), for plaintiff in error.

Jeremiah Smith, Jr., of Boston, Mass. for defendant in error.

Before COLT and PUTNAM, Circuit Judges, and ALDRICH, District Judge.

PUTNAM Circuit Judge.

This is a suit at common law, in which jury trial was waived, upon the following contract:

'This agreement, made in Chicago, Illinois, this 14th day of September, 1905, by John C. Cobb, of Boston, Massachusetts, with the Commercial National Bank of Chicago, witnesseth, that:
'Whereas, said bank has this day in consideration of this contract (and other considerations), made a certain loan of thirty-six thousand ($36,000) dollars, to Albert W. Cobb and Chas. H. Lawrence, evidenced by a promissory note signed by said Albert W. Cobb and Lawrence, payable to said bank, on demand, bearing interest at 5% per annum, with which note are deposited as collateral security certificates for 300 shares preferred stock of Cobb Cocoa Company, and two certain demand promissory notes for $10,000 each, signed by Albert W. Cobb, dated December 15th, 1897, each secured by a certain trust deed (being two trust deeds):
'Now, therefore, upon the further consideration of one dollar, and other valuable considerations, the receipt whereof is hereby acknowledged, said John C. Cobb does hereby guarantee said Bank, its successors and assigns, the full and prompt payment, at the rate (or in the amount) of not less than seventy-two hundred ($7,200) dollars per annum, and interest, of the entire sum of money now or at any time hereafter owing by said Albert W. Cobb and Lawrence on account of their said indebtedness to said bank incurred by virtue of said loan and now evidenced by the aforesaid note for $36,000
'It is expressly stipulated, however, that said bank is not entitled to demand payments of more than $7,200 per annum and interest, under this guaranty, and also that the liability of said John C. Cobb hereunder shall in no event exceed the principal sum of $36,000 and accrued interest thereon at 5% per annum from this date.
'It is also stipulated that said bank may, at any time, in such manner and upon such terms as it may see fit, extend the time and alter the manner for the payment of said indebtedness or any part thereof, of said Albert W. Cobb and Lawrence, without notice to John C. Cobb, he hereby agreeing beforehand that no such alteration of time or terms of credit shall in any manner affect the liability of John C. Cobb hereunder; and that the guaranty hereby established shall be a continuing guaranty and shall remain in full force and effect until the aforesaid indebtedness of Albert W. Cobb and Lawrence is fully paid and satisfied; further that said Bank need give no notice of acceptance of this guaranty.
'In witness whereof said John C. Cobb hereto sets his hand and seal at the place and time aforesaid.

John C. Cobb. (Seal.)'

The note to which this contract was collateral was as follows: '36000.00

Chicago, Ill., Sep. 14, 1905.'

'On demand after date we promise to pay 'the Commercial National Bank of Chicago,' or order thirty-six thousand dollars, at its office, for value received, with interest at the rate of five per cent. per annum, after date payable semi-annually, having deposited as collateral security for the payment thereof, and for the payment of any other liability or liabilities (due or to become due or that may hereafter be contracted) of the undersigned, or the guarantors or the endorsers hereon, or any of them, to said bank the following described property: 300 shs. Pfd. Stock Cobb Cocoa Co., two notes $10,000.00 each of Albert W. Cobb dated Dec. 15, 1897, due on demand both secured by trust deeds which we hereby give the said bank, or its attorney appointed for that purpose, or the holder hereof, authority to sell, all, or any part thereof, on the maturity of this note, or at any time thereafter, or before in the event of said securities depreciating in value, or on the maturity of any of the liabilities above mentioned, at public or private sale, at the discretion of said bank, or the holder hereof, without advertising or giving us any notice thereof, and to apply so much of the proceeds thereof, to the payment of this note and other obligations above mentioned, as may be necessary to pay the same, with all the interest due thereon, and also to the payment of all expenses, including reasonable attorney's fees and charges paid or incurred for making papers, attending and making the sale of said collateral security; and if the sale be public, or at broker's board, or be made by an attorney appointed as aforesaid, the holder of this note may purchase thereat, the same as any other person, and in case the proceeds of the sale of the said collateral shall not cover the principal, interest and expenses, we promise to pay the deficiency forthwith after such sale with interest at 7 per cent. per annum. And in case of an exchange of, or addition to, or substitution for the collateral above named, or any part thereof, the provisions of this note shall extend to such new or additional collateral. And we also authorize said bank, at the election of its president, cashier, or any officer thereof, at any time to apply any and all money it may have in our deposit account, or the deposit account of any of us, towards the payment of this note, or any of the obligations mentioned above, whether due or not.

Albert W. Cobb.

'Due

Chas. H. Lawrence.'

This note had on the back the following indorsements showing payments thereon, which were admitted and found by the court to be correct:

'$4500.00 Paid Oct. 13, 1905 also endorsed on $10000.00 note Albert W. Cobb secured by Englewood lots.

'$3500.00 Paid Nov. 1, 1905 also endorsed $1000.00 on $10000.00 note Albert W. Cobb secured by Englewood property & 2500.00 on 10000.00 note Albert W. Cobb, sec. by lot on Lake Forest Property.

'200.00 paid Dec. 3, 1905 also endorsed 200.00 on 10000.00 note Albert W. Cobb secured by Lake Forest Property

'2000.00 paid on this note April 6, 1906 and also endorsed on $10,000 note A. W. Cobb dated 12/15/1897

'2000.00 paid Apr. 19, 1906 also endorsed on 10,000.00 note A. W. Cobb dated 12/15/1897

'600.00 Paid June 11, 1906

'2500.00 Paid Sept. 16, 1907

'7715.00 Paid Jan. 18, 1909

' 60.00 Paid Jan. 18, 1909

Interest on within, paid to Mar. 14, 1906

Do. Sept. 14, 1906
Do. Mar. 14, 1907
Do. Sept. 14, 1907
Do. Mar. 14, 1908

Jan. 18, 1909 Interest on within paid to Mar. 14, 1909 $975

'The Commercial National Bank of Chicago, Ill.

'By N. R. Losch, Cashier.'

Both the contract and note were made in the state of Illinois, and, under the circumstances, are for the purposes of this case governed by the statutes of that state. The only statute in point is section 1 of the act of February 27, 1874 (Hurd's Revised Statutes, 1911, p. 2305), as follows:

'That when any person bound as surety for another for the payment of money, or the performance of any other contract in writing, apprehends that his principal is likely to become insolvent or to remove from the state, without discharging the contract, if a right of action has accrued on the contract, he may, by writing, require the creditor forthwith to sue upon the same; and unless such creditor shall within a reasonable time, and with due diligence, commence suit thereon, and prosecute the same to final judgment and execution, the surety shall be discharged; but no such discharge shall in any case affect the rights of the creditor against the principal debtor.'

No payments had been made on the note by Cobb, the defendant in this suit. Before the bringing of the suit the Commercial National Bank of Chicago transferred to the plaintiff all its rights in and to both the note and the agreement of John C. Cobb, the defendant, which we have copied. At the conclusion of some correspondence which we need not detail, the following letter of January 17, 1910, was written to the Commercial National Bank by Andrew R. Sheriff, acting as attorney in behalf of the defendant John C. Cobb:--

'925 The Rookery, Chicago,
'January 17, 1910.
'Commercial National Bank, Chicago, Illinois.
'Gentlemen: In response to your vice-president Vernon's letter of the 10th inst. referring to the Albert A. Cobb and Lawrence indebtedness, in view of your statement that your people refuse to sell the Lake Forest mortgage and insist that the whole matter should be settled at once, it seems that my several offers to expedite payment or liquidation of the debt-- I acting on the behalf of Mr. John C. Cobb-- are expressly declined by your bank.
'Therefore the only thing which now appears open for you to do is to sue the principal debtors, and this Mr. John C. Cobb, without prejudice to any rights or forfeitures heretofore existing or arising in his favor, hereby requires you to do, inasmuch as he apprehends that the principal debtors, and each of them, are likely to become insolvent without discharging their indebtedness.
'Yours very truly,

Andrew R. Sheriff.'

The judgment of the District Court was for the defendant below, whom we name herein as the defendant, and thereupon the plaintiff below, whom we name herein as the plaintiff, sued out this writ of error. The main defense rests on the statute of Illinois, supplemented by the letter from Mr. Sheriff, which we have stated.

We will preface our discussion of the effect of that statute by observing that there...

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4 cases
  • Bank v. Earth Foods Inc.
    • United States
    • Illinois Supreme Court
    • October 21, 2010
    ...relied on a case from the United States Court of Appeals for the First Circuit, Continental & Commercial Nat. Bank of Chicago v. Cobb, 200 F. 511 (1st Cir. 1912), interpreting section 1 of the Sureties Act as applying to guarantors. The appellate court therefore remanded the cause for furth......
  • Jp Morgan Chase Bank v. Earth Foods, Inc., 2-07-0045.
    • United States
    • United States Appellate Court of Illinois
    • November 4, 2008
    ...of the United States Court of Appeals, which has interpreted the Act in the way defendant urges. See Continental & Commercial National Bank, Chicago, v. Cobb, 200 F. 511 (1st Cir.1912). In Cobb, the defendant invoked section 1 of the Act (which had the same relevant language then as now) fo......
  • City Nat. Bank of Murphysboro, Ill. v. Reiman
    • United States
    • United States Appellate Court of Illinois
    • October 19, 1992
    ... ... Page 321 ... [175 Ill.Dec. 924] Commercial Code (the Code) (Ill.Rev.Stat.1989, ch. 26, par. 1-101 et seq.) ... Katz v. Diabetes Ass'n of Greater Chicago (1975), 31 Ill.App.3d 240, 243, 333 N.E.2d 293, 295 ... (Continental & Commercial National Bank of Chicago v. Cobb (1st Cir.1912), 200 F. 511.) ... ...
  • Austad v. United States
    • United States
    • U.S. Court of Appeals — Ninth Circuit
    • November 16, 1967
    ... ... Continental & Commercial Nat. Bank of Chicago v. Cobb, 1 ... ...

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