Purdy v. Peters , 35 Barb. 239 ( 1861 )

By the Court, Barnard, J.

The points raised by the appellant, are—

1st. That on the facts as proved, the certificate of deposit is illegal and void.

2d. That on the facts as proved, the guaranty is also void by reason of the certificate of deposit being void.

The certificate of deposit is on its face a perfectly valid instrument. (Curtis v. Leavitt, 15 N. Y. Rep. 29, 83, 84, 295.) But, in the consideration of this case, we shall assume that the decision of the referees in the case of Tracy v. The North American Trust and Banking Company, adjudging the certificate in question to be invalid and to have been issued by said company contrary to law, is conclusive evidence both as against the plaintiff and defendant to this action on the question of the validity of the certificate. Our views as to the validity of the certificate, above expressed, do not impugn the decision of the referees, because, although the certificate may be valid on its face, yet it may be invalid and void by reason of matters dehors its face; and it would appear, from the testimony of Bobert Emmet, that it was in consequence of such, matters that the referees came to the conclusion they did. But notwithstanding the concession that the certificate is void for matters dehors its face, yet the judgment must he affirmed.

This action is not brought on the certificate, but on a guaranty of its payment, in writing, expressing a consideration. This guaranty was given to Bapelye and Purdy on a sale and transfer of said certificate to them by the defendants’ testator, they refusing to take said certificate without such guaranty; and upon such transfer with the guaranty, paying a valuable consideration therefor.

Bapelye and Purdy thus became the holders, for value, of the guaranty in question; and they can recover therein, notwithstanding the certificate be invalid and void for matters dehors its face.

There is no distinction, in principle, between this case and the case of Mann v. Eckford’s Mx’rs, (15 Wend. 502,) where it was held that the plaintiff might recover on the guaranty of a bond void for usury.

Indeed, it is difficult to perceive upon what principle a man who, for a valuable consideration, sells and transfers to another any instrument or claim, and guaranties its payment, (the contract upon which the guaranty is given being subsequent to and different from the contract out of which the instrument or claim guarantied arose,) can be allowed when sued on the guaranty, in default of such payment, to- set up as a defense that the party whom he guarantied should pay, was never liable. That would make the nature of a guaranty of payment to be, in all cases, this: “ If the person who is principally liable to pay this, has no defense and does not pay, then I will pay; but if he has any defense, then I will not pay.” This is clearly not the law. On the contrary, a guaranty of payment to one not a party to the instrument or claim guarantied, made upon a valuable consideration, or made' under such circumstances as would work a damage to the party guarantied, is in effect a representation that the instrument or claim is perfectly legal and valid, as well as an undertaking to pay it in case of default of the person primarily liable, and concludes the guarantor from questioning the liability of the party on such instrument or claim.

A guaranty, however, may be made under such circumstances as to render it equally invalid and void with the instrument guarantied. Thus, where as matter of fact the guaranty is given to the party to whom the instrument guarantied is given, both the guaranty and the instrument being given under and in pursuance of the very same contract— then there is, as a matter of fact, but one contract, the two instruments forming parts of it; and if one falls the other must necessarily go with it, as if, upon a usurious contract to loan money, the lender should stipulate that the borrower, to secure the loan and usury, should give his bond for the amount of the loan and the usury, with a guaranty of payment by a third person indorsed thereon. Such a guaranty would not be within the principle of the case of Mann v. Eckford’s Ex’rs, but would be equally void with the bond. This constitutes the distinction between the case of Swift v. Beers and the case of Mann v. Eckford’s Ex’rs. The present case falling within the principle of the case of Mann v. Eckford’s Ex’rs.

In the case of Swift v. Beers, (3 Denio, 70,) the guaranty was given to the payee of the certificate, and the court held as matter of fact (undoubtedly correctly) that the guaranty and certificate in that case were given under and pursuant to the terms of the same entire contract, to the party who was the payee of the certificate.

They used the expression, “partook of the character of the principal contract.” This expression is technically correct, because the guaranty, taken by itself, is a contract distinct from the certificate, the certificate being the principal contract. But the expression is capable of being misunderstood. It might lead to the supposition that the court intended to decide as matters of law that in all cases, if the instrument guarantied is void, the guaranty is equally so. All the circumstances of that case, as well as the authorities cited by the defendants’ counsel therein, show that the only point decided was, that in that particular case the guaranty given to the payee of the certificate, under the circumstances attending the giving of it, was as matter of fact part of the contract under which the certificate was given, and therefore partook of the character of the certificate, and was equally void with it. In this view of that case we coincide; but if it was intended to decide in that case, as matter of law, that if an instrument be void, a guaranty of its payment is in all cases also void, we must dissent from such a proposition. Wé have particularly adverted to the case of Swift v. Beers, because there is one point of similarity between that case and this, to wit: they are both actions brought on guaranties of time certificates of deposits, issued by the same company, and we deemed it proper to point out what, in our opinion, constituted the distinction between the two cases; which is, that in this case the plaintiff is the holder of a guaranty of payment made by the defendant to his assignees, upon assigning the certificate in question for a valuable consideration, the contract under which the guaranty was given being wholly distinct from the contract under which the certificate was given, and neither the assignees nor the plaintiff being parties to the certificate or the contract under which it was made; while in the case of Swift v. Beers the guaranty was made to the payees of the certificate, pursuant to the contract under which the certificate was issued to them; •the guaranty and the certificate being given in pursuance of, and constituting parts of, the same entire contract.

[New York General Term, September 16, 1861.

The other cases cited by the appellants’ counsel on this point will, on examination, appear to have been all decided on principles not affecting the case under consideration.

Judgment affirmed, with costs.

Clerke, Leonard and Barnard, Justices.]