Case ID: scl_26/html/0050-01.html
Source: Caselaw Access Project
Author: {"author": "BUTLER, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

E. Carson vs. W. Hill and T. F. Jones.
    A blank note signed by a firm, with, sureties thereto, and by one of the firm placed in the hands of the plaintiff, a factor in Charleston, as collateral security for acceptances of drafts, to be drawn on him by the firm, and afterwards filled up in good faith by the plaintiff, in accordance with his instructions, with the sum of §5000, the sum agreed on by them at the time the note was left, was held not to be void, and that the plaintiff had the same right that an endorsee would have to fill up the terms of an endorsement above the name of his endorser, 
    
    The plaintiff, after he accepted drafts drawn by the firm, to the amount of $7,500, acquired as perfect a right to the note as if he had bought it; and his right could only be divested, and the defendants’ liabilities discharged, by payment.
    All the payers to a joint and several promissory note are principals, and their relation to each other does not affect their liability to the payee.
    Where a guaranty is absolute in its terms, and definite as to its amount and extent, in such case no notice to the guarantor is necessary.
    Where a debtor does not direct the application of money paid to any specific demand, where there are two or more, the creditor who receives the money may make his own application. 
    
    The surety is bound by the terms of the contract, and cannot be discharged unless the principal varies the terms of the original contract, by enlarging the time of performance. 
    
    Before Butler, J., at Laurens, Fall Term, 1840.
    This was an action of assumpsit, on a joint and several promissory note, signed by the defendants. Wm. Hill was *out of the State at the commencement of the action — Davis had suffered judgment to go against him by default, and the defendants Wiley Hill and Jones, were the real parties to the issue. The manner in which the note was signed filled up and used, is important, and will appear from the following statement: William Hill and W. G. Davis had entered into a mercantile copartnership, and were doing business under the firm of Davis & Hill, at Laurens, during the year 1835. They had contracted debts in Charleston, to a large amount; and not having cash in hand to meet them, in 1836, when they fell due, they procured the note upon which this action is brought, to be signed by Wiley Hill and Thomas F. Jones, below their own names, in blank, with $5000 inserted at the top of the paper. The paper was then signed in March, 1836, and delivered to William Hill, tobe used by him in Charleston as he might think proper. Without filling up the body of the note, Hill deposited it with the plaintiff, as collateral security) to indemnify him, for acceptances of drafts to be drawn on him by Davis & Hill in favor of their creditors, from whom they had purchased goods in Charleston. Carson accepted drafts to the amount of about $1000, on the faith of the paper which he held in blank. These drafts fell due six month after their date. Besides these drafts, Carson advanced, during the years 1836, 1837, and 1838, other large sums of money for Hill and Davis, and for Davis alone, who was the active partner, at Laurens, not only to close the concern, but in conducting business on his own account. The drafts drawn by Hill & Davis on the plaintiff, fell due on the 1st September, 1836, at which date the defendant filled up the note in the terms of an ordinary joint and several note of $5000, payable six month after date. After it was thus filled up, Carson deposited it with Martin & Walter, as collateral security to cover liabilities which Carson was under to them. It remained with Martin and Walter until it was taken away by plaintiff and sent up to be sued on, which was in 1839. Some time in 1838 Carson wrote to Davis to inform him he would put the note in suit; Davis requested him to delay suit, that he might make some arrangements to pay the note himself, and the plaintiff did delay and give him and the others time till suit brought. Just before the suit was brought, David Martin, as the agent of plaintiff, presented the note to *defendant. Jones expressed great surprise that, the note had not been paid long ago ; said he knew Carson had such a ' note, but supposed it had been paid long ago. Afterwards Jones wrote to Carson, requesting him to let him know the amount of the note and the payments on it. The other defendant, Wiley Hill, said when the note was presented, that he thought it had been paid ; but did not say that he knew that Carson had such a note, but acknowledged that be had signed a note in blank for $5000, which was delivered to William Hill.
    It appeared very satisfactorily, that the note had been placed with Carson as collateral security, to cover his liability for drafts accepted on account of Davis & Hill, and that he filled it up in the absence of all the parties; and gave the defendants notice of the existence of the note just before it was sued on. During the years 1836, 1837, 1838, and 1839, Davis remitted large sums of money at different times to Carson, to enable him to meet the engagements which he had incurred On account of Hill & Davis, and on Davis’ individual account. The account current presents a fair statement of the accounts ; when Davis remitted the money, he gave Carson no particular instructions as to its application, but left it to Carson to apply the credits as he pleased. After striking a balance of all the accounts between Carson & Davis, Carson states that Davis was indebted to him $3728, which sura he contended he had a right to recover against the defendants on this note He placed the credits to the general accounts as he received the money, without regard to any specific demand. At the end of the year 1836, or rather on the first of March, 1837, the balance against Davis was $4784 73 cents. In January, 1838, the balance was $2669 ; and in 1839, January, the balance was $3728. The accounts will explain themselves. There are two items in them which deserve particular notice. One is a note of Davis & Hill, for $3000, indorsed by Elijah Carson, discounted in the Bank of South Carolina, on the 15th September, 1836. Nett amount after discount, $2959. The other was a note of Davis & Hill, for $3219, discount taken off, $3184, indorsed by James S. Rogers first, and Elijah Carson, dated March 18th, 1837, and payable to the Planters’ and Mechanics’ Bank. Those two notes were sent down by Davis, from Laurens, and were endorsed for the accommodation of Davis & Hill Carson credited at the time above stated, these sums to Davis; but when they became due, he paid the renewals himself, and entered the sums thus paid to the debit of Davis. Carson then paid off entirely the note to the Bank of South Carolina; so that the amount of it stands both on the debit and credit side of the account, swelling both, but making little difference, ultimately, as to the balance. The note to the Planters’ and Mechanics’ Bank was paid off at different times of its renewal, to about $1100. This last sum Carson does not charge against the defendants, but against Rogers, the ¡first endorser. The sums actually paid by him are entered in the account; be charged to the defendants, for whose accommodation the note was executed.
    There are other facts which may be regarded as connected with the justice of this case, which perhaps shonld be stated. In the spring of 1836, after his return from Charleston, Wm. Hill went to Mississippi, as it was supposed to speculate in lands. In the fall of 1837 he left this State and went to Mississippi, where he has remained ever since. After Hill left here, the stock of goods remaining at Laurens were packed up by Davis and sent to Mobile for Hill, by the way of Charleston, Carson receiving and forwarding the goods for the parties. He paid the freight and charged the amount to Davis — I think about $160. From this fact, as well as others, it was certain that he knew that Hill had removed to Mississippi.
    As I have not been furnished with the grounds of appeal, I do not deem it important that I should enter particularly into the details of my charge to the jury. The jury found for the plaintiff, under my instructions, and if I was in error as to one of the many questions raised on the circuit, I am willing that defendant’s counsel should avail themselves of any advantage of it. I felt great doubts as to some of the questions at the time ; more particularly as to the credit of the proceeds of the note discounted in the Planters’ and Mechanics’ Bank, with Rogers’ name as first endorser on it. I held in effect that the note was good, although it was not filled up till it got into Carson’s hands — that the plaintiff had acquired a right to it, when he advanced money equal to its amount. That having no specific instructions from Davis, the plaintiff had a right to keep the accounts and place the credits as he *might think proper. That he had not lost his right to recover on the note, by waiting with Davis, or by not giving notice to all the makers of their liability; and that the sums raised on the notes discounted, were receivgd on accommodation paper, for the benefit of Davis & Hill; and that the money afterwards paid by plaintiff in discharge of the notes, was properly set off, on the debit sides, to the credits which had been entered.
    GROUNDS OP APPEAL..
    1. Because his Honor charged the jury that the plaintiff was entitled to recover, notwithstanding- the paper sued on was signed in blank, and filled up by the plaintiff, in the absence of all the makers, near six months after its execution, without the consent or knowledge of the defendants, and without giving notice thereof to them, until just before the commencement of the suit.
    2. Because the paper sued on was signed in blank, and delivered to the plaiutiff to be held as collateral security for acceptances to be made by him for Hill & Davis, and he was not authorized to fill it up as a negotiable paper and an unconditional promise to pay.
    3. Because the payments made by Davis to the plaintiff should have been first applied to the discharge of the exceptances, to secure which the paper sued on was delivered to the plaintiff.
    4. Because, even if the paper sued on were valid, the testimony established the payment of the whole, or the greater part thereof.
    5. Because the plaintiff gave indulgence to Hill & Davis, the principals, and at the same time aided them in removing their effects from the State, without giving notice to the defendants that he held them liable for this claim.
    6. Because his Honor charged the jury that the proceeds of the two notes discounted in bank, for the accommodation of Hill & Davis, should not be regarded as payments of the acceptances made by plaintiff for Hill & Davis.
    7. Because the finding of the jury was contrary to law and evidence.
    8. Because his Honor charged the jury that the note sued on could not be regarded as a guaranty.
    
      
       Cited 6 Rich. 507. 3 Rich. 113. An.
      
    
    
      
       See 11 Rich. 468. An.
      
    
    
      
      
         See Comwell vs. Holly, 5 Rich. 56. Wayne vs. Kirby, 2 Bail. 551. Pickett vs. Lands, 2 Bail. 608. 4 Strob. 20, 90. 1 Bail. 418. Post. 145. An.
      
    
   ^ (jUTÍCL, pCT

BUTLER, J.

The two first grounds present the same mi. mol giuuuuo i;jug oamc question, to wit: was the note void because it was left with Carson in blank, and filled up by him in the absence of the other parties to it ? Carson acquired his possession, control and right to the note from William Hill, who was acting not alone by derivative authority from others, but on his own account as one of the principals to the note. He had full authority to use the paper as he might think proper. The note was taken and filled up by Hill’s express authority and direction, and in good faith, for the purpose agreed on between himself and Carson. The latter had the assent of one of the principals to fill up the blank, as fully as an endorsee has the authority of his endorser to fill up the terms of endorsement above his name ; which was nothing more than making the note payable to and negotiable by himself for the amount specified by all the makers. The next question that arises is, what right did Carson acquire to the note upon or after its delivery ? Until he accepted drafts to the amount of it, he had no right to or control over it, but it was subject to the demand of the depositor. But after Carson had incurred a liability to the amount of $7500 for Hill & Davis, by accepting the drafts for that sum, he acquired as perfect a right to the note as if he had bought it, and the defendants had as little control over it as if they had given it absolutely for goods sold and delivered. From that time Carson’s title could not be divested, nor the defendant’s liability discharged, without payment. The pledge, or collateral security, (call it what you may,) had become forfeited, and could only be redeemed by the payment of money equal to its amount. So far as regarded the payee, all the makers were principals; although as between themselves, Jones & Wiley Hill were securities of the other two. This relation between the makers could not affect their liability to Carson. The note could not therefore be regarded in the light of a guaranty requiring notice, as contended for by the counsel. Or if so, it would be an absolute guaranty for the payment of so much money, which would impose the same obligation as any other unconditional engagement to pay money. I think this general principle well stated in the case of Norton vs. Eastman, (4 Greenleaf, 521,) in which it was said by the Judge who delivered the judgment of the Court, “ it seems to be well settled that where a guaranty is *absolnte in its terms, and definite as to its amount and extent, in such case no notice to the guarantor is necessary ; the very act of the party in giving the guaranty is inseparably connected with the knowledge of its nature and limits. ” Only where the party cannot know before hand whether he is to be ultimately liable or not, nor to what extent, is it necessary, in order to charge him, that he should have reasonable notice. Here Jones and Wiley Hill gave William Hill power to make them absolutely liable for $5000, without condition or limitation. By the understanding of the parties, they were to be equally liable, and to the same extent as Hill & Davis. After signing the paper, their ultimate liability was fixed, and they should have guarded themselves by their own vigilance, and not have relied on notice from Carson, who had given credit on an unqualified obligation to pay him, should the drafts not be paid.

Having come to the conclusion that the note was a valid obligation, and that the defendants were liable to pay, according to the terms of the paper, after it was filled up, the remaining questions arise out of the application and the extent of the credits which should have been made by Carson, and to which the defendants were entitled, by the sums of money remitted by Davis, and raised by Carson on the notes discounted in the banks. If the money remitted in cash by Davis from Laurens, had been applied to this note, or to the drafts accepted on its faith, then the defendants would have been entirely discharged. Davis & Hill, and Davis alone, owed, beyond the amount of this note, large sums, for which the plaintiff, Carson, had no security. He had paid and advanced money oil their individual responsibility. From the manner in which he kept the accounts, he applied the money received from Davis to the payment of these latter demands. Or rather, that is the result — for he did not apply the payments to the extinguishment of the specific demand covered by the note. The law seems to be clear and indisputable, that where the debtor does not direct the application of money paid, to any particular demand, where there are two or more, the creditor who receives the money may make his own application. When Davis remitted money he gave no particular direction about it; but, perhaps, believing he could pay all demands against him, he left it to Carson to make the ^application of the credits as he might think proper. Carson consulted his interest, and applied the payments to the more insecure debt. And this we think he had a right to do according to law, if he acted in good faith and without fraud or collusion with Davis, of which there was not even a suspicion. Allowing this to be so, still the defendants insist that they ought not to be debited with the sums subsequently paid into the banks by Carson, after he had received and given Davis credit for them. That is, the credit when once made, was absolute and beyond Carson’s control. And that when he paid the money into bank, after protest, he could not debit the amount against the credit previously given. It is admitted that the money raised on the notes discounted, was drawn on accommodation paper for the benefit of Hill and Davis The first was endorsed by Carson alone, and there is little doubt that it was discounted in bank more on the credit of his name than those of Hill and Davis, the makers. This being the case, Carson might well have charged them with this liability at the time he gave the credit. To test it, suppose the defendants, or either of them, should have come the day after the credits were made, and demanded the note upon which this action is brought, could they have obtained it without relieving Carson from his liability to the bank ? I think they could not. Justice and fair dealing would forbid it. And if they could get the note without paying the amount credited to it, and for which Carson was liable, the credit would be unavailing to them. Carson could not be divested of his title to the note until it was discharged of all its incumbrances The money, therefore, paid to the South Carolina Bank in satisfaction of the note discounted in it, may well be set off on the debit side of the account; the debit neutralizing the credit; the one being received, and the other paid, for Davis and Hill, by Carson, without benefit to him, beyond commissions. The money raised on the note endorsed by Rogers, must be regarded in the same light. [The money thus raised was not for Rogers or Carson, but for Davis and Hill; and when Carson paid the renewals he was not bound to look exclusively to Rogers for indemnity. Davis and Hill were the principals, and Rogers security, as between themselves, but all were liable to Carson ; and the money when paid was for the real and ultimate benefit of the makers ; and they having got credit for the *money received, they should be debited with it when paid. Allowing these items to be just debts to countervail the previous credits, the balance, as struck by Carson, was three thousand seven hundred and twenty-eight dollars, for which the jury were instructed to find their verdict with interest. And the Court is satisfied that the defendants could not, at any time, have redeemed their note without paying this sum. The verdict was therefore right, and cannot be set aside on any of the grounds noticed.

Another ground is taken, that the plaintiff gave indulgence to Hill and Davis, the principals, and at the same time aided them in removing their effects from the State, without notice to defendants. This suggests the inquiry, what indulgence did the plaintiff give, and for what purpose ? The plaintiff, at the instance of one of the defendants, Davis, did forbear to sue. But he entered into no obligatory contract for forbearance. There was no contract between himself and Davis that would impose any impediment to his suing at any time that he might think proper. He gave Davis time ; without any consideration or agreement, that could constitute a new and separate contract from that which arose from the note itself. There was no promise to indulge or forbear which was binding on the creditor. The law is very clear, that the surety is bound by the terms of the contract, and cannot be discharged unless the principal varies the terms of the original contract, by enlarging the time of performance. (2 J. C. R., 559.) There was nothing to prevent Carson from suing at any time, by virtue of any agreement which he had entered into with Davis. As to receiving and forwarding the goods of Davis and Hill, he had as perfect a right to do so, as of any other customer in good credit. He certainly had no authority to stop them for any one, much less for Wiley Hill and Jones, who lived near the place from which they were transported. He acted for Hill and Davis as a mere forwarding agent, and cannot be held responsible for not interposing to attach or arrest their goods for the benefit of others.

Irby and Young, for the motion. Henry and Wardlaw, contra.

We cannot perceive any grounds to grant a new trial. Motion refused.

Rtcííardsox, O’Neal, Evans, and Eajile, JJ., concurred : G-antt, J., dissented. 
      
       See Lawton vs. Maner, 9 Rich. 337. An.