Norton et al. v. Coons

Norton et al. v. Coons. Rights of cosureties. — Parol evidence. One of several co-sureties, who pays the debt, may call upon the others for contribution, though the sureties became such at different times, and the one who paid the debt did not know, when he became surety, that the defendant was to execute the instrument as a co-surety. The liability of co-sureties to each other being fixed by the law, cannot be varied, by paroi evidence of a conversation between the principal debtor, and the surety who last signed, in which the former expressed the opinion, that the latter would not be responsible, so long as the other surety was solvent. Appeal from the general term of the Supreme Court, in the third district, where a judment entered upon a verdict in favor of the' plaintiffs, had been affirmed. (For a former report of this case, see 3 Denio 130.) This was an action of assumpsit, by B. & A. Norton against Joseph H. Coons, the defendant, for contribution, as co-sureties, in a promissory note, of which the following is a copy: $1000. One year after date, we, jointly and severally, promise to pay to the order of Olive Eldridge, one thousand dollars, for value received. Troy, March 31st, 1841, with interest. Schryver & Aikin, R. & A. Norton, Joseph H. Coons. Schryver & Aikin were the principal debtors; the plaintiffs and defendant, the other joint-makers, their sureties. Schryver & Aikin shortly afterwards failed, and the plaintiffs were compelled by suit to pay the amount of the note, with costs; whereupon, they brought this action for contribution. On the trial, before Parker, J., the defendant offered to prove that Schryver & Aikin, the principal debtors, applied to Miss Olive Eldridge, the payee, for a loan of $1000, and offered to give the plaintiffs as sureties; but she did not know them, and required that the defendant’s name should also be furnished. Shryver & Aikin made and signed the note, and the plaintiffs signed it as sureties, # *not then knowing that the defendant was also to sign the note; nor had the latter then agreed to do so. Two days afterwards, Schryver & Aikin saw the defendant, and asked him to sign the note, telling him that Miss Eldridge required his name. The defendant demurred to signing the note, as it was drawn jointly and severally; but Schryver & Aikin told him he would run no risk at all, as the plaintiffs were abundantly responsible; and that he would not be liable, so" long as they were responsible. The defendant said, it was something he would not do for everybody; but as he had dealt a good deal with them, if he ran no risk, he would do it. They told him his name was wanted to satisfy Miss Eldridge that the note was good; and upon these considerations, he put his name to it. The plaintiff’s counsel objected to this offer, on the ground that the facts proposed to be proved constituted no defence; and the court sustained the objection; whereupon, the defendant excepted. The jury, then, under the instruction of the court, found a verdict for the plaintiffs for one-half of the amount paid by them, with interest; and the general term having denied a motion for a new trial, and entered judgment on the verdict, the defendant took this appeal. Hill, for the appellant. Stow, for the respondents. [MAJORITY — *Gray, J. Gardiner, J.] *Gray, J. — It is not denied, that, as between principal and surety, when the character in which they are obligated does not appear on the face of the instrument, paroi evidence is admissible, to show which is principal and which surety. Nor is it denied, that one who is about to become a surety upon a note, already executed by the principal and other sureties, may regulate the terms of his suretyship, to suit himself. He may contract to be co-surety with others who have executed the instrument, or to be, as between him and them, surety alone, not co-surety with them, and thus exempt himself from liability to contribute. (Harris v. Warner, 13 Wend. 400.) The defendant assumes, that the proof offered by him, and rejected, would establish an agreement between him and one of the principals, *by which he was not to be co-surety with the ^ plaintiffs, but surety for them, and, therefore, *- not liable in this action to reimburse to the plaintiffs any portion of the amount paid by them. The note itself affords no evidence of this agreement; the question, therefore, is, whether it is competent to establish it by paroi. The doctrine of contribution was first established and enforced in equity. -It rested upon, and resulted from, the maxim, that “ equality is equity.” This principle has been so long established, that persons becoming bound as sureties for a principal debtor, are regarded as acting under a contract implied from the settled rules which regulate their liability to each other. (Craythorne v. Swinburne, 14 Vesey 169.) As between the makers of the note and the payee, their rights and liabilities are regulated by the terms of the contract as expressed; as between the sureties, the contract is implied from their signatures to the note, so that the whole contract, as expressed and implied, is in short, an agreement by the several obligors to pay the note at maturity, and if, upon default of its being paid, either of the sureties pay it, the others shall contribute, each his equal proportion of the amount paid, less the share of the one who has paid the whole. In the one case, the parties have defined their liabilities in express terms, in the other, the law has defined them, and in terms equally express, and thus settled, as between the sureties, the legal effect of subscribing their names to the note. They are each chargeable with knowledge of the legal liability incurred, as between themselves, by the execution of the note, and should, therefore, be regarded as standing in the same relation to each other, and bound by the same rules they would be, if the legal effect of their contract had been fully written above their signatures. We are referred to the case of Craythorne v. Swinburne (14 Vesey 169), as authority for receiving paroi evidence of the terms upon which the defendant signed the note. That was a case in which the instrument then under consideration very clearly regulated the terms of the suretyship, but paroi evidence was offered and received, . ... n It was, however, evidence of *extrinsic facts, J and was, as remarked by Lord Eldon in that case, in support, and not in contradiction, of the written instrument. No doubt is entertained, that paroi evidence of collateral facts is ' admissible, to rebut dhe presumption arising from the face of the instrument, that all are principals and equally bound to contribute. (Harris v. Brooks, 21 Pick. 195.) The defendant’s proposition goes further. After proving for whose benefit the note was made, and who received the funds, and thus establishing the relation of principal and surety, he proposes to show, that he was not co-surety, not by extrinsic facts, but by a paroi agreement varying the operation of his contract, as defined by law and subscribed to by him, and thus, in effect, made his written agreement. Within my means "of research, I have not been able to find a case going that length, and I apprehend none exists. The law, in this case, having defined the rights and obli•gations of the sureties, as between themselves, their signatures establish their assent to it, and the contract is thus made as clear and certain as if the whole had been written. It is the highest and best evidence of their agreement, and the reason of the rule that excludes paroi evidence from being received to vary the operation of a contract, wholly written by the parties, applies with all its force to this case. The mischiefs and frauds to be guarded against in the one case, are as great as those in the other. Although the facts in this case are not analogous to those in the case of Thompson v. Ketchum (8 Johns. 148), yet the principle which should govern this, is stated there by Kent, C. J., as a principle of general application, and that is, where the operation of á contract is clearly settled by a general principle of law, it is to be taken to be the true sense of the contracting parties; and it is against the general rule to vary the operation of a writing by paroi. (See Hall v. Newcomb, 7 Hill 416.) It will not be denied, that the operation of the contract, in this case, was clearly settled by a principle of law. The defendant, by subscribing his assent to it, has so far made it his written contract, as to be prohibited from overthrowing it by a *paroi agreement made at the same time. The judgment of the supreme court should be affirmed. [ * 42 Gardiner, J. — It appears from the offer of the defendants, that when the negotiation was made with Miss Eldridge, she required that the note which she was to receive for the money loaned by her to Schryver & Aikin, should be joint and several, and undersigned, both by the Nortons, and Coons, the defendant, as sureties. That Coons was informed by Schryver & Aikin, when he signed the note, that Miss Eldridge required the security of his name. The preliminary agreement between the lender and the borrowers contemplated the signatures, therefore, of both plaintiffs and defendant, as sureties for a common principal. Their signatures on the written instrument are in conformity with this understanding. No agreement whatever was made between the sureties. The representation of Schryver & Aikin to Coons was, that they wanted him to go on the note, that he ran no risk at all, as the Nortons were abundantly responsible. That his name was wanted to satisfy Miss Eldridge that the note was good; and upon these considerations, he put his name on, saying, it was something he would not do for everybody, but as he had dealt a great deal with us, and if he ran no risk, he would do it. Schryver & Aikin did not pretend to speak for the Nortons, or to possess any authority to bind them, by any agreement or understanding whatever. They made no agreement with Coons which the Nortons could ratify. The most .that could be inferred by Coons from what was said, was, that in the opinion of Schryver & Aikin, he ran no risk at all, because the Nortons were abundantly responsible. It seems to me, that such evidence is very far from rebutting the clear evidence of co-suretyship established by the other testimony, and that the judgment should be affirmed. Parol evidence is admissible, that one of two joint makers of a promissory note signed as surety, in order to let in the defence, that he was discharged by the holder giving time to the principal debtor, with knowledge of the suretyship. Hubbard v. Gurney, 64 N. Y. 457 ; Miller v. Stem, 2 Penn. St. 286. See Wells v. Miller, 66 N. Y. 255. [DISSENT — *Foot, J.] *Foot, J. (Dissenting.) — The legal propositions -I stated by Ch. J. Bronson, in delivering the opinion of the supreme court, when this case was before it, on a motion for a new trial (3 Denio 132), are all, in my opinion, correct, with one exception. That exceptian is, his position, that the appellant could not avail 'himself of his qualified undertaking as a surety, because such qualification did not appear in the form of his undertaking. In other words, because the form of his signature to the note indicated co-suretyship with the respondents, he could not show the real character of his engagement, viz., that he was surety for those whose names were before his on the note. For this position, the learned chief justice cited no authority, while he cited numerous cases to sustain his other positions. Both reason and authority oblige me to adopt a different conclusion. The form of the undertaking indicates, if it is at all a guide, that the three parties to the note were all principals; and it may as truly and forcibly be said, that the form of the undertaking shall prevent the respondents from showing that they were sureties, as that it shall prevent the appellant from showing the true character of his suretyship; but neither the one or the other is sound, for the obvious reason, that the form of the undertaking is consistent with both. Hence, the surety is always permitted to show by paroi, that he did not become a party to the paper as principal, but as surety; this is settled by numerous authorities, and is almost daily practised. Can there be any reason why he should not be permitted also to show the true character of his suretyship ? I can discover none. This point, however, has been settled by authority. (Craythorne v. Swinburne, 14 Vesey 160.) My conclusion, therefore, is, that if the appellant became surety only for those whose names were before his on the note, or, in other words, more applicable to this case, if he signed the note, under an agreement with the principals, Schryver & Aikin, that he was only to be responsible, in case the respondents were unable to pay, then he is not liable in this action to the respondents. *The proof offered and rejected consisted of a series of facts, tending to show the limited char- [* 44 acter of the appellant’s undertaking, and was rejected, on the broad ground, that, if proved, it constituted no defence. It follows, from what has been already said, that this proof was erroneously rejected. I am, therefore, of opinion, that the judgment should be reversed, and a new trial granted. Judgment affirmed