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Moakley against Riggs

New York Supreme Court of Judicature1821-05
19 Johns. 69

Summary

Holding. The defendant's guaranty obligation was conditional upon the plaintiff exercising due diligence to pursue legal remedies against all parties to the note, and the plaintiff's failure to sue the maker for seventeen months after the note matured constituted negligence that absolved the defendant from liability. Judgment for the defendant with leave to amend on payment of costs.

A plaintiff held a promissory note and obtained a guarantee from the defendant that the note was good and collectible after due legal process. The plaintiff took action against the endorsers of the note in May 1818 but never sued the maker, Hull, during the seventeen months following the note's maturity. The plaintiff's only explanation for this omission was that Hull had been discharged from his debts by a commissioner under insolvency law in March 1819—but this discharge occurred ten months after judgments were already obtained against the endorsers and well after the plaintiff had reasonable opportunity to pursue the maker.

The court held that a guarantor's obligation is conditional on the creditor exercising due diligence to collect against all parties to the note before seeking recourse under the guaranty. The guarantor has the right to insist on this condition as part of his engagement. Because the plaintiff failed to prosecute against the maker for seventeen months—a period during which suit and judgment were plainly achievable—this constituted culpable negligence. The subsequent discharge of the maker did not excuse the plaintiff's earlier inaction, since the discharge came too late to have prevented timely prosecution.

Summary generated by law.co from the public-domain opinion. The opinion text itself is public domain.

Key issues

  • Whether a guarantor's liability depends on a condition precedent of due diligence by the creditor
  • Whether delay in prosecuting against the maker of a promissory note excuses the guarantor
  • Whether a debtor's subsequent discharge from insolvency excuses the creditor's prior failure to pursue collection

Procedural posture

The defendant guarantor contested his liability on the note, asserting that the plaintiff had failed to exercise required diligence in collecting against all parties to the instrument.

Authorities cited

No cited authorities resolved to law.co cases yet.

Opinion

majority opinion

Spencer, Ch. J.

delivered the opinion of the Court. The .first inquiry is, whether the defendant’s liability under his engagement, that the note was good and collectable, after due course of law, did not depend on a condition precedent, to be performed by the plaintiff, the use of due diligence in attempting to collect the note by legal prosecution. It does not admit of a doubt, that the defendant, who is a mere guarantee, can only be made responsible by the plaintiff’s showing a pérformance, on his part, of the condition, on the observance of which the defendant consented to be answerable for the amount of the note. The defendant’s undertaking, that the note was good and collectable, after due course of law, imposed a necessity upon the plaintiff, if he meant to resort to his guaranty, to prosecute, with due diligence, all the parties to the note. The guaranty extends as well to the maker of the note as to the endorsers. The plaintiff accepted the note with the several and respective liabilities of the maker and endorsers; and his title to demand of the defendant the performance of the guaranty, depends on his showing, either that he has, with reasonable vigilance, pursued a due course of law, that is, commenced and prosecuted suits to effect, against all the parties to the note, and has thus ascertained, that the note was not good and collectable, or he must set forth a legal excuse for omitting to do so. There is no averment, that a suit has been prosecuted against Hull, the maker of the note, and the I excuse is, that he was discharged from all his debts by a commissioner, pursuant to the statute, on the 15th of March, 1819. Though the act of God, or the act of the law which renders the performance of an act stipulated to be done, unlawful, may excuse a party from a strict compliance with his contract, as matter of defence, it may well be doubted, whether an engagement by one to perform an act, on the previous performance of another act by the other. can be enforced, without showing the previous act done, or that its performance was dispensed with, or prevented by him who was to perform the subsequent act. Here, however, the very excuse set up is no answer to the objection made by the defendant; for seventeen months had elapsed after the note became due, before Hull was discharged from his debts. We know, judicially, that by the course of the Court, Hull might have been sued, and judgment obtained long before his discharge. Indeed, the plaintiff himself shows, that with respect to the endorsers, judgment was obtained against them, on the 8th of May, 1818, more than ten months prior to Hull’s discharge as an insolvent. Courts are to interpret and enforce, not make, or alter the contracts of parties. The defendant has a right to insist, that he entered into this guaranty, under the express condition, that he was not to be liable, unless the note turned out not to be good, or collectable, after a regular prosecution against the maker and endorsers of the note, with due and reasonable diligence. This is the substance of his engagement; and we think it cannot admit of a doubt, that the total omission to prosecute Hull, for the period of seventeen months, was a clear and,culpable negligence, which absolved the defendant from his guaranty. We do not mean to say, that a suit should have been brought forthwith, after the note fell due, but, at all events, a term should not have been lost. And when the defendant is regarded as a surety, most emphatically he cannot be bound beyond the scope of his engagement.

Judgment for the defendant, with leave to the plaintiff to amend, on payment of costs.