Case ID: tenn_33/html/0141-01.html
Source: Caselaw Access Project
Author: {"author": "McKiNNEY, J.,", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

NASHVILLE:
    DECEMBER TERM, 1853.
    
      W. H. McNairy vs. John Thompson et al.
    
    L Contract. Rule of construction. Intention. The sole object of the rules and principles laid down for the exposition of contracts, is to do justice to the parties by enforcing a performance of their agreement, according to the sense in which they mutually understood it at the time it was made. The governing principle of construction is the intentipn of the parties; and that intention may be ascertained by looking to the situation of the parties; the motives which induced the agreement, and the objects and purposes designed to be effected by it.
    2. Same. Same. In expounding a deed or other instrument, the construction must be upon the entire writing, so that one part may help to expound the other; and all its recitals may be looked to and used to explain any doubts which may arise as to the intention of the parties.
    3. Same. Covenant of indemnity. Construction. W, H. M. & M. M. H,, who were merchants, executed and delivered to the covenantees, the following covenant, to-wit: “ Whereas, J. M. H. and M. H., execulor and executrix of the estate of ¡3-, W. H., did, on or about the 31st day of December, 1850, make and execute the following notes which were signed by them as executor and executrix of the said estate ?’ [describing five several notes amounting to $2,709;] “and whereas, four of the above not's amounting to $2,159, were given to the Planters’ Bank, and the other note for $550, was given to the Union Bank in renewal of notes made and drawn by (their testator) the late G-. W. H.,npon which we were endorsers, and which were then due and under protest; and whereas, it was at our request and for our especial benefit and accommodation that the said 3. M. H. and M. H. consented to become the drawers of the above described notes; in view of the above facts, we, the undersigned do, by these presents declare, that we do not hold the said M. H. and J. M. H. personally responsible or bound, and we do hereby release them from all personal obligation to pay said notes, and will not look to them for the payment of the same, any further than the said estate may be able to pay: ” Held, that said instrument, in •its legal effect, is a covenant to indemnify J. M. H. and M. H. against personal liability, and to prevent their suffering loss or damage in consequence of having become makers of the several notes therein specified ; and that from the situation of the parties at the time of its execution, the motives which prompted it, and the end to be effected by it, it imports an absolute engagement on the part of the covenantors to “release” and exonerate the covenantees from the payment of said notes except so far as the assets of the estate in their hands might, in due course of administration, enable them to pay; and that said covenant was broken the instant the covenantees became liable to pay the notes.
    ?. Pleading. Joinder by plaintiffs in action of covenant. When a covenant to indemnify against the payment of a debt, is made to two or more persons jointly, all must join in an action upon it, and the failure to join would defeat the action, although they may have severally paid the debt, and out of their separate funds in equal or unequal proportions.
    -5. Evidence. Husband and wife. Money paid by husband, for wife dwm sola. "Where M. H., a feme sole, had become bound to pay the debt of another, which was paid by J. H. in contemplation of marriage with the said M. H., and after marriage they bring their joint action to recover back the money so paid, it must be shown, in order to entitle them to recover in said action, that the payment so made on account of the wife, was made at her request, or with her knowledge and consent. The want of proof in this respect cannot be supplied by inference from the fact of their marriage soon after said payment.
    FBOM DAVIDSON.
    Tiiis was an action of covenant in the circuit court of Davidson county, brought by John Thompson and Ids wife, Mary, (formerly Mary Honse,) and James M. Hamilton, against ¥m. TI. McNairy and M. Hamilton, upon an instrument under ¿seal, executed on the 4th of January, 1851, by said McNairy and M. Hamilton to said James M. Hamilton and Mary House, as executor ■and executrix of the last will and testament of Geo. "W. House, deceased. The covenant sued on is sufficiently quoted in the above abstract, No. 3. It appears that in the year 1850, Geo. W. House died, leaving a last will and testament, in which Jas. M. Hamilton and his widow, Mary House, were appointed executors. At the time of his death he was the malcer of several notes in the Planters’ and Union Bants at Nashville on which said McNairy and M. Hamilton, then constituting a firm of merchants in Nashville, under the style of McNairy & Hamilton, were first endorsers. When these notes fell due, there being no money in the hands of the executors, they were severally protested for non-payment. McNairy & Hamilton requiring considerable accommodations from these bants, and being unable to procure any whilst they were under protest, were anxious to have the notes renewed, and persuaded the executors to execute new notes in their own names as executors, which should be endorsed by McNairy & Hamilton, and substituted in lieu of the old notes. The executors refused to do so until they were advised that they would not, in so doing, render themselves personally responsible, exacting a pledge from McNairy &■ Hamilton, that if they should be deemed or held to be personally liable, they, McNairy & Hamilton, Would give them a written indemnity.
    In a few days after the signature of the notes, the executors becoming satisfied that they had rendered themselves individually responsible, applied to McNairy & Hamilton for their indemnity, who, on being reminded of their promise, signed and delivered to the executors the covenant which is quoted above. Before these notes became due the executors discovered that the estate of George W. House was insolvent, and they filed their bill accordingly, suggesting its insolvency, which was still pending and undetermined in the chancery court at Nashville, no dividend having been declared at the termination of this law suit in the circuit court. The notes fell due, were protested, suits brought on several of them and judgments rendered against Jas. Hamilton and Mary House individually. Before these judgments and notes not sued on, were satisfied, John Thompson and Mary House agreed, to be married, and a day or two previous to the marriage, and perhaps in view of that relation, John Thompson paid off one of the judgments, but it does not appear that said payment was made with the knowledge and consent, or at the request of Mary House. After the marriage, Jas. Hamilton and John Thompson each paid their half of the debts, in unequal parts, and then, on the 2nd of September, 1852, instituted separate suits in ease, against McNairy & Hamilton. At the return term of the writs the counsel for Jno. Thompson and wife moved to change the nature of their action to covenant, and add the name of Jas. Hamilton as co-plaintiff, which was accordingly done. The declaration contains two counts. One of which declares upon the covenant as if executed simultaneously with the signature of the notes, and alleges the general breach. The other goes on the moral obligation of a simultaneous promise, and then states the subsequent execution of the covenant in performance of it.
    
      Previous to tbe jury trial, M. Hamilton, one of tbe original defendants in tbe suit, and partner of McNairy, entered confession of judgment for. tbe damages against bim. He was then offered as a witness on tbe jury trial, and objected to by tbe counsel of McNairy; tbe objection was overruled, and be then proved tbe inducement to tbe covenant, and tbe previous pa/rol promise on tbe part of McNairy and himself. There was a verdict and judgment for tbe plaintiffs at tbe June Term, '1853, of said circuit court, (Hon. N. Baxtbe, presiding,) from which defendant McNairy . prosecuted a writ of error to this court.
    "WashiNG-toN, for plaintiff in error,
    with whom was Houston, who said:
    1. If any suit can be sustained against defendant, on tbe paper, it cannot be joint. Thompson paid a part of tbe money and James M. Hamilton paid a part, but they paid unequal parts. If tbe paper sued upon is a covenant of indemnity, then tbe damage to Thompson, by its breach, is no damage to Hamilton, and vice versa. They have no interest in each other’s rights. There is error in tbe charge on this point in tbe cause.
    2. There is error in tbe charge in relation to tbe sum paid by Thompson before Ms marriage. It is based upon a state of facts that bad no existence. Tbe question of fact was left to tbe jury to presume it without any proof. There is no proof that Thompson paid tbe $611 at tbe instance or request of Mrs. House.
    3. There was error in admitting Mortimer Hamilton as a witness. He had confessed judgment and fixed bis own liability to plaintiffs, and be was directly interested in fixing tbe same liability upon McNairy. He is interested to relieve himself of part of the debt for which he has confessed a judgment, by charging it on the defendant. 1 Greenl. Ev., p. 497-8. 12 Ohio R., 275. Foster vs. Hall & Eyton, Humph., 846.
    4. There was error in the admission of Hamilton’s testimony, because the testimony itself is incompetent. Its effect is to vary the terms of the written contract.
    ANDREW Ewing-, for defendants in error,
    said:
    The covenant on the part of McNairy & Hamilton was one of indemnity except so far as they might be in possession of assets-of the estate of George W. House, appliable to these debts. This construction is deduced from the situation of the parties previous to the execution; the motives for its execution as recited on the face of the paper itself, and the obligatory words used in its conclusion.
    Previous to the signature of the new notes, James Hamilton and Mary House were not individually liable for one cent, and could not have become so unless by fraud or mismanagement in their executorship, whilst in their present attitude, according to the construction of the counsel for the plaintiff, they lose all they have paid except what is received from House’s estate. On the other hand, if things had remained as they were, McNairy & Hamilton would have lost all except what they derived from House’s estate, whilst now, McNairy claims that they are entirely exonerated from any loss, and this, he insists, was in the view and mind of the parties at the inception of the contract. Eor the law on this branch of the question, see Ohitty on Contracts, p. 75, and notes. Tbe motives for tbe execution of tbe new notes is stated on tbe face of tbe covenant and proved aliunde; they were solely for tbe benefit of McNairy & Hamilton, to relíeme th&i/r credit in bcmh and prevent their suspension of business. That recitals are always to be looked to in cases of doubt as to construction of contracts, and at tbe time absolutely control it, see Cbitty on Contracts, pp. 86 and 89. Tbe obligatory words are, “ we do not bold them personally responsible or bound on tbe notes, and we release them from all personal obligation to pay tbe same, and we will not look to them for payment of tbe same further than tbe estate can pay.” Now, wbat is tbe meaning of these phrases? Is it, that if McNairy & Hamilton ever paid these notes they would not look to Hamilton and House for repayment; why, no such contingency could ever arise if tbe makers remained solvent, and if they became insolvent then their subsequent liability to McNairy & Hamilton would be unimportant. We are placed then, by this supposition, upon tbe absurdity of supposing that all parties thought tbe endorsers must p£$r tbe notes before tbe makers, and yet they are also cognizant that tbe makers would then be liable to tbe endorsers, and they are providing by covenant against the secondary liability. Surely this construction is inadmissible, and tbe true meaning is that McNairy & Hamilton exonerated tbe executors from all responsibility.
    I insist that Hamilton was a competent witness in this case. He had confessed judgment, and was no longer liable to any bias or interest. If tbe plaintiff was cast in tbe suit it had no effect on the liability of NcNairy to tbe witness for contribution. He was no party to the suit, and therefore could not be estopped. If the plaintiff recovered against McNairy it would not affect the witness’s liability, for the whole amount might have been collected of him, if able, and he put to his recourse against McNairy, or, if collected of McNairy, he, McNairy, could then have his recourse against witness. For the law on the subject, see §§ 399 and 400, 1 Greenl. 2 Humph. 106. I insist further, that there was no necessity for the testimony of Hamilton, and that the charge of the circuit judge on that point was wrong, we were entitled to a recovery on the first count of the declaration. Fox’, when a contract of guaranty is under seal there is no necessity for air allegation or proof of consideration. See 24 "Wendal, 256.
    That a consideration in any sealed instrument may be proved by parol on the face of the papei’, or that point contradicted in the same way, is now universally admitted, and the exact question in this case as to the relevancy and effect of the testimony of Hamilton, is decided in 6 Yerger, 418. Cliitty on Contracts, 52 and 500.
    In regard to the joinder of plaintiffs in this case, that was inevitable; they could not split their cause of action and sever in their suits when the covenant was joint, although their payments were necessai’ily separate. See Chitty on PL, 8, and notes.
   McKiNNEY, J.,

delivered the opinion of the coui-t.

The assignment of errors in this case, presents various questions for our consideration.

1. It is argued, that his Honor, the circuit judge, erred in construing the instrument declared on. This proposition assumes that the instrument upon its proper construction, contains no covenant to indemnify or to save harmless the covenantees against the payment of the notes to the banks, who were the holders thereof, but merely that the covenantors as endorsers of said notes, would not, in the event they should be first compelled to pay said notes, seek to hold the makers liable further than the assets of the testator’s estate, in their hands as Executors, would enable them to pay.

The instrument is inartificial in its language, and if the operative words used in the latter clause, were alone looked to, the construction contended for by the counsel of the plaintiff in error, would not be without plausibility; but in looking to the whole instrument, we are very clear that such is not the true construction of the agreement.

The rules and principles laid down for the exposition of contracts, have, for their sole object, “to do justice between the parties, by enforcing a performance of their agreement, according to the sense in which they mutually understood it at the time it was made.” Chitty on Con., 73. The intention is the governing principle of construction. In ascertaining the intention, the situation of the parties, the. motives that led to the agreement, and the objects designed to be effected by it, may all be looked to by the court. Ibid 74, note 2.

The construction must be upon the entire instrument, so that one part may help to expound the other. And in the construction of a deed or other instrument, the recitals may be looked to and used to explain a doubt as to the meaning and intention of the parties. 1 Spen. Eq., Jur., 528, 535. “ If, by a particular construction, the stipulation of tbe party would be frivolous and utterly ineffectual, and tbe apparent object of tbe contract in reference to its subject matter would be frustrated; but a contrary exposition, though per se, tbe less appropriate, looking to words only, would produce a different effect, tbe latter interpretation shall be applied to tbe agreement if it can possibly be supported by any thing in tbe contract, or tbe nature thereof.” Ohitty on Contracts, 80.

No particular form of words is necessary to make a covenant, but any words which manifest tbe intention of tbe parties in respect to the subject matter of tbe contract, are sufficient. Eac. Abr. Covenant. A. Com. Dig. Covenant, A. 2. Lebr., N. P., 469. 3 John. R., 44.

Applying these principles to tbe case under consideration, tbe conclusion is inevitable, that tbe instrument declared on, in its legal effect, is a covenant to indemnify tbe defendants in error against a personal liability, or in other words, to prevent their suffering loss or damage in consequence of having become tbe makers of tbe several notes specified in said instrument. Looking to tbe situation of tbe parties at tbe time of tbe agreement, tbe motives which prompted it, and tbe end to be effected by it, no other sensible meaning can be given to it.

It is shown by tbe recitals of tbe instrument, that no personal liability whatever, rested upon James M. Hamilton and Mary House, as executors, in reference to tbe pre-existing notes, which were under protest, made by tbe testator, and of which, McNairy and M. A. Hamilton were first endorsers. And on tbe other band, it is apparent that McNairy and Hamilton, as endorsers, bad become fixed with a liability from which there was no escape in any event.

No motive or reason, consistent with our experience, can be imagined why the executors, in the then doubtful condition of the estate, and which very shortly after-wards proved to be insolvent, should consent to incur personal liability for so large an amount without consideration, and with no indemnity. Such a conclusion is utterly irreconcilable with, perhaps, the most universal and urgent principle of human action, self interest. But we can easily perceive, from the facts recited in the instrument, a reasonable and adequate motive on the part of the endorsers, for soliciting the executors to enter into the arrangement. The endorsers were inevitably liable to the payment of the protested notes, and subject to bear the loss personally, except so far as the assets of House’s estate might turn out to be sufficient to reimburse them.

As a mercantile firm in Nashville, their credit was likely to be ruinously affected by the dishonor of their paper; hence, it was equally important for them to remove the suspension of their credit in the banks, and to procure time for the payment of the debts.

In putting the executors forward to execute new notes, in' renewal of those under protest, the endorsers were effecting a most important object, the sole benefit of which enured to them personally, and therefore they might well undertake that the executors, in doing so, should be subject to no hazard of personal loss.

In thus undertaking to indemnify the executors, the endorsers, while securing to themselves an important benefit, were taking upon themselves no greater or different liability, than that with wbicb, by law, they already stood, charged.

The instrument, it is true, is less artificial and explicit in its expression than it might have been, but the intention is sufficiently apparent. It imports an absolute engagement on the part of McNairy and Hamilton to “release,” or exonerate the executors from the payment of said notes to the banks, except so far as the assets of the estate in their hands, might, in the due course of administration, enable them to pay.

And this covenant was broken the instant the executors were left to make payment of these notes to the banks. The covenantees cannot resist a recovery in the present action on the ground that the ability or inability of House’s estate to discharge these notes, in whole or in part, has not yet been ascertained. The administration of the estate having been referred to a court of chancery, the defendants must have recourse to the assets, if any there be, in the regular mode.

2. In the progress of the cause, the defendant, Hamilton, confessed judgment for the damages sought to be recovered, and in the trial of the issues as to the defendant, McNairy, was offered and examined as a witness on behalf of the plaintiffs, for the purpose, mainly, of establishing the consideration upon which the covenant was founded. This was objected to, and is now assigned for error.

This proceeding, though irregular, constitutes no error respecting the merits. Generally speaking, a contract under seal imports a consideration, and therefore, no averment, or proof of a consideration was requisite to be made. But, if it had been required to show a consideration, it is sufficiently apparent upon tbe face of the instrument. The issue and proof upon this point, being wholly irrelevant and immaterial, cannot, in this court, be made a ground of reversal.

3. It is said, that as the notes, except one, were paid equally by Jas. M. Hamilton -and John Thompson, after the marriage of the latter to Mrs. House, each paying his own money, that each should have sued separately, and that a joint action will not lie in such case.

This proposition is clearly untenable. The- covenant being made to two persons jointly, they must be joined if living, and the failure to join wpuld defeat the 'action-, although they may have severally paid the debt, and out of their separate funds, either in equal or unequal proportions. 6 Wend., 629. 3 Cowen R., 142. Chitty on Pl., 8. How the law upon this point, in an action of assumpsit for money paid, may be, we need not now enquire.

4. It is proved by Mr. Ewing, that on the 22d of October, 1851, John Thompson, one of the plaintiffs, gave him six hundred and seventy-seven dollars to be paid to the Hnion Bant in extinction of the judgment of said bant,” upon one of the notes specified in the covenant declared on. And it is also proved that this transaction toot place on the day preceding the marriage between said Thompson and Mrs. House. For this sum there was a recovery in this case, as well as for the several aipounts paid in discharge of the other notes described in this covenant.

It is said, that as to this payment on the 22d of October, 1851, there is no evidence to support the verdict, an,d so we think.

It is certainly true, as argued, that if Thompson paid the money at the request of Mrs. House, and for her prior to the marriage, it might well be recovered in the present action. But there is no evidence whatever, in this record, that the money was paid to Mr. Ewing for Mrs. House, or at her request, or even with her knowledge; and this want of proof cannot be supplied by inference from the fact of the marriage between Thompson and Mrs. House on the following day. The character of the transaction, as well as the legal effect, must be judged by the state of facts existing at the time of the payment. And it is clear, upon the proof before us, that if the marriage had not followed, Thompson would have- had no pretext for claiming to recover for this payment, against Mrs. House.

For aught that appears, it was merely an officious, voluntary act, wholly incapable of creating the relation of debtor and creditor between them.

Upon the last ground alone, the judgment must be reversed, and a new trial granted.