Case ID: serg-rawl_10/html/0075-01.html
Source: Caselaw Access Project
Author: {"author": "Tilghman, C. J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

[Lancaster,
    June 2, 1823]
    SLAYMAKER against GUNDACKER’S Executors.
    IN ERROR.
    Where the plaintiff was drawer and'the defendant indorser, with others, of a promissory note, which the plaintiff paid, the declarations of other indorsers that the parties had agreed to be mutually responsible for the note, are not evidence against the defendant.
    Nor is the evidence of one of the indorsers, that the parties were bound in honour to each other, or proving a conversation between him and another indorser, admissible.
    If the Directors of a Turnpike Company become the drawer and indorsers of a note, on which money is borrowed for the use of the Company, and applied to the payment of its debts, they are, in the absence of any special’agreement, mutually responsible and liable to contribution in case of loss, whether payment be made by one by compulsion, or voluntarily.
    If, in place of such a note, on which the defendant was indorser, a new note be drawn, not indorsed by the defendant, which is applied at bank to the discharge of the first, it is a payment of it: but whether it barred the remedy against the defendant for contribution, is for the jury to decide, under all the circumstances.
    Error to the District Court for the city and county of Lancaster, in an action of debt on assumption, brought by Henry Slay-maker, plaintiff below, against the executors of John Gundacker, deceased, in which a verdict and judgment passed in the court below for the defendants.
    It appeared from the evidence returned with the bills of exceptions, that Henry Slaymaker, the plaintiff, John Gundacker, the defendants’ testator, and others, were directors of the Falmouth and Elizabeth Town Turnpike-road Company. This company being in debt, the directors came to a resolution to borrow money, and applied to the Farmers’ Bank of Lancaster, for a loan in their corporate capacity. The bank declined a loan to the corporation; in consequence of which the directors borrowed 4,000 dollars on their personal responsibility, by a note drawn by one of them, and indorsed, by others, in the usual manner. It was after-wards resolved to extend the loan to 5000 dollars, and on the 25th August, 1812, a note for 5000 dollars was put into the bank, of which Henry Slay maker,the plaintiff, was drawer, and Hugh Wilson,John Pedan, William Hamilton, Henry Keffer, Samuel White, and John Greer, all directors, were indorsers. On the 27th October, 1812, another note for 5000 dollars was put into the bank, with the same drawer, and John Gundacker and other directors indorsers. This note was renewed several times with the same drawer, and Gundacker as one of the indorsers, until the 9th November, 1813, when the last renewal took place, by a note drawn by Henry Slay-maker, and indorsed by Hugh Wilson, John Gundacker John Pedan, William Hamilton, and Samuel White. On the 11th January, 1814, a note for the same sum was put into the bank, with Henry Slaymaker drawer, and Hugh Wilson and Samuel White only, indorsers. Gundacker was never afterwards on any of the notes, the last of which, drawn by Slaymaker, and indorsed by Wilson and White, was protested on the 14th September, 1814. The corporation for whose use this money was borrowed, had become insolvent, and Slaymaker brought this.action to recover from Gundacker's executors his proportion of the note for 5000 dollars, dated the 9th November, 1813, of which Gundacker was an indorser. It did not appear that the directors ever made an express agreement to be personally responsible to each other for their respective proportions of the money borrowed of the bank, in case the company should prove insolvent.
    No declaration was filed in this case, but the plaintiffs filed a statement of their demand, by virtue of the act of assembly, claiming 476 dollars 19 cents, two thirds of one seventh part of the 5000 dollars, which set forth the details of the case, and stated, among other things, that on the 9th November, 1813, it was mutually agreed by and between the said Henry Slaymaker, Samuel White, Henry Keffer, John Pedan, William Hamilton, John Gundacker, and John Greer, that they would borrow of the Farmers' Panic of Lancaster, 5000 dollars, binding themselves personally for the repayment of the same, to aid, assist, and enable them to satisfy the claims and demands of the maker of the said Turnpike Road, on the said Company: and that if the said Company should not be able to pay off and. discharge the monies so borrowed, or any part of them, that then, and in that case, they and each of them, would pay their respective and equal part and proportion of the said note. The defendants pleaded nil debent, and payment.
    On the trial, the plaintiff offered to prove, by the acknowledgment and admissions, and statements of several of the parties to the note, of the 9th November, 1813, namely, John Greer, Hugh Wilson, William Hamilton, and John Pedan made at different times, separate and apart from each other, that before and at the time the said note was executed, the parties to it had mutually agreed with each other, and with a certain Henry Keffer, that, they would each of them hold themselves responsible to the others, to pay their respective proportions of the said note, in case the funds of the company should not be sufficient to pay the same, and this evidence was objected to by the defendants, and overruled by the court, who sealed a bill of exceptions.
    Another bill of exceptions was taken by the plaintiff to the rejection, by the court below, of certain parts of a deposition made by Wm. Hamilton, and offered on behalf of the plaintiff, which were as follows: “I always understood that the managers were bound in honour to each other, and that they were individually responsible to each other for the money borrowed from the bank. When Mr. Slaymaker and Mr. White, called on me to know whether I would agree to pay my proportion of the loss or.deficiency, I told them I did not wish them to lose, and although I was not on the note, I would pay my proportion. That the said deponent then paid off his share.” “ That the said deponent had a conversation with Henry Keffer, in which this'deponent told Henry Keffer he ought to pay his proportion of the money. At first he said he would not pay; then seemed doubtful: at last said he would not pay. We were desirous to get him to come in and pay his proportion.”
    The following points were submitted to the court below by the plaintiff for their opinion.
    1. That the money borrowed on the note of the 9th of November, 1S13, Under the evidence and testimony given in this cause, Was borrowed by the parties to it, not for their own use and benefit, but for the use and benefit of the company of which they were officers, though on their individual responsibility, and so applied, and that law and equity require, that the parties to it should bear their aliquot proportions and equal parts of the .loss sustained by the company’s becoming insolvent, and being unable to pay any part of the same; and that therefore, the plaintiff is entitled to recover from the defendants two thirds Of one seventh part of the said note paid by him.
    2. That the giving of the note of the 10th of January, 1814, given in evidence in this cause, was prima facie, payment of the note of the 9th November, 1813, and was inlaw sufficient evidence to enable the plaintiff to sustain his suit.
    3. That the testimony of John Eberman, cashier of the Farmers’ Bank of Lancaster, proving “that the note of the 9th of November, 1813, was paid by the parties to the note of the 11th of January, 1814, by it, and that the bank had no claim after the note of the 9th November, 1813;” was plenary evidence to entitle the plaintiff to recover.
    4. That where one of several co-sureties pay the debt for which they are surety,and the principal becomes insolvent.each of the sureties are liable to pay their equal proportions, and if one pays the whole, he is entitled to sue the others for equal contribution.
    The court charged as follows on these points.
    1st point. The court direct the jury, that it is in full proof, that the note of the 9th of November, 1813, was borrowed by the parties, for the use and benefit of the company of which they were officers, and that they became individually responsible to the bank, for the same; and it is equally clear, that if there were no funds of the company to redeem the said note, it would be both legal and equitable, that the parties to it should bear their equal parts of the loss, on the company’s becoming insolvent, if payment of the note was compelled by the bank.
    
    2d. The giving of the note of the 11th of January, 1814, given in evidence in this cause, was not prima facie evidence of payment of the note of the 9th November, 1813, and is not sufficient to enable the plaintiff to sustain this suit, as it was proved by John Eberman, that it was a renewal of the former note, and the defendant not having indorsed the new note, became discharged therefrom, and there could be no claim against him by the bank, and the payment afterwards on the new note, cannot afterwards make bin liable. It is not the common understanding of transactions of this nature, that once an indorser, always an indorser. It is not in common practice of the bank, understood as a payment, but a mere renewal of the debt, or a continuance of the loan. It still remained substantially a debt from the company, though not formally so, ..andxmight have been redeemed by the funds of the company. It r'g^mbfés more what the civil law calls a novation, or a renewal of the debt, emphatically a change of the debtor for another, by which the debtor agrees to take another party instead of a former one, and entirely discharges the old debtor, and has no resemblance -to a payment or discharge of the debt. And liability could only "'arise in such case from a special agreement, which, as the ease Íí^now stands, is the only ground of the suit, and these notes are no "'evidence of such special agreement; so as to support the statement in this case,
    3d question. John Eberman’s testimony does not prove any payment of the note of 9th November, 1813, but merely a renewal of the note, and a change of the debtors, as stated in the second question, and as there stated, the bank could not afterwards have any claim against Gundacker, who ceased to be, and was thereby , discharged as a debtor — and is no evidence, upon the circumstances of this case, to entitle the plaintiff to recover.
    4th question. It is certainly true, that where one of several co-sureties pay the debt for which they are surety, and the principal becomes insolvent, each of the sureties is liable to pay his equal proportion, and if one pays the whole, he is entitled to sue the other for equal contribution.
    But that is not this case, if we are to look at the notes in this case, and decide upon the face of them, because upon the face of the papers, John Gundacker was no co-surety for Henry Slay-maker, because Henry Slaymaker upon the note is á principal, and not an indorser or co-surety. And the renewal of the-note or payment of it, is prima facie a renewal of a note, or payment of , his own debt: and though, if paid by the indorsers, they might have had recourse to him; yet it never can be said, that if a principal pays his own note, he can have recourse to the indorsers. And this strongly shows the necessity of going beyond the notes, and proving .a special agreement to respond to each other. A mere liability to the bank does not prove this, for when one ceases to indorse, and the bank renews the note with a substitute, the former indorser loses his liability — but it furnishes no proof beyond his individual liability for the company, and not an individual responsibility to each other, which is the ground of this suit.
    
      
      Slaymaker and Hopkins, for the plaintiff in error.
    1st bill of exceptions. The court below ought to have admitted in evidence the acknowledgments of the other directors of a mutual responsibility fon the note. The acknowledgment of one partner is evidence against another: so when several persons are engaged in a common enterprise the admission of one is evidence against all. 6 Johns. 267, 3 Serg. & Rawle, 16. The other directors being parties to the contract were not competent witnesses.
    2d bill of exceptions. Hamilton’s deposition went to show the understanding on which this money was raised: and though he thought they were bound in honour they were bound in law also.
    1st point proposed to the court. The charge of the court on the first point submitted to them was correct, in every part, except the last, which restricted the liability of the parties to the case of payment of the note being compelled by. the bank. The same liability existed in case of a voluntary payment by the other parties. A surety is not bound to wait the result of a suit, but may pay the debt and look to the principal for indemnity.
    2d. point. Thei’e was error in charging that the note of the 11th January, was not prima facie evidence of payment of the note of th'e 9th November, 1813. Giving a new note is payment of a prior one. This was so decided by Parsons, C. J. in 5 Mass. Rep. 599. In Pennsylvania it is well settled that a note taken in payment discharges a prior debt, and that the receipt of a negotiable instrument on account of such debt must be taken prime facie to be satisfaction. Whart. Big. 286, 11, 12, 13, 14.
    In Holmes v. De Camp, l Johns. 36, and Pintarán. Tackington, 10 Johns. 104, the acceptance of a negotiable note on account of a prior debt was held prima facie evidence of satisfaction. It is a good plea that a pr'omissory note was given in satisfaction of a book debt. 5 Term Rep. 513. The cases cited in Whart. Big. 180, are to the same effect. When the bank accepted the new note the former note on which Gundacker was indorser was given up. He was discharged, and it was nothing to him whether it was by payment then or otherwise. The plaintiff paid it in the situation of surety, and. had a right by so doing to recur to the co-sureties.
    3d point. The court was in error in saying that Eberman’s testimony did not prove payment, whereas it did prove payment expressly.
    4th point. This error consisted in charging that a special agreement was necessary. This is contradictory to the answer to the first point, in which the court said that they were co-sureties, and as such liable to contribution if the first no.te had been paid.
    They likewise objected that the statement varied from the evidence. It sets forth a positive agreement for mutual responsibility between the drawer and indorsers of the note; but there was no evidence of any such agreement.
    
      Rogers and Buchanan, contra.
    
      1st bill of exceptions. The admissions or confessions offered were not evidence, until the partnership or mutual agreement was first proved. 1 Phill. Ev. 73. 10 Johns. 66. In this case they were offered, not in a controversy with third persons, but in a dispute between two of the parties themselves. The persons whose acknowledgments were offered might have been produced as witnesses. Two of them, Hamilton and Pedan were actually examined, and the evidence of Greer, who is dead, might have been perpetuated.
    2d bill of exceptions. The understanding of Hamilton or his conversations with Keffer, were not competent: nor was it relevant to the case, whether or not the parties considered themselves bound in honour.
    1st point. The defendants have cause to complain of the charge on this point, for the court said it was legal and equitable that the parties to the note of 9th November, 1813, should bear their equal parts of the loss, if the company became insolvent. It is to be recollected, that the plaintiff failed in showing a special agreement. The judge then stated, that from the face of the note, which is the only criterion, the drawer and indorsers were not answerable to each other in any other manner than is implied by the law from the drawing and indorsement. The plaintiff was president of the bank, and took upon himself the dangerous post of drawer. If they were co sureties it was only on that note, for 60 days, and then their relation as such terminated.
    2d point. Was the giving of the note of 11th January, 1814, payment? It is material that this note was never actually paid till after this suit was brought, and that the testator was not on the first note for 5000 dollars, either as drawer or indorser. But giving a new note for a former is not payment, Whart. Dig. 286, 288, 17, 19, 20.
    If the plaintiff’s argument be correct he might recover against the defendants on this supposed payment, although he afterwards proved insolvent and paid nothing himself.
    3d point. This is in substance the same as the 2d point.
    4th point. The answer to the abstract position stated by the plaintiff was in the affirmative, after which the judge proceeded to show that the abstract position was not applicable to the case before the court.
   The opinion of the court was delivered by

Tilghman, C. J.

It docs not appear that the directors ever made an express agreement to be personally responsible to each other for their respective proportions of the money borrowed of the bank in case the company should prove insolvent. The counsel for the plaintiff offered to prove by the acknowledgments and admissions of several of the parties to the note of the 9th March, 1813, that the drawer and indorsers had agreed to be responsible to each other for their respective proportions of the said note, in case the funds of the company should not be sufficient to pay the same.” This evidence was objected to by the defendants’ counsel and rejected by the court. The argument in favour of the evidence is, that the confession of one partner is evidence against another. Certainly it is,- but it must first be proved that a partnership existed. The defendant denied the partnership, and I see no evidence of it. The drawer and indorsers were directors of the turnpike company, but that is no partnership. Neither is it a partnership, to put their names on the same negotiable paper. To say that it is, is begging the question. The persons whose confessions were offered in evidence, were Competent witnessess for the plaintiff and one of them, William, Hamilton, actually was a witness as appears by his deposition. There was no ground therefore for admitting their confessions, without oath, as evidence against the defendants.

The second bill of exceptions was to the rejection of the following part of the deposition of William Hamilton. “ I always understood that the managers were bound in honour to each other, and thatthey were individually responsible to each other for the money borrowed from the bank. When Mr. Slaymaker and Mi*. White called on me to know whether I would agree to pay my proportion of the loss or deficiency, I told them I did not wish them to lose, and although I was not on the note I would pay my proportion; that the said deponent then paid off his share.” It was clearly right to reject this evidence. The defendants are not to be affected by Mr. Hamilton’s ideas of honour. Courts of justice know of no other than legal engagements. The jury are permitted to hear of none other. It would be worse than waste of time, for the court to suffer evidence to go to the jury one minute, and to tell them the next that they were to pay no regard to it. There was another part of Mr. Hamilton’s deposition also very properly rejected. It contained the relation of a conversation between Mr. Hamilton and Henry Keffer, which in no point of view could be evidence, and I think was abandoned in the argument.

The remaining exceptions are to the opinion of the court, on four questions proposed by the counsel for the plaintiff. The whole may be reduced to two points, 1st. In what relation did the drawer and indorsers of this note for 500 dollars of the 9th November, 1S13, stand towards each other? was there any responsibility between them in case of loss, supposing that there was no express agreement to that purpose? 2d. What was theeffectof the renewal, as itis called, of the note of 9th November, 1813, of which Gundacker was an indorser, by that of the 11th January, 1814, of which he was not an indorser. In considering these questions, it is always to be kept in view, that the money was borrowed for the use of the Turnpike Company, and applied to the payment of its debts. The drawer and indorsers of the note of November, 1813, therefore, were, with respect to each other, in the nature of securities for the company. And as such there can be no doubt, that in the absence of all special agreement, there existed between them a mutual responsibility in case of loss. The principle of contributicm arose, from the nature of their situation. It is plain law, that where three are bound in a bond as principal, and two as sureties, if the principal prove insolvent, and one of the sureties pay the whole, he may call on the other for contribution of a moiety. And it makes no difference whether they are bound jointly, or severally, or jointly and severally. Nay, so far has this principle been carried, that where one was bound in three several bonds, with one several surety in each, for the faithful performance of his trust in a public office, the sureties were held liable to mutual contribution, in proportion to the penalty of each bond, in case of loss by the insolvency of the principal. This was decided in the case of Sir Edward Decring v. Earl of Winchelsea and others, 2 Bos. & Pull. 376. And that the right of contribution existed between all the parties to the note of the 9th November, 1813, was the opinion of the judge of the District Court, in the case before us, in which I perfectly agree with him. But he fixed a limit to this responsibility to which I cannot agree. He confined it to the case of payment being compelled by the bank. I can see no reason for this limitation. The parties were all bound to the bank, why then might not one of them pay it, without compulsion? Suppose, for instance, when the note of the 9th November, 1813, fell due, Mr. Gundacker had said, he would have nothing to do with the renewal of it, why might not Slaymaker have paid it, and called on Gundacker for his proportion? Why should he submit to loss of money and character, by waiting for a suit by the bank? If indeed the other parties had chosen to discharge Slaymaker, and take all responsibility on themselves by renewing the note without him, they might have done so, and then he ought not to have paid it, but nothing of the kind is pretended. I have no doubt then, that if Gundacker had refused to join in the indorsement of a new note, the parties to the old one might have paid it, and recovered from him his proportion. This leads to the second question. What was the effect of the note of 11th January, 1814, drawn by Slaymaker, and not indorsed by Gundacker? Was it payment, or prima facie evidence of payment of the note of 9th November, 1813. The District Court thought not, and there again we differ in opinion. The cashier of the bank was called as a witness, and declared that it was considered by the bank as payment, and no doubt it was so. It is generally called a renewal of the old note, but in strictness it is a payment. When the new note is offered for discount, a new loan is created, a new discount is paid, the drawer of the new note is credited by the new loan, and charged with the amount of the old note, which is given up to him. Thus the debt on the old note is completely extinguished, and both drawer and indorsers discharged for ever. I think the District Court was wrong then, in saying that there was no evidence of payment. But it was right, in not going all the length contended for by the counsel for the plaintiff, who asked the court to charge the jury that the acceptance of the note of the 11th January, 1814, by the bank, was in itself conclusive evidence, which entitled the plaintiffs to a recovery. Whether they were entitled to a recovery would depend upon circumstances. Why was not Gundacker an indorser of the note of 11th January, 1S14? Was it accidental, or was it intended by S'aymaker and the others, and understood by Gundacker himself, that he was to be discharged. I believe that things often take this course, when directors of turnpike and other companies, borrow money from banks for the use of the company. New directors sometimes come in, who put their names on the renewed notes, in the place of the old directors who go out. Where there is no positive agreement, the jury will judge from the conduct of the parties. When a director who has once been on a note, is suffered to withdraw himself, and the notes are renewed from time to time for a considerable period, without any intimation to him that he is held responsible, much may be said in favour of his discharge. There would be great reason in such case, to suppose, that there was an understanding, that the parties to the new note were to take the responsibility on themselves, and look to the funds of the company for indemnification. On the contrary, where his indorsement is omitted by accident, (such as his not happening to be present when the new note is drawn,) and .he is soon told that he is held responsible for his proportion, I do not see on what principle he can escape. My opinion is, therefore, that in this case the jury should have been told that tjie acceptance of the note of the 11th January, 1814, by the bank, was evidence of the payment of the note of 9th November, 1813; and it should have been left to the jury to decide, from the facts in the case, whether or not Gundacker was discharged, or held responsible for his proportion.

There was no declaration filed in this case, but a statement of the plaintiff’s case under our act of assembly. It was objected, that it varied from the evidence in this, that it set forth a positive agreement for mutual responsibility, between the drawer and indorsers of the note given by the directors to the bank. The objection is not good. The plaintiff has a right to averio his statement that an agreement was made, in all cases where the law implies an agreement; justas he may do in a declaration at common law. In an action on an implied assumption, the declaration avers a positive assumption. It was the object of the act of assembly to dispense with form. When the plaintiff states that there was an agreement, he must prove it. But whether he prove an agreement express or implied, is immaterial. In either case he makes good his assertion. I am of opinion upon the whole, that this judgment should be reversed, and a venire de novo awarded.

Judgment reversed and a venire facias de novo awarded.