Eckhart v. Heier

• Citation: 37 S.D. 382,158 N.W. 403
• Decision Date: 27 June 1916
• Docket Number: 3894
• Parties: B. A. ECKHART, Plaintiff and respondent, v. JOHANNES HEIER, et al, Defendants, and J. B. Gundert, Defendant and Appellant.
• Court: Supreme Court of South Dakota

37 S.D. 382, 158 N.W. 403 (1916)

B. A. ECKHART,

Plaintiff and respondent,

v. JOHANNES HEIER, et al,

Defendants,

and J. B. Gundert,

Defendant and Appellant.

South Dakota Supreme Court

Appeal from Circuit Court, Edmunds County, SD

Hon. Joseph H. Bottum, Judge.

#3894--Affirmed

C. O. Newcomb, E. L. Grantham

Attorneys for Appellant.

Frank Turner

Attorney for Respondent.

Opinion filed June 27, 1916

WHITING, J.

This cause is before us on an appeal from an order overruling a demurrer to the complaint. Plaintiff seeks the foreclosure of a real-estate mortgage, and the party demurring was made a party defendant because, as alleged in said complaint:

"In order to induce plaintiff to accept the said principal note, interest coupons, and the said mortgage, and advance moneys thereon, the said bank and the said J. B. Gundert [this appellant] for a valuable consideration, promised and agreed [in writing] to and with plaintiff that they would stand hack of, and become responsible for, the said loan and the principal note and interest coupons."

It is the contention of appellant that such allegation shows him to be a mere indemnitor; that his liability does not arise until plaintiff has been unable to collect from the makers of the note; and that, for those reasons, the complaint does not show a cause of action to have accrued. Respondent contends that, where one contracts to "stand back of and become responsible for" a note, such contract its one collateral to the contract evidenced by a note, and is one to answer for the debt or default of another, thus being, under section 1969, C. C., a contract of guaranty.

The authorities recognize the essential difference between a guaranty of a note, which is a covenant to pay same, and a covenant of indemnity against loss through non-payment. The distinction arises out of the terms of the contract. In the case of a guaranty the covenant is collateral to the other contract and the failure of the third party is a breach of the terms of the contract of guaranty; in the other case the covenant is not collateral to the other contract, and the mere failure of the third party to pay is not a breach of the indemnitor's covenant--he did not covenant that he would pay but covenanted merely to make good any loss resulting from non-payment. Wicker v. Hoppock, 73 U. S. (6 Wall.) 94, 18 L. Ed. 752; Burton v. Dewey, 4 Kan. App. 589, 46 Pac. 325. One does not merely covenant to save a payee of a note harmless when he covenants to "stand back of and become responsible for" the note. His covenant...