Howell v. Alma Milling Co.

• Decision Date: 17 January 1893
• Citation: 54 N.W. 126,36 Neb. 80
• Parties: HOWELL v. ALMA MILLING CO. ET AL.
• Court: Nebraska Supreme Court

36 Neb. 80

54 N.W. 126

HOWELL

v.ALMA MILLING CO. ET AL.

Supreme Court of Nebraska.

Jan. 17, 1893.

Syllabus by the Court.

1. Where a plaintiff transfers his interest in the subject of the action to another during the pendency of the cause, the suit may be prosecuted to final termination in the name of the original plaintiff, or the person to whom the transfer is made may be substituted as plaintiff.

2. A bank brought an action in a county court on two promissory notes held by it as collateral security, and recovered judgment thereon against the maker. The defendant took an appeal to the district court, the usual statutory bond being executed. While the cause was pending in the appellate court the indebtedness due the bank by the pledgor of the notes was paid, after which one H., to whom the said notes, prior to the bringing of the suit, had also been pledged as collateral security for a debt due him, subject to the claim of the bank, was substituted in place of the bank as plaintiff, who recovered judgment against the maker of the notes. Held, that the surety in the appeal bond or undertaking was not released by the substitution of H. as plaintiff.

3. The mere continuance of a cause in an appellate court by stipulation of the parties, without the consent of the surety in the appeal bond, will not operate to discharge such surety.

4. By an agreement between the parties to an appeal pending in the district court, a judgment was rendered therein against the party appealing, without the knowledge or consent of the surety on the appeal bond. Held, in the absence of proof of fraud or collusion between the principal and the creditor, that the stipulation for judgment did not release the surety from liability on the appeal bond.

Error to district court, Harlan county; Gaslin, Judge.

Action by George W. Howell against the Alma Milling Company and F. E. Goble on an appeal undertaking. Judgment for defendants. Plaintiff brings error. Reversed.Smith & Solomon and Morning & Keester, for plaintiff in error.

Case & McNeny and C. C. Flansburg, for defendants in error, cited, as to the liability of sureties on a bond, Phillips v. Wells, 2 Sneed, 154; Harris v. Taylor, 3 Sneed, 541; Irwin v. Sanders, 5 Yerg. 287;Smith v. Roby, 6 Heisk. 546.

NORVAL, J.

This action was brought by the plaintiff in error upon an appeal undertaking. There was judgment in the court below for the defendants. To reverse this judgment a petition in error was filed in this court. The facts, briefly stated, are these: On the 1st day of November, 1885, the Nebraska Lumber Company turned over a large number of notes to the Commercial National Bank of Omaha as collateral security for money borrowed. Among the notes so turned over were two against the Alma Milling Company,--one for $361.35, and the other for $326, exclusive of interest. Afterwards, on the 30th day of December, 1885, the Nebraska Lumber Company assigned, subject to the rights of said bank, the same securities, including the said two notes executed by the Alma Milling Company, to the plaintiff, as collateral security to a debt from said lumber company to plaintiff. On the 7th day of June, 1886, the said Commercial National Bank brought suit in the county court of Harlan county against the said Alma Milling Company upon the two notes above mentioned, and recovered judgment thereon for the sum of $723.37 and costs. From this judgment the Alma Milling Company took an appeal to the district court, the defendant in error F. E. Goble signing the appeal bond or undertaking as surety, which bond was conditional that the principal should prosecute its appeal to effect without unnecessary delay, and, if judgment should be adjudged against it on appeal, satisfy such judgment and costs. While said cause was pending on appeal in the district court, the claim of the said Commercial National Bank against the Alma Milling Company, for the payment of which said notes were held as collateral security, was paid and discharged in full, so that said bank was no longer the real party in interest in said suit. The collateral notes were turned over to the plaintiff in error by virtue of the agreement above referred to, made between the Nebraska Lumber Company and said George W. Howell. After the notes were so turned over, on the 23d day of November, 1881, the said Howell, the plaintiff in error herein, was substituted as a party plaintiff in said action in lieu of the Commercial National Bank. It was agreed between the plaintiff in error and the Alma Milling Company that, in case the latter would consent or allow the former to be substituted as plaintiff for the bank, said cause should be continued to February 20, 1888; that in accordance with said agreement said cause was so continued, without the knowledge or consent of the surety. Said cause was subsequently continued from time to time, by stipulation of parties in open court, until May 6, 1889, when judgment was rendered against said Alma Milling Company, by agreement between it and the plaintiff, for the sum of $900 and costs of suit. Execution has been issued on such judgment, and returned unsatisfied, for want of property whereon to levy, whereupon this action was brought, upon said appeal undertaking, to recover the amount of said judgment and costs.

It is contended by counsel for defendants in error that the substitution, after the cause was appealed to the district court, of plaintiff in error as party plaintiff in place of the Commercial National Bank, the original plaintiff, without the knowledge or consent of F. E. Goble, the surety in the appeal bond, operated as a release of the surety. We consider the position altogether untenable. We are unable to perceive how the substitution of George W. Howell as plaintiff in lieu of the bank could have the effect to discharge the surety. The reason for the substitution arose solely from the fact that the indebtedness of the Alma Milling Company to the bank, for the payment of which the notes upon which the original action was based were given, was fully paid off after the appeal had been taken. The bank, therefore, no longer had any interest in the litigation. The notes declared on, prior to the institution of the action, had been pledged by the Nebraska Lumber Company to plaintiff in error as collateral security to its indebtedness to him; so that, when the claim of the bank was satisfied, plaintiff in error was entitled to prosecute the suit either in his own name or in the name of the bank.

Section 45 of the Code of Civil Procedure, which was in force when the appeal was taken, provides that “an action does not abate by the death, marriage, or other disability of a party, or by the transfer of any interest therein, during its pendency, if the cause of action survive or continue. In the case of the marriage of a female party, the fact being suggested on the record, the husband may be made a party with his wife; and, in case of the death or other disability of a party, the court may allow the action to continue by or against his representative or successor in interest. In case of any other transfer of interest, the action may be continued in the name of the original party, or the court may allow the person to whom the transfer is made to be substituted in the action.” There can be no doubt that under this statute the payment by the Nebraska Lumber Company of its indebtedness to the bank did not abate the action on the collateral notes. The section quoted confers ample power upon a court, where there has been a transfer by the plaintiff of his interest in the subject of the action during the pending of the suit, to allow the person to whom the transfer is made to be substituted in place of the original plaintiff. The substitution was made according to the provision of the statute. It is conceded that plaintiff in error had a right to be substituted as plaintiff in the place of the bank, but it is urged that the surety is not liable on his bond for a judgment obtained by the substituted party against the principal. The law permittting the substitution of parties in case of the transfer of interest must have been known to the surety in the appeal undertaking when he became surety, and he must be held to have signed the bond subject to such contingency. In this case it is stipulated that, at the time Goble signed the appeal undertaking, he knew that the notes were held as collateral security, and was informed and believed that the claim of the bank against the Alma Milling Company would be paid by the collection of other securities held by the bank. The surety knew, in case the bank ceased to have any interest in the notes sued on during the pendency of the action, that the court had the power to permit the substitution of the party interested in the subject of the suit. The surety took this risk of substitution. He was not in the least prejudiced by the change of plaintiffs. The cause of action remained the same. He was not placed in a worse situation; for, had there been no substitution, Howell could have prosecuted the suit to judgment in the name of the original plaintiff. Magemau v. Bell, 13 Neb. 247, 13 N. W. Rep. 277;Temple v. Smith, 13 Neb. 513, 14 N. W. Rep. 527;Dodge v. Railroad Co., 20 Neb. 276, 29 N. W Rep. 936. The undertaking of the surety was that...