Case ID: ohio_7/html/0468-01.html
Source: Caselaw Access Project
Author: {"author": "\n      Judge Wood", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Redick McKee v. The Bank of Mount Pleasant.
    One partner makes a bond and a warrant of attorney to confess judgment, under seal, and in the name of the firm, upon which judgment is confessed before the other partner has any knowledge of the transaction. His remedy is to have the judgment vacated, on motion, in the court that rendered it. Chancery can not interfere.
    Reserved in the county of Belmont for decision in the court in bank.
    The bill states that on June 27, 1829, one David B. Bayless, a merchant at Wheeling, in the State of Virginia, being desirous of borrowing of the bank of Mount Pleasant two thousand dollars, executed a bond and svarrant of attorney, and also procured the signatures of Knox and McKee, the ^complainant, William B. Tjmson & Co., Jones & Ritchie, and E. B. Swearingen & Co., as his securities; the names of the firms being all signed to the said bond and warrant of attorney by the several first-named partners without any knowledge, authorit}', or consent of the copartners. The obligors, at the time of the execution of the bond and warrant of attorney, resided, and still do reside, in Virginia, with the exception of Bayless, who has since deceased. The bill states that all the obligors but Bayless were only securities, but the bond itself recites they were principal debtors. On this bond Bayless obtained the money of the respondents. Before May 10, 1830, Bayless died in Wheeling, and John C. Bayless was appointed administrator. On May 10, 1830, the surviving obligors sent a written notice to the. respondents to sue the administrator of the principal debtor, or they should consider themselves discharged from liability on the bond and warrant of attorney. This notice the bank for a while disregarded, and on May 19, 1830, entered up a judgment on the bond and warrant of attorney in the Supreme Court of Belmont county.
    This judgment is against the oomplainant and all the other obligors.
    On March 5, 1831, in pursuance of notice of McKee and others, the respondents commenced a suit against the administrator of Bayless, in Virginia, who appeared on the 10th March, on the return of the writ, and confessed a judgment for the amount due, with stay of execution of this judgment until the next August term.
    On February 28, 1834, the respondents issued an execution on their judgment, which was entered in the Supreme Court in Belmont county, o'n which execution the real estate of the complainant was taken. JMcKoe, the complainant, obtained an injunction to stay the sale, and now asks us to perpetually enjoin the respondents from the collection of this judgment, and for other relief.
    The respondents, in their answer, deny that any of the obligors were sureties, but all principals, and were so treated and considered by the bank in obtaining the loan; that the respondent never know ’that the complainant denied the execution of the bond by his partner as obligatory on him, but, on the contrary, he authorized and sanctioned it. The answer further admits the judgment on the bond, and warrant of attorney, and the issuing ^execution and levy on tho complainant’s property. In a supplemental answer, the bank admits the judgment against the administrator in Yirginia, and that stay of execution was entered of record, as stated in the bill. But tho respondents aver no knowledge of such proceeding in Yirginia until the filing of the complainant’s bill; that no such proceeding was ever authorized by the bank, but that the suit was commenced by an attorney, at the instigation of tho administrator himself, and the whole business arranged by him and the other obligors.
    A supplemental answer was filed, the object of which was to correct some errors in fact, set out in the original answer. No exception was taken to the filing of the supplemental answer until the cause came up for hearing.
    Peck, for the complainant:
    1. Were these parties the securities of D. B. Bayless?
    2. Was the bank obliged to take any notice of the request to sue?
    3. Having brought suit in pursuance of such notice, is it not bound to notice them as securities?
    The fact of securityship is amply proved both by the answers of the obligors to the interrogatories of the bank and by the testimony.
    The answers are full and positive. The testimony of J C. Bay-less is to the point and full. The testimony of the old cashier Walker, is full to the point. So are the entries in the books of the-bank, where D. B. Bayless is charged alone with the money, and it was drawn out on his check, and he alone is credited’ with the payments.
    So it is proved by the bond itself; for it is provided that the time of payment might be extended without impairing the liability of any one on the paper at the option of the bank. This presupposed some of them to be securities, else this clause would have been senseless.
    The clause of “principal debtor” was inserted in the bond, as it would seem, by the testimony of Harris, the cashier, to evade the law made for the benefit of securities, and for no other purpose.
    I take it to be fully and satisfactorily proved that at the time of the discounting of the bond the bank were well aware that the obligors, except D. B. Bay less, were only his ^securities, and that they so treated the parties at the time; but if they were not cognizant of this fact at the time of the loan, they were unquestionably fully notified of it on May 10,1830, by means of the written notice.
    Was the bank under any obligation to act upon the reception-of that notice?
    In Ohio it would not be necessary to sue an administrator if he acknowledged the debt, and was willing to pay it; but in Virginia the executor or administrator stands so much in the shoes-of his testator or intestate, that the goods of the testator can be taken by execution on a judgment against the executor; and then the executor is obliged to pay judgments and decrees first, and' specialty creditors next, and simple contract creditors last. Hence the necessity of a judgment against the administrator in this case. The usual course in Virginia, when there are judgments, specialty and simple contract debts, is for a simple contract debtor to file his bill in equity, and so soon as he gets a decree on his own behalf, and all others who may come in and prosecute under his bill, he stops the assets, and the court orders an account to be taken, and makes a pro rata distribution. Hence the anxiety of the obligors, in this case, to have a judgment so as to bind the assets, and prevent the simple contract creditors from coming in.
    The excuse the bank makes for not immediately commencing suit on the reception of that notice was, that they were all principal debtors, and were not securities, and rely, I suppose, on the-principal debtor clause in their bond, though this does not plainly appear.
    Perhaps this is the first time that the question has been raised, whether if one acknowledges himself principal in a bond, can ho be permitted to prove himself but a security only.
    I do not see how this clause can alter the legal effect of the bond. 'The law puts that construction on a mere joint or' a joint and ¡several bond; this principal debtor clause is but the mere conclusion of the law on all instruments of more than one obligor, unless it otherwise appear on the face of the instrument. I do not ■see why one should be concluded by inserting a mere conclusion ■of the law; it does not alter the fact.
    This bond on its face is false and contrary to the intent of the parties, and for that reason it is prima facie fraudulent, *and it is an acknowledged fraud on the statute, and therefore parol evidence is admissible to show the real transaction. 1 Johns. Ch. 125.
    This bank has the privilege of issuing three times the amount ■of paper to the stock paid in. This is not enough, but they must have two and a half per cent, over the interest allowed them for attorney’s fees. This is not all; they must have a warrant of attorney, executed before their money is loaned, and then make a law that all who deal with them must be principals — no securities there. I think that the court should not be overserupulous in dealing with such contrivances.
    I think, however, that at law this principal debtor clause might have been pleaded or replied as an estoppel, and if the bank wished to raise that question, they should not have acted on the notice at all, and it should have pleaded this matter here as an estoppel, or they should have demurred, and thus raised the question unmixed with others; and I think that, even admitting that the obligors were concluded by that recital in the bond, yet here the bank’s course of conduct on the notice, and their manner of pleading have fully opened it, and let the truth fully appear.
    I take it to be a well-settled elementary principle, that if a party intends to rely on a bare legal estoppel, he must put his defense precisely upon that point; but that if you go into the merits, you must take the whole merits.
    In this case the bank have taken issue on the securityship, have ■denied it, and not that alone, they call upon the obligors to answer under oath whether they were securities or not; this is done in every varity of shape to get at the whole merits of that question, and is answered as fully and explicitly.
    Now, if the obligors in a common note, or one stating that they were securities, were called on in this way, they would have to discover the truth, would the holder of the paper bo bound by such a recital, if untrue ? The rule must be mutual; now, in this •case, the obligors are bound by their answers in all respects; and must not the bank be bound likewise? There can be no doubt of it, unless they can prove them untrue. • It is a question which the bank have opened, and that, too, in the most ample manner.
    In fact, it does not deny but that it knew that, as among themselves, the obligors might have been the securities of D. B. Bay-less, but that it was in the habit of taking bonds in *that way (no doubt to evade the statute), and consider them as principal debtors. Perhaps the bank would have been justified in treating them all as principals until notice of the securityship in writing; but that, after that notice, however justifiable they might have been in lying idle, they could only act at their peril. On the reception of this notice, they do treat the obligors as securities. The request to prosecute the administrator in Wheeling was most reasonable, especially when accompanied by an offer of indemnity against costs. In pursuance of that request, the bank did sue the administrator; and here, again, after the judgment against the administrator, the bank possibly might have laid idle, but it does another act, greatly to the prejudice of the obligors, that of staying the execution. This was, in every sense of the word, unjustifiable.
    Admitting that the bank might have disregarded the fact of securityship of notice to sue, and objected on account of the administrator’s residence in Yirginia, yet they have done it voluntarily after notice, and must be bound by it and abide the consequence. Indeed, I apprehend that under the circumstances, even though they were all principals, the creditor has no right to get a judgment against one and stay the execution; for if the other were to pay, they could have no contribution of him until the stay should expire. The creditor may sue which of them he pleases, or all, or let it rest; but he has no right, in equity, at least, to intermeddle with the -remedies and rights of the obligors, as among themselves.
    In the case of the Bank of Steubenville v. Hoge and others, in a suit at law, this court decided that an obligor is not estopped at law from showing himself security, in a case identical with this,, except the principal debtor clause. The court say, “that if the obligation recited that the obligors were principals, there might be color for the assumption that the admission concludes them. In the absence of such recital, we find nothing to stop them from proving the truth.” 6 Ohio, 18.
    This clause of giving time of payment, from time to time, may be ended by notice. 6 Ohio, 512.
    The answers to those interrogatories, so far as they go, are as good evidence as any other; for when one party calls for the testimony of the other, he makes him a witness in-the case. 3 Pet. Cond. 319.
    If, then, these obligors can prove themselves securities, or if *that question has been opened by the bank, as I think it has, this case is decided; for it is wo,ll enough settled that such an act, either as the refusal to sue, or the stay of an execution against the principal without consent, if there is no other sufficient ground for relief, this is sufficient. 5 Ohio, 207, and the cases there referred to.
    A security may call upon the holder of paper on which he is security, and compel him to sue the principal without any statute for that purpose. It is but natural equity, and justice requires it..
    Alexander, for respondents:
    Three questions arise in this case.
    1. Were McKee, Kiger, and Ritchie bound by the act of their-partners in executing the bond and warrant of attorney, etc.
    2. If they were, were they and the other obligors discharged, by the conduct of the bank on the receipt of the notice to prosecute?
    3. Or were they discharged by the stay of execution ?
    In going further into the case, we shall take it for granted that the depositions excepted .to, are ruled out, and that they should be, is so palpable that nothing need be said on the subject.
    1. Were McKee, Kiger, and Ritchie bound by the act of their partners’ judgment in Ohio, etc.?
    These persons’ names were not only signed by their partners to. the bond, but also to the power of attorney, by virtue of which their attorney appeared in court for and confessed judgment ngainst them. Is not this act of their attorney binding on them ? The presumption is, that their attorney had sufficient authority to act as he did, and this authority might have been either the power attached to the bond or other tantamount authority; and ■the presumption is by no means rebutted by any legal testimony in the case.
    Again, the facts would warrant this view of the case, that their ■names, viz: their firm names, were signed as principal debtors, that the two thousand dollars were drawn and divided among them, that a certain portion went into the funds of each partnership, and, consequently, an existing equitable liability rests upon all. And this might be the case, independent of *any bond, warrant of attorney, or judgment. This is the strong probability. Hence their attorney appeared for them, and confessed judgment. This judgment, then, should not be set aside, unless the most positive evidence is adduced to show a total absence of authority in the attorney who acted for them, etc.
    2. Were they discharged by the conduct of the bank on the receipt of the notice to prosecute ?
    On this subject it is said, in the argument for complainant, that the bank, even if the notice might have been disregarded on account of the administrator’s residence in Tirginia, etc., yet having voluntarily regarded it, that by so doing its obligatory power is ■recognized.
    In answer to this, we say, that the bank has in no act acknowledged any such power; and, even in the answer, protests that the notice could have rio such obligatory power.
    If the bank were bound to regard the notice, she did all that law or equity required. The statute of Ohio reads, that if any person shall become bound as surety or sureties by bond, etc., for ■the payment of money, etc., and shall apprehend that the principal is likely to become insolvent, or reniove from the county and state, etc., such person so bound may, by notice in writing, require the creditor forthwith to put such bond, etc., in suit, provided a right of action shall have accrued, etc., and unless this is done in a reasonable time, the surety, etc., shall be discharged.
    Section 3 of the act provides, that nothing in the act shall be so construed as to affect bonds with collateral conditions, etc.
    The common law, it will not be claimed, extends further than, ■the statute or near so far.
    
      The question arises here, did the bank put this bond in suit in a reasonable time after the receipt of this notice ? The notice was-sent to the bank on May 12,1830, and on May 19,1830, only seven days after, the bond was not only put in suit but judgment obtained. This must have been done by order of the directors at. their next meeting after the receipt of the notice, as they only meet once á week as other banks; and this was done in accordance with their practice, as stated in their answer. In any way of putting it, the bank could only be bound to regard the notice as binding ^according to the statute or the common law doctrine on the subject, and so far the bank has fully complied.
    But the bank was not obliged to regard the notice as obligatory,, or pay any attention to it whatever.
    What is the language of the notice? It is in effect that we, theobligors, having indorsed for the late Mr. D. B. Bayless for two thousand dollars, and eighteen hundred dollars remaining unpaid, deem it necessary for our safety that the bank request a judgment .from him, or we will not hold ourselves bound for the same. We-further say, that if you will send us the bond by the bearer, we-will attend to it ourselves, etc.
    The notice does not require the bond to be put in suit; it does not say that Bayless is likely to become insolvent, or leave the county of Jefferson or Belmont, or the State of Ohio, or the commonwealth of Yirginia. It is therefore, in itself, insufficient. It asks too much. It requires more than the bank could reasonably do, and more than law, equity, or common sense would say she-should do. We, the obligors, say unto you, bank, go to Yirginia,. and request a judgment from Bayless, the administrator, or send the bond to us, or we will not hold ourselves bound for the same. Bayless perhaps resided in Yirginia, Ohio county. The bank says she did not know where he resided, and it is not proved that she did know. But suppose she did know that he did reside in Ohio county, Yirginia, was she bound to go there and make the request? If she was, she was on the same principle bound to go to Accomac county, Yirginia, or any other town or county in the-United States, or in North America, or any port of the whole globe, the city of Amsterdam not excepted, if Bayless perchance had resided there, and then and there go to the trouble and expense* and encounter the delay of prosecuting an estate, doubtful as to-the solvency, for the purpose of collecting this money, and at the same time these obligors having property at the very door of the bank. The proposition needs only to be mentioned in order to see its absurdity, and it matters not whether those who executed the bond were principals or sureties.
    But were they bound as sureties ? In the bond they bound themselves as principal debtors, and agreed that the bank might extend the time of the payment thereof from time to time, etc. And it necessarily follows, that if they were bound as principals, the notice might be disregarded by the bank. The testimony is, that the bank used bonds of this description for the purpose of making all the obligors principals as between *them and the bank, and without doing so, the bank would not discount any bonds; and in faith oí this, the obligors got the two thousand dollars. This, then, was the contract and understanding of the parties, and this, their intention, should be carried out by this court.
    It appears plain, from the bond and testimony, that the obligors were all principals as between them and the bank, and nothing has transpired to change this relationship.
    If these obligors wished to have a judgment against Bayless, the administrator, they should have first paid the bank, and then proceeded against him where they could have found him. This would have been fair sailing.
    In complainant’s argument it is said that judgments in Yirginia have precedence, etc., and for this purpose they wished the bank to request a judgment, etc. There is no evidence in the case that this is the fact; but admit that judgments have precedence, a judgment was obtained seven days after the notice, and is certainly entitled to precedence, even if obtained in Ohio. The bill claims that obligors were discharged by the refusal of the bank to sue according to notice. The argument for complainant claims that the bank complied voluntarily with the notice to sue, and is bound by her act; and, therefore, obligors discharged (loco foco), because the notice was not properly complied with. Scylla on one side and Charybdis on t’other.
    
    There is another view that might be taken of this case, that is, that D. B. Bayiess, who is said to be the principal in the bond, was deceased at the time notice was given, and consequently the statute could not reach the point made.
    Neither the statute nor common law requires us to run after “dead men’s bones” for money, vphen we can get other property, and that, too, at home, and not in a foreign land, etc. This fact, alone, is conclusive on this point.
    3. Were the obligors discharged by the stay of execution?
    Having almost a perfect confidence that this question is settled by supplemental anRwer, etc., we shall pay but little attention to it. In the bond the obligors bound themselves jointly and severally, as principal debtors to the bank; this gave the right to the bank to sue all jointly or each one separately, or any one of them alone; and over any such suits a perfect control, at least so far as the staying of execution might be concerned. This view of the case is aided by another clause in the bond, viz: that clause that gives the *right to the bank to extend the time of payment from time to time, etc.
    It is insisted on in the argument for the complainant that this would affect the right of contribution among the obligors. This is not true. If the bank had commenced several suits on this bond and obtained judgment against each one, and stayed execution on’all except one, and on that one. made the money, it is perfectly obvious, in our opinion, that in an action for contribution by that one against the others, the stay of execution could not affect his rights.
    The obligors then bound themselves as principals, and must blame themselves, and not do it again. They might have been but the sureties of Bay less, as between them and Bayless, but •this matter they may settle among themselves. The original answer of the bank states, responsive to the bill, that stay wa3 given without her consent or authority, and this is sustained by the depositions both of Bebee and Atkinson; and the question whether the bank ever consented to or authorized the stay of execution is put in issue by replication to answer. The truth is, as appears from the testimony, that the bank not only did not authorize or consent to the stay, but never knew of the judgment or stay until the filing of this bill. The pretended securityship, if true, could not, under the circumstances of this case, if the bank had given the stay, release them. There is an equity arising from the nature of the bond, judgment, and other facts in this case, going to show the understanding of the parties that will vouchsafe this claim to the bank. In conclusion, we have a few words to say in reply to some other arguments of complainants, aiso, as touching this case generally.
    
      It is argued that the warrant of attorney attached to the bond •was void because it was executed in Virginia, and that the bond is false on its face, a fraud upon the statute, etc., and also void.
    This is almost a little too absurd to notice. The intention of the obligors was to have the bond discounted at the bank in Ohio; the warrant of attorney was attached to it. At the bank in •Ohio it took effect, and in Ohio it is legal; also in Virginia.
    There is no law in Virginia that prohibits people from signing bonds and warrants of attorney, nor is it proved that this bond, etc., was executed in Virginia.
    *Again, we say that the bond is true on its face, and .shows the intention of the parties as between the bank and obligorsAs between themselves, we care not whether it is true or false.
    Would these obligors execute instruments of writing forbidden -by the laws of Virginia? Would they commit frauds upon the statute, etc ? They say they would, or have; and if they would, they would try to cheat us out of our money. ■
    It is also argued that as to the question of estoppel, that it can only be raised by plea or demurrer.
    It is insisted upon, in the answer of the bank, that these obligors, having bound themselves as principals, can not now say that they are only securities.
    Is this not sufficient? Can not the question be raised by the answer, as well as in any other way ? We think it may. And we still insist upon it that these obligors are estopped from saying that they only are securities.
    As to the solvency or insolvency of the estate of D. B. Bayless, ■there is no legal testimony in the case; nor does it appear that the •obligors have or will lose anything, if they have to pay the money, .and by no means does it appear that they have been injured •by the conduct of the bank.
    There is a contract existing between these parties, evidenced by •the bond and warrant of attorney. In construing this contract, we must look at the words and expressions made use of in it. These are plain, and upon its face there is certainly no ambiguity, and as to the meaning of it and the intention of the parties there can be no dispute.
    There is also a judgment existing between the parties. This judgment was obtained by virtue of the warrant of attorney, which was surely sufficient. It never was revoked, and could not be, being coupled with an interest, etc.; and it did authorize, to> the fullest extent, the power exercised under it by their attorney,, who confessed the j udgment.
    These matters go to charge, independent of everything that has been said, a liability existing, upon those who seek to be released,, for the payment of this money.
    The two and a half per cent, rests in contract, and it is nothing-more than just that the bank, in this case, should be indemnified against all costs and attorneys’ fees, when agreed upon by the parties.
    One word as to the predicament in which these men have-placed themselves, in order to get rid of the payment in this *case. In the first place, more than one-half of theseobligors signed the bond and warrant of attorney in the firms’ names without the knowledge, consent, or authority of their partners, as they say; and having done so, never informed them. In the second place, they signed said bond as principal debtors, and when interrogated under oath, they signed it only as securities; and lastly, they say they committed a fraud upon the statute in signing said bond, it being false on its face; and violated a law of Yirginia in signing the warrant of attorney, etc., it being prohibited.
    Do they love money? For it they are willing, as they say, to-commit forgery! For it theyare willing, they say, to commit perjury l For it, frauds upon the statute, and violations of the laws of their native state. But do they love wickedness ? Would they speculate upon their characters ? Would they barter for money ■their honesty, their faith, and their sacred honor? If they are willing to admit all this, we are unwilling to believe it. Nor do-we charge it, as they might have been in part mistaken; though even this is strongly rebutted by the fact that the most of them of their own accord, and moved by the love of money, gave depositions strong and full, each one to clear his fellow, and in their-argument cite authority to establish their own disgrace.
    We ask a decree against these obligors, especially Knox, Tyson, Jones and Swearingen, who signed the bond, etc., for the whole-amount of the judgment, except the amount paid. As to McKee, Kiger, and Ritchie, we admit that their liability is, to a certain f silent, doubtful.
   Judge Wood

delivered the opinion of the court:

A question of fact is presented in this case, as to the complainant’s assent to the execution of the bond by his partner. This allegation is averred by the respondents in their answer, but this averment avails nothing as proof, because it is not in response to-anything charged in the bill. Besides this, the answers of the complainant and others, to the interrogatories propounded in the respondent’s answer, make a strong impression that the complainant knew nothing of the bond and warrant of attorney, until after the confession' of judgment.

It is well settled that one partner can not bind his copartner by bond under seal, unless specially authorized to do so. There is, in this case, no evidence of any such authority, or *of any ratifieation of the bond or warrant of attorney, in act or deed, by the-complainant. He can not then be concluded by them. The warrant of attorney conferred no power from the complainant upon the attorney who acted under it in confessing the judgment, and the ease must be one for relief somewhere. Can it be obtained by bill in chancery?

This question has been decided in Critchfield v. Porter, 3 Ohio,. 522. That was a case where an attorney appeared for the complainant without authority in a suit at law, went to trial, and a verdict and judgment were rendered against the complainant, who filed his bill in equity for relief. The court say the complainant has relief at law, by motion in court, where the judgment was rendered; that it was fully competent for the court to give the complainant all therelief, on motion, he could obtain in acourtof equity; that it had become one of the plain and accustomed remedies of a court of law to afford full and adequate relief against judgments, irregularly or improperly obtained, when there had been no fault nor negligence on the part of the judgment debtor; and this relief is to be had on a motion to set aside the judgment addressed to the court by whom it was rendered, and upon whose records-it remains. Consequently, he can not be relieved in equity, and this bill must be dismissed.