Case ID: va_73/html/0017-01.html
Source: Caselaw Access Project
Author: {"author": "STAPLES, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Callaway’s Ex’or v. Price’s Adm’r & als.
    July Term, 1879,
    Wytheville.
    Absent, Moncure, P., and Burks, J.
    
    In January, 1858, L, as principal, and P, as his surety, executed to C a bond for $925, payable in twelve months. P died before the bond became due, and L qualified as his administrator. In December, 1860, C sued L upon the bond; and at the earnest solicitation of L, C accepted from him three negotiable notes, satisfactorily endorsed, payable in three, six and nine months, for the amount of the bond; and in January, 1861, dismissed his suit. $150 was paid on the first note, and it was twice renewed; the second was also renewed. No more was paid on them, and both principal and sureties on the notes had become insolvent before 1866, when C sued upon them. He then filed a bill to subject the estate of P to the payment of the bonds — Held:
    *i. Principal and Surety-Taking Notes — Release of Surety. — If upon accepting the notes the agreement was to give time upon the payment of the debt, then the surety in th e bond was released, and the estate of P is not liable to pay the debt.
    2. Same —Same —Same.— Though there was no agreement to give time upon the debt, the legal” effect of accepting the notes was to suspend the right of action on the bond during the period allowed for the payment of the notes; and that operated as a release of the surety in the bond.
    3. Same — Same—Same.—Whilst the mere taking a negotiable security, payable at a future day, does not, unless so agreed, operate as a payment of an antecedent debt, it does operate to suspend the right of action on the original demand until the maturity of the bill or note. It is a conditional satisfaction with respect to the principal; and with respect to the surety it is absolute, unless it plainly appears the parties intended otherwise.
    
      4. Same — Same—Agreement to Stay Action — Burden of Proof. — If the parties agree that the right of action on the original debt [shall not be.stayed, the surety will not be released. But in the absence of such agreement, the effect of taking the notes or bill in the case of a pre-existing debt, is a suspension, and a consequent discharge of the surety. It is not for the surety to prove an agreement to stay the action, but for the creditor to show that by agreement the negotiable security does not entitle the debtor to forbearance.
    5. Administrators — Conflicting* Interests. — C, by his dealings with L, had produced an irreconcilable conflict between the interests of L, as an individual, and his duty as administrator of P, and it is not for C to insist that L, as administrator of P, was not prevented by the arrangement from taking the necessary steps to protect the estate of his intestate, either by giving notice to C to sue upon the bond, or by paying th e debt out of the assets of P’s estate, and then give a lien on his own estate to indemnify P’s estate.
    6. Same — Devastavit where Creditor Responsible.— If L had applied the assets of P’s estate to the payment of his own debt, he would have been guilty of a gross breach of trust, a devastavit on the part of L, for which C would have been responsible. C cannot relieve himself of the effects of an improvident arrangement with his debtor by insisting that a personal representative ought to have misapplied the assets in his hands.
    *7. Same — Same.—If L, as administrator of P, might have consented to the arrangement made between himself and C, it would be necessary to show that he actively concurred and consented, as administrator, to be bound by the new arrangement.
    8. Same — Breach of Duty* — Collusion — Liability.— Any one who concerts with an executor or administrator, in any manner contrary to the duty of the latter, will himself be held answerable. If, therefore, C obtained the consent of L, as administrator of P, to the arrangement, the effect of which is to throw the loss upon the estate of P, the surety, he can stand on no higher ground than L himself occupies; and he is precluded from claiming any benefit from that consent, to the injury of P’s estate.
    This case was heard in Richmond but was decided at Wytheville. It was a creditors bill in the circuit court of the county of Franklin, brought in August, 1868, by James M. Callaway and Thomas Dudley, claiming to be creditors of Marshall P. Price, deceased, the first by a bond executed to him in January, 1858, by James M. W. Reftwich and Marshall P. Price, for $925, payable in twelve months, and the other by a bond for $3,000 executed in August, 1858, to Dudley, by said Leftwich and several other persons, among whom was said Marshall P. Price. The only questions in this cause was in relation to the bond executed to Calla-way.
    The heirs of Marshall P. Price answered the bill, and insisted that said Price was the surety in said bond; and that the estate of said Price had been released from any liability on said bond by the action of said Callaway. That said Callaway had received from said Leftwich his three negotiable notes, satisfactorily endorsed, for the amount of said bond, in satisfaction thereof. These notes were given payable in three, six and nine months;-and if not given in satisfacticín of the bond, the said Price’s estate was released by Callaway’s thus giving time to the principal debtor.
    *It appears that Price had died before the bond fell due, and Leftwich qualified as his administrator. That at the urgent request of Leftwich, Callaway, who had brought a suit upon the bond against him. consented to dismiss the suit, and accept the three negotiable notes of Leftiyich, with endorsers, payable in three, six and nine months, for the .amount of the bond. And this arrangement was carried out, the notes were delivered and the suit dismissed. The testimony is conflictihg as to whether these notes were taken in satisfaction of the bond, or as a collateral security.
    In the progress of the cause a commissioner was directed to take, among others,, an account of the debts of Price, and he reported as one of the debts due this debt of Callaway’s; and there was an exception to the report on this account. And the cause coming on to be heard on the 18th of October, 1873, this exception, as well as others, was sustained, and the accounts were recommitted to the commissioner.
    After this decree had been made, Calla-way died, and his administrator applied to a judge of this court for an appeal; which was allowed. The facts as viewed by this court will be seen in the opinion of Staples, J.
    J. A. Early, for the appellant.
    Ould & Carrington, for the appellees.
    
      
      Judge Moncure was not present during this term of the court at Wytheville. He was in bad health, and was directed to rest. He sat in the court at Staunton. Judge Burks had been counsel in the cause.
    
    
      
       Sureties. — A surety is discharged by any change, such as taking a new note, etc., in a contract for which he is bound, if made without his knowledge or consent, Christian & Gunn v. Keen, 80 Va. 869. See also Burson v. Andes & Wife, 83 Va. 445; Stuart v. Lancaster, 84 Va. 772; Dey v. Martin, 78 Va. 1; 3 Min. Inst. (2nd Ed.) 187. See also 24 Am. & Eng. Enc. Law (1st Ed.) 840.
      The doctrine set out in the second headnote was affirmed in Stuart v. Lancaster, 84 Va. 772, citing this case.
    
   STAPLES, J.

That Leftwich was principal in the bond to Callaway, and Price merely his surety, does not, I think, admit of serious question. Leftwich proves the fact, and he is not contradicted by any other witness. It is very true that upon cross-examination he says it is his impression that Price was surety merely; but I do not understand him as intending to qualify his previous positive statement to the same effect. Leftwich of course well *knew how the fact was, and his admission, so manifestly against his interest, that he alone was principal, is entitled to great weight. Besides, his testimony is corroborated by all the circumstances. Leftwich’s appeal to Calla-way for indulgence, his proposal to give the negotiable notes, the whole tone and temper of his letter to Callaway, show that he considered the debt as his own, and the burden of discharging it as resting exclusively upon him. Callaway no where in the record appears as denying the fact, although an opportunity of doing so was afforded him when his deposition was given, and although it was manifestly the turning point in the case. Under all these circumstances we are bound to conclude that Leftwich was principal and Price his surety.

The main question in the case to be considered is, whether Price’s estate is released by the dealings between Callaway and Leftwich.

It appears that Callaway instituted an action on the bond against Leftwich in December, 1860, and in January, 1861, Callaway took from Leftwich, at the earnest solicitation of the latter, three negotiable notes with responsible endorsers, for three hundred and forty dollars each, being the amount then due on the bond, and thereupon the action was dismissed. These notes were payable three, six and nine months after date. At the maturity of the first note the sum of $150 was paid upon it; and this was all that was ever paid. The first and second notes were several times renewed. The renewed notes and the nine month’s note remained in the hands of Callaway's counsel until the year 1866, when suit was brought upon them. The maker, Leftwich, and the endorsers had in the meantime become wholly insolvent, and nothing was realized from that source.

There is some conflict in the testimony upon the point whether these notes were taken by Callaway in discharge of the debt. or simply as collateral security. Leftwich *swears positively they were accepted in satisfaction: Callaway says they were taken merely as collateral security; and his counsel agrees with him. But as the information of the latter was derived wholly from the statements of his client, it is not entitled to the weight it otherwise would have.

The matter to be noted, however, is that Callaway states he did not agree to give time to Leftwich. He says that Leftwich proposed to give the notes as collateral security; that he declined to go into the arrangement until he could consult his counsel; and the latter advised him the arrangement would not in any manner impair the obligation of the bond; and upon this advice he received the notes as collateral security. Now Callaway may have believed, and his counsel may have thought, the taking the notes would not impair the obligation of the surety, or even operate as a suspension of a right of action on the bond. The question is not what they believed, but what was the legal effect of the arrangement, in the absence of an express agreement that the acceptance of the notes should not suspend a right of action on the bond.

The proposition with respect to the notes came from Leftwich. There is no doubt his sole object was a dismissal of the suit, and an extension of time; and Callaway knew it.

Leftwich in his letter to Callawav, says: “If you prosecute this suit you will cause others to sue, and it will terminate in sacrificing my property. I say sacrifice, because no property, under existing circumstances, can be sold except at a sacrifice.” Further on, after an earnest appeal for indulgence, he says: “If you will dismiss this suit, I will give you three negotiable notes at ninety days each — the first third you will get in ninety,' the second third you will get in six months, the third and last in nine months, the discount and interest to be added.”

Surely, after reading this letter no one can have any *difficulty as to Leftwich’s understanding of the arrangement; and that Callaway understood it in the same way is most manifest from the fact that shortly afterwards the notes were given, the action upon the bond was dismissed, and no effort is ever made to collect it until all the parties to the negotiable notes, maker and endorsers, had become utterly insolvent. It is impossible to believe upon these facts, that boi:h parties did not perfectly understand the debtor was to have further time. To adopt any other conclusion is to suppose that Leftwich not only gave the notes without an object, but that he was willing to subject himself to a recovery on the bond while his negotiable notes were or might be current in the hands of bona fide holders.

1 attach no sort of importance to the fact that Callaway did not surrender the bond. It was no doubt filed among the papers when the suit was brought, and there remained after the suit was dismissed. Besides, Callaway’s retention of the bond is perfectly consistent with the arrangement to give time, which was all Leftwich desired.

But if I am mistaken in supposing there was an express agreement for further time, there can be no doubt the legal effect of accepting the notes was to suspend the right of action on the bond during the period allowed for the payment of the notes. Whilst the mere taking a negotiable security, payable at a future day, does not, unless so agreed, operate as a payment of an antecedent debt, it does operate to suspend the right of action on the original demand until the maturity of the bill or note, unless it is made to appear it was received simply as collateral security.

It is a conditional satisfaction with respect to the principal; and with respect to the surety it is_ absolute, unless it plainly appears the parties intended otherwise. Rees v. Berrington, 2 Lead. Cases in Equity, 1915; Putnam v. Lewis, 8 John. R. 389; Myers v. Wells, 5 Hill’s R. 463; Brandt on Suretyship and Guaranty. § 316.

The reason is said to be that the creditor, by negotiating *the bill ciñóte, and passing it into the hands of a bona fide holder, may expose the debtor to the payment of both claims. In some of the cases it is held that taking the negotiable security creates a conclusive presumption of law of an agreement to suspend. In other cases, it is held, and with better reason, it is simply a question of intention. If the parties agree that the right of an action on the original debt shall not be stayed, the surety will not be released. But in the absence of such agreement, the effect of taking the notes or bill, in the case of a pre-existing debt, is a .suspension, and a consequent discharge of the surety. It is not for the surety to prove an agreement to stay the action; but for the creditor to show that by agreement the negotiable security does not entitle the debtor to forbearance. See Armistead v. Ward, 2 Patton & Heath, 816; Blair & Hoge v. Wilson, 28 Gratt. 165, 171, 173. In the case before us, it is not proved, there is nothing from which it may be inferred there was an agreement that Callaway might proceed on the bond notwithstanding the negotiable notes. On the contrary, all the circumstances indicate the understanding that further time was to be given.

The learned counsel -for the appellant insists, however, that Leftwich, as the personal representative of Price, was not prevented by the arrangement from taking the necessary steps to protect the estate of his intestate. If, for example, he had given Callaway notice to sue, he (Leftwich) could not by plea, or by injunction, have stayed Callaway’s hands. He might, if he pleased, have paid the debt out of the assets, and then given a lien on his own estate to indemnify his intestate’s estate. It is a sufficient answer to say that Callaway, by his dealings with Leftwich, had created an irreconcilable conflict with Leftwich’s interest as an individual and his duty as personal representative; and it does' not lie in the mouth of Callaway to say that Leftwich might or ought to have given *such notice. If we can 'suppose so-improbable an event as a notice by Leftwich, the personal representative, to Callaway to bring such suit, we must suppose that Leftwich, as an individual, would claim the benefit of the agreement for indulgence.

The idea that Leftwich might have paid the debt out of the assets of Price’s estate, and then given a lien on his own property as indemnity, is still more untenable.

If we may presume he had in his hands assets available for that purpose, upon what pinciple, or by what right, could Leftwich, as personal representative, direct these assets to the payment of his own debts to the injury of Price’s creditors and distributees? Such an act would have been a gross breach of trust, a devastavit on the part of Leftwich, for which Callaway himself would have been responsible. The proposition cannot for a^ moment be entertained that Calla-way may relieve himself of the effects of an improvident arrangement with his debtor by insisting that a personal representative ought to have misapplied the assets in his hands.

It has been further argued that an agreement to forbear will not release the surety, if made with his knowledge and consent; and in that case Leftwich, being at the time the personal representative of the surety, must as such have consented to the arrangement with Callaway.

It is, very clear, however, that Leftwich was acting for himself only. He did not profess to represent the estate of Price in

anything that was said or done. And before that estate can be held bound it ought plainly to appear that Leftwich in his character of administrator consented to the arrangement. It is not enough that he was merely passive. It would be necessary to show that he actively concurred and -consented as administrator to be bound by the new agreement. Brandt, § 299. But if it be conceded that such assent was given, it was a palpable breach of official duty. The effect of the arrangement was to deprive -*the representative of Price’s, estate of the legal right to insist upon payment of the debt by the principal, or to pay the debt himself, and to proceed at once against the principal. It will scarcely be denied that if the personal representative of the surety agrees that the creditor may give time to the principal debtor, and in the meantime the principal becomes insolvent, and the estate of the surety is required to pay the debt, the personal representative will himself be held to answer out of his own estate. 2 Lomax Exo’rs, 295; mar. 471, 476, 485, top.

It is equally clear, I take it, that any one who concerts with an executor or administrator in any manner contrary to the duty of the latter, will himself be held answerable. Graff v. Castleman, 5 Rand. 195, 203. If, therefore, the creditor enters into an arrangement with the personal representative cf the surety, the effect of which is to throw the loss upon the estate of the surety, he can stand on "no higher ground than the personal representative himself occupies. And in this case if it be conceded that Callaway obtained the consent of Leftwich as administrator to the arrangement, he is precluded from claiming any benefit from that consent to the injury of Price’s estate.

The learned counsel tells us, however, the arrangement was an advantageous one for all parties, especially the surety, inasmuch as it furnished a new and additional security for the debt. It may have so appeared at the time, but the result has proved the very reverse. It is most apparent the indulgence extended to Leftwich is the cause of all the difficulty in the case. If Callaway, instead of yielding to his solicitations for delay, had proceeded with his suit, and obtained his judgment, he would have secured his lien, and ultimately realized his debt. His conduct with respect to the negotiable notes was equally unjust to Price’s estate, for after receiving them he left them in th.e hands of his counsel, without an effort to collect or even to secure his debt by judgmeiit until all the parties had become insolvent. *But if it was conceded the arrangement was an advantageous one to the estate of Price, the concession would not help the cause of the appellant. It is well settled law that if the time' of payment be extended by an agreement binding on 'the creditor, the surety is discharged even though the extension of credit may prove to be a benefit to him. Because the question whether the alteration be beneficial or the .reverse depends on circumstances that cannot always be judicially ascertained, and the sureiv can no longer require the principal to fulfil the contract in its original form. Rees v. Bowington, 2 Lead. Cases in Equity, 1908; 10 John. R. 70; 7 Hill’s R. 250.

For these reasons I think there is no er- ■ ror in the decree of the circuit court, and that it ought to be affirmed.

CHRISTIAN and ANDERSON J’s, concurred in the opinion of Staples, J.

Judge Moncure was not present when the opinion was delivered, but he had read the opinion and concurred in it.

Decree Affirmed.