17 Johns. 384 | Court for the Trial of Impeachments and Correction of Errors | 1819
The following facts I consider sufficiently proved and established. That the appellant signed the note as surety with Fowler to Baldwin; that, in 1808 and 1810, the appellant applied to Baldwin, representing the approaching insolvency of Fowler, and earnestly urged him to prosecute Fowler and collect the note; that Baldwin peremptorily refused to do so, declaring he would not trouble Fowler, if he never got his money.
That, prior to the month of June, 1812, Fowler was discharged from his debts under the insolvent act, and in the month of June, 1812, the note given by the appellant and Fowler was put in suit. The evidence renders jt reasonably certain, that had Baldwin prosecuted the note when he was required to do so, the money might have been collected of Fowler.
The appellant was alone arrested, and the cause was tried at a circuit court in November, 1812, and a verdict was obtained against the appellant for the principal and interest of the note, upon which a judgment was entered up, and an. execution issued. On the trial, the appellant offered proof of the facts, that he gave the note as surety, and #that tíre plaintiff at law had been required to sue Fowler, which he had refused to do, and that if he had sued him as required, the note might have been collected of him ; this proof was overruled, and no motion was subsequently made for a new trial.
Two questions have been argued: 1. Whether the appellant
I do not understand the chancellor to have expressed a decided opinion, that the appellant is concluded from asserting his rights in a court of equity, from the fact of his having been prevented, by a decision at the circuit, from going into his evidence. The only remark upon that point is, " that, perhaps, it would be sufficient to rest the objection to the plaintiff's claim here, on the trial and recovery at law ; ” he proceeds to show, that the defence was equally cognizable at law and in equity, but there is no express decision on that point,
I consider it an established principle, that where a court of equity once had jurisdiction, it will insist on retaining it, though the original ground of jurisdiction, the inability of the party to recover at law, no longer exists. (1 Madd. Ch. 2-3.) In Atkinson v. heonard. (3 Jiro. Ch. Rep. 218.) Lord Thurlow said, “ it did not follow, because a court of law will give relief, that this court loses the concurrent jurisdiction it has always had ; and till the law is clear on the subject, the court would not do justice in refusing to entertain the jurisdiction.” To the same effect are 9 Ves. 464. and 7 J es. 19. In Bellow v. Muhell, (1 Atk. 126.) Lord Hardwicke overruled an objection like the one made here: the plaintiff had been sued at law, and upon the trial, insisted to have a sum of money allowed him, and because it was not allowed, he filed his bill in equity, and his lordship entertained the bill, because it was matter of contract and account, and because he considered the party justly entitled to it.
I cannot view the appellant’s bill as founded on a matter #which is res judicata. Suppose a matter of set-off be offered on a trial at law, and overruled, and the party acquiesced, would that have been a bar to a suit ? Certainly not ; for as the matter was never passed, upon by the jury, it never was a subject of trial; it was not the appellant’s fault that the evidence was not received, and it would be unjust that he should suffer. If it had been a clear case of a defence at law, the objection would have force; but until the case of Pain v. Packard, the principle had not been distinctly settled in the Supreme Court; and, beyond all doubt, if the appellant was entitled to relief, the relief in similar cases, in the English courts, had been usually afforded in equity. I entirely subscribe to the opinion of Lord Rcdesdale, (Bateman v. Willoe, 1 Sch. & Lef. 205.) that, on a bill, in the nature of a bill for a new trial, after a trial at law, and where the subject was passed upon and decided on its merits, though the decision was wrong, a court of equity will not give relief. Í go further, and hold, that if the matter was strictly of legal jurisdiction, and the
The Supreme Court have, undoubtedly, decided the principal question in this cause, in the case of Pain v. Packard, #(13 Johns. Rep. 174.) that if the payee of a note is required by the surety to proceed, without delay, to collect the money of the principal, who is then solvent, and if the payee neglects to proceed against the principal until he becomes insolvent, the surety may plead these facts at law; and if they are established, he will be exonerated. The chancellor, aware of this decision, has dissented from it, with a liberality and respect calculated to induce a re-examination of the doctrine with the same liberal feelings. It is true, that the case of Pain v. Packard was decided without argument at the bar; but it is equally true, that it received a very critical and deliberate examination by the court.
It will be observed, that in the cases of the People v. Jansen, and Pain v. Packard, the Supreme Court referred to the case of Tallmadge v. Brush, and admitted the authority of that case, that mere delay by the creditor in suing the principal would not discharge the surety; and the principle adopted in Pain v. Packard was this, that where the creditor did an act injurious to the surety, or omitted to do an act when required, which equity and his duty to the surety enjoined it upon him to do, and which omission was injurious to the surety, in either of these cases, the surety would be discharged.
The chancellor expressly recognizes the principle in equity, and which is supported by a strong current of authorities, that the surety has a right to apply to a court of equity, at any time after the debt is due, to coerce the creditor to bring his action to collect the debt of the principal. Without referring to any other authority, the case of Rathbone & Rathbone v. Warren, decided in this court, with entire unanimity, establishes the principle, that if the creditor does any act impairing the
The only point on which the chancellor and the Supreme Court differ, is this: the chancellor maintains, that the surety }jas no right, by an act in pais, to require the creditor to coerce the principal by suit to pay the debt, but that he must apply to a court of equity, which will lend its #aid for that purpose ; whilst in the case decided in the Supreme Court, it is held, that the creditor is bound to prosecute the principal at the request of the surety, and if he fail to do so, and the principal become insolvent afterwards, so that the debt is lost, as against him, the surety will be discharged.
The chancellor considers it unnecessary and inexpedient to introduce what he considers a new principle of action between the creditor and surety; he apprehends that it will open a litigious inquiry as to the certainty and efficiency of the notice, and that such a weapon, put into the hands of a surety, affords a temptation to vexation and fraud.
The principle adopted by this court, in Rathbone v. Warren, that a surety will be discharged, if a new agreement be entered into between the creditor and the principal debtor, varying or enlarging the time of the performance of a contract, although amply supported by cases decided in the English courts, is of modern growth, even in a court of equity. And it is well settled now, that this defence may be set up at law. Gibbs, Ch, J., says, in Orme v. Young, that the principle is borrowed from a court of equity. Our system of jurisprudence is in a constant progress of improvement, and some of the most valuable principles have sprung up and attained their perfection within the recollection of many members of the bar. Many cases might be mentioned, but I will only refer to that just and salutary rule, that a court of law will take notice of, and protect the rights of, an assignee of a chose in action. I have witnessed the rise, progress, and establishment of that wholesome and equitable principle. This, too, was borrowed from a court of equity. The soil into which it has been transplanted is congenial to its nature and its perfection; it has saved much litigation and enormous costs.
I do not, then, perceive any solid objection to a court of law taking cognizance of the matters forming the grounds of the appellant’s relief, because in such cases courts of equity have also jurisdiction. Much less do 1 perceive the necessity of applying to a court of equity to compel a creditor to do what equity and good conscience requires of him. Courts of equity, when they interpose to compel a #creditor, at. the instance of a surety, to sue the principal debtor, undoubtedly proceed on the sound and just principle, that it is the duty of the creditor to obtain payment, in the first instance, of the principal debtor, and not of the man who is a mere surety that
If this duty exists, and does bind the conscience of the creditor, I cannot conceive why it may not be brought into exercise, by an act in pais, and without the interposition of a court of equity. Upon an application to that court by the surety, if the facts were conceded, an order or decree, that the creditor should prosecute the principal debtor would be a matter of course ; the decree would operate as a mere declaration of the duty of the creditor, and unless his conscience was dead to a sense of moral duty, it would not stand in need of such an admonition. If we are at liberty, as I think we are, to regard the consequences of the contrary doctrine, that the surety must either pay the debt himself, or resort to a court of equity to coerce the creditor to proceed at law against the principal, we shall find abundant cause to adopt the principle of the decision in Pain v. Packard, The delay and expense are serious evils ; the debt itself may, and undoubtedly will, in many cases, be jeopardized and lost, as regards the principal, and the surety will be exposed to the final payment, with a vast accumulation of costs.
*The principal objection to the decision in Pain v. Packard, is, “ that it will open a litigious inquiry as to the certainty and efficiency of the notice.” This objection lies with equal force to all acts in pais; such as a demand of the goods in an action of trover, a demand of the maker of a note, and notice of the non-payment to the endorsor, due demand and notice of nonpayment to the guarantee ; so in a great variety of other cases, the responsibilities of parties depend on acts in pais; and I cannot perceive any ground for alarm or apprehension, as to the mode of proof, unless we are prepared to distrust parol evidence in all cases.
The chancellor refers to the civil law, in support of his opinion. It appears that Justinian altered the civil law, and gave to the surety an exception of discussion, by which he might require the creditor to proceed, in the first instance, against the principal; but if the creditor does not proceed
My opinion rests on these principles, that the creditor is under an equitable obligation, and such is the essence of the contract, to obtain payment from the principal debtor, and not from the surety, unless the principal is unable to pay the debt; that if the creditor unjustly and improperly collude with the principal, to throw the debt on the surety, or after a full and explicit request by the surety, to proceed at law to recover the debt of the principal, the creditor, from any improper motives, refuses and neglects to do so, and by such refusal and neglect, the means of recovering the debt of the principal are lost, that then the surety is exonerated. This has been treated as a novel and alarming doctrine ; but, in #my apprehension, it cannot alarm an honest or conscientious creditor; for where is the man who will boldly avow the unjust and immoral principle, that after his debt has become due, and after he has been solicited by the surety to proceed and collect it, by prosecuting both principal and surety, he will abstain from suing, with a view of favoring the principal, and throwing the eventual loss on an innocent man, who, from motives of friendship or humanity, has become a surety ?
There is but a minute shade of difference between the opinion expressed by the chancellor, and that of the Supreme Court, in Pain v. Packard; and it is simply this: the chancellor holds, that a court of equity must first be appealed to, to compel the creditor to sue at law, w'hereas the Supreme Court maintain, that he can be required by the surety to sue, without the aid of a court of equity ; and if I am right in supposing, that there does exist a moral and equitable duty on the part of the creditor, to collect his debt from the principal in the first instance, (and this must be so, or a court of equity could not interpose at all,) then I maintain, that a court of law may, without overleaping its just jurisdiction, and in analogy to several other cases in which they take notice of existing equities, not only take cognizance of the equity which requires a creditor to collect his debt from the real debtor, but they may apply the consequence of the refusal of the creditor to sue the principal, without which the principle itself would be of no value, by holding that the surety is discharged, if the creditor will not do his duty and collect his debt, if he can, from the principal.
it has been urged, that the surety has nothing to do but to pay the debt, and prosecute the principal himself. Those who make this remark, seem to forget, that whatever may be the form of the instrument by which the principal and surety become bound, it was never the intention of the parties that the surety should, in the first instance, pay the debt; he is actually a guarantee, that the principal shall pay the debt; and it would be a very inconvenient and rigid rule, which should require the surety to pay the debt, before he had any remedy against the principal, by means of the security which the creditor holds ; and they seem to overlook, also, the clear and settled principle of equity, that the creditor may be coerced, at the instance of the surety, to prosecute the principal.
I disclaim the introduction of a new' principle of law, but have endeavored to show that the principle is one already fixed ; that a court of law' has cognizance of it, and that, without the previous monition of a court of equity, if a creditor will disregard the rights of a surety so far, as unconscientiously to refuse to proceed at law' for the recovery of his money, when fully and reasonably required, and a loss happens by such refusal, that loss ought to be thrown on the party whose uncon-scientious conduct lias drawn it on himself. I am, therefore, of opinion, that the decree of the chancellor ought to be reversed.
said, that although he concurred in the law as laid down by the chief justice, yet he did not think that the facts in the case warranted the application of it. *He was,
The only question, on the merits of the case, is, whether a request by the surety, and a refusal by the crecl-itor, to sue the principal debtor, then being solvent, with the fact of the subsequent insolvency of the principal, does in equity exonerate the surety from his engagement.
Upon a careful examination of all the authorities on this point, my mind has been irresistibly led to the conclusion, that, according to the rules of law and of equity, which are alike in this case, the facts here disclosed do not form a defence in the suit of the creditor against the surety.
By the law of such contracts, the surety, as original co-obligor or promisor, stands in the same relation to the creditor as the principal debtor, so long as the contract remains unaltered by the act of the creditor, with the acknowledged right in the surety, at any time after the money becomes due, to pay the debt, and to sue his principal, at his own risk, for indemnification. The surety may, also, by resorting to chancery, in most cases, compel the creditor to sue the principal debtor. I say, in most cases; for, in answer to a bill for that purpose, the creditor may show a state of facts which would destroy the equity of such an application. It is not of course to compel such suit against the principal; and hence, the reason, I apprehend, for requiring the surety to resort to a court of equity for that relief. For instance, suppose the creditor should answer, and prove, that the principal debtor is utterly insolvent, or resides under a foreign jurisdiction, or that the surety had been amply indemnified by his principal, or by a separate contract had assumed to pay the debt for his principal, a court of equity would, in these cases, deny such relief.
The thorough review of all the cases on this head, by his honor the chancellor, in assigning the reasons for his decree, (2 Johns. Ch. Rep. 554.) renders it useless for me to refer to, or comment on them.
I concurred in the judgment of the Supreme Court, in the case of Pain v. Packard: (13 Johns. Rep. 174.) but, upon more full and deliberate investigation, I am convinced, that ♦judgment was erroneous; and Í rejoice that I can now so early enjoy the privilege of acknowledging my error. However fit and proper it might be for the legislature to modify the rales of law and equity, in order to afford a more cheap and convenient relief and protection to sureties in such cases, (though I doubt very much the expediency of such a law.) I am convinced that, according to the existing law, the appellant, as surety, is not entitled, upon the evidence before us, to any protection against the claim of the respondents. Although we are now pronouncing an irreversible judgment in this court
My opinion is, that the decree of his honor the chancellor ought to be affirmed.
The case presents two questions for the decision of this court: 1. ’Whether the appellant is concluded by the recovery against him at law ; and, 2. Whether, upon the merits disclosed by the pleadings and proofs in the cause, he is entitled to the relief which the Court of Chancery has denied him.
The first question turns upon the point, whether the matters alleged in the bill and proved, were available to the appellant, by way of defence to the suit at law ; for if they were, and he has neglected to avail himself of them, or if his defence was overruled at the trial, and he has acquiesced in the decision of the judge at the circuit, he cannot be permitted to resort to a court of equity, either to repair such neglect, or review that decision. This general proposition is so well settled, that it cannot be disturbed, without overleaping the jurisdictional line, which has been long established %etween the courts of law and equity, and opening a door to protracted and vexatious litigation. The doctrine, that the decision of a court of competent authority is binding upon all courts of concurrent power, is indisputable. It pervades every regular system of jurisprudence, (2 Karnes’s Eq. 367.) and has become a rule of universal law; it is founded on the wisest policy—-it springs from the necessity of putting an end to legal controversies, which have been heard and decided. Let me test this case by the foregoing doctrines.
The same matters which are set forth in the appellant’s bill, and proved, were stated in the notice to his plea to the suit at law; but the judge at the circuit rejected the testimony which was offered to verify the facts. From his decision, it was competent for the appellant to appeal to the Supreme Court, and thence to this court, in order to a final review and determination. But he has seen fit to waive that course, and to seek relief in the Court of Chancery, upon precisely the same matters which the judge at the circuit had overruled. Here, then, the question is fairly presented, whether the Court of Chancery could rightfully sustain the complainant’s bill. It will readily be perceived, that in order to sustain it, one of two '
In the case of the People v. Jansen, (4 Johns. Rep. 337.) the late chief justice said, !< that there was nothing in the nature of the defence of a surety to make it peculiarly a subject of equity jurisdiction ; and that, whatever would exonerate the surety in one court, ought also in the other. The facts being ascertained, the rule of law must be the same in this court as in the Court of Chancery.” In Rees v. Barrington, Lord Loughborough asserted the same doctrine. (2 Vesey, jun. 542.) The rule established in both cases clearly is, that if the form of the security will admit *the inquiry at law, whether surety or not, a court of law will take cognizance of the surety’s de-fence. In order to test the applicability of this doctrine to the present case, it is necessary to examine, whether the nature of the security given by the appellant precluded the inquiry at law, whether surety or not. The cases above cited arose on bonds, and the solemnity of such instruments forecloses, in general, all inquiry at law into the consideration of them. But the case before the court arises on a joint promissory note, in which a greater latitude of defence is allowable at law : and, therefore, the consideration may be inquired into and impeached. A payment, or a higher security taken, or a release, may be given in evidence, to defeat a recovery. (4 Johns. Rep. 296. 7 Johns. Rep. 26. 4 Term Rep. 36, 37. 3 East, 258. Doug. 106.) Hence, it is difficult to assign a good reason why the appellant’s defence at law was not admitted, provided the matter of it was competent to exonerate him. On this point there is an express decision of the Supreme Court, that the defence was admissible at law. In Pain v. Packard, (13 Johns. Rep. 174.) impleaded with Munson, the action was commenced on a joint promissory note. The defendant, Packard, pleaded, that he signed the note as surety, and that he had urged the plaintiff to put it in suit, which he neglected, until the principal became insolvent; and the court said, “ there can be no substantial objection to such a plea.” It, therefore, is put beyond dispute, that if the appellant had brought the decision of the judge at the circuit, before the Supreme Court, for re-examination, he would have obtained the full benefit of the defence set up by his notice in the suit at law.
Let me now examine, whether it was competent for the Court of Chancery to interfere, after the merits of this defence had been overruled at law, and when the decision at law was acquiesced in by him.
It will not be pretended, that the Court of Chancery pos-
On the first question, then, I apprehend the law is settled, that the matters stated in the appellant’s bill and proved, on which he sought relief in the Court of Chancery, were available to him by way of defence to the suit at law, and that his acquiescence in the decision of the judge at the circuit is conclu-sire against him. The general rule on which I found this opinion, is intended to put an end to litigation and to cherish peace, that men may know when they may repose with security on the decisions of courts of justice.
1 might here stop, inasmuch as the opinion which I have expressed results in favor of the decree of the chancellor. But the second question having also been discussed before this court, and there appearing to be a difference of opinion between the Supreme Court and the Court of Chancery, it may be proper that I should proceed to consider it.
The appellant contends, that he was discharged from his ^suretyship, by reason of Baldwin’s neglect and refusal to sue Fowler, when required by the appellant to do so; and this presents the point on which the Court of Chancery and the Supreme Court differ.
In Wright v. Simpson, (5 Ves. 734.) Lord Eldon said, that he never understood, that, as between the obligee and the surety, there was an obligation upon the former of active diligence against the principal. The surety is a guarantee, and, there
Í consider the settled-and known doctrines of judicial tribunals as invaluable land marks, which ought not to be altered without cogent reasons. Such alterations lead to uncertainty, and frequently involve the substitution of experiment in the room of experience, which is generally a source of more or less inconvenience. Besides, it appears to me worthy of grave consideration, whether a departure, by the judicial tribunals of a particular state, from a well established general rule of law, will conduce to the advancement of justice. It must not be forgotten, that this is a highly commercial state, and that the com-mereial dealings between our citizens and those of other states, frequently produce contracts with sureties, to a large amount. In making such contracts, it is presumable that parties mean ¾> repose themselves upon the generally established and known rules of law on the subject. The introduction of a new and local rule may, therefore, be productive of inconvenience, and perhaps of injustice. In cases which may arise between our own citizens, and the citizens of other states or countries, the local rule may mislead the former, but can afford them no protection. Why, then, should a new principle of action, between creditor and surety, be introduced here ? The surety has now ample and well known means of relief in a court of equity, which will at once compel the creditor to do his duty, upon just terms. .This is the old settled course, recognized in Nesbit v. Smith, (2 Bro. Ch. 570.) and in Burm v. Administrator of Pough, (4 Dessaus. Rep. 604.,) and, I may add, in all the cases to be found. For when the books speak of the right of a surety to coerce the creditor to sue, by an application to chancery, it may fairly be inferred, that they mean, that he cannot be coerced in any other way. Again, the surety has, at all times, the power of relieving himself, by paying the debt and suing the principal in his own name; and this is within the scope of his undertaking, and according to the common understanding of its true meaning, that he is bound to see the debt paid. He is the person who trusts the principal; for the creditor manifests, by requiring a surety, that he does not rely on the principal; this renders the rule of Lord Hardwicke, (3 Atk. 93.) “that he who trusts most shall lose most,” strictly applicable to the surety.
Upon the whole, I am clearly of opinion, that the chancellor’s decree ought to be affirmed.
The members of the court being thus equally divided in opinion,
Decree of reyersaL
For affirming, 13 5 for reversing, 13.
In Fulton v. Matthews, (15 Johns. Rep. 433.) Die Supreme Court held, that the creditor's delaying to sue the principal, or discontinuing a suit already commenced, without the privity of the surety, would not discharge the surety, although the principal was solvent when the suit was commenced, and, afterwards, became insolvent; as the creditor had not been required by the surety to sue the principal, nor had done any act, or made any contract with the principal debtor, which would disable him from suing him, at any time. In the case of the Vrccde, (1 Dodson's Adm. Rep.) Sir W. Scott recognized the doctrine of the Court of Chancery, as laid down in Nesbett v. Smith, and Wright v. Simpson, and applied it to the case of a surety to a bond given, on the delivery of goods to the claimant, to answer adjudication, in which there had been no demand against the principal for nine years after the decree of restitution. (Vide 3 Wheat. Rep. 154—158, note. Dunn v. Slee, 1 Holt’s jY. P. Rep. 309.)
The exception-of discussion which, by the civil law, a surety was allowed to oppose to the demand of the creditor against him, was not allowed to judiciary sureties, nor where the principal debtor was absent, or had no property which could be attached. Although the creditor might defer this discussion against the principal debtor, as long as he pleased, without losing his security ; (Dig. Lib. 46. tit. 1. 1. 62.) yet the surely might, although he had not beensued by the creditor, or paid the debt, sue the principal debtor, if he was in failing circumstances, for his indemnity; so where the principal debtor, after the time of payment had expired, neglected fora long time to pay the creditor, the surety might sue him, to compel him to discharge the debt, though the creditor was quiescent. “ Si diu in solu-tione reus cessabit, aut corte bona sua dissipabit; pnesertim si domi pecuniam fidejussor non habebit, qua numerata creditor!, mandati actione conveniat.” (Dig. Lib. 17. tit. 1. 1. 38.) The law, however, fixed no precise period of delay on the-part of the debtor, which should give the surety a right to sue for his indemnity but it was left to depend on the circumstances of each case. Vide Hayes v. Ward, 4. Johns. Ch. Rep. 123.