16 US 520 Lenox v. Prout
16 U.S. 520
3 Wheat. 520
4 L.Ed. 449
LENOX et al.
March 9, 1818
APPEAL from a decree of the circuit court for the district of Columbia.
The facts of this case were as follow: William Prout, the plaintiff in the court below, on the 29th of July, 1812, endorsed, without any consideration, a promissory note made by Lewis Deblois, 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 and use of the maker, and not being paid, an action was brought against him, and another against the endorser, in the name of the trustees, and 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 facias on the judgment against Deblois, promising to show the marshal property on 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 Deblois 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 considerable. It appears, from the evidence, probable that if the fieri facias had been 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, no 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 countermanded the day after it was received by the marshal, of which Prout had notice soon after.
On these facts, the circuit court decreed that the appellants should be perpetually enjoined from proceeding at law on 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 defendants below appealed to this court.
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 on the default of the maker; so that the holders of the note could proceed against him alone, without taking any steps against the maker. That, therefore, they were not bound 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 was in before it was issued. That the fi. fa. was not countermanded with any view to injure the plaintiff, but because the agent had ascertained that the trustees of the bank were not bound to issue the fi. fa. in the first instance, 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 placed in a worse situation by countermanding the fi. fa.; but had it in his power, under the act of assembly of Maryland of 1763, ch. 23. to tender the amount of the note to the agent of the bank, and obtain an assignment of the judgment, by which he 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.a 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.b 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. 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 liability, although they may have been previously charged by notice of non-payment.c 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 suretyship, whether absolute or collateral; and whether the liability of the co-obligors, sureties, or endorsers, has been fixed by judgment or not.d 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 an 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 a compliance with the act.
Mr. Key, in reply, insisted, that a court of equity would not relieve in such a case as this, even if the plaintiff was to be considered as a gratuitous surety. That the cases cited of co-obligors, or sureties, in bonds, were not pertinent. This is a commercial contract. 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 converted into a principal debtor. The punctuality of commercial dealings, and the preservation of paper credit requires that it should be so. An indulgence given to the maker can 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.
Mr. Justice LIVINGSTON delivered the opinion of the court, and, after stating the facts, proceeded as follows:
The only ground on which this deeree can be sustained is, that the countermand by Davidson of the fieri facias which had issued on the judgment against Deblois, 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 not fall within any of the rules 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, without affording any cause of complaint to the endorser; or if he issues an execution, he is at liberty to make choice of the one which he thinks will be most beneficial tohimself, 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 any 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, it seems expressly provided, which is, perhaps, only declaratory of the common law, that an endorser may tender to a plaintiff the amount of a judgment which he has recovered against the maker of a note, and obtain an assignment of it.
But it is alleged, that in this case there was a positive agreement on the part of Mr. 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 there 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 no farther than to say that he would consult his lawyer. Not being able immediately to 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 him, was afterwards recalled. To this answer of Mr. Davidson, it is supposed, by the claimant's counsel, no credit is due, because his commission on the sum in question gave him an interest in the controversy, and he might be answerable over to his principal for his conduct in this business. No. constat, that he would be entitled to any commission on this sum. It is quite 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 not effect the verity of his answer; for if he had a direct interest in the event of the suit, and to the extent of the whole sum in controversy, still his denial of a fact directly alleged in the bill would be entitled to full credit, 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 his own conduct, render his account a very probable one. If he had not been made a defendant, which was not a very correct course, he might have been examined as a witness for the other defendant, or for the complainant; but, having been made a defendant, and being the only one acquainted with the transaction, the court 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 ca. sa. was served, to have called and paid the judgment against him, and thus have obtained a controul over the one which had been recovered against Deblois. If he had done this, instead of censuring the conduct of Davidson, he might have issued a fieri facias himself, and secured a property, which if it has not been applied towards his relief, is owing more to his own neglect in not paying, in time, a debt justly due from himself, than to any other cause whatever.
A person so regardless of his interest, as well as duty, as Mr. Prout has been, who has not only refused to pay a note endorsed by him when due, but has put the holders to the trouble, delay and expence, of proceeding to judgment 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 defendant.
English v. Darley, 2 Bos. & Pul. 61.
Nisbet v. Smith, 2 Bro. Ch. Cas. 578. Rees v. Berrington, 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.
Vide ante, p. 148. Lanusse v. Barker, note a.