Case ID: ohio-st_28/html/0041-01.html
Source: Caselaw Access Project
Author: {"author": "Johnson, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Marling Oldham v. Daniel Broom.
    1. The right of contribution among co-sureties is not founded in contract, and does not depend on the form of the instrument nor the position of the names of the obligors therein, but is the result of the application of general principles of equity, and depends on the actual relation they sustain to the instrument and to each other.
    2. In an action for contribution, and in the absence of any contract in writing fixing such relation and liability between accommodation parties to a note, parol evidence is admissible to show the real nature of the trans-' action.
    3. As between accommodation makers of a promissory note, the presumption is that they are co-sureties, and as such liable to each other to contribute ; but this presumption may be rebutted by parol proof showing that the one last signing did so as the surety for the prior makers, and not as a co-surety with the prior surety.
    4. "Where a joint note is signed by the principal and by one as his surety and is entrusted by the surety to the principal without limit on his authority, such surety thereby impliedly authorizes the principal to obtain such additional sureties or guarantors as may be required to make the paper available for the purposes intended by the original makers, and the sureties or guarantors so obtained may stipulate the terms of their liability, as between themselves and prior parties.
    5. One who thus signs such note, at the request of the principal debtor, to enable him to use it as intended, without the knowledge of the prior surety, and without any agreement or understanding with him to the contrary, may stipulate with the principal debtor and make it a condition of his signing that he signs as surety of the prior parties, and not as co-surety with the prior surety.
    6. Such stipulation need not be in writing, and parol evidence is admissible to show an express contract to that effect, or facts and circumstances that will raise an implied contract.
    7 Declarations of such party, made to the principal debtor at the time ho executes and delivers the instrument, as to the terms and conditions on which he becomes liable, are, in connection with other testimony, admissible as part of the res gestee, tending to show an agreement, express or implied, as to the extent of such liability.
    Error to District Court of Guernsey county.
    This was an action in the court below by Daniel Broom against Oldham, to compel contribution, on the ground that they were co-sureties of one Hugh Broom, on a note joint in form, executed by. all, as makers, to secure to one Mathews money owing by Hugh, for whose accommodation the plaintiff’ and defendant became liable as co-sureties of Hugh, who is insolvent.
    The petition further states that after the maturity and non-payment Mathews recovered a judgment against all the makers, and, to satisfy the same, sold plaintiff’s property ; and the prayer is that he recover of defendant one-half the amount.
    Oldham admits signing the note, but denies he is a co-surety, and avers that he is only liable for Hugh and Daniel Broom.
    Upon this issue the verdict was for the plaintiff for one-half the amount paid by plaintiff.
    A motion for a new trial was overruled; and judgment rendered on the verdict.
    A bill of exceptions was taken, and, on error to the district court, the judgment was affirmed.
    The errors complained of are :
    1. That the court erred in its charge to the jury.
    2. And in refusing to charge as requested by the defendant.
    The bill of exceptions contains the charge given, as well as that refused, with a statement of the nature of the evidence offered in the case. It is as follows:
    “ Be it remembered that on the trial of this cause in the Court of Common Pleas within and for the county of Guernsey, Ohio, at the April term thereof, a. d. 1872, evidence had been given tending to show that plaintiff signed the note upon which judgment was obtained and upon which the payment alleged in the petition was made, before defendant signed the same; that neither was present when the other signed the note; that defendant stated to Hugh Broom that he would not sign the note without a written promise from plaintiff to indemnify him against its payment; that Hugh Broom presented the note to defendant; that the note had been before signed by Hugh Broom and plaintiff; that at the same time Hugh Broom gave defendant a written promise from plaintiff to indemnify defendant against its payment in case he signed the note; that there was no other agreement or understanding between plaintiff and, defendant in relation .to the note or the defendant’s signing thereof; that upon the faith of said written promise of indemnity defendant signed the note; that defendant stated at the time he signed the note that he did sign the same as surety for Hugh Broom and plaintiff; that defendant intended to and did sign the same as surety for Hugh Broom and plaintiff; that this note was executed and given in renewal of a note upon which Hugh Broom was principal and upon which plaintiff and defendant were co-sureties ; that at the time the second note ryas signed by plaintiff, he did not recollect who was on the first note, or whether any person except himself; did not know the time defendant signed the renewal note, and that Hugh Broom alone was present at the time defendant signed the renewal note. The defendant asks the court to instruct the jury upon the proposition herein indicated, among such other instructions as the court may deem necessary to be given in charge upon the other propositions in the case, as follows: A surety who signs the note after another surety has signed, may so stipulate at the time of signing as not to be liable to contribution with the other sureties who have signed before him, and the form of doing this is not important, nor is it important that this should appear upon the note, and where one signs as surety after other sureties have signed and without privity with them, it is not important that they should be made aware of the terms upon which subsequent sureties become holden; should you find that the written request to sign the note and save harmless, claimed by defendant to have been made to him by plaintiff was not made, you will then make the additional inquiries, did the defendant at the time he signed the note intend to and did he sign the same as surety for Hugh Broom and plaintiff’, and not merely as co-surety with plaintiff, and did he so sign the same after plaintiff' had signed and in plaintiff’s absence and without any previous agreement or understanding'with plaintiff tosiga as co-surety; and should you as to these inquiries find, either by the form of the writing, that is, by the note itself, or from the nature of the transaction, as that defendant, at the time he signed the note, said or in any loay indicated that he intended and did ■sign the same as surety for Hugh Broom and plaintiff, and not as co-surety with plaintiff, and should you find that he so signed the note after the same had been signed by plaintiffj and in his absence and without any agreement or understanding with plaintiff to sign as co-surety, your verdict will be for defendant; which instructions the court refused to give to the jury, but the court did charge the jury as follows: ‘The plaintiff” avers that on the 1st day of August, 1868, himself and defendant jointly with Hugh Broom executed their promissory note to E. W. Mathews for $700, payable four months after date; that said note was given for money borrowed of E. W. Mathews by Hugh Broom for his sole use and benefit; that the plaintiff and defendant were sureties for Hugh Broom on the said obligation; that at the maturity of said note Hugh Broom failed to pay it and plaintiff was compelled to pay and did pay, in discharge of said obligation, on the 15th day of May,, 1871, the sum of $823.15, the whole amount of said obligation, with interest and costs; and he now seeks to recover in this action of the defendant, his alleged co-surety, one-half of said sum, $411.57, with interest from said 15th of May, 1871. The defendant by his answer expressly admits the execution of the note by Hugh Broom, plaintiff” and defendant for the amount, and dated and payable as stated in 'the petition; and he also admits, because he does not deny, that the money for which the note was given was borrowed by Hugh Broom for his sole use and benefit, and that the plaintiff has been compelled to pay in discharge thereof the amount stated in the petition and as therein specified. The defendant, however, denies that he executed said note as co-surety with Daniel Broom; on the contrary, he avers that he signed ,the same as surety for both Hugh and Daniel Bi’oom. The issue then presented by these pleadings to the jury for their deliberation is, did the defendant execute this note as surety for Hugh Broom with the plaintiff as alleged by him, or did the defendant execute the note as surety for Daniel and Hugh? The burden of proof to establish the fact that the defendant and plaintiff executed the note in question to E. W. Mathews as sureties for Hugh Broom is on the plaintiff’, and he must satisfy you of the truth of ^this proposition by the testimony, or the verdict must be for the defendant. It is, however, conceded by counsel in argument that the testimony in this ease shows that the note in question was executed as a renewal of a former note executed by the same parties to E. W. Mathews for money borrowed of him by Hugh Broom for his sole use ; that, on the original note, Daniel Broom and Marling Oldham were sureties thereon for Hugh Broom; that some time after this note became due it was taken up and the loan renewed by the giving of the note described in the petition. It is claimed on behalf of the plaintiff that it is shown by the testimony that the renewal was effected by Hugh Broom, who procured the signatures of the plaintiff and defendant in the same manner as his sureties to the original note. On the contrary; it is claimed on behalf of the defendant to be established by the testimony that, after the first note became due, he refused to renew the note as surety for Hugh Broom, with plaintiff as co-surety, but that defendant was induced to execute said note by the request of Daniel Broom and as surety for him as well as for Hugh Broom; that the request of the plaintiff upon which the defendant executed said obligation was in writing signed by the plaintiff, and was a request by plaintiff to defendant that he execute said note, and a promise to save him harmless from loss that might arise therefrom; that this paper, executed by the plaintiff was presented by Hugh at the time of execution of the note; that the defendant, at the time of the execution of the note, declared that he signed the same as surety for both Hugh and Daniel Broom. This written request is the only arrangement claimed by the defendant to have been made by him with the plaintiff in regard to the execution of the note, and the important questions in this case and upon which the verdict of the jury must depend are, did the plaintiff execute the written request which defendant avers was delivered to him at the time of the execution of the note by Hugh Broom, and was the defendant induced to sign the note in question by virtue of said written instrument thus executed by the plaintiff? The burden as to both of these propositions is upon the defendant, and he must satisfy your minds by a preponderance of testimony of the truth of both the above propositions, or your verdict must be for'plaintiff and for one-half of the amount paid by him in discharge of said obligation, with interest from the time of payment, May 15th, 1871, to first day of this term. If, however, the jury are satisfied by the testimony that Daniel Broom signed the written instrument to Marling Oldham requesting him to become surety on the paper in question, and that the defendant executed the note in accordance with said request, then your verdict must be for defendant. The verdict, if for defendant, will simply find an issue for defendant; if for plaintiff, must find an issue for plaintiff, and assess, as amount due, the defendant’s pro-rata share of the obligation paid by plaintiff, with interest to the first day of this term.’ ”
    
      John Ferguson, for plaintiff in error,
    cited Keith v. Goodwin, 31 Vt. 268; Redfield & Bigelow, 597; 14 Ves. 160; 10 Pick. 121, as to the effect of Daniel Broom’s acts. And, 3 Ohio St. 418; 10 Ib. 283; 15 Ib. 515; 31 Vt. 268; 14 Ves. 160, on the question as to whether it may be shown by parol evidence what position and liability Oldham intended to, and did take, upon the second note.
    
      H Skinner, for defendant in error,
    on the admission of parol evidence, cited Norton v. Coons, 2 Seld. 23; Harris v. Warner, 13 Wend. 400; Hogg v. Smith, 1 Taunt. 347; Thompson v. Ketchum, 8 Johns. 148; Hall v. Newcomb, 7 Hill, 416.
   Johnson, J.

The note was in form the joint obligation of all the makers. There was nothing to indicate that either was a surety. Prima facie, all were principals.

The pleadings admit that Daniel Broom and plaintiff in error were accommodation makers, and that Hugh Broom was the principal debtor.

The question in issue was whether Daniel Broom and Oldham were co-sureties of Hugh, or whether Oldham was the surety of both the prior makers.

They had been co-sureties on a former note, in renewal of which this was delivered to Matthews.

It was signed by Hugh and Daniel, and in that condition was presented by Hugh to Oldham (with whom there appears to have been no understanding that he should sign), with a request that he execute it. Without his signature, it was in complete form for delivery to Mathews, if acceptable to him. The defendant offered evidence tending to show that he refused to sign without an indemnity from Daniel, and thereupon Hugh presented a writing purporting to be such indemnity, and on the faith of which Oldham signed, stating at the time that he signed as surety for both, and intended to obligate himself as such, and not as co-surety with Daniel Broom. There was no communication with Daniel, or agreement or understanding with him or Hugh, other than the one just stated.

The errors complained of are :

1. The court charged the jury that, as this written indemnity was the only arrangement between plaintiff and defendant respecting this note, the verdict of the jury must depend on whether this writing was executed by plaintiff, and whether the note was executed on the faith of it.

2. The court refused to charge that if the jury found the indemnity was not in fact executed by.plaintiff, still they should go farther and look to the real nature of the transaction, and ascertain if at the time the defendant signed he intended to bind himself as a co-surety with plaintiff, or as surety for both the prior parties.

The charge given, as well as the one refused, rests on the theory that the defense depended on the validity of this paper purporting to have been executed by Daniel Broom, promising to indemnify Oldham in ease he became a surety.

It took from the jury all other evidence on the issue, and made the case to depend on the genuine character of this contract of indemnity.

The jury were told that if Daniel Broom had not executed this paper the verdict must be for the plaintiff, whatever may-have been the real nature of the transaction, as disclosed by the other evidence.

The charge excluded all other facts and circumstances tending to support the issue presented by defendant, and made the verdict depend on the execution or non-execution of this paper.

This view logically led the court to refuse to charge that the jury might look beyond this paper and determine the issue from-the actual relation of the parties as shown by the other evidence.

The right of contribution among sureties is not founded in contract, but is the result of principles of equity on the ground of equality of burdens and benefits.

Eor this reason, where several parties by the same or by distinct instruments become sureties for the payment of a sum of money, and one pays more than his share, he may compel contribution from the others as co-sureties. Craythome v. Swinburne, 14 Ves. 164; Dering v. Winchelsea, 2 B. & P. 270 (1 Cox, 318).

Courts of law took jurisdiction of actions for contribution, on the ground that, as equity and good conscience demanded that as among co-sureties there should be equality of burdens, there was an implied assumpsit, which would support an action at law. De Colyer on Guar. & Sureties, 336-340; Camp v. Bostwick, 20 Ohio St. 337; 8 Am. Law Reg. 449-456; 13 Ib. 529, 536.

The plaintiff’s right of recovery does not rest on anything in the form or terms of the promissory note, for, looking to that alone, they are joint makers, and prima facie principals. If the fact appears that some of the parties are sureties of the principal debtor, then y rima fade-the law implies an obligation to contribute.

In Longly v. Griggs, 10 Pick. 121, a note was executed by A. B. and C., the last two as sureties. On the back of the note D. indorsed the words, “ I consider myself holder* as guarantor of this note,” and signed the same. It was held that D. might thus limit his undertaking, and that B. and C. could not compel him to contribute.

So in the well-considered ease of Keith v. Goodwin, 31 Vt. 268, thete was a note signed by seven persons, without anything to designate who were principals and who were-sureties. Below these names the plaintiff' and others signed the following guaranty : “ For value received we guaranty the payment of the above note.” The defendant, who was-one of the seven makers, though apparently a principal maker,, was in fact a surety. It was held that the plaintiff was surety for all the makers of the note jointly, and not a co-surety with the defendant. It is said in that ease that there was nothing on the face of the note to indicate that the makers' were anything but-joint principals, and the defendant having signed the note and intrusted it to others with author-* ity to procure additional names, it was giving them authority to represent the defendant, and, by presenting the note for additional names, a virtual representation was made that the defendant was a joint principal. It was further held that a person may, at the time of signing, stipulate with the person presenting the note as to the extent and character of his liability.

We are of opinion, also, that where,'as in this case, there is nothing in the form of the contract to indicate who are principals and who are sureties, the court may look to the nature of the transaction, to determine not only who are principals and who are sureties, but also, in actions like the present, to determine the liabilities of the parties as between themselves.

This is not parol evidence contradicting a written contract. The action is not on the note, nor, in the present case, on any agreement or understanding between the plaintiff and defendant. If Oldham was, in fact, a co-surety for the principal debtor, plaintiff would have a right of action, upon making payment, without any arrangement and understanding with Oldham. If he did not know that he had a co-surety, he might compel contribution on discovering that fact. The implied assumpsit, or liability to contribute, does not depend on the existence of a contract or arrangement between the several sureties, but on the fact that they are each the sureties for the same debt or obligation.

The form of the note, the position of the parties to it, and the prima facie character of the paper, and the order in which they sign it, determine the liability of the obligors to the obligee; and parol evidence is inadmissible to vary or contradict the written contract.

Where, however, the question is one of contribution, and the nature of the transaction between the obligors shows ■they, or some of them, are sureties of others, the form of the note is no barrier to parol evidence of the actual relation of these obligors to each other.

In case of two accommodation indorsers of a note, if they jointly indorse for the principal, and either pays, he may have contribution of the other; but if they, without any -communication or understanding with each other, successively indorse, and the last indorser pays, he can recover the whole amount of the prior indorser; but if the first indorser pays the note, he can not have contribution of the last. In the first case, there is contribution, because, they •are co-sureties, and this is made to appear by parol. In the second, the whole amount is recovered, because it is the case of second indorser or holder (who, as indorser, has been compelled to take up the note) against a prior indorser, on the faith of whose indorsement he is supposed to have become liable.

In the third case, the first indorser can not have recourse ion the second, if he takes up the note, because he must look to the prior obligors.

This was the case of McDonald v. Magruder, 3 Pet. 474, and is placed on the ground that the legal liability of the first indorser to the second was fixed by the form of their signing, and could not be changed “ otherwise than by an express or implied contract between the parties; ” and, as there was no such contract, the general rule of commercial law prevailed.

It is said, by C. J. Marshall “Magruder and McDonald might have become joint indorsers, and that would have been a joint promise, in which event, each would be liable for a moiety; but as they indorsed separately and successively, and there was no contract or understanding between them which might vary their legal liabilities, they remain in full force as successive indorsers.”

Where different persons successively indorse accommodation paper, before it goes into circulation, for the purpose of obtaining a discount for one of the parties, their liability to each other depends on the circumstances of the case. In an action by the holder, who was last indorser, and had taken the paper up, parol evidence was admissible to show the circumstances under which the bill was signed. Pilkin v. Flanagan, 23 Vt. 160.

In Barry v. Ransom, 2 N. Y. 465, it is said that“anagreement between co-sureties, as to their liability among themselves, in a manner different from what the law would prescribe where there was no such agreement, would not contradict any of the terms of the bond.”

So, parol evidence of extrinsic facts is admissible to rebut a presumption, arising from the face of an instrument, that all are principals. Harris v. Brooks, 21 Pick. 195.

In Keith v. Goodwin, supra, it is said “if one sign a note as surety, and intrust it to his principal, he thereby gives the latter implied authority to obtain either additional sureties or guarantors indefinitely, uutil the note is fairly launched in.the market; and one who signs as such additional surety may at the time so stipulate as not to be liable with other sureties, but as surety of the prior parties.”

In New York it is held that parol proof of extrinsic facts, to show who are principals and who are sureties, or of a contract distinct from the note, between the sureties themselves, is competent; but that conversations and declarations of intention, at the time of signing, are not admissible. Barry v. Ransom, 21 N. Y. 465; Harris v. Warner, 13 Wend. 400; Norton v. Coon, 2 Seld. 33.

Judge Gray places the case last cited on the ground that such declarations are inadmissible, because they would contradict the implied liability created by signing as surety; while Gardner, J., places it on the ground that the evidence was insufficient; and the other judges concurred in the judgment, but whether on the ground stated by Gray or Gardner, does not appear. While in Wright v. Garlinghouse, a later case by the same court, it is said the prima facie character of the paper, and the liability which it imposes, are of no consequence, where it can be shown there was an agreement on the subject.

The case of Norton v. Coon, supra, would hardly be regarded as authority, even in that state, for the doctrine laid down by Judge Gardner.

In New York, it is said that parol proof is inadmissible to show the intention of a stranger to a note, who indorses his name on the back, that the law makes him an indorser, and his liability can not be changed by parol; while in-Ohio and most other states, such evidence is competent. Champion v. Lathrop, 13 Ohio, 228; Robinson v. Abel, 17 Ohio, 36; Greenough v. Smeed, 3 Ohio St. 418; Seymour v. Mackey, 15 Ohio St. 515; Bright v. Carpenter, 9 Ohio, 139. See, also, in Kelley v. Few, 18 Ohio, 441, a case of accommodation parties to a bill.-

So the findings of the court, in á former action on the note, that some were principals and some were sureties, did not conclude the parties in a subsequent action for contribution. 26 Ohio St. 000.

Parol evidence of declarations of intention made at the time of signing, before delivery of the paper, are part of the res gestoe, admissible to establish an agreement, where they do not contradict the written contract or vary the rights of prior parties. Bonser v. Rendell, 31 Ind. 128; Robinson v. Lyle, 10 Barb. 512; Adams v. Flanagan, 36 Vt. 400; Apgar v. Hiler, 4 Zab. 812.

That such declarations are competent in connection with other testimony, as part of the res gestee, going to show a mutual agreement, express or implied, is supported by numerous cases. , '

The actual relations of the signers to each other and the real nature of the contract between them is the problem to be solved where the paper is silent; and even though the paper describes some as sureties, that is not conclusive, and the real purposes and objects of the paper may be shown. Adams v. Flanagan, 36 Vt. 408; Lathrop v. Wilson, 30 Vt. 604; Morris v. Faurat et al., 21 Ohio St. 155.

"Where there is no understanding with prior parties, and nothing in the form of the contract to prevent, and no fraud on the rights of the first signer, we think it is clear that another, who afterward signs as an accommodation party, may stipulate as to the terms of his liability, and that as between him and his co-obligors such terms need not be in writing. We hold further, that where the prior surety signs and intrusts the note in complete form to the principal debtor, without limitation as to his authority, he is competent to accept additional names on such terms as they may agree on, which do not change the obligation of prior parties.

Apply these principles to the ease at bar. Daniel Broom signed as surety without any agreement or understanding that Oldham should also sign. The note was complete, and might have been negotiated -without further signatures, and he could not have complained. Hugh Broom had authority to negotiate it in that condition, or, if not acceptable to the creditor," to obtain other signatures to make it so, and might therefore accede to conditions on which others were willing to sign.

The evidence tended to show that Oldham refused to sign unless indemnified, and that then Hugh presented such contract of indemnity, purporting to be signed by plaintiff, and on the faith of that writing, and intending to sign as surety for both, he signed the note and delivered it to Hugh, who accepted and negotiated it.

This stipulation was one not in fraud of any right of plaintiff, and if the defendant’s proof was satisfactory to the jury, it constituted a contract limiting his liability, as he made that a condition of his becoming liable.

The plaintiff having executed this note jointly with the principal debtor and as his surety, and having in that form intrusted it to his principal to be used, impliedly authorized him to issue it as it was, or to procure such further security as would make it available, and for that purpose to accept such terms as the party signing might prescribe. If those terms were in writing, no one would doubt their force, though not made with plaintiff; but it is well settled such an agreement may be by parol.

The evidence tended strongly to show that Oldham did stipulate his terms, and that Hugh accepted the signature on the conditions prescribed.

If this contract of indemnity was a forgery, but waa relied on by Oldham, that fact is a circumstance, an extrinsic fact,” tending to show his intention when he signed the note.

The condition on which he agreed to sign was that the plaintiff should indemnify him. These terms seem to have been satisfactory to Hugh, as he presented a paper purporting to be executed by plaintiff as such indemnity. It was accepted as such, and on the faith of it defendant became a party to the note. It was none the less a contract because the paper he received in execution of its terms proved to be a forgery. The case, as presented to the jury, was made to turn on the genuine character of this paper. If the defense had rested on that, if it had been pleaded as the ground of defense to the action, the view of the court would have been correct; but such was not the issue presented.

It was that he signed as surety of both prior makers, and was not a co-surety.

It is said in argument that this paper was a contract of indemnity for defendant’s becoming the surety of Hugh Broom, and that his signing made him a co-surety with plaintiff, relying on his indemnity to protect him, and therefore it is inconsistent now to claim he was not such co-surety, but was surety for both.

To this we answer, that although it may have been in form a contract of indemnity that is to save him harmless if he went on the note, it was in legal effect, as between plaintiff and defendant, an agreement that the plaintiff would pay the note, and would not look to defendant for contribution. If it had been genuine, it would have been a bar to this action. If not genuine, while he could not defeat a recovery on the ground that the plaintiff had bargained away his right of contribution, that did not prevent the defendant proving a contract with the principal debtor limiting his liability, where no right of plaintiff was impaired.

Eor these reasons we think the district court and the court of common pleas erred.

Judgment reversed, and cause remanded.