Bank of Chenango v. Osgood

4 Wend. 607 | N.Y. Sup. Ct. | 1830

By the Court,

Marcy, J.

The first point raised by the defendants was waived, or at least not much urged on the argument. The mode of declaring against both drawers and endorsers of a note as joint makers, is not only authorized but enjoined by the sixteenth section of the act incorporating the plaintintiffs; a valid exception cannot therefore be taken to it. The principal difficulty in this case relates to the the construction to be given to the covenant entered into by the plaintiffs not to sue Hatch. The occasion and object of this covenant must be considered before we pronounce upon its legal effect. The defendants, as appears by the recital in the covenant, were indebted to the plaintiffs in a balance of about $4000 on a bill of exchange, Hatch having paid about $750, the plaintiffs gave him a covenant not to sue or prosecute him on that bill, or on any note or liability growing out of that transaction. Cotemporaneously with the execution of this covenant by the plaintiffs, the defendants entered into a covenant that if the plaintiffs did receive of any one of the defendants the equal fourth part of the balanee which was due, and the plaintiffs should discharge such defendant or covenant not to sue him, such discharge or covenant should not be taken to be a release of the other defendants, beyond the amount actually paid; and they further covenanted not to plead the discharge or covenant which might bo given by the plaintiffs to any defendant, on receiving from him his proportionate share of the balance due on the bill of exchange. To give, as we are now asked to do, such construction to the covenant not to sue Hatch as will release the defendants from all liability for the $4000 balance, and every part of it would be defeating the express intention of the parties, arid at the same time bar the recovery of a demand justly due to the plaintiffs. Such a result could not have been contemplated by them.

A covenant not to sue operates as a release upon the principle of preventing circuity of action. The plaintiff who, in violation of such covenant, should sue and recover, were it not construed as a release, would be immediately answerable, on his covenant to the person from whom he recovered, for the full amount of his recovery. Such would not be the case here. The plaintiffs are not responsible, on their covenant with Hatch, to all the defendants who now wish to avail themselves of a pretended breach of it. We are not, in this case, called on to give it the operation of a release, because the principle of preventing circuity of action does not apply. It has been decided that where the obligee covenanted not to sue one of two joint and several obligors, and if he did, the covenant should be a release of the demand as against the obligor with whom the covenant was made, the obligee may still sue the other obligor. (8 T. R. 168.) In giving the opinion in the case of Lacy v. Kynaston, (2 Salk. 575,) the court say, “ If A. and B. are jointly and severally bound to H., and H. covenants with A. that he will not sue him, this is not a defeasance; for still there is a remedy on the bond against B.otherwise, if A. only had been }30uncj) for then such covenant excludes him from any remedy forever, to amid circuity of action. The remark made by this court in Jackson v. Stackhouse, (1 Cowen, 122,) that a covenant not to sue operates as a release, contemplates the covenant to be made by the party having the right to sue, with all the parties liable to be prosecuted. This observation, though not literally, is substantially applicable to the case of Phelps v. Johnson, (8 Johns. R. 54.) It is true that the covenant in that case was not with both the persons liable to be sued, yet it was made for the benefit of the one not named in it, and the court considered it available to him, because he might sue on it, using the name of the defendant with whom it was made. He was in effect the party, because he was the cestui que trust; and his equitable interest the court felt themselves bound to protect.

Have the defendants, in the case now before the court, any equities growing out of the covenant with Hatch which this court ought to protect? None at all. If, upon strict principles of law, they could prevail in this defence, equity would consider it unconscionable and dishonest, and on that ground would give the plaintiffs relief. (8 T. R. 171.) I am clearly of opinion that the covenant not to sue Hatch, without being taken in connection with the covenant of the defendants, explaining that covenant and agreeing not to avail themselves of it, cannot be construed as a release of all the defendants; and if we view it in that connection, it does not appear to me that the greatest ingenuity can raise a doubt upon the point,

The note for SI 1,000 was given to the plaintiffs to secure them for their liability on the bill of exchange, which the defendants had negotiated to, and procured to be discounted by, the plaintiffs. The judge at the circuit decided, that from the agreement which the parties had entered into on this subject, it was to be assumed that the liability of the plaintiffs actually amounted to the sum for which the note was given. The defendants objected to this decision, contending that it was incumbent on the plaintiffs to shew the extent of their liability. Whether this decision was correct or not, it is not material now to consider; for the defendants themselves subsequently introduced a witness who proved that the plaintiifs became responsible on that bill by reason of its being protested to an amount of more than $11,000.

It is stated in the case that the judgment against Jones by confession was taken as collateral security. The levy on property, by virtue of an execution issued thereon, cannot be considered- a bar, unless followed by an actual satisfaction of the original demand. (8 Cowen, 192.) It is admitted that the property which the defendants offered to shew had not been sold, but had been purloined from the sheriff. I think the judge properly rejected the evidence; for if it had been received, it could not have affected the plaintiff’s right to a recovery, or reduced the amount thereof.

The allowance for the rate of exchange, and the disallowance of the $600 sent to the plaintiffs by Jones, were, in my opinion, both correct. For the first, the case of Denston v. Henderson & Cairns, (13 Johns. R. 322,) is an explicit authority. In relation to the disallowance of the $600, it is to be observed that Jones, who made the payment, did not direct the application. This left the plaintiffs at liberty to appropriate the money to any claims which they had against Jones; and they accordingly did appropriate it to claims other than those for the payment of which the defendants were bo d.

Judgment for the plaintiffs.