Recovery upon such guaranty.

usual legal proceedings, if taken with reasonable diligence.

NOTE. 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., p. 92; see, also, Curtis vs. Smallman, 14 Wend., p. 231; Cooke vs. Nathan, 16 Barb., p. 342; Vanderveer vs. Wright, 6 id., p. 547; Warfield vs. Watkins, 30 Barb., p. 395.

2801. A guaranty, such as is mentioned in the last section, is not discharged by an omission to take proceedings upon the principal debt, or upon any collateral security for its payment, if no part of the debt could have been collected thereby.

NOTE.-In Cady vs. Sheldon, 39 Barb., p. 103, the defendants, upon the 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., p. 457; Moakley vs. Riggs, 19 Johns., p. 69; Thomas vs. Woods, 4 Cow., p. 173. Loveland vs. Sheppard, 2 Hill, p. 139; Burt vs. Horner, 5 Barb., p. 501; Vanderveer vs. Wright, 6 Barb., p. 547; Curtis vs. Smallman, 14 Wend., p. 231; White vs. Case, 13 Wend., p. 543; Kies vs. Tifft, 1 Cow., p. 98; Eddy vs. Stanton, 21 Wend., p. 255; People vs. Jansen, 7 Johns., p. 332; Hart vs. Hudson, 6 Duer,

p. 303; Taylor vs. Bullen, 6 Cow., p. 624; Gallagher
vs. White, 31 Barb., p. 94; Morris vs. Wadsworth, 11
Wend., p. 100; 17 id., p. 103; Merritt vs. Lincoln, 21
Barb., p. 249; Newell vs. Fowler, 23 Barb., p. 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.

tor's

upon such

2802. In the cases mentioned in Section 2800, the Guaranremoval of the principal from the State, leaving no liability property therein from which the obligation might be guaranty. satisfied, is equivalent to the insolvency of the principal in its effect upon the rights and obligations of the guarantor.

NOTE. This is the principle adopted in Cooke vs.
Nathan, 16 Barb., p. 342; but see White vs. Case, 13
Wend., p. 543; Burt vs. Horner, 5 Barb., p. 501;
Newell vs. Fowler, 23 Barb., p. 628.

Guaranty,

how

ARTICLE IV.

LIABILITY OF GUARANTORS.

SECTION 2806. Guaranty, how construed.

2807. Liability upon guaranty of payment or performance. 2808. Liability upon guaranty of a conditional obligation. 2809. Obligation of guarantor cannot exceed that of the principal.

2810. Guarantor not liable on an illegal contract.

2806. A guaranty is to be deemed unconditional

construed. unless its terms import some condition precedent to the liability of the guarantor.

Liability upon

NOTE.-Morris vs. Wadsworth, 11 Wend., p. 100; 17 id., p. 103; Smith vs. Dann, 6 Hill, p. 543. Where one person guarantees the payment of the debt of another, in consideration of the agreement of the creditor to stay proceedings against the debtor, the promise of the creditor is a condition precedent, and its performance must be proved to entitle him to a judgment against the guarantor.-Smith vs. Compton, 6 Cal., p. 24.

2807. A guarantor of payment or performance is guaranty of liable to the guarantee immediately upon the default perform- of the principal, and without demand or notice.

payment or

ance.

NOTE." Upon the default of the principal."--Van Rensselaer vs. Miller, Hill & D. Supp., p. 237; Bank of N. Y. vs. Livingston, 2 Johns. Cas., p. 409; Loveland vs. Shepard, 2 Hill, p. 139; Moakley vs. Riggs, 19 Johns., p. 69; Grant vs. Hotchkiss, 26 Barb., p. 63; Thomas vs. Woods, 4 Cow., p. 173; Backus vs. Shipheid, 11 Wend., p. 629. "Without demand or notice." Brown vs. Curtis, 2 N. Y., p. 225; Allen vs. Rightmere, 20 Johns., p. 365; Clark vs. Burdett, 2 Hall, p. 197; Kemble vs. Wallis, 10 Wend., p. 374; Morris vs. Wadsworth, 11 id., p. 100; 17 id., p. 103; Mackensie vs. Farrell, 4 Bosw., p. 192; Sterns vs. Marks, 35 Barb., p. 565; Walton vs. Mascall, 13 M. & W., p. 452. Where a joint promissory note was indorsed contemporaneously with the signing of the note-as follows: "I guarantee the collection of the within note when due. (Signed.) A. Hayward."-it was held that the engagement of Hayward was not original, but collateral; that he was a guarantor, and not a promissor, and was entitled to legal notice of non-payment of the note

before he can be charged on his contract.-Reeves vs.
Howe, 16 Cal., p. 152; see, further, Riggs vs. Waldo, 2
Cal., p. 485; Hartman vs. Burlingame, 9 Cal., p. 557;
Dane vs. Corduan, 24 Cal., p. 157; Pierce vs. Kennedy,
5 Cal., p. 138; Brady vs. Reynolds, 13 Cal., p. 31; Hum-
phreys vs. Crane, 5 Cal., p. 173; and see Jones vs. Good-
win, 39 Cal., p. 493, affirming the principles decided in
the cases above cited. This section undoubtedly quali-
fies the law, as shown by decisions, very materially, so
that the guarantor is liable immediately upon default
of principal, and without demand or notice. See, also,
Whiting vs. Clark, 17 Cal., p. 407; Donahue vs. Gift,
7 Cal., p. 242.

upon
of a

obligation.

2808. Where one guarantees a conditional obliga- Liability tion, his liability is commensurate with that of the guaranty principal, and he is not entitled to notice of the default conditional 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.

NOTE.--Douglas vs. Howland, 24 Wend., p. 35.

of

cannot

exceed

2809. The obligation of a guarantor must be neither Obligation larger in amount nor in other respects more burden- guarantor some than that of the principal; and if in its terms it exceeds it, it is reducible in proportion to the princi- principal. pal obligation.

2810.

NOTE.-Code Napoleon, 2013.

that of the

not liable

illegal

A guarantor is not liable if the contract of Guarantor the principal is unlawful; but he is liable notwith- on an standing any mere personal disability of the principal, contract. though the disability be such as to make the contract void against the principal.

NOTE.-Kimball vs. Newall, 7 Hill, p. 116; Swift vs. Beers, 3 Denio, p. 70; Ledeliey vs. Powers, 25 How. Pr., p. 240.

ARTICLE V.

CONTINUING GUARANTY.

SECTION 2814. Continuing guaranty, what.

2815. Revocation.

Continuing guaranty, what.

Revocation.

2814. A guaranty relating to a future liability of the principal, under successive transactions, which either continue his liability or from time to time renew it after it has been satisfied, is called a continuing guaranty.

NOTE.-See Agawam Bank vs. Strever, 18 N. Y.; p. 502; Rindge vs. Judson, 24 N. Y., p. 64; Gates vs. McKee, 13 N. Y., p. 232. In general, an agreement to be responsible for goods delivered to a third person will not be deemed a continuing undertaking, unless its language clearly indicates that such was the intention of the parties.-Dixon vs. Frazee, 1 E. D. Smith, p. 32; Fellows vs. Prentiss, 3 Den., p. 512; Whitney vs. Groot, 24 Wend., p. 82.

2815. A continuing guaranty may be revoked at any time by the guarantor, in respect to future transactions, unless there is a continuing consideration as to such transactions which he does not renounce.

NOTE.-Offord vs. Davies, 12 C. B. (N. S.), p. 748. There has been an exception made in the case of guaranties under seal, as to which see Hassell vs. Long, 2 M. & Selw., pp. 363, 370; Calvert vs. Gordon, 7 B. & Cr., p. 809; but the distinction between sealed and unsealed instruments being abolished by this Code, and for other reasons, this exception is no longer preserved.

What

with

dealings

debtor

ARTICLE VI.

EXONERATION OF GUARANTORS.

SECTION 2819. What dealings with debtor exonerate guarantor.

2820. Void promises.

2821. Rescission of alteration.

2822. Part performance.

2823. Delay of creditor does not discharge guarantor.

2824. Guarantor indemnified by the debtor, not exonerated. 2825. Discharge of principal by act of law does not discharge guarantor.

2819. A guarantor is exonerated, except so far as he may be indemnified by the principal, if by any act exonerate of the creditor, without the consent of the guarantor, the original obligation of the principal is altered in

guarantor.