Schickle v. Hazard , 35 N.Y. St. Rep. 264 ( 1890 )

Brady, J.

This action was brought upon a promissory note for $14,542.17, made by the defendants Comegys & Lewis to their own order, and indorsed by them and the defendant Hazard, and delivered before maturity to the plaintiffs for value. The defendants Comegys & Lewis denied the allegations of the complaint, but set up two counter-claims,—one for the alleged breach of a contract made by the plaintiffs to furnish pipe for water-works at Nebraska City, and the other for an alleged breach of a contract on behalf of the plaintiffs by which they agreed to furnish pipe for works at Chillicothe. The defendant Hazard averred that he was an accommodation indorser, setting forth the fact that the makers of it had a counter-claim against the plaintiffs, and claiming that any and all amounts due from plaintiffs to the defendants Comegys & Lewis arising from the alleged counter-claims should be deducted from the amount due upon said note, and that judgment should be rendered against them accordingly. It appears, however, that he offered no evidence to support these allegations. These averments of counter-claim were denied, and a settlement of the accounts of Comegys & Lewis set up by the plaintiffs in their reply. The learned referee has discussed elaborately the questions arising upon the evidence and the facts which he found had been established. A careful and elaborate examination of the record has led to the conclusion that his findings of fact cannot be disturbed; that they are all sustained by the evidence, and so clearly that it is only necessary to state that result. It would be a work of supererogation to go into details to demonstrate the propriety of his findings. The opinion which was delivered by him upon the rendition of judgment is one which commends itself to our judgment upon due deliberation of the facts and circumstances of the case, and as a disposition of all the questions save one, which will be made the subject of separate consideration. The findings of fact and conclusions of law as declared by the referee are therefore adopted and affirmed.

It may be said with great propriety that the chief legal proposition urged on behalf of the defendant Hazard is that he occupied the position of a naked surety, without consideration, for the performance by the defendants Comegys & Lewis of their contract with the plaintiffs, and that, therefore, if, by reason of the non-performance of that contract by the plaintiffs, any damages resulted to the defendants Comegys & Lewis, they were applicable to the satisfaction of the note in suit, in whole or in part, and that he had the right to insist that they should be so applied. Indeed, the proposition is carried so far that it is insisted that, if the defendants by their dealings and arrangements with the plaintiffs waived or relinquished their right to have such damages, the defendant Hazard was deprived of a substantial right, and was therefore discharged from all liability upon the note. And this legal attitude is founded upon the assumption that a surety may avail himself of all existing claims in favor of his principal against the plaintiff where the principal is insolvent; citing the cases of Gillespie v. Torrance, 25 N. Y. 306, and Coffin v. McLean, 80 N. Y. 560.

Admitting, for the sake of argument, that the counter-claim herein was established, and that, the defendant Hazard is entitled to all the advantages springing therefrom, nevertheless there is no proof of the insolvency of the defendants Comegys & Lewis. It is true that insolvency is averred by the defendant Hazard in his answer, and that it is not denied in express terms by the plaintiffs; but there is a denial of each and every allegation of the defendants’ answer in so far as it sets up a counter-claim in this action, and this is regarded as a sufficient denial, inasmuch as insolvency is a necessary element to make the counter-claim available to the surety. It is supposed that the denial is limited to the counter-claim alleged, and that the allegation of insolvency is not denied, either generally or specifically; but this is an erroneous view of the condition of the pleadings, for the reasons above stated. The adjudications mentioned, upon which the defendant Hazard relies, declare that in equity a counter-claim may be pleaded, as contemplated, where the principal is insolvent, and this makes insolvency a constituent part of such a defense. There was no proof of it, and therefore the alleged counterclaim is of no avail. Ho case has been cited which goes so far as to hold that, under circumstances kindred to those which marked the relations between the plaintiffs and the defendants Comegys & Lewis, they might not waive either a counter-claim or a set-off, which might otherwise have existed. In this case the doctrine invoked on behalf of the plaintiffs was one of waiver, which rests, however, upon doctrines of equity, and for that reason are further from the grasp of the surety than they otherwise would be. For these reasons, in addition to those contained in the opinion of the referee, the judgment should be affirmed. All concur.