Citizens National Trust & Savings Bank v. Seaboard Surety Corp.

EDMONDS, J., pro tem. Bessolo & Gualano, Inc., made a note payable to itself in the principal sum of $13,500 which was guaranteed by Angelo Bessolo, V. A. Gualano and M. Angelo Bessolo, Jr. This note was thereafter transferred to the plaintiff bank, together with a bond of the defendant sued upon in this action. This bond names the three individuals and the corporation as principals, and itself as surety, and recites that they are bound unto J. M. Berry, and any and all further holders of the note, in the sum of $13,500 upon the condition “that if the Obligee shall collect said note from said Principals or any of them, then this obligation shall be void, otherwise to remain in full force and effect”. The defendant asserts that this is a guarantee of collectability and not a guarantee of payment, and the appeal is from a judgment based upon the conclusion of law of the trial court, finding this to be the legal effect of the instrument and the action to have been prematurely brought.

The appeal is on the judgment roll and the facts are undisputed. The trial court found that the note and the bond had been executed and delivered as alleged by plaintiff, and had been accepted by the plaintiff before maturity, in good faith, for value, and in the usual and regular course of business; that no part of the principal or interest on the note had been paid, and that on June 9, 1929, when the note became due, plaintiff made demand upon the maker and guarantors thereof; that on August 2, 1929, plaintiff notified the defendant of the nonpayment of the note, and demanded payment from it as surety; that on August 19, 1929, plaintiff commenced an action against the makers and guarantors of the note and recovered judgment thereon; that an appeal to this court was taken by the defendants from that judgment, but without the filing of any bond stay[768]ing execution; and that the appeal was then pending and undetermined.

In response to the issues raised by defendant’s answer, the trial court found it not to be true that plaintiff failed and neglected to proceed to collect the note. It also found the plaintiff bank had not been negligent and dilatory in its efforts to collect the note, and that the defendant surety company had not been exonerated from liability by reason of any acts on the part of plaintiff.

In Corpus Juris it is said that “where the guaranty is of the collection or of the collectability of the bill or note, it is generally held to be a conditional guaranty; it is equivalent to a guaranty that the bill or note is collectable by due course of law, and the guarantor is bound only upon condition that the drawee or payee of the bill or note uses due diligence to collect the debt from the drawer or maker, and gives the guarantor notice of the principal’s default”. (28 Cal. Jur. 951.) If the payee of a negotiable note indorses it: “I hereby guarantee the collection of the within at maturity,” only a conditional guarantee is created. The indorsement “we guarantee the collection of the within note” is of the same kind. A guarantee of the collection of the amount of a debt as it becomes due is likewise an undertaking that the debt will be paid if the principal is prosecuted with reasonable diligence. Cases where the foregoing were passed upon are collected in a note to Fall v. Youmans, 67 Minn. 83 [69 N. W. 697, 64 Am. St. Rep. 390, 394], In Phillips v. Lindley, 112 App. Div. 283 [98 N. Y. Supp. 423], the defendant made an agreement “to collect said note without cost or expense to said Phillips”. It was held to be a conditional guarantee. The words “I guarantee the collection of this note to George Leitch” were also held to create a conditional guarantee. (Cumpston v. McNair, 1 Wend. (N. Y.) 457.)