Young v. Carr

• Decision Date: 04 October 1934
• Docket Number: Civil 3422
• Citation: 36 P.2d 555,44 Ariz. 223
• Parties: M. JEANETTE YOUNG, Appellant, v. ELLA CARR, Appellee
• Court: Arizona Supreme Court

36 P.2d 555

44 Ariz. 223

M. JEANETTE YOUNG, Appellant, v. ELLA CARR, Appellee

Civil No. 3422

Supreme Court of Arizona

October 4, 1934

APPEAL from a judgment of the Superior Court of the County of Maricopa. G. A. Rodgers, Judge. Judgment affirmed.

Mr Arthur L. Goodmon and Mr. James E. Nelson, for Appellant.

Mr Austin O'Brien and Mr. James A. Walsh, for Appellee.

OPINION

McALISTER, J.

Ella Carr brought suit against M. Jeanette Young on two promissory notes in both of which she was the payee. One of them was dated May 1, 1930, and obligated the makers Harriet H. Carr and M. Jeanette Young, to pay $600 with six per cent. interest one year after date. The other was dated February 16, 1931, and bound the maker, M. Jeanette Young, to pay $200 with interest at six per cent. six months after date. By direction of the court the jury returned a verdict for the plaintiff for the full amount of both notes and from the judgment entered thereon this appeal has been prosecuted.

In her answer the defendant sets up three defenses: First, that she was an accommodation surety and the principal maker, Harriet H. Carr, who was a resident of Maricopa county, Arizona, a fact known to the plaintiff at the time, was not joined in the suit as a codefendant; second, that the plaintiff released the defendant from payment in this way; she had in her possession through her agent money belonging to the latter, the principal maker, and, instead of applying it to the payment of the notes, allowed it to pass from her to the principal maker, Harriet Carr; and, third, that Harriet Carr, the principal debtor, stated to her that the notes had been paid.

The defendant (we will refer to the parties as they appear in the superior court) makes three assignments of error but relies upon two propositions of law. The first is that she was an accommodation surety and under the provisions of section 3732, Revised Code of 1928, could not be sued alone because the principal maker who was within the jurisdiction of the court when process was served was not made a party to the suit. This section reads as follows:

"§ 3732. Actions against surety, assignor or indorser. The assignor, indorser, guarantor and surety upon a contract, and the drawer of a bill, which has been accepted, may be sued without the maker, acceptor or other principal obligor, when the latter reside beyond the limits of the state, or in such part of the same that they cannot be reached by the ordinary process of law, or when their residence is unknown and cannot be ascertained by the use of reasonable diligence, or be dead, or insolvent."

The substance of the answer, in so far as it concerns this proposition, is that on May 1, 1930, and for a long time prior thereto, the defendant and Harriet Carr, one of the makers of the note of that date, had lived together on a ranch near Phoenix, Arizona, the partnership property of the two, and that on divers occasions prior thereto, the plaintiff Ella Carr, had loaned her sister, Harriet, various sums of money totaling $600; that on May 1, 1930, the plaintiff requested Harriet Carr to execute a note in this amount payable to her and asked defendant to sign with Harriet Carr and that, having full confidence in the latter, she signed it as an accommodation to her, a fact which the plaintiff well knew, and thereby became an accommodation surety thereon; that at the time process was served upon the defendant, Harriet Carr was living in Maricopa county, Arizona, and could have been served, a matter well known to the plaintiff and her attorney; that the plaintiff could not under the statute bring an action on the note against the defendant nor could judgment be rendered against her unless Harriet Carr, the person primarily liable thereon, be made a party and judgment rendered against her also, either then or prior thereto.

Under the provisions of section 3732, supra, one may bring an action against the assignor, indorser, guarantor or surety upon a contract without joining the maker or principal obligor, but this can only be done when the latter comes within one of the exceptions mentioned therein, that is, when he resides out of the state, etc. The defendant contends that, having signed the note merely as an accommodation surety, the fact that the principal maker who was in the county when the action was filed and could have been served with process, was not made a party, had the effect of releasing her from the obligation, and to support this view cites two decisions of this court, Rhoton v. Woolford, 24 Ariz. 562, 211 P. 858, and United States Fidelity & Guaranty Co. v. Alfalfa Seed & Lumber Co., 38 Ariz. 48, 297 P. 862, 863. The court did say in the first of these cases, an action against an indorser on a note in which the maker was not joined, that "The maker of the note should have been made a party defendant, or one of the statutory reasons for not doing so, as that he was a nonresident, etc., or dead, or actually or notoriously insolvent, should have been set out in the complaint,..." and in the second, an action under section 3836, Revised Code of 1928, by a materialman against the surety on a contractor's bond in which the principal thereon had not been joined, that "while section 3836 provides that all parties to a joint obligation may be sued jointly or severally, and in terms contains no exception, nevertheless the exception to such rule is found in section 3732," and to give effect to both of these sections, 3732 and 3836, the court construed them together and in doing so held that the right to sue a surety separately, which is conferred by section 3836, "is conditioned upon the existence of facts bringing the case within the exception stated in section 3732." Giving the two sections this meaning, the court said, accords with "section 3731, which provides, in effect, that a judgment may not be entered against a party not primarily liable upon a contract until judgment is obtained against the principal obligor in such contract."

The correctness of both holdings is without question but in neither of the cases was the court dealing with the rights and obligations of the maker of the note. In the first it was concerned with those of an indorser and in the second with those of a surety on a contractor's bond, both of whom are secondarily liable. It is apparent that what the court said concerning an indorser was not applicable here, because an indorser is not, under the Negotiable Instruments Law (Rev. Code 1928, § 2338 et seq.) and the authorities construing it, a maker. "In similar fashion did that statute (Negotiable Instruments Law) change our former rule that indorsers before delivery were co-makers. It requires them to be treated instead as the parties they appear to be, indorsers only." Vernon Center State Bank v. Mangelsen, 166 Minn. 472, 208 N.W. 186, 187, 48 A.L.R. 710. See, also, Rockfield v. First National Bank, 77 Ohio St. 311, 83 N.E. 392, 14 L.R.A. (N.S.) 842; Haddock v. Haddock, 192 N.Y. 499, 85 N.E. 682, 19 L. R.A. (N.S.) 136; Toole v. Crafts, 193 Mass. 110, 78 N.E. 775, 118 Am. St. Rep. 455. It is unnecessary to cite authorities on the proposition that a surety on a bond is not a principal or primarily liable.

The party sought to be held in this case, however, is, according to the allegations of her answer, an accommodation maker and, therefore, primarily liable on the note. Section 2361, Revised Code of 1928, which is a copy of section 29 of the Negotiable Instruments Law, defines an accommodation party as "one who has signed the instrument as maker, drawer, acceptor or indorser without receiving value therefor and for the purpose of lending his name to some other person. Such a person is liable on the instrument to a holder for value, notwithstanding such holder, at the time of taking the instrument, knew him to be only an accommodation party." By signing in this way he lends his name and credit to his co-signer, becomes in law a maker of the note and is obligated to pay it when called upon by he holder, regardless of any action taken against his comaker. While he receives nothing of value for lending his name and credit and is, as between himself and his co-signer, merely a surety, yet, as between him and the payee or the latter's transferee or assignee, he is maker and primarily responsible for the payment of the note. Farmers' State Bank v. Forsstrom, 89 Or. 97, 173 P. 935. Section 2479, Revised Code of 1928, provides that "the person 'primarily' liable on an instrument is the person who by the terms of the instrument is absolutely required to pay the same. All other parties are 'secondarily' liable." "Approaching the act (Negotiable Instruments Law) from this point of view (uniformity)," to use the language of the court in Union Trust Co. v. McGinty, 212 Mass. 205, 98 N.E. 679, 680, Ann. Cas. 1913C 525, "it is apparent that no relation of principal and surety is established or contemplated by any of its sections. It determines the liability of the various parties to the negotiable instrument on the basis of that which is written on the paper. The obligation of all makers, whether for accommodation...