Kohler v. . Matlage , 72 N.Y. 259 ( 1878 )

[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.]

[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.]

[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] [EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] The plaintiff's testator and one Chapman had been copartners in manufacturing bread in the city of New York. The plaintiff, after the death of her testator, sold to Chapman her interest in the property and business of the firm for the sum of $3,000, the latter agreeing to pay all the debts of the firm, and certain rents and taxes, and to give a "purchase-money" chattel mortgage to secure the purchase-money, and also the payment of the debts, rents, etc., and also a bond with approved sureties to secure the payment of the debts, rents, etc.

The action is upon the bond executed and delivered in pursuance of this agreement against the principal Chapman, and the other defendants who were his sureties, and who alone defend.

The condition of the bond, so far as it affects the payment of debts, is, that if Chapman "shall well and truly pay, or cause to be paid unto the proper parties, the balance of the debts of the concern for manufacturing a variety of bread known as `Kohler's Cream Bread,' remaining due and unpaid upon the delivery of this bond, and which are stated by said Chapman not to exceed $2,500 within nine months after the date of this bond," then it was to be void. Another part of the condition was that the obligors would save the plaintiff harmless from the payment of said debts.

The point was taken on the trial that this was a mere bond of indemnity against loss or damage, and that non damnificatus was a good answer. This position cannot be sustained. It is settled that upon an obligation to do a particular thing, or to pay a debt for which the covenantee is liable, or to indemnify against liability, the right of action is complete on the defendant's failure to do the particular thing he agreed to perform, or to pay the debt or discharge the liability. (Belloni v.Freeborn, 63 N.Y., 383; Churchill v. Hunt, 3 Denio, 321;Thomas v. Allen, 1 Hill, 145.) The distinction is clearly defined between such an obligation and an indemnity against loss or damage by reason of a liability. In the former case the covenantee is to be saved from the thing specified, and in the latter from the consequences of it. (Gilbert v. Wiman,1 N.Y., 550; 63 N.Y., 383; 3 Denio, 321; 1 Hill, 145.) In both cases courts seek to carry out the contract as made by the parties. In none of the cases was the language more explicit than in this. If Chapman paid the debts of the firm within nine months, the bond in that respect was satisfied; if not, it was in force. Chapman did not pay, and the right of action thereby became complete.

It is insisted that the estate was only liable contingently for these debts, and not until the creditors had exhausted their remedy against Chapman, the surviving partner, and that the authorities cited do not apply. (Richter v. Poppenhausen,42 N Y, 373.) The answer to this is, that the firm business was carried on in the name of Kohler, and the creditors had a right to proceed against him alone, or against his estate, in the first instance, without resorting to Chapman, but it is not intended to decide that the contingent liability referred to would not be sufficient to give the obligee the same rights as if the liability was direct. That point is not in the case.

It is objected that the debts were not proved. The judge finds the amount of the debts against the firm, and that none of them were paid by Chapman, and the evidence was sufficient to justify the finding. The evidence of Spear, the attorney for the plaintiff, so far as he stated facts, was competent upon the question. The presentation of the various claims against the estate, his investigation to prove their correctness, with the evidence of Chapman that they were correct as far as he knew, was sufficient prima facie to establish them and warranted the finding.

The counsel for the defendants presented various questions by requests to find, and otherwise, based upon the conduct of the plaintiff in respect to the chattel mortgage before referred to, and the counsel in some of his points seems to suppose that if the plaintiff by any act or consent had impaired this security, or changed its terms, the sureties would be entirely discharged from their obligation. This is a misapprehension. Any change in the terms of the contract of the principal, for which the sureties are bound, without their consent, would discharge them. The contract is contained in the bond signed by the sureties, and there is no pretense that any of the terms of that instrument were changed, or in any manner affected. The chattel mortgage was held by plaintiff as collateral security, and if the defendants had paid the debts, they would have been entitled to subrogation after the individual interest of the plaintiff had been satisfied. If the plaintiff, by any act of bad faith, had impaired this security to the injury of the defendants, they might avail themselves of it to the extent of the injury proved (Story's Eq., § 501; Schroeppell v.Shaw, 3 Comst'k, 457); but it would not release them beyond that.

It was urged upon the trial that the plaintiff had consented to the sale of the three horses. The original contract provided that Chapman might sell three of the horses, and it appeared that he had sold six. I think the referee was justified in refusing to find that the plaintiff consented to the sale of the other three horses. Chapman's evidence, although somewhat confused, tends to prove it; but other evidence tends to show that he represented, down to the time of the foreclosure, that he had the horses in his possession, and when they could not be found he admitted that he had practiced a deception, and refused, upon the urgent solicitation of the plaintiff's attorney, to state to whom they were sold or where they might be found.

Another point made is, that when the mortgage was renewed in 1874, the certificate stated the interest of the plaintiff at only $2,000; and another point is, that the mortgage was not renewed in 1875, after the foreclosure and sale, so that the property which had been disposed of might be pursued; and still another point is, that the avails of the sale (less than $500) should be applied upon the defendants' obligation. As to all these points, without discussing their respective merits in other respects, it is sufficient to say that the plaintiff held the mortgage to secure her individual claim for the purchase-money of the property, in preference to any rights which the defendants might have in it as a security for the debts against the firm, and from the evidence the property mortgaged was not worth more than the balance due after the payment of one of the notes of $1,000, so that it does not appear that the defendants would have been injured if the mortgage had been released. The whole value of the mortgage belonged to the plaintiff. The result, as it turned out, was that the plaintiff, upon the foreclosure and sale of all the property that could be found, realized less than $500, leaving a deficiency of over $1,500 unpaid; and it may be added that there is nothing in the case to show that she was in fault for the missing property, and she was the sole loser by reason of it. The defendants had no interest in it, and it follows that they were not entitled to credit for any part of the avails of the sale. The judgments and executions against Chapman, and the proof of payment of the debts were unnecessary to enable the plaintiff to recover in this action, but this evidence shows that the plaintiff had been actually damnified to the amount that she claims to recover in this action.

We are unable to find any error in the trial which would justify a reversal of the judgment, and it must be affirmed.

All concur.

Judgment affirmed.