First National Bank of South Bend v. Mayr
| Decision Date | 22 April 1920 |
| Docket Number | 23,603 |
| Citation | 127 N.E. 7,189 Ind. 299 |
| Parties | First National Bank of South Bend v. Mayr et al |
| Court | Indiana Supreme Court |
From St. Joseph Circuit Court; Walter A. Funk, Judge.
Action by the First National Bank of South Bend against Frank Mayr Jr., and others. From a judgment for the defendants, the plaintiff appeals. (Transferred with recommendations from the Appellate Court under § 1394, cl. 1, Burns 1914, Acts 1901 p. 565, § 10).
Reversed.
Arthur L. Hubbard and Samuel B. Pettingill, for appellant.
Graham & Crane and Cyrus E. Pattee, for appellees.
This was an action, by appellant against appellees, founded upon a certain written agreement of the following tenor:
From the complaint it further appears that the Modern Specialties Manufacturing Company executed notes to appellant as follows: September 20, 1915, for $ 2,500 October 11, 1915, for $ 1,000; and on November 6, 1915, for $ 11,500; each of which notes was due ninety days after date with six per cent interest after maturity. Thereafter appellant executed the instrument following:
The complaint also shows that on May 20, 1916, and thereafter and at the time of filing the same, September 16, 1916, the specialties company was insolvent; that after crediting the notes of the specialties company to the bank of date May 20, 1916, with the payment of $ 10,154.41, made by Eberhart, there was a balance due the bank of $ 2,326.36, and for the collection of which this action was commenced. A separate and several demurrer by appellees to the complaint was sustained, and this ruling is here assigned as error.
The question for our consideration is, Did the instrument executed by the bank to Eberhart, Page and Blair have the effect to release appellees?
It has been urged that, as the alleged release of Eberhart, Page and Blair was not under seal, it was in legal effect a covenant not to sue, and therefore insufficient as a release. This assumption must rest upon the theory that the instrument contains no recital of a consideration which, at common law, a seal would import. However, it will be noticed that the instruments above set out are of equal dignity and weight. Neither is under seal, and both were executed and were to be performed in this state, where, by statute, the common law respecting the use of a seal has been greatly modified. Acts 1881 p. 240, § 319, § 466 Burns 1914, § 450 R. S. 1881. This section provides that:
As the question suggested does not involve a specialty, we are not called upon to decide what influence the above legislation would have on such an instrument, but in the present case we regard the statute as controlling, and the agreement to be as binding as if under seal. American Food Co. v. Halstead (1905), 165 Ind. 633, 76 N.E. 251.
We are thus brought to a consideration of the real question in this case. The parties who signed the agreement to the bank all joined in the same engagement and were alike obligated. They jointly and severally agreed with the bank to pay all notes for loans not to exceed $ 15,000, made to the specialties company, "when the same shall become due." Treating this instrument as a surety engagement, appellant insists that as the debt evidenced by the notes was due when Eberhart made the $ 10,000 payment, and it not appearing that this payment conferred a benefit on appellant to which it was not then entitled, or that Eberhart or anyone else was thereby prejudiced, it follows that there was no consideration to support a release agreement. Hence the alleged release was no more than a covenant not to sue the persons therein named.
The many times reiterated conclusion that a surety is a favorite of the law, and entitled to stand on the letter of his contract, has given rise to the thought that he occupies some peculiar situation entitling his stipulations to a special interpretation not accorded other contracts. But such is not the rule. While he may insist on the strict terms of his engagement, yet these terms are determined in accordance with the established rules of construction applicable alike to all contracts. Irwin v. Kilburn (1885), 104 Ind. 113, 3 N.E. 650; Weir Plow Co. v. Walmsley (1887), 110 Ind. 243, 11 N.E. 232; Walsh v. Miller (1894), 51 Ohio St. 462, 38 N.E. 381; Brandt, Suretyship and Guaranty (3d ed.) §§ 103, 104.
In the present case the contract with the bank executed by appellees and others, and the notes of the specialties company all made part of the complaint, are to be considered together. This done, we conclude that upon the execution of the notes, as in the contract provided and within the limitation therein fixed, all having reference to the same identical debt, the obligation thereby created was the same as if all had actually signed the notes. Stevens v. Tucker (1882), 87 Ind. 109, 122; Houck v. Graham (1886), 106 Ind. 195, 6 N.E. 594, 55 Am. Rep. 727; Durbin v. Kuney & Sayers (1890), 19 Ore. 71, 74, 23 P. 661.
By express stipulation, all who signed the surety agreement promised jointly and severally to pay the notes, and to that extent the relation between the creditor and sureties was expressed. As to the payee of the notes, they were all makers and severally liable for the whole debt. The payee might have proceeded against any one or all, but as between themselves their rights and liabilities depended upon "the contract between them, upon the relation each may sustain to the other and to the transaction." Schooley v. Fletcher (1873), 45 Ind. 86, 89; Starry v. Johnson (1869), 32 Ind. 438; Morrison v. Fishel (1878), 64 Ind. 177; Acts 1875 p. 119, § 9085 Burns 1914, § 5516 R. S. 1881; Brandt, Suretyship and Guaranty (3d ed.) § 110.
None of the parties to the agreement, by express contract, became surety for the other, and for aught appearing, there was no contract between the sureties fixing their rights and liabilities as to each other. This being true, under well-settled equity principles applicable to sureties, justice requires that each contribute to his cosurety who has paid the debt so much thereof as will make each equal in the loss, counting only those who are solvent. As said in Michael v. Allbright (1890), 126 Ind. 172, 174, 25 N.E. 902, 903: "Where one or more of the sureties are insolvent they will divide and apportion the amount paid among those who are solvent." See, also, Windley, Exr., v. Williams, Gdn. (1897), 18 Ind.App. 158, 47 N.E. 680; Gross v. Davis (1889), 87 Tenn. 226, 11 S.W. 92, 10 Am. St. 635.
The recitals in the release show an engagement not contemplated by the surety obligation and a consideration...
To continue reading
Request your trial