The Bank of Conway, a Corp. v. Stary
| Decision Date | 18 August 1924 |
| Court | North Dakota Supreme Court |
Appeal from the District Court of Walsh County, North Dakota, Burr J.
Affirmed.
Judgment affirmed with costs.
H. C DePuy, for appellant.
Gray & Myers, for respondent.
This is an appeal from a judgment entered by the district court of Walsh County, against the defendant, Dan Sutherland. The other defendant, B. H. Stary, interposed no defense, and judgment was entered against him by default. Sutherland appeals.
The suit is upon a promissory note, the complaint being in the usual form. It is alleged that the defendant Sutherland wrote his name on the back of the note, before delivery thereof to the payee, for the purpose of securing the loan.
The defendant Sutherland answered, specifically admitting the corporate character of the plaintiff and the execution of the note by his codefendant Stary; otherwise, the answer denied generally the allegations of the complaint. At the trial, the paragraph containing the general denial was stricken out. The result is that the allegation of the complaint, as to the endorsement by appellant, stands admitted. The defendant alleged, by way of defense, that he received no consideration for endorsing the note, that it was endorsed for the accommodation of the maker, that, at the time he endorsed the note, the maker Stary was wholly solvent and was doing a profitable business and was fully able to pay the note; that thereafter, and while Stary was solvent, able to pay the note, engaged in a profitable business, and while the plaintiff had funds and collateral in its possession and opportunity to collect said note from the maker, the defendant demanded that plaintiff proceed against the maker and served notice that, unless such proceedings were taken, appellant would hold himself discharged; that the plaintiff did not proceed against the maker, but instead, and for a valuable consideration, without appellant's consent, extended the time of payment. The answer further alleges that several times thereafter, and after the note was past due and payment thereof had been extended, and while the maker was solvent and was transacting business with the plaintiff and fully able to pay the note, and while the plaintiff had opportunity to collect the note from the maker, the appellant demanded that plaintiff take proceedings against the maker Stary, or this appellant would hold himself discharged. Then follow allegations that the plaintiff and respondent neglected to take proceedings against the maker; that the maker became and was, at the time of the trial, wholly insolvent; that collateral held by the plaintiff had become worthless and deposits withdrawn; and that the appellant herein had been prejudiced by the acts and omissions of the plaintiff as alleged in the answer to the full amount due on the note.
Some testimony and formal proofs were offered, tending to support the allegations of the answer. These were rejected by the court and error is predicated on such ruling. The plaintiff proved the execution of the note by the defendant Stary and the endorsement thereof in blank by the defendant Sutherland, introduced the note in evidence and rested. The note contained the following:
"The makers and endorsers each guarantee the payment of this note and waive demand, protest and notice of nonpayment, and consent to any extension of time of payment or renewal thereof without notice."
The defendant took the witness stand and some questions were asked with reference to the solvency of the defendant Stary, but the witness was not permitted to answer, the theory of the trial court being that the facts affirmatively alleged did not constitute a defense to plaintiff's cause of action.
In order to have a correct understanding of the situation, it is necessary to refer more specifically to the proceedings had in the trial court. The defendant, Sutherland, testified in his own behalf, in substance, as follows: That he endorsed the note in suit for the accommodation of the maker and received no consideration therefor, either from the payee or the maker of the note; that after the note matured, to wit: after the 15th day of November, 1917, the plaintiff bank, thru either an officer or employee, asked the defendant to pay the note or renew it, but that defendant at that time told the bank that he would not pay it or renew it; that the maker was doing "lots of business" and "that if they did not get it from Stary (the maker) that I would not consider myself under obligation to them." It is to be noticed that the date of this conversation is not given, but it took place after the maturity of the note. Obviously, if this demand upon the defendant to pay the note was made, (as the inference must be from the testimony) before any binding extension had been given to the maker and the maker had defaulted in payment, the obligation of the endorser to pay the note had become absolute and such liability, it has been held, is not that of a surety. See Comp. Laws 1913, § 6969; Carnegie Trust Co. v. Kistler, 89 Misc. 404, 152 N.Y.S. 240. The defendant testified that in the fall of 1920 the bank again requested him to renew the note, and that he refused. He now contends that he was entitled to the rights of a surety as defined in chapter 85, Civil Code, Comp. Laws 1913, and more specifically §§ 6681, 6682 and 6683 thereof, and was exonerated by reason of the refusal or failure of the plaintiff to proceed against the principal upon demand.
When the witnesses had testified as above set forth, and offers of proof had been made and rejected, a colloquy took place between the court and counsel for both parties, at the conclusion of which counsel for the defendant struck from his answer the general denial and counsel for plaintiff moved for judgment on the pleadings. The trial judge, in granting the motion, said that he took into consideration the evidence already in the record, as well as the defensive matters alleged in the answer. This statement of the court seems to have been acquiesced in by both sides and, in fact, counsel for appellant, in his statement of the ultimate facts, sets out the demand made upon the defendant Sutherland for the payment or renewal of the note. This was testified to by Mr. Sutherland. The case, therefore, comes before this court upon the pleadings and the evidence before the trial court when the motion for judgment on the pleadings was granted.
Taking the most favorable view of the case from the standpoint of the defendant and appellant, the record shows that, after the note was due, at the time when plaintiff made its demand upon the defendant for payment, the latter countered with a demand that the plaintiff proceed against the principal debtor and then told plaintiff that if such proceedings were not taken, defendant would hold himself discharged. The fundamental question, therefore, is whether an accommodation endorser, who endorser, before delivery, a promissory note containing the waivers and consent to extensions of time, incorporated in the note in suit, may relieve himself from liability thereon by notifying the creditor-payee to proceed against the principal debtor under the provisions of § 6683, Comp. Laws, 1913.
Section 6683 appears to be principally relied on by the appellant. That section reads as follows:
"A surety may require his creditors to proceed against the principal or to pursue any other remedy in his power, which the surety cannot himself pursue and which would lighten his burden; and if in such case the creditor neglects to do so, the surety is exonerated to the extent to which he is thereby prejudiced."
It is not necessary, in the view we take of this case, to discuss at great length the interesting question of the boundaries of the right given the surety by § 6683, supra. That question is not free from difficulty. The Oklahoma statutes defining the rights of sureties, including § 6683, supra, are taken from this state without change. In that state, the supreme court was held, under facts very similar to, in fact, scarcely distinguishable from the facts in the case at bar, that the surety cannot, by demand, compel the creditor to sue the principal maker before the former may require the surety to pay the note. The statutes cited in these cases, as to the remedies of the surety, are identical with ours, and § 4964 of the Oklahoma Statutes of 1910, is substantially identical--perhaps not quite so broad--as § 7407, Comp. Laws 1913, making it optional with the plaintiff to include in one action all persons severally liable on an instrument. Palmer v. Noe, 48 Okla. 450, 150 P. 462; National Bank v. Lowrey, 57 Okla. 304, 157 P. 103; Gregg v. Oklahoma State Bank, 72 Okla. 193, 179 P. 613. According to the Oklahoma rule, as applied in the cases cited, the contention of the appellant could probably not be sustained.
An accommodation endorser, who endorses a promissory note before delivery, under §§ 6914, 6948 and 6949, Comp. Laws 1913 §§ 29, 63 and 64 of the Uniform Negotiable Instruments Act), is not a surety within the provisions of chapter 85 of the Civil Code (Comp. Laws 1913, §§ 6675 to 6689) so as to have the right, under § 6683 thereof, to require the creditor "to proceed against the principal or to pursue any other remedy in his power which the surety cannot himself pursue and which will lighten his burden," with resulting exoneration from liability if the creditor fails, refuses or neglects to sue the principal, or enforce payment by the...
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