Lenox et al. v. Prout

(CuANCSKTbJ Lenox et al. v. Prout. íbe endorser of s promissory note, w hi> h.is been chargfd by doe no" Vice of :he default of ihe maker, is no« en ¡lied to he protect ion of a ■ court of oquit) aa n surety ; the holder may proceed against either pnrtj’iit his pleasure, and does not discharge ihe endorser, by not if* suing, or by countermanding an execullonagamst the1 maker. JSythe statute of Mae) land; ofI763, oh 23 s. 8. which is puh&ps only declaratory of the common law, an endorser, has' a right to pay ihe amount of the note or bill (o the holder, and to he stíbrog Med io mil his riglrfl by obtaining an assignment oftbe holdérVjudgmeni ágatas^, ihe Maker. The answer of n defendant in chancery, though he mty he interee'ed !** the whole amount in. coritrouehiy, is conclusive evidence.- if irncon*ttadicted by- the .testimony of any witness* inf the cause. •Appeal from a decree of the circuit court for the1' district of Columbia. The facts of this case were as follow :• WilliamProut,. the plaintiff in the court' below, on the. 29th of July, 1812; endorsed, without, any consideration, a promissory note made by Lewis Deblbis, in his favour for 4,400 dollars payable in thirty days after date. This- note, was discounted by the defendants,, as trustees for the late bank of the United States, for' the accommodation arid use o'f the maker, and' not being-paid, an acti.on was brought against him, and another against tlie endorser, in the name of the trustees, arid judgment rendered therein' in the. same circuit court, in. the term of December, 1813. In the April following, • Prout, fearful of Deblois’’ failure, called on the defendant Davidson, who was agent of the other defendants, and requested him to issue a fieri fiadas on the judgment against Deblois, promising to show' the marshal property Oft', which to levy. On the 16th of April, or thereabouts, Davidson directed an execution of that kind to issue, and PrOut, On Being apprized thereof, offered to point out to the marshal property of the defendant, and to indemnify him for taking and selling the same-But before any thing farther was done, Davidson countermanded this execution, and' On the 2d of May,. 1814, or thereabouts, a ca. sa. was issued against Déblois by the clerk through mistake, and without any Order of Davidson or the other defendants. This; Was served on Deblois. on the 10th of May, who afterwards took the benefit of the insolvent laws in force within the district of- Columbia, the effect of which was to divide all his property among his creditors, whose demands were very consider able. It ap pears, from the evidence, probable that if the fieri jatias had beeu prosecuted to' effect, a great part of the money due on the judgment-against Deblois, which had been recovered on the note endorsed by Prout, would have been raised, and the latter, in that case, would have had to' pay but a small sum on the one against him. But as matters stood, little or nothing Was expected. from the estate of Deblois ; and, of Course, ho part of the judgment against' Prout could be satisfied in that way, but the whole still remained due and unpaid. The fieri facias appears to have been countemanded the day after it was received by the parsh&l,' pf which Prout had notice soon after. On these facts,-.the circuit court decreed that the appellants should he perpetually enjoined from proceeding at law oh the judgment which they had obtained^ against Prout, and that they should also pay. him his ‘ costs of-suit to.be taxed.. From this decree, -the defen-dants below appealed to this court.-- March 6th. Mr. Key, for the appellants, argued, that this being a negotiable instrument, ' the" liability of the plaintiff below,, after notice of. non-payment by the maker, was• no longer conditional,-and depending onthe-de-' fault'of the maker; so that the, holders of the note 'could-proceéd, against,him alone, without taking any steps against fhe maker. That, therefore, they were not hound to issue the fieri facias against Deblois, on the application of the plaintiff. That having issued it, they had, a right to countermand it, provided they did not place the plaintiff in a worse situation than he wasun before it was issued. That fhefi. fa. was'not ^countermanded with any view to injure the plaintiff, But because the agent had ascertained that the trustees of fhe bank were not bound to issue the fi. fa. in the first íiistatíce, and that it- was neither right nor safe for the bank to give thereby a preference, to the , plaintiff over other endorsers of Deblois. And that the plaintiff was not placecfin a worse situation by countermanding they?, fa.; but had it, in his power, under the act of assembly of Maryland of 1763, ch. 2$. to tender the amount of the note to the agent of the*bank,.and obtain. an assignment of the, judgment,, by which be might have secured-himself, by levying on the property still in the possession of Deblois. Mr. Jones and Mr. Law, for the. respondent and plaintiff below-, argued, that the plaintiff being a mere gratuitous surety, was entitled to the. protection of. a court of equity. That even in a court-of law,, it had been determined, that where the holder of a bill gave an indulgence • to the acceptor, after judgment,, the endorser was discharged. That of all ‘forms of suretyship, that by endorsement emphatically entitles the surety to protection. The relative obligations between the holder and endorser require the former, in the first instance, to look to the drawer for payment, and to give notice of his default to the endorser. - The relief given by courts of equity to sureties on a bond is derived from the common law principles in favour of endorsers. A surety has a right to come into equity, .and compel the creditor to proceed against the .principal debtor. If the party for whose benefit a contract is made prevents its execution, the' contract is rescinded. The contract between the holder and endorser is, that the former shall seek payment of the maker before he resorts to the endorser. If he disables the maker from paying, the endorser is discharged. 1 If the holder of the bill, or note, gives time to the acceptor or maker, in prejudice of the -endorsers, without their concurrence, they will be discharged from all liabllity, although they may , have been previously charg. ed by notice of non-payment. The doctrine of equity, that a surety is discharged by any indulgence shown to the principal by the creditor in prejudice of the surety, is applicable to every species of surety-ship, whether absolute or collateral ; and whether the liability of the co-obligors, sureties, or endorsers, has beed fixed by judgment or not. If giving time, staying execution, or taking new security, in consideration of indulgence, releases the surety, how much-more ought he to be discharged by the countermand of ah execution on which the money might have been levied/ The statute of Maryland is only in affirmance of the pre-existing rules of equity. Nor.'does it apply to this -case ; the issuing of the fieri facias, at the plaintiff’s solicitation, being a waiver of all right to. demand # ■compliance with, the act. Mr. Key, in reply, insisted, that a court of equity ■ would not relieve in such a case a? this, even, if the plaintiff was to be considered as a gratuitous surety. That the cases cited of co-obligors, or sureties, is bonds, were not pertinent. This is a commercial cotir tract. The drawer of the .note having made default^ ■and the endorser having had legal notice of non-payment, becomes liable absolutely. His engagement .ceases to be- collateral and contingent., and he is conr •verted ihto a principal debtor. The punctuality of commercial dealings, and the preservation of papei credit requires that it should be so. An indulgence giventothemakercan.no more discharge the endorser, when thus fixed, than an indulgence to him will discharge the maker. The law does not require that the holder should take any active measures of diligence ; nor can a single case be found where a court of equity has compelled him to take any such measures. The endorser promiBsory note, wb» has been chai-g ü^flhe u> the aid ofa court of equity as a surety, March 9th. English v. Darley, 2 Bos. & Pul. 61. Nisbet v. Smith, 2 Bro. Ch. Cas. 578 Rees v. Barrington, 2 Ves. Jun. 540. Chitty on Bills, 300. Am. ed. 1817. . Nisbet v. Smith, 2 Bro. Ch. Cas. 578. Rees v. Berrington. 2 Ves. Jun. 540. Law v. The E. I. Company. 4 Ves. 824. [MAJORITY — Mr. Justice Livingston] Mr. Justice Livingston delivered the opinion of the court,, and, after stating the facts, proceeded as follows. ^ The only ground on which 'this -decree can he • ‘ , tamed is, that the countermand by Davidson ot the fieri facias which had issued on the judgment against Dehlois, absolved the .complainant from- all liability on the one which had been recovered against him on the ° . same note ; 'and this has been likened to certain cases between principals and sureties; but it does net fall within any of the rulés which it has been thought proper to adopt for the protection of the latter. Although the original undertaking of an endorser of a promissory note be contingent, and he cannot be -charged without timely notice of non-payment by the maker, yet, when the holder has taken this precaution» and has proceeded to judgment against both of them, he is at liberty to issue an execution or not,. as he pleases, on the judgment against the maker, withoutafiording any causé of complaint to the endorser ; or if he issues an execution, he is at liberty to make choice ofthe'one which he thinks will be most beneficial to' himself, without any consultation whatever with the endorser on the subject; nor ought he to be restrained by any fear of exonerating the endorser, from countermanding. the service of any execution which he may have issued, and proceeding immediately, if he chooses, on the judgment against the indorser. And the reason is obvious; for by the judgment, they have both become principal debtors, and if the endorser Suffers ahy injury by the negligence of the judgment creditor, it is clearly his own fault, it being his duty to pay the money, in which case, he may take under his own direction the judgment obtained against the maker. By an act of Maryland, ft seems expressly provi^ed, which perhaps, only declaratory of the common law, that an endorser may tender to a plaintiff amount of a judgment which he has recovered against the maker of'a note, and obtain an assignment nf u ” By'the'local ía^,P «nd^t mon*uw'X endorser has a to^he^holderl «ndtobe sub-regaled to atl his right».. ., . n, , ., , . ,. . But it is alleged, thatm this case there .was a positive agreement on the part of Mt. Davidson with Mr. Prout, to issue a fieri facias, and proceed therein, and that by not doing .so, the latter was thrown off his guard, and lost the' opportunity of an indemnity out of the estate of Deblois. Without deciding what might have been the effect of such an • agreement, it -is sufficient to 'say that there1 is no evidence of it. Mr. Davidson expressly denies that he agreed with the complainant, or even promised, him to issue a fieri facias against the estate of Deblois, and that he went no1 farther than to say that he would consult his lawyer. Notbeing.able immediately tp find his lawyer, and'not knowing whether some advantage might not be taken if he refused to comply with the complainant’s request, he directed a fieri facias, to be issued, which* for reasons assigned by hiin, was afterwards recalled. To this answer of Mr. Davidson, it is supposed, by the claimant’s counsel,- no credit is due, because hi/j commission on the. sum in question gave him an interest in the controversy, and he might bé ánswerable .over to his principal fot his conduct in this business. JVt constad, that he wo.uld be entitled to any commission on this sum. It is quité as probable he 'was acting, under a fixed salary, which would not be affected by the event of the suit; and-as to his responsibility,.none could exist, if he had acted within the Scope of his authority; and if he had transcended his power as agent; it would hardly be fair, that his Constituents should suffer by his act. But admitting both objections, and they will effect the verity of fiis answer; for if lie ha'd a direct interest in the event of the súit, and to the extent of whole sum in controversy, still his denial pf a fact directly alleged in the bill would be entitled'to full it, according to the rules, of .a court of equity-, Where not a single witness' has been produced to disprove it, and where the circumstances of the case, and hisowij conduct, render his account a very probable vone. If he-had not been made;a defendant, which was, not a very correct course, he migbjt.bav.e-,beep examined as a witness for the other defendant,or. for the complainant; but, haviner been made a defendant; and being the only one acquainted with the transaction, the eoutt is of opinion that his answer, uncontradicted as it is,- is proof against the . complainant of the non-existence of any, such agreement as he alleges, was made between them, in relation to the issuing of the fieri facias— Nor would Mr. Prout have suffered by the-withdrawing of the fieri facias,, which is the burthen of his complaint, if he had'done what he might and ought to have done. He had sufficient notice of this fact,- before the Bit. sa. was served,- to -have' Called and paid the judg-mént against him, and thus have obtained a controul over the one which had 'been recovered against Dé-blois. If he had done this, instead of censuring the conduct of Davidson,- He might have issued & fieri fa-das himself, and' secured a property, whifch if it has not been applied towards his relief, is owing more to his own neglect in not paying, in tíme, a debt justly due-from:himself, than to any other cause whatever. The answerer conclume A person so regardless of his interest, as well as duty, as Mr. Prout has been, who has not only refused to pay á note endorsed by him, when due, but' has put the holders to the trouble,delay, and expence, of pro eeeding to judgmen t against him, has but little right to-be dissatisfied, if a court of equity shall not think itself bound by any extraordinary exertions of its powers, to extricate him from- a difficulty and loss which he-might so easily Have avoided. The decree of the circuit court is reversed, and the complainant’s bill must be dismissed, with the costs of that court, to be paid by the. complainant to the defén áant. Decree reversed. Vide ante, p. 148, Lanusse v. Barker, note a.