SEC. 2788. NOTE.-Sec. 12 of our statute of frauds is an exact copy of the New York statute. The second subdivision of the section is the one embraced in the text. A person may become guarantor even with. Knowledge out the knowledge or consent of the principal. N. Y. C. C., Sec. 1535. of principal not necessary to cre ation of guaranty. ARTICLE II. CREATION OF GUARANTY. SECTION 2792. Necessity of a consideration. 2793. Guaranty to be in writing, etc. 2794. Engagement to answer for obligation of another, when deemed original. 2795. Acceptance of guaranty. SEC. 2792. a considera Where a guaranty is entered into at the Necessity of same time with the original obligation, or with the ac- tion. ceptance of the latter by the guarantee, and forms, with that obligation, a part of the consideration to him, no other consideration need exist. In all other cases there must be a consideration distinct from that of the original obligation. See Mallory vs. Gillett, 21 N. Y., 412. The person to whom a guaranty is made, is here called the guarantee. This is the proper legal meaning of the word (see Bouvier's Dictionary, also Webster and Worcester), although it is often used in another sense. N. Y. C. C., Sec. 1536. SEC. 2793. Except as prescribed by the next section, a guaranty must be in writing, and signed by the guarantor; but the writing need not express a consideration. The familiar provision of the Revised Statutes made every special promise to answer for the debt, default or miscarriage of another person, void, unless "some note or memorandum thereof expressing the consideration be in writing, etc. (2 Rev. Stats., 135, Sec. 2, Subd. 2). In the draft of this Code, the Commissioners recommended that the requirement that the consideration be expressed, should be omitted (Dr. Civ. Code, Sec. 1380). This change in the law has since been made by the Legislature, by Laws of 1863, Chap. 464; and the section in the text, therefore, corresponds to the existing law. The Commissioners have inserted in the text an express provision that the writing need not express a consideration, because by the section immediately preceding an actual consideration is necessary to support a guaranty in some cases, while in others none is required. It has been lately held by the Court of Appeals that a contract required by the statute of frauds to be in writing, cannot be partly in writing and partly oral; thus, where a writing relating to a contract for Guaranty to ing, etc. be in writ. Engagement to answer for obligation the sale of land fixes the price, but refers to "terms as specified," which are not stated in writing, the memorandum is insufficient, and cannot be made good by oral evidence of the time agreed upon for payment (Wright vs. Weeks, 25 N. Y., 153). If, therefore, the section in the text should simply omit the former provision of the statute requiring the consideration to be stated, it might be exposed to the construction that in all those cases in which the consideration is made, by the previous section, essential to the contract, it must be stated in reducing the contract to writing. In England the statute, 19 and 20 Vic., Chap. 97, Sec. 3, enables a party to prove the consideration of a guaranty by parol. So in Maine (Rev. Stats., 631). N. Y. C. C., Sec. 1537. SEC 2794. A promise to answer for the obligation of another, in any of the following cases, is deemed an origwhen deem'd inal obligation of the promiser, and need not be in writing: of another, original. 1. Where the promise is made by one who has received property of another upon an undertaking to apply it pursuant to such promise; or by one who has received a discharge from an obligation in whole or in part, in consid eration of such promise. 2. Where the creditor parts with value, or enters into an obligation, in consideration of the obligation in respect to which the promise is made, in terms or under circumstances such as to render the party making the promise the principal debtor, and the person in whose behalf it is made, his surety. 3. Where the promise, being for an antecedent obligation of another, is made upon the consideration that the party receiving it cancels the antecedent obligation, accepting the new promise as a substitute therefor; or upon the consideration that the party receiving it releases the property of another from a levy, or his person from imprisonment under an execution on a judgment obtained upon the antecedent obligation; or upon a consideration beneficial to the promiser, whether moving from either party to the antecedent obligation, or from another per son. 4. Where a factor undertakes, for a commission, to sell merchandise and guaranty the sale. 5. Where the holder of an instrument for the payment of money, upon which a third person is or may become liable to him, transfers it in payment of a precedent debt of his own, or for a new consideration, and in connection with such transfer enters into a promise respecting such instrument. N. Y. C. C., Sec. 1538. of guaranty. SEC. 2795. A mere offer to guaranty is not binding, Acceptance until notice of its acceptance is communicated by the guarantee to the guarantor; but an absolute guaranty is binding upon the guarantor without notice of acceptance. N. Y. C. C., Sec. 1539. ARTICLE III. INTERPRETATION OF GUARANTY. SECTION 2799. Guaranty of incomplete contract. 2800. Guaranty that an obligation is good or collectible. 2801. Recovery upon such guaranty. 2802. Guarantor's liability upon such guaranty. incomplete SEC. 2799. In a guaranty of a contract, the terms of Guaranty of which are not then settled, it is implied that its terms contract. shall be such as will not expose the guarantor to greater risks than he would incur under those terms which are most common, in similar contracts, at the place where the principal contract is to be performed. N. Y. C. C., Sec. 1540. SEC. 2800. A guaranty to the effect that an obligation is good, or is collectible, imports that the debtor is solvent, and that the demand is collectible by the usual legal proceedings, if taken with reasonable diligence. Thus a guaranty in these words, indorsed on a note, "I hereby guaranty the collection of the within note," imports a promise that the note can be collected of the maker, if the holder, within a reasonable time and with due diligence, prosecutes the same to judgment and execution against the maker. This obligation to prosecute within a reasonable time, and with due diligence, is a condition precedent to the liability of the maker. What is a reasonable time depends on the circumstances of each case. Generally, delay which cannot have prejudiced the guarantor, will not discharge him (Gallagher vs. White, 31 Barb., 92; see also Curtis vs. Smallman, 14 Wend., 231; Cooke vs. Nathan, 16 Barb., 342; Vanderveer vs. Wright, 6 id., 547; Warfield vs. Watkins, 30 Barb., 395). N. Y. C. C., Sec. 1541. Guaranty gation is fectible. that an obli good or col upon such SEC. 2801. A guaranty, such as is mentioned in the Recovery last section, is not discharged by an omission to take pro- guaranty. ceedings upon the principal debt, or upon any collateral security for its payment, if no part of the debt could have been collected thereby. Guarantor's liability upon such guaranty. In Cady vs. Sheldon (39 Barb., 103), the defendants, upon an assignment of a bond and mortgage, made a guaranty in these words: "In consideration of, etc., we guaranty the collection of said bond." On the trial of an action on this guaranty, before a Referee, it appeared that the obligors in the bond were insolvent, and unable to pay any part of the bond, and that the premises covered by the mortgage had been sold under a prior mortgage for less than the amount due upon it. The Referee, however, nonsuited the plaintiffs. And upon appeal, one question raised was, whether the omission to sue the obligors, or attempt a foreclosure of the mortgage, precluded the plaintiffs from recovering upon the guaranty. The Court, after reviewing numerous cases (Cumpston vs. McNair, 1 Wend., 457; Moakley vs. Riggs, 19 Johns., 69; Thomas vs. Woods, 4 Cow., 173; Loveland vs. Sheppard, 2 Hill, 139; Burt vs. Horner, 5 Barb., 501; Vanderveer vs. Wright, 6 Barb., 547; Curtis vs. Smallman, 14 Wend., 231; White vs. Case, 13 Wend., 543; Kies vs. Tifft, 1 Cow., 98; Eddy vs. Stanton, 21 Wend., 255; People vs. Jansen, 7 Johns., 332; Hart vs. Hudson, 6 Duer, 303; Taylor vs. Bullen, 6 Cow., 624; Gallagher vs. White, 31 Barb., 94; Morris vs. Wadsworth, 11 Wend., 100; 17 id., 103; Merritt vs. Lincoln, 21 Barb., 249; Newell vs. Fowler, 23 Barb., 632), stated the following principles as supported by the weight of authority: 1. That a guaranty of collection implies that a note or other evidence of debt is good and collectible against the principal debtors; and this means collectible by due course of law. 2. That, ordinarily to test that question, it is necessary that the usual legal proceedings should be resorted to, to wit, a judgment and execution against the parties primarily liable to pay; and a return of an execution unsatisfied is primarily sufficient evidence that it is not collectible. 3. That it is not indispensable that legal proceedings should be resorted to, to test the collectibility of the paper, if it otherwise satisfactorily appears that a resort to such proceedings would be ineffectual; and proof that the principal debtors, from the period of the maturity of the debt, have been uniformly insolvent and unable to pay any part of the debt, is sufficient evidence for this purpose. 4. That legal proceedings are not a condition precedent to the liability of the guarantor, but equivalent evidence of inability to collect any part of the debt will suffice; and that, however desirable it may be to have one uniform rule -e. g., the return of an execution unsatisfied against the principal debtor-as the test of the collectibility of a debt, the weight of authority does not allow that rule to be adopted. N. Y. C. C., Sec. 1542. SEC. 2802. In the cases mentioned in Sec. 2800, the removal of the principal from the State, leaving no property therein from which the obligation might be satisfied, is equivalent to the insolvency of the principal, in its effect upon the rights and obligations of the guarantor. This is the principle adopted in Cooke vs. Nathan, 16 Barb., 342; but see White vs. Case, 13 Wend., 543; Burt vs. Horner, 5 Barb., 501; Newell vs. Fowler, 23 Barb., 628. N. Y. C. C., Sec. 1543. ARTICLE IV. LIABILITY OF GUARANTORS. SECTION 2806. Guaranty, how construed. 2807. Liability upon guaranty of payment or performance. how con strued. SEC. 2806. A guaranty is to be deemed unconditional Guaranty unless its terms import some condition precedent to the liability of the guarantor. N. Y. C. C., Sec. 1544. SEC. 2807. A guarantor of payment or performance is liable to the guarantee immediately upon the default of the principal, and without demand or notice. N. Y. C. C., Sec. 1545. SEC. 2808. Where one guaranties a conditional obligation, his liability is commensurate with that of the principal, and he is not entitled to notice of the default of the principal, unless he is unable, by the exercise of reasonable diligence, to acquire information of such default, and the creditor has actual notice thereof. N. Y. C. C., Sec. 1546. SEC. 2809. The obligation of a guarantor must be neither larger in amount nor in other respects more burdensome than that of the principal; and if in its terms it exceeds it, it is reducible in proportion to the principal obligation. N. Y. C. C., Sec. 1547. SEC. 2810. A guarantor is not liable if the contract of the principal is unlawful; but he is liable notwithstanding any mere personal disability of the principal, though the disability be such as to make the contract void against the principal. N. Y. C. C., Sec. 1548. ARTICLE V. CONTINUING GUARANTY. SECTION 2814. Continuing guaranty, what. 2815. Revocation. |