Hamilton vs. Van Rensselaer

Hamilton vs. Van Rensselaer. A surety, who guaranties the punctual payment of “ the interest” on a money bond not bearing interest by its terms, is liable for interest accru- ' ing after the bond becomes due. CONTROVERSY submitted by the-parties, without suit, upon the following state of facts: On and before the 1st day of July, 1854, William D. Waddington and two other persons were jointly and severally indebted to George L. Schuyler, trustee, &c. in the sum of $10,000; and it was then mutually agreed between the said Waddington "and the said Schuyler, that he, the said Schuyler, should release the said Waddington from his joint liability, and accept from-him, in liquidation of his indebtedness, the bond and guaranty hereinafter set forth. That on the said 1st day of July, 1854, the said William D. Waddington made and executed, in pursuance of said agreement, under his hand and seal, and delivered to the said George L. Schuyler, trustee as aforesaid, his certain bond or obligation, in writing, whereby he, the said William D. Waddington, his heirs, executors and administrators, became held and firmly bound unto the said George L. Schuyler, trustee as aforesaid, his successors or assigns, in the penal sum of $7000, upon the following conditions, to wit: That if the said William D. Wadding-ton, his heirs, executors or administrators, should well and truly pay, or cause to be paid, unto the said George L. Schuyler, trustee as aforesaid, his successors or assigns, the just and full sum of $3333.33 on the 31st day of January, 1861, together with interest thereon, at and after the rate of seven per cent per annum,'payable on the 1st day of January, 1855, and half yearly thereafter, then the above mentioned obligation should be void, otherwise to remain of full force and virtue. That, simultaneously with the execution of the said bond, Jeremiah Van Bensselaer, the defendant, named his certain guaranty of the punctual payment of the interest on the said bond, indorsed thereon in the following -words, to wit; “For value received, I guarantee the punctual payment of the interest on the within bond, and will pay the interest on demand, in default of its payment by.Mr. Waddington. Signed, Jer. Van Bensselaer” — and without which said guaranty the said bond would not have been accepted, nor -would the consideration and advantages for which said bond was given, have been granted and parted with by said Schuyler. And the said bond was delivered and accepted, with said guaranty indorsed thereon, according to the agreement between said Schuyler and Waddington. That on or about the 15th day of March, 1856, the said George L. Schuyler, trustee as aforesaid, for value received, duly assigned and set over unto the plaintiff, Mary M. Hamilton, all his right, title and interest, in and to the said bond and guaranty, with all arrearages of interest thereon, which said bond is still due and unpaid, and no extension of time has been given to the said William D. Waddington, or to any other person. That the interest on the said bond has not been paid since the 1st day of July, 1860, although payment thereof has been demanded, both of the said William D. Waddington and of the defendant, and refused by them, except that the defendant has tendered to the plaintiff the sum of $136.11, being the amount of interest due on the said bond till the 31st day of January, 1861, and the defendant is ready and willing to pay the said sum of $136.11 to the plaintiff, or to pay it into court. The plaintiff claims that the defendant is liable for the payment of the interest on the said bond from the 1st day of July, 1860, till the 31st day of January, 1863,' making in the aggregate the sum of $583.33, with interest thereon from the 1st day of January, 1863. The defendant claims that he is liable only for the sum of $136.11, being the interest on the said bond from the 1st day of July, 1860, till the 31st day of January, 1861, when the said bond became due and payable. The parties hereto mutually prayed the judgment of the court on this statement of facts. Samuel LJ. Lyon, for the plaintiff. I.' The bond was by its terms to continue in full force and virtue, if not paid at maturity. After it became due it was, if not paid, as much a bond as before. When, therefore, the guarantor took the responsibility of securing the j)ayment of the interest, he took the risk of paying the interest which accrued after the bond became due in case the principal thereof was not paid. II. Guaranties are to be liberally construed. If the guarantor wished to restrict his liability to the payment of interest which accrued before the hand became due, he should have done so in express terms. Having failed to .restrict his liability, the words of the guaranty are to have their most extensive meaning; i. e. to be construed strongly against the guarantor, and liberally in favor of the plaintiff. (Drummond v. Prestman, 12 Wheat. 515. Douglas v. Reynolds, 7 Peters, 113, 122. Lawrence v. McCalmont, 2 How. 426. Bell v. Bruen, 1 id. 169, 186. Dobbin v. Bradley, 17 Wend. 422. Fellows v. Prentiss, 3 Denio, 518. Gates v. McKee, 3 Kern. 232. Ridge v. Judson, 24 N. Y. Rep. 64.) III. By the facts, as submitted, Schuyler released two persons jointly liable as principals, with Mr. Waddington, and accepted instead of their joint liability the bond of Waddington, with the guaranty of the defendant. Such guaranty would not' have been accepted but from, the consideration that the interest would be promptly paid so long as the principal remained unpaid. IV. The objection that the guarantor would be liable for an indefinite period, if the plaintiff’s theory be correct, is inadmissible, for the guarantor might have restricted his liability, if he had chosen to do so. Hot having done so, the words of the guaranty must be construed against him as strongly as the case will admit. (Drummond v. Prestman, supra.) V. It being admitted by the stipulation annexed to the case, that there are no loches on the part of the holder of the bond, the only question before the court is, as to the extent of the liability of the guarantor upon the contract of guaranty. The words “ value received” in the contract, express a sufficient consideration. (19 Wend. 557. 24 id. 35.) If it be admitted, as it must be, that the principal is liable for the interest on the bond until it is paid, the case leaves no room for argument; because—1st. The contract of the surety is “For value received, I guarantee the punctual payment of the interest on the within bond, and will pay the interest on demand in default of its payment by "Waddington;” and, 2d. The rule of law, as is well stated in 1 Parsons on Con tracts, 593, is, that “the liability of the guarantor is coextensive with that of the principal, unless it be expressly limited.” Hence, as there is no limitation in the guaranty upon the subject of interest, if Van Rensselaer’s liability is coextensive with that of Waddington, and Waddington is liable'for the interest till the bond is paid, it seems to follow as a logical consequence that Van Rensselaer is liable to the same extent. VI. The plaintiff is entitled to, and should have, judgment for the whole amount claimed by her, viz. $583.33, with interest from the 1st day of January, 186‘3. It. M. Harison and G. D. I. Harison, for the defendant. I. The contract of guaranty must be strictly construed, and in no event can be extended beyond the fair import of its actual terms. It is strictissimi juris. (Miller v. Stewart, 9 Wheat. 680. United States v. Kilpatrick, Id. 720. Walsh v. Bailie, 10 John. 180. Wright v. Johnson, 8 Wend. 512. Bigelow v. Benton, 14 Barb. 123.) II. The guaranty in this case was of “the punctual payment of the interest on the bond.” By a consideration of these terms, the meaning of the agreement may be readily ascertained. 1. The words, “the interest on the bond,” clearly point to a certain and definite amount of interest, which was payable in any event, according to the condition of the bond, namely, interest at seven per cent, from July 1, 1854, to January 31, 1861. 2. The words “punctual payment” limit the guaranty to such interest as was to be paid on certain specified days. Interest upon a debt that is overdue accrues daily, so as to daily increase the indebtedness, but it is not payable at all without the principal. The creditor may refuse to accept a payment of' interest only, and retain unimpaired his right of action for principal and interest together. III. Interest to January 31st, 1861, was the only interest which the obligor in the bond agreed to pay, and this only was the interest upon the bond mentioned in the guaranty. Interest from the time when the bond became due may be recovered against the obligor, but only as damages, given by the law, for the breach of his agreement to pay the principal debt, not as interest accruing by contract. (Watkins v. Morgan, 6 Car. & P. 661.) 1. Damages are a mere incident of the principal, and can not be separated from it. Hence the receipt of the principal is a waiver of all claims for damages. (Dixon v. Parkes, 2 Esp. C. 110. Tillotson v. Preston, 3 John. 229. Johnston v. Brannan, 5 id. 268. Stevens v. Barringer, 13 Wend. 639. Jacot v. Emmett, 11 Paige, 142.) But the rule is different as to interest for the period before the principal becomes due, because there is an express agreement to pay such interest, which agreement is not satisfied by the payment of the principal. (Fake v. Eddy’s Ex’r, 15 Wend. 76.) 2. Interest after the principal is due is frequently recoverable at a different rate from that stipulated in the contract. Thus, a bank prohibited by its charter from taking interest upon loans and discounts at a higher rate than 6 per cent, may recover interest at 7 per cent upon a note, from the time it falls due. (United States Bank v. Chapin, 9 Wend. 471.) And although the rate of interest reserved in a mortgage be but 5 per cent, the full legal rate is allowable after default. (Bell v. Mayor &c. of New York, 10 Paige, 49.) Interest, in the nature of damages, is computed according to the lex fori, not according to the lex loci contractus. (Ives v. Farmers’ Bank, 2 Allen’s Mass. Rep. 239. Barringer v. King, 5 Gray, 12. Easton v. Mellus, 7 id. 580.) As, therefore, it appears that such interest is not governed by, it can not be founded on, the agreement of the parties. But the collateral agreement of the guarantor, for the payment of interest, can not be subjected to a wider construction than the original agreement of the principal debtor, for the payment of interest; therefore, as the principal debtor agreed to pay interest until the 31st of January, 1861, only, the defendant is not liable foi the interest which has accrued since that time. IV. The construction of the defendant’s agreement, claimed by the plaintiff, imposes upon the defendant an obligation scarcely less onerous than if he had guarantied the whole debt; but it is evident that he had no intention of assuming any such responsibility. For the forbearance which his credit obtained he agreed to pay, which was all that could reasonably be asked of him. At the end of the term of credit the plaintiff was in the same position as her assignor before it was given, having her action against the original debtor for the debt; but the defendant was not liable for it, nor for damages for its detention. Y. The plaintiff’s claim for interest upon interest is clearly untenable. If. allowable, it could only be from the time when a demand for the payment of the interest was made upon the defendant. Hence, as no such demand was made, the defendant’s tender of the amount of interest from July 1, 1860, to January 21, 1861, was sufficient. [MAJORITY — Geo. G. Barnard, J.] By the Court, Geo. G. Barnard, J. I think the defendant liable to pay the interest which has accrued upon the bond since it became, by its terms, due. He agreed by his written promise to pay "the interest on the written bond.” There was no interest upon it when he covenanted to pay. It was, then, the interest which was to accrue. If the bond had been payable instantly, there would be no question of the defendant’s liability. Why limit the liability where it had a term of credit contained in the bond ? The guaranty makes no such limitation. Would it not be interest if the bond was due ? Is it not interest after the bond becomes due ? The party has not limited his liability, and the court cannot, if he omits to do it. His interest can not be inferred or declared from the burden his unrestricted words put upon him. [New York General Term. November 7, 1864. I think the plaintiff entitled to judgment for simple interest only. The principal debtor can not be made to pay inore, and the surety is only to make good his default. Judgment accordingly. Leonard, Sutherland and Geo. G. Barnard, Justices.]