Case ID: ohio-st_33/html/0019-01.html
Source: Caselaw Access Project
Author: {"author": "\n      Wright, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Kingsland, Hook & Co. v. Watson Pryor.
    X. The maker of a note by fraud procures an accommodation indorsement upon it, transferring it, before due, to a creditor, in payment of a preexisting debt, the creditor giving time and surrendering collaterals. Unless complicity in the fraud, or knowledge of it at the time of taking the note, is proven against the creditor, the paper in his hands can not be impeached.
    ■ 2. A creditor demands security of his debtor, who, to obtain it, makes fraudulent representations to the one who becomes surety. The creditor is ignorant of these representations, and innocent as regards the debtor’s conduct. No such relation of agency exists as will make the creditor responsible for the debtor’s acts.
    Error to the District Court of Belmont county.
    Pryor was sued in the court below as indorser of a promissory note for $4,030.14, dated August 14,1869, payable in four months at the Eirst National Bank of Barnesville. Jones & Mays were makers of this note, and Pryor indorsed it for their accommodation. Pryor claims that his indorsement was obtained by fraud, with which plaintiffs-are connected, and therefore they can not recover.
    ■Jones & Mays were merchants, in apparently prosperous circumstances, and Pryor was their neighbor and friend and a family connection.
    In April, 1869, a debt was due from Jones & Mays to-plaintiffs, Kingsland, Hook & Co. It is not necessary testate the origin of this debt, or other circumstances attending it, further than to say that it was a legitimate one, falling due August 14, the date of the note in suit. For ■ this debt, the original one, plaintiffs had certain collateral, securities. Becoming dissatisfied with these securities, plaintiffs desired others, and Jones & Mays said they could, furnish Pryor, Brock, or Lisle as indorsers.
    Plaintiffs therefore instructed their attorney, Collins, who had already acted for them, to get a note indorsed with one of these names, and Jones & Mays were to have an extension of four months, and receive back the collaterals already held by Kingsland, Hook & Co.
    It is through the conduct of this attorney, in part, that Pryor claims plaintiffs are connected with the fraud perpetrated by Jones & Mays. Besides being an attorney,. Collins was a director in the Bank of Barnesville, and, as it appears, its counsel. Jones, the active partner of Jones & Mays, was also a director in the. Bank of Barnesville, owning $10,000 of its stock. In April, 1869, the firm of Jones & Mays was embarrassed, and in that month Jones transferred his $10,000 bank stock to the bank, to secure or pay a debt of the firm. In May he transferred all the real estate of the firm to the bank for the same purpose. As attorney for the bank, Collins knew all about these transactions. They were kept a secret from the public, and the deed kept off record, according to the finding of the jury, by agreement. This agreement is denied by Collins. With knowledge of these facts, Collins undertakes-to get the new security for his clients, Kingsland & Hook.
    Collins sends word to Jones that he must furnish the se— curity required; whereupon, Jones goes to Pryor, and asks his indorsement, telling him he wants to get money out of the Barnesville bank, to buy wheat with. Pryor did not know that Jones had already transferred all his real estate and all his bank stock to the bank, and Jones did not inform him of these facts. Pryor supposed the firm to be as strong as they ever were. He had confidence in Jones, who undoubtedly abused that confidence. Having thus obtained the indorsement, Jones takes it to Collins, and receives back the collaterals, the debt being thus extended four months from August 14th, the date of the note. This note, as originally indorsed by Pryor, was in pencil. Subsequently, Kingsland & Hook wanted the obligation written in ink, as was quite natural. Thereupon Collins makes a new note in ink, like the former, and tells Jones to get Pryor’s indorsement upon it, when the old one in pencil would be returned.
    In obtaining this new note, Jones writes a note to Pryor, telling him that “ our directors are not satisfied ” with the ■pencil note, and asks the new one, for the accommodation •of the “ directors,” thus leading Pryor to suppose that •the note was in the hands of the bank, when it had already been transferred to Kingsland, Hook & Co. In November, 1869, Jones & Mays became bankrupt, and Pryor is left to pay his indorsement, or get out of it if he • can.
    The testimony in the case is quite voluminous, and we have not stated all of it, but only such as is important, in view of the points upon which the decision turns.
    In the court of common pleas, the verdict and judgment was for defendant, Pryor. The district court affirmed that judgment, and a petition in error was filed in the supreme •court.
    
      William Okey and ./. H. Collins, for plaintiff in error.
    
      D. D. T. Cowen and St. Clair Kelley, for defendant in error.
   Wright, J.

I. Plaintiffs in error, Kingsland, Hook &' Co., plaintiffs below, took this note, with Pryor’s accommodation indorsement, and gave for it an extension of four months, surrendered up collaterals which they held, thus receiving the new note in absolute payment. They are therefore bona fide holders- of paper transferred to them-before maturity.

II. Jones, of Jones & Mays, obtained this accommodation indorsement of Pryor by fraud. Had Jones informed Pryor, as he should have informed a confiding friend of whom he was asking pecuniary favors, of the condition of the firm; had he informed him that all the real estate had. been deeded away to pay or secure debts; that all the-bank stock had gone in the same direction; that creditors-were praying for security upon old obligations; that lawyers were employed to collect or secure, Pryor, if a man of ordinary intelligence, would not have indorsed for so-' large an amount, unless, indeed, there were other claims-upon him to render assistance than those appearing in the case. Indeed, Pryor says he would not have gone on the paper if he “ had had any idea things were in the shape-they were.” But not content with suppressio veri, in the-nature of demónstrate falsi, Jones gives as a-reason for-asking the favor, that he wants to get money out of theBarnesville bank to buy wheat. This was untruth in the-fullest sense of the term. No such purpose was ever, at anytime, entertained. Jones wanted the note to pay the old debt of Kingsland, Hook & Co., who, through Collins, were urgent. This was his sole object, and the indorsement was-at once thus applied.

HI. Could we in any way connect plaintiffs, either directly, or through their attorney, Collins, with this fraud of Jones, we should long hesitate before reversing the-judgment below. But can this be done ? As to plaintiffs themselves, they did not know Pryor, except through Jones.. They never spoke to him, never saw him; had no communication with him.' Jones offered to give his name, or that of others, as security. Kingsland, Hook & Co., who were merchants in Baltimore, inquired, and found that Pryor was responsible, and informed Jones they would take him. Further, Kingsland, Hook & Co. did not suggest to Jones • anything of the course he took to procure the indorsement. They knew nothing of this whatsoever. Directly, therefore, they are in no way connected with, or responsible for, Jones’ conduct. Are they, then, responsible through their attorney, Collins, upon the ground that the principalis responsible for the acts of his agent ?

Had Jones and Collins put their heads together in this matter; had Jones proposed and Collins assented, or had Collins proposed and Jones assented, that Jones should go to Prior, and, concealing his financial distress, tell the story about the wheat, and so get the desired note, we would not hesitate to hold Kingsland, Hook & Co. responsible for the acts of their attorney, with all the consequences, even to invalidating the note. Burks v. Wonterline, 6 Bush. 20 ; Story Eq. Jur. § 204; Rees v. Barrington, 2 White & Tudor L. C. in Eq. 1867; Owen v. Homan, 8 Mac. & G. 378.

But what part did Collins take in the matter ? As to getting the original note — the one in pencil — Collins had no communication with Pryor, did not see him, did not speak to hinj on the subject. Nor did he advise Jones as to the course he should pursue. He did not intimate to Jones to conceal his condition from Pryor, nor did he have any part or parcel in the wheat story; the whole transaction was original with Jones, and no one is responsible for it but him. It is true that when plaintiffs wanted a note in ink substituted for the one in pencil, Collins writes a letter to Jones, inclosing a new note, asking him to get Pryor’s indorsement, and to send the letter to Pryor, that he may understand the old note will be returned. This appears to be all the intercourse Collins had with Pryor throughout the whole business, and we fail to see any evidence whatever to implicate Collins in the fraud that Jones perpetrated.

The court, therefore, properly charged: “ The defense of fraud and collusion, in procuring the signature of Pryor, fraud in the improper use of the security, is set up, and if these defenses are made out, the plaintiffs, if they shall by testimony be so connected with these frauds as to make them parties thereto, or to charge them with the knowledge ■of the same, can not recover.”

This charge, for the purposes of the case, was correct, and there is no evidence in the record to warrant the conclusion that plaintiffs were connected with the fraud in question, or were charged with knowledge thereof. Defendant alleges, in his answer : “ The defendant further says that the said plaintiffs were in collusion with said Jones & Mays, in obtaining said indorsement, and the note came Into plaintiffs’ possession with notice of the manner in which it was obtained.”

It is precisely this allegation which fails of proof.

It is beyond question that Collins, as attorney of the Barnesville bank, knew of J ones’ condition ; knew he had transferred his real estate and bank stock, though he says he still thought the firm' solvent. He had also been securing other claims. It seems to be insisted that, because Collins had obtained this knowledge, as attorney of the bank, he was in some way bound to communicate it to Pryor. We can not so believe. Collins was^employed to get the security from Jones; he had dealings with Jones alone, and it was no part of his business to give any information whatever to Pryor, at least until he was asked for it. Magee v. Mem. Life Ins. Co., 92 U. S. 93; Hamilton v. Watson, 12 Cl. & F. 109; N. B. Ins. Co. v. Lloyd, 10 Exch. 523; Withers v. Labouchere, 3 De Gex & J. 609.

An attorney employed to secure a claim is not bound to make public such information, in his possession, as will prevent him from accomplishing the object of his employment.

A portion of the charge is occupied in stating to the jury that the knowledge obtained by Collins as attorney ■of the bank was not a privileged communication, and it was not a breach of professional confidence in him to impart it to plaintiffs. We do not see what this has to do with the ease. The question, and the sole question, as we conceive it to be, as regards Collins, is, did he directly, or through Jones, impose upon. Pry or? Whether he communicated his information to plaintiffs or not, makes no sort of difference, and unless he was under some obligation to impart it to Pryor, the not doing so is nota circumstance to impeach the transaction. The charge, therefore, in this respect, was misleading. Nor can it be said that Jones, in •getting the indorsement, acted as agent for plaintiff, so as to make them responsible for the fraud he undoubtedly •committed. Farmers’, etc., Bank v. Lucas, 26 Ohio St. 385. Jones was acting for himself, and merely did what many before him have done, and doubtless more after him will do. With the terror of impending failure before him, he imposed upon unwary friendship, and involved others in a ■desperate attempt to escape the inevitable.

The views expressed dispose of certain questions of evidence.

Questions A to K, inclusive, in Collins’ cross-examination, were incompetent. The purpose of these questions is to show the condition of the firm, and the transfer of its property, as being facts at the time known to Collins. It is no matter of consequence whether he knew them or not, unless it was his business to inform Pryor of them, a duty which, as we have said, it was not incumbent upon him to perform.

Two letters were offered in evidence, by Pryor, as follows :

“ Burr’s Mills, October 9, 1869.

“ Mr. Watson Pryor — Dear Sir: Inclosed please find our note, payable to your order, for indorsement, to take the place of the one you indorsed for us, written with a pencil. 'The note written with pencil is just as valid as written with pen and ink, but some of our directors are not satisfied, and I told them I would get one with ink, and the one you signed will be destroyed. By writing your name across the back, will much oblige undersigned; for the accommodation of the other directors. G-. M. Jones.”

. “P. S. — You will find the letter inclosed of director Collins. G-. M. Jones.”

“Babnesville, Ohio, September, 11,1869.

“ G-. M. Jones, Esq. — Dear Sir : Please sign this note, firm name, and get Pryors indorsement thereon, and I will return you the note written with pencil. Send this letter to Pryor, so he will understand the other note is to be returned. Sincerely, J. II. Collins.”

These letters were objected to by plaintiff, and should have-been ruled out. They are incompetent on two grounds:

1. The original indorsement was made in pencil. The rights of the parties were fixed at that time, and the circumstances subsequently occurring could not vary those-rights.

2. It is very apparent that Jones, by his letter, wanted Pryor to understand that the note was in the hands of the-bank, in accordance with the wheat story, that suspicion might not be awakened. This was a deception; but how are plaintiffs connected with or responsible for-it ? Collins, so far as the evidence shows, did not know of this note, or its contents. He simply wrote to Jones to get the new-note, and J ones took his own course.

The bill of exceptions states that when defendants’ counsel offered the Jones letter, he stated that plaintiffs would be connected with it. The connection, however, failed.

Judgment reversed.