MacY v. Inland Empire Land Co. , 145 Wash. 523 ( 1927 )

Stephen F. Smith and wife executed and delivered to the Inland Empire Land Company a promissory note secured by a mortgage on real property in Lincoln county. The Inland Empire Land Company duly assigned and delivered the note and mortgage to one Henry Neeb, and at the same time and as a part of the same transaction, executed and delivered to him its written obligation which, for the purposes of this case, reads:

"For value received, The Inland Empire Land Company, of Spokane, Washington, hereby assigns to ___________________ and guarantees the collection of the principal sum mentioned in the within bond (No. 501 Dated Sept. 28th, 1916, Due Oct. 1st, 1921, executed by Stephen F. Smith and Nora F. Smith for $600.00) within two years after the maturity thereof, and the payment of interest thereon until said maturity, according to the terms of said bond and interest coupons annexed thereto, and the payment of interest after maturity at the rate of six per cent per annum, payable annually until said principal sum is fully paid, this guarantee is to inure to the benefit of any legal holder hereof."

Thereafter, by several assignments, Jay K. Macy became the owner and holder of the note and mortgage, and of the guaranty obligation of the land company. He brought suit for judgment on the note against the makers, and for the foreclosure of the mortgage, and also for judgment against the Inland Empire Land Company on its written guaranty. The guarantor, appearing, objected to any judgment against it, but the court, nevertheless, entered a present judgment against the guarantor, from which it has appealed.

[1] Clearly the guaranty is not one of payment but merely of collection. There is a well defined difference between the two. In the first, liability of the guarantor becomes fixed by the failure of the principal debtor to pay at maturity, or at the time payment was guaranteed — an absolute guaranty. In the second, no liability is incurred capable of judgment until after, by the use of due and reasonable diligence, the guarantee has become unable to collect the debt from the principal debtor. Daniel on Negotiable Instruments, § 1769, as quoted in Hanna v.Savage, 7 Wash. 414, 35 P. 127, 36 P. 269; Ohio ElectricCar Co. v. Le Sage, 182 Cal. 450, 188 P. 982; Burton v.Dewey, 4 Kan. App. 589, 46 P. 325; Galbraith v. ShoresMuellerCo., 178 Ky. 688, 199 S.W. 779; Jenkins v. Wilkinson,107 N.C. 707, 12 S.E. 630; 12 R.C.L., Guaranty, § 43, p. 1090; 28 C.J., Guaranty, § 97, pp. 950-1, and § 123, p. 970.

The money judgment against the Inland Empire Land Company appealed from is reversed, and the cause is remanded to the superior court with directions to cancel that portion of the judgment.

MACKINTOSH, C.J., PARKER, TOLMAN, and FRENCH, JJ., concur.