Case ID: va_25/html/0226-01.html
Source: Caselaw Access Project
Author: {"author": "JUDGE GREEN", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Farmers’ Bank, &c. v. Vanmeter.
    November, 1826.
    Equity Practice — Injunction to Judgment— Mistake. —A'Court of Equity will never injoin a judgment at law, on the ground that it would have been reversible if the proper steps had been taken in the Court of Law, but by mistake, a confession of judgment had been entered.
    Bills of Exchange — Fraud—Arrangement with Endorsers. — It Is no fraud In the holder of a hill of exchange, to make an arrangement with one of the endorsers, by which it is agreed that the whole burthen shall be thrown upon the other endorsers, and that the endorser first mentioned* is to be liable only in case they should be unable to pay.
    Same —Refusal to Accept — Notice to Endorser, — Where a bill of exchange is presented to-the drawee, who refuses to accept or to pay, notice need not he given to the endorser, if the bill was drawn and endorsed for the accommodation of the drawer, with the knowledge of the endorser, and there was no expectation that hill would be paid by the drawee.
    Same — Endorsers—Contribution—Right to.— One endorser has no right to contribution against the other endorsers, where the several endorsements, were made for the accommodation of the drawer*' unless there is a stipulation to that effect.
    Appeal from the Staunton Chancery Court. The case was this:
    William Bane, drew three drafts on Bryan Hampson & Co. and prevailed on William Vanmeter, James Marshall, and W. H. Triplett to endorse the same, in the; order in which their names are here set down. These drafts so endorsed, were discounted at the Bank, and they *were presented to Bryan Hampson & Co., noted for non-acceptance, and protested for non-payment.
    The Bank brought suits against the drawer and endorsers, and took judgment against Lane and Vanmeter by confession. Lane proved insolvent, and Vanmeter filed a bill to injoin the said judgments. The Bank, Isaac Baker the Cashier, James M. Marshall and William H. Triplett, were made defendants.
    The bill states four grounds of relief: 1. That the drafts were drawn and endorsed, purely for the accommodation of Lane, and for the purpose of raising money by discounting them at Bank; and therefore, all the endorsers are jointly bound to contribute their proportion in the event of Lane’s insolvency. 2. That the Bank had made a fraudulent agreement with Marshall, one of the endorsers, to proceed against Vanmeter alone, upon the assurance of the said Marshall, that he would ultimately see the money paid, if it could not be obtained from Vanmeter. 3. That the judgments were entered by confession, without any authority given by Vanmeter for that purpose; and if they had not been so entered, he could have defeated the plaintiff at law. 4. That notice of protest was not given to Vanmeter or any of the endorsers.
    The Cashier of the Bank answered, denying that the judgments were confessed without authority, &c.
    Marshall averred in his answer that he had no suspicion, when he endorsed the bills, that it was not intended that they should be paid when at maturity, and that he was assured, that Lane had flour in Alexandria, or on the road, amply sufficient to discharge the said bills: that he would not have endorsed them, if he had not believed that they would be paid when due, inevitable accidents only excepted. As to'the charge of collusion, he admits the statement in the bill, to be substantially true, and denies that there is any thing illegal in it.
    *The injunction was granted; and at a subsequent day, on a motion to dissolve, the Court over-ruled the motion, and the defendants appealed.
    Nicholas, for the appellants.
    No Counsel, for the appellee.
    Nicholas, having stated the case, was stopped by the Court, and informed that no argument was required on that side of the question.
    
      
      Equity Practice — Injunction to Judgment — Judgment Stands as Security. — Wheire a party is proceeding at law to get a judgment for more than is due, and the defendant appeals to the court of chancery for relief by way of injunction, the settled rule is, that it will only be granted on terms of confessing a judgment and executing a release of errors at law. And a judgment is always suffered to stand as a security for what may be really due, though obtained by fraud, accident or surprise, and although what may be due be the whole or a part only of the debt recovered. Bank of Washington v. Hupp, 10 Gratt. 33, citing opinion of Judge Green in the principal case as authority.
      And in Grafton, etc., R. Co. v. Davisson, 45 W. Va. 17, 29 S. E. Rep. 1030, It is said: "The court must not at once set aside the judgment, and grant a new trial, when it determines that a retrial should be had, but must await its result, as the judgment ought to stand as security until it is finally determined whether it shall be perpetually enjoined or not. Knifong v. Hendricks, 2 Gratt. 212; Bank v. Hupp, 10 Gratt. 33; Wynne v. Newman, 75 Va. 811; Bart. Ch. Prac. 58; 2 Story Eq. Jur. § 1574. The judgment ought tobe allowed to stand as security until the final decree, as its lien is good for what may be found to be really due, though obtained by fraud, accident or surprise, and though what may beduebethe whole or only part of the debt recovered (Bank v. Vanmeter. 4 Rand. 553. Judge Green’s opinion; Judge Lee’s opinion, Bank v. Hupp, 10 Gratt. 33); justas a judgment reversed in partis all the while a lien (2 Bart. Ch. Prac. §295; Moss v. Moorman, 24 Gratt 97). There are cases where at once the judgment was set aside a"nd a new trial granted: but it is improper, as cases above show.”' To the same point the principal case is cited in Smith v. McLain. 11 W. Va. 672.
      See further, monographic note on "Judgments”' appended to Smith v. Charlton, 7 Gratt. 425; mono-graphic note on "Injunctions” appended to Claytor v. Anthony, 15 Gratt. 518.
    
    
      
      BIIIs of Exchange — Nonacceptance—Notice to indorser— Necessity of. — The drawer of a bill of exchange, or order, is not directly liable to the payee or Indorser, hut his implied obligation or contract is to pay, in the event the amount is not paid by drawee. And the general rule is well established, that the drawers and indorsers are entitled to prompt notice of the nouacceptauce or nonpayment, in order that the former may look after his funds and withdraw or secure the same, and that the latter may take the necessary steps to secure himself: and that upon the failure to receive such notice they are discharged from liability; and the bill or order, as between the drawer and payee or indorser, will be considered paid. Ford v. McClung, 5 W. Va. 166. citing principal case as authority. To the same effect, the principal caséis cited in McClain v. Lowther. 35 W. Va. 299, 13 S. E. Rep. 1003. Bach of these cases say that there are well defined and numerous exceptions to this rule.
      In the principal case, the indorser was not released because he could not possibly suffer any damage by failure to give him notice: since the only purpose of notice would be to inform him of the necessity of resorting to the drawer for indemnity, which, in this case, is unnecessary, as he already has indemnity In his hands. Turner v. Stewart, 51 W. Va. 493. 41 S. E. Rep. 927.
    
    
      
      Negotiable Paper — Successive Indorsements — Effect. —The legal effect of several successive indorsements is. that each indorser has a right to look for indemnity to all the indorsers who precede him, whether they indorse for accommodation of the drawer or for value received; unless there he an. agreement aliunde, different from that evidenced by the indorsements. Bank of United States v. Beirne. 1 Gratt. 265, citing the principal case as its authority. Again in Willis v. Willis, 42 W. Va. 524, 26 S. E. Rep. 515. It Is said: “1 Daniel Neg. Inst. § 703, says: ’When several persons indorse a bill or negotiable note in succession, the legal effect is to subject them, as to each other, in the order they indorse. The indorsement imports a several and successive, not a joint, obligation, wbether the indorsements be made for accommodation, or for value received, unless there be an agreement aliunde different from that evidenced by the indorsements. When the successive indorsements are for accommodation of other parties, the indorsers for accommodation may make an agreement to be jointly and equally bound, but whoever asserts such agreement must prove it. In cases, therefore, in which no such agreement is proved, the indorsers are not bound to contribution amongst themselves, but each and all are liable to those who succeed them.’ This clear statement is sustained by authority in almost all quarters, including authority binding us. Hogue v. Davis, 8 Gratt. 4; Bank v. Beirne, 1 Gratt. 265; Bank v. Vanmeter, 4 Rand. 558; Shields v. Reynolds, pt. 2, 9 W. Va. 483; Hoge v. Vintroux, 21 W. Va. 1, pt. 2. It would be different in the case of an ordinary surety on nonnegotiable paper. But while an indorser on negotiable paper is, in a sense, surety, as regards payee and maker, he is not as to a prior indorser, for the benefit of that indorser. 'Edmiston’s opinion. Shields v. Reynolds, 9 W. Va. 487; Ross v. Jones, 22 Wall. 576." To the same effect the principal case is cited in Bank of United States v. Jackson, 9 Leigh 239: Faulkner v. Thomas, 48 W. Va. 148, 85 S. E. Rep. 917; Young v. Sehon (W. Va.), 44 S. E. Rep. 139.
      See further, monographic note on “Bills. Notes and Checks” appended to Archer v. Ward, 9 Gratt. 622.
    
   November 28.

JUDGE GREEN

delivered the opinion of the Court.

The object of this suit was to injoin three judgments recovered by Baker for the use of the Farmers’ Bank, against the plaintiff and Lane. These judgments were entered as confessed by those defendants, and were so entered by some mistake; Vanmeter never having employed counsel, or authorised the confession of judgments.

There are several grounds for relief asserted bv the appellee. The first is, that such judgments could not have been had, or if had, would have been erroneous and reversible, if they had not been entered as by confession; the actions being joint against the drawer and endorsers of an inland bill of exchange, not upon its face negotiable at any of the chartered Banks of Virginia. This objection to the form of the actions, and the fact that the judgments would have been erroneous and reversible, if they had not been entered by mistake, as confessed, can have no weight in a Court of Equity. There the rule is,, that whosoever asks equity must do it, as a condition of relief; and a judgment at law, however obtained, no matter by what fraud, accident or surprise, is allowed to stand as a security for what is justly due,, whether that be a part or the whole of the debt recovered. The enquiry in a Court of Equity is never, *whether the judgment is erroneous or unduly obtained; but whether it be for a debt justly due or not. If Vanmeter was responsible for these debts, in actions brought against him individually, he cannot complain in a Court of Equity, that he is injured by judgments rendered against him jointly with another.

The next objection taken to these judgments, is on the merits. The plaintiff alleges that the three endorsers, himself, Marshall and Triplett, were joint sureties, by virtue of their endorsement of the bills; drawn by Lane, and discounted at the Bank for Lane’s accommodation : that each was bound to bear a due proportion of the loss, Lane being insolvent; and that the Bank, who is not charged with notice of that fact, had concluded with Marshall to throw the whole burthen upon him, by dismissing the suit as to Marshall, upon his agreeing* to hold himself bound for the debts, and to pay them immediately, if Lane and Van-meter should be unable to pay.

If all this were true, and the endorsers were mutually bound to each other for contribution, and the officers of the Bank had full knowledge of the facts, they would have been guilty of no fraud or wrong to the plaintiff, by making such an arrangement with Marshall, and carrying it into effect. The drawer and endorsers were severally liable to the Bank for the whole amount of the bills in solido. The Bank had a right to pursue any one or more, or all, in several actions; and to have coerced the payment of the whole from either of them. The legal or equitable rights of securities to contribution among themselves, can never affect the rights of the creditor, or bind him to proceed against each for his proportion of the debt: unless, indeed, were the ■obligations of the parties are in the form of a joint contract, in which case, all must be sued together, but either may be compelled by execution to pay the whole.

The remaining objection is also on the merits.

The bills were presented before they were due, and the drawee refused to accept ; and Vanmeter alleges that no ^notice was given to him, he being the first endorser, either of the nonaCceptance, or non-payment. This is probably true, and in the present stage of the cause, must be taken to be so. If he was entitled to notice, he was not liable to the claim of the Bank, and would be entitled to relief; for, he was precluded from making this defence at law, by the mistaken entry of judgments by confession.

The facts, upon which the question, whether Vanmeter was or was not entitled to notice, are stated by himself in his bill. He says, that the bills were drawn and endorsed for the accommodation of Bane, the drawer; and for the purpose of getting them discounted at the Bank: that no consideration, whatever, passed between the parties, or any of them; and that there was no expectation that they would be paid by the drawee.

It is a general rule, that the drawer or endorser of a bill of exchange, is discharged from responsibility, unless he has due notice of the dishonor of the bill, by non-acceptance or non-payment. This notice was required originally, for the purpose of enabling the party to take promptly such measures for his security, as might be in his power; and it seems to have been originally required of him, if he complained of the want of notice, to prove, that for the want of it, he had suffered some injury. The modern doctrine, however, is perfectly well settled, that the law implies an injury, from a want of due notice; and this presumption is so strong, that in order to repel it, proof is required to shew that it was impossi ble for the party to suffer any damage or inconvenience. Thus, in the case of a drawer; if the bill be drawn'without funds in the hands of the drawee, and the drawer had no reason to expect that the bill would be accepted; this is considered as a case in which it is shewn that no possible prejudice can result to the drawer from the want of notice; since he knew, when he drew the bill, that it would devolve on him to take it up, as well without as with notice of its dishonor; and having no reason to expect the bill to be accepted, it cannot be *supposed that he would make any arrangements for putting funds in the hands of the drawee to take it up. But, if the drawer, without funds in the hands of the drawee, has any just ground to believe that the bill will be accepted, he ought to have notice; for in that case, it is to be presumed that he will ■so arrange his funds as to place the means of paying the bill at maturity, in the hands of the drawee. Such arrangements, if unnecessary and fruitless, would be prejudicial to the party; and to enable him to avoid this mischief, immediate notice should be given.

The case of an indorser is still stronger than that of a drawer; for he has, in general, a right to resort to the drawer- for indemnity, and to enable him to assert this right with the greatest possible effect, he ought to have immediate notice. But, even as to an endorser, a case may occur, in which it may be shewn to be impossible for him to suffer any inconvenience for the want of notice. As in the case of a note endorsed by the payee for the accomodation of the drawer, who should place in the hands ot the endorser funds sufficient to discharge it. The latter would not be entitled to notice of the non-payment; because he could not possibly suffer any damage by the failure to give him notice, Carnay v. Da Costa, 1 Esp. Rep. 303; since the only purpose of a notice, would be, to inform him of the necessity of resorting to the drawer for indemnity, which, in this case, is unnecessary, as he already has that indemnity in his hands.

With the exception of the cases, in which it can be shewn, that they could not, by possibility, suffer an injury by the failure to give them notice, the drawer and endorser have in all cases a right to strict notice, unless they waive that right, or forfeit it by their own fraud. I do not find this ground of fraud, very distinctly laid down as a reason for dispensing with the necessity of notice. But, there are many cases in which it appears to have been the sole ground of the judgment, and in which, the principle is distinctly alluded to.

*In De Bert v. Atkinson, 2 H. Black. Rep. 336, the endorser of a note for the accommodation of the drawer, who knew that he was insolvent, was held not to be entitled to notice of non-payment. If this case proceeded upon the supposition, that the knowledge of the drawer’s insolvency made it impossible that the endorser could suffer any injury for the want of notice, then it contradicted many other cases, in which it .has been determined, that the insolvency of the acceptor, whether he accepted for the accommodation of the drawer or of himself, did not dispense with the necessity of notice; for, it is not impossible to procure payment from an insolvent man, through his friends or otherwise; and the drawer is entitled to notice, in order to enable him to take this chance. The drawer of the note in this case, was in the situation of an acceptor, for his own accommodation; and the endorser, in the situation of the drawer of the bill so accepted. If it was decided upon the ground of fraud, the decision was equally objectionable; for, no fraud or imposition was practised on the holder, since he got the security of the very names, which he expected to get when he contracted. This case has been virtually over-ruled in French’s ex’r v. Bank of Columbia, 4 Cranch, 161. I mention it only to shew, that Bord Ellenborough considered it as decided on the ground of fraud; and upon the authority of that case, decided Sisson v. Thomlinson, Selw. N. P. 324, n. 31; in which he ruled, that when an endorser had not given any consideration for a bill, and knew at the time that the drawer had not any effects in the hands of the drawee, he was not entitled to notice of non-payment. In this case, the decision could not have been founded upon the principle that the endorser could not sutler any detriment for want of notice, since it was a bill accepted; and although none of the parties had given any value, and it was to all the parties an accommodation bill; yet the endorser had a right, if he paid it, to resort to the acceptor; a right, which might have been rendered of no avail, for *the want of timely notice of non-payment. The only ground, upon which this case was decided, was, the fraud upon the public, practised by the endorser, by endorsing a bill which he knew to be drawn without funds. This case was totally different from that of an insolvent’s note, endorsed for his accommodation; the holder of which got all he contracted for. Every drawer of a bill, virtually represents to all dealing for it, that it is drawn upon sufficient funds. The holder deals upon the faith that he shall have the additional security of the drawer; and if he fails in this, he is disappointed by the fraud of the drawer; and if the endorser, with a knowledge of the facts, endorsed for the purpose of promoting the object of the drawer, he would be a participator in the fraud. If, therefore, in Sisson v. Thomlinson, the bill had not been accepted, there would have been better reason to hold, that the endorser was not entitled to notice; for, that would have corroborated the presumption, that the endorser knew that the bill was not only not drawn upon funds; but also, that it would not be accepted. So that the holder would be disappointed in the expectations raised by the fraudulent misrepresentations of the drawer and endorser. Neither would the endorser, in that case, have any acceptor to resort to; nor could he claim against any one but the drawer. If he knew that the bill would not be accepted, then he knew the necessity of looking to the drawer from the moment he endorsed; and therefore, wanted no notice to put him on his guard. The bill, however, being accepted, the holder got all he contracted for; and the fact of acceptance indicated, that although the endorser knew that the drawee had no funds of the drawer, he had reason to expect an acceptance, and would be entitled to notice. In such a case, the holder can hardly be said to be deceived or defrauded. The actual decision of this case cannot be supported, but upon the ground, that if the endorser acted in the beginning with an intent to deceive others, he cannot insist upon notice, even if no one be deceived.

*In Brown & al. v. Massey, 15 East. 216, it was held, that when a bill was drawn, accepted and endorsed by several, for the accommodation of the last endorser, and the acceptor had no effects of the drawer in his hands, but that fact was unknown to one of the endorsers, who was the defendant, he was entitled to notice of the non-payment, having a right to resort to the last endorser for indemnity. This case seems to turn upon the bona fides of the endorser. If he had known the fact that there were no funds in the hands of the drawee, he would probably have been considered as having participated in the fraud of putting a bill purely for accommodation, into circulation.

In Leach v. Hewitt, 4 Taunt. 731, the defendant had endorsed a bill for the accommodation of a third person, whose name was not on it. The bill purported to be drawn by one firm, which had no existence, and accepted by another fictitious firm; but this was unknown to the endorser. The instruction of Mansfield, Justice, to the jury, afterwards approved of by the Court, was, that the endorser was entitled to notice, if he was not privy to the fraud. If the endorser in that case, had been privy to the fraud, he would not have been entitled to notice. Not being privy, he was entitled to claim against the person, for whose accommodation he had endorsed; and the Want of notice might have impaired his remedy.

These cases are referred to, for the purpose of shewing that an endorser, who unites with the drawer to deceive the holder, by representing a bill as one that will probably be accepted, with a knowledge that it will not, is guilty of a fraud, which deprives him of the right to insist upon notice. The principle, although perhaps pushed too far in its practical application in some of those cases, is just. If a bill! were drawn upon a fictitious person, and was endorsed with a full knowledge of that fact, for the purpose of enabling the drawer to raise money by getting it discounted, it could not for a moment be doubted, that the holder could recover against the endorser, without giving him notice *that he applied at the place to which the bill was directed, and found no person to present it to, answering the description of the bill. This, would be a gross and palpable fraud, in both drawer and endorser. I can perceive no difference between that case, and one in which the bill was drawn and endorsed, with full knowledge on the part of the endorser, that the drawer not only had no funds in the hands of the drawee, but that he had no right to draw upon him, or reason to expect that he would accept; except that in one case, the non-existence of the nominal drawee would be complete proof of the fact, that there was no expectation, or ground for expectation, that the bill would be accepted; and in the other, it might be fairly inferred, in the absence of proof to the contrary, that the endorser, from the representations of the drawer or otherwise, did bona fide expect that the bill would be accepted; an inference which it might be difficult, and almost impossible, to disprove.

But, the case under consideration, is precisely the case last supposed, and the proof is full. Vanmeter, in his bill sworn to, states that the bills were drawn and endorsed for the accommodation of the make r, for the purpose of procuring a discount at the Bank; and that there was no expectation that they would be paid by the drawee; and the answer of the Bank, sworn to by the Cashier, states, that if the facts so stated by plaintiff, had been known to them, they would not have discounted these bills. I think this was a fraud upon the Bank, and that Vanmeter was therefore entitled to no notice. '<

It is not necessary to enquire whether, if Vanmeter would have had a right to claim contribution from the other endorsers, if they had had due notice of the non-acceptance or non-payment, he was therefore en-. titled to notice, in order that he might give them notice, and so secure his recourse against them. For, he had no right to claim contribution from them. There was no agreement amongst them, that each should bear a part of the loss as joint sureties, *éither expressed or to be implied from the. circumstances of the case, but the contrary. Each of the ■endorsers defendants,-deny that there was any such agreement, and say, that although they endorsed for the accommodation of Lane, they did so under the full persuasion that the bill would be accepted and paid. I at one time doubted, whether several endorsing for the accommodation of another, ought not to be considered as joint sureties, and bound to contribution amongst themselves. But, I am satisfied, that this cannot be the effect of such a transaction, unless there be a stipulation to that effect. Sureties may bind themselves severally in succession ; so that each may be a supplemental surety, in respect to another. Craythorne v. Swinburne, 14 Ves. 160. In this case, they have bound themselves by an instrument, the legal effect of which is to subject them, in respect to each other, in succession in the order in which they endorsed ; and they must be taken to have intended to be bound according to the legal effect of the instrument, until the contrary appears. If several endorsers, in such circumstances, were liable to contribution as a matter of course, the books would have teemed with cases on the subject. But, I cannot find that the question has ever been raised.

The order refusing to dissolve the injunction upon the merits, must be reversed, and the injunction, dissolved.