National Exchange Bank v. Gay

57 Conn. 224 | Conn. | 1889

Pardee, J.

The plaintiff corporation was organized on April 5th, 1864, under the act of Congress of February 25th, 1868. Under that law its existence would have terminated on February 24th, 1883. By an act of Congress passed July 12th, 1882, entitled an “Act to enable National Banking Associations to extend their corporate existence and for other purposes,” it was enabled to, and did, extend its existence during twenty additional years.

On January 8th, 1872, the defendant, with others, executed a bond as follows:—

"Know all men by these presents, that, whereas the National Exchange Bank of Hartford, Connecticut, has discounted, and may hereafter discount, for the Delaney & Munson Manufacturing Company, (a corporation existing under the laws of the state of Connecticut, located and doing business in the town of Farmington,) promissory notes, drafts, and bills of exchange: Therefore we, James W. Delaney, George Dunham, Lucas Richards, Samuel Q. Porter, George Richards & Co., Augustus Ward, William Gay, Winthrop M. Wadsworth, and Samuel S. Cowles, for value received, jointly and severally guarantee to the said National Exchange Bank the full, prompt and ultimate payment of all promissory notes, drafts, bills of exchange, or other evidences of indebtedness which the said National Exchange Bank have discounted or may hereafter discount for the said Delaney & Munson Manufacturing Company to an amount not to exceed fifteen thousand dollars in all at any one time. And in case of non-payment we do hereby bind ourselves, our heirs, and executors, to pay the same on demand, with all costs and damages. It is, however, agreed and understood between the parties to this instrument that any one or all of the signers thereof may, at any time hereafter, give notice in writing to the president or cashier of the said National Exchange Bank, that such signer or signers of said bond will not be holden upon said bond for any liabilities created by said Delaney & Munson Manufacturing Company subsequently to the giving of said written notice, and that such signer or signers shall thereby and thereupon be released and discharged from any claim by said, bank upon said bond for any liability created as aforesaid, after the giving of said written notice. Dated at Farmington on this eighth day of January, A. D. 1872.”

In a suit by the bank against William Gay, one of the signers of the bond, the defendant by way of answer averred “ that, at the time said bond was made, the obligee therein described was a corporation duly organized on the 5th day of April, 1864, under the banking laws of the United States, to continue as such national banking corporation until the close of business on the 24th day of February, 1883, but it had no power or right of succession or of corporate existence for a longer period than twenty years from and after its said organization, to wit, after said 24th day of February, 1883.”—Also “ that the only consideration for said bond was such as might arise from time to time by the said obligees discounting notes and other evidences of indebtedness for the benefit of said Delaney & Munson Manufacturing Company within such time as the said bond might continue in force, and that none of the notes described in the plaintiff’s complaint were discounted by said obligee prior to February 25th, 1883, but were all discounted in 1887 and 1888, as specified in said complaint, and long after the expiration of the corporate existence of said obligee under the banking laws in force at the time of its organization as aforesaid or at the time of the making of said bond.”

In reply the plaintiff averred “ that the notes described in the complaint were discounted for the Delaney & Munson Manufacturing Company since February 24th, 1883; that from the date of said bond (January 8th, 1872) to the commencement of this suit, the plaintiffs have held at all times some notes, drafts, bills of 'exchange, or other evidences of indebtedness which they had discounted for said manufacturing company, relying upon said bond as security therefor, and that all of the notes described in said complaint were renewals and extensions in whole or in part of loans and discounts made for said Delaney & Munson Manufacturing Company upon the faith of said bond before said 24th day of February, 1883; and that the defendant and the other signei\s of said bond were severally stockholders of said Delaney & Munson Manufacturing Company, and executed the same for the purpose of securing the plaintiffs for all discounts they should thereafter make for said company, and all the notes or commercial paper subsequently discounted by the plaintiffs,’including the notes described in the complaint, were discounted by the plaintiffs in good faith and in full reliance on the security of said bond.”

To this reply the defendant demurred, and the case is reserved on the demurrer for the advice of this court.

Courts, when called upon to construe contracts guaranteeing the faithful discharge of the duties of an office, adhere closely to the letter, for this reason, that the obligor has assumed a burden of responsibility solely for the benefit of another, without compensation or possibility of profit to himself, and therefore the law will add nothing to it by way of presumption.

In the case before us the defendant with others, desired to become a manufacturer, of course for pecuniary profit. For the purpose, among others, of putting a limit to individual responsibility for losses, they associated themselves under the statute as a joint stock corporation. Being unwilling individually to contribute the necessary capital from money in hand, they determined to borrow it from the plaintiff. For convenience in the transaction of the business the money was borrowed upon notes made by the corporation. To avoid the inconvenience of indorsements by several individuals upon each of a large number of original notes and the renewals thereof, the obligors made one comprehensive continuing contract of indorsement in the form of a guaranty under their respective hands and seals. In effect, therefore, the defendant borrowed money for himself and his associates; he received and used it for his and their profit; and still has it in possession. It is difficult therefore to perceive any distinction between his ease and that of any other borrower; difficult to perceive any of the essential elements of a suretyship in his position ; therefore difficult to see any reason why he should ask, or the court should grant, the special protection of the law applicable to that relation.

It may well be presumed that obligors would desire to limit the time during which they would be bound for the faithful performance of the duties of an office by another. But, inasmuch as both morally and legally it is the duty of every man to repay money borrowed for his own use and profit, it must be the presumption that these obligors intended to do so; that they intended to pay it to the plaintiff, or even to such person or other corporation as should legally become the assignee of its right to receive.

There can be no presumption that they had any preference as to whether the plaintiff should lend money to the corporation at its and their request for the use and profit of themselves and their associates, before rather than after the extension of its corporate existence; it being in their power to terminate their liability at the moment when the use of borrowed money should cease to be profitable to themselves; no presumption of preference to pay before rather than after extension. Indeed, the presumption must be in favor of the longest credit as against a borrower who can pay when he pleases.

Again, the letter of their obligation has this, and no other limitation ; namely, they guarantee the repayment of money, to a limited amount, which the plaintiff should thereafter lend to the corporation, reserving the right to terminate the contract at will.

The power which created the plaintiff put a limit to its existence; before that limit had been reached, while the plaintiff was in full corporate life, the creating power moved that limit farther into the' future. The power which can create can prolong. It was not the substitution of one legal entity for another; it was not the change of a state into a national corporation; it was not even the restoration of a spent corporate life. The identical corporation which received the breath of life in 1863 has been in uninterrupted, unchanged existence to this present; having the same rights: bearing the same obligations. Its power to enforce payment upon its debtors was not affected by the fact that the time of first limitation had expired. Its title to real estate needed no re-enforcement by additional conveyances. It is therefore the corporation to which the obligors bound themselves to repay.

The court would jar the foundation upon which law stands, namely, the common sense of mankind as to what is right or wrong, if it should say that the defendant need not repay borrowed money for the reason that he took it from the plaintiff after it had entered the period of its prolonged existence.

Moreover, in the second paragraph of its reply, the plaintiff alleges that the notes upon which it asks a judgment are renewals in full, or extensions of such part as has not been paid, of notes made before the expiration of the limit first put upon its existence. To this the defendant demurred, averring that the allegation is immaterial, for the reason that if, after the day of expiration of the first limit to the corporate life of the plaintiff, it renewed any notes, such renewal would of itself discharge the defendant from liability. But by the bond the obligors guaranteed “the full, prompt, and ultimate payment of all promissory notes,” etc. Beyond doubt it was in the contemplation of both parties that the relation of borrower and lender thus formally established would continue during a long period of time—for years. In fact, so far forth as the defendant is concerned, it continued during sixteen years. Beyond doubt, too, the notes in suit are accommodation notes; that is, the maker is the corporation; the payer is a stockholder and an obligor upon the bond; not representing any business. But, however that may be, it is beyond doubt that both parties contemplated that, although the lending by the plaintiff would be in form upon the comparatively short time customary to a bank, yet in fact the borrower would long continue to be such by renewal or extension. Therefore the bond is framed to meet such contingency.

To guarantee “full and prompt ” payment would meet the case of a note, on usual bank time, actually to be paid in full at maturity. To guarantee, in addition to “full and prompt” payment, the “ultimate” payment, can have no other meaning than that the obligor should continue bound to the end of all substitutions, renewals, and extensions.

The Superior Court is advised that the reply to the answer is sufficient.

In this opinion the other judges concurred.