Case Name: John Rossman v. Noah C. McFarland
Court: Supreme Court of Ohio
Jurisdiction: Ohio
Decision Date: 1859-11
Citations: 9 Ohio St. 369
Docket Number: 
Parties: John Rossman v. Noah C. McFarland.
Judges: Brinicerhoer, C. J., and Sutlife and Gholson, JJ., concurred.
Reporter: Ohio State Reports, New Service
Volume: 9
Pages: 295–307

Head Matter:
John Rossman v. Noah C. McFarland.
In 18-42, the Bank of Hamilton assigned all its effects to three trustees, McC., M., and C., among which was a joint and several note of McC. & J. as principals, and R. as surety, for §900. After its maturity, the makers gave a new note of like character, and by way of renewal, to assignees, at ninety days. The last note was not paid at maturity, and was retained by the assignees for several years, ¿luring which period the principals became insolvent. The assignees then transferred it to F., fo^collection merely. F. brought suit thereon against R., and on the trial R. offered to prove that the bank made the assignment with intent to prevent the bank commissioners from closing up its affairs, under the acts of February 25, 1839, and March 23, 1840, which testimony was ruled out by the court. Held—
1. That such proof -was properly excluded by the court.
2. That an action might be maintained on said note, in the names of the assignees, against R., although one of them was also a maker of the note.
3. That there was no such suspension of a right of action upon the note in the hands of the assignees as authorizes the court to hold the note assets in the hands of the trustees, or either of them.
The case of Bigelows. Bigelow, 4 Ohio, 138, does not apply to cases of joint and several notes, where only one of the makers becomes trustee to a payee.
In error to the district court of Butler county.
This suit was brought in the court of common pleas of Butler *eounty, to recover judgment against John Rossman, upon a promissory note which reads thus:
“ $900.00. Hamilton, March 8, 1842.
“Ninety days after date, we, or either of us, promise to pay to the order of the assignees of the Bank of Hamilton, at their office in Hamilton, nine hundred dollars, for value received.
“McCleary & Johnson,
“John Rossman, security.”
The plaintiff declared specially on the note, and added the common counts. Plea — the general issue.
The cause was appealed to the district court, which on submission, a jury being waived, rendered a finding and judgment in favor of the plaintiff.
During the trial, a bill of exceptions was taken to the finding and rulings of the court, from which it appears that in February, 1842, the Bank of Hamilton made an assignment of its effects to Andrew McCleary, John M. Millikin, and Jesse Corwin, as its general assignees. Among the effects thus assigned was a note made by McCleary & Johnson, as principals, and John Rossman, the plaintiff in error, as surety. On the 8th of March, 1842, this note was renewed by a note for nine hundred dollars, payable at ninety days, made by McCleary & Johnson, as principals, and plaintiff in error 'as surety, payable “ to the order of the assignees of the Bank of Hamilton.” This note remained in the actual possession of the assignees from its date until the year 1852, when, without consideration, and merely for the purpose of collection, it was, by said assignees, assigned to N. C. McFarland, the defendant in error. McFarland brought suit against Rossman upon the note, in the court of common pleas. Judgment was given in favor of Rossman, and McFarland aj>pealcd to the district court, where judgment was rendered against Rossman for the balance due upon the note.
*The suit was brought for the sole benefit of the assignees.
The firm of McCleary & Johnson, the principals in said note, was composed of Andrew McCleary and Samuel Johnson. McCleary was also one of the assignees of the bank. McCleary and Johnson were both persons in good credit, and amply able to pay the note, from 1842, when the note was given, until 1846, when they both became, and have since remained, insolvent.
Rossman offered to prove that the assignment so made by the Bank of Hamilton to its assignees, was made with intent to prevent said banking institution from being closed up by the bank commissioners of the State of Ohio, under the act entitled “ an act providing for the appointment of a board of bank commissioners, and for the regulation of banks within the State of Ohio,” passed February 25, 1839, and the act amendatory thereto, passed March 23, 1840. This evidence having been objected to by defendant in error, the objection was sustained.
A motion for a new trial was made in the district court, by the plaintiff in error, which was overruled.
To reverse said judgment of the district court, this petition in error was filed.
The plaintiff in error now claims that the district court erred in sustaining the objection to the evidence, and in not treating the note, under the evidence, as paid.
James Clark and Thomas Millikin, for plaintiff in error, insisted:
1. The district court erred in refusing to receive evidence that the general assignment made by the Bank of Hamilton was made in fraud and in violation of the act providing for the appointment of bank commissioners, etc. Swan’s Stat. (1841) 133, sec. 20.
The evidence was offered for the purpose of defeating the title of the defendant in error to the note. The statute expressly declares such assignments to be “unlawful” and *“ absolutely void as against tho'operation and provision of said acts.” No title can be acquired by an assignment which is in violation'of law. Modintock v. Cummins, 3 McLean, 161. The sole question is, whether the legislature intended to prohibit such assignments either expressly or by implication. Smith’s Merc. Law, 647.
The district court, in rendering judgment in this case, necessarily passed upon the title by which the defendant in error held the note. If the note had not been assigned to the defendant in error, he clearly could not have recovered, though he had a complete equitable title to the note. For the same reason, if the title of the assignees of the bank was acquired in a manner and for a purpose forbidden by a public law, it was void.
The distinction is between a mere private fraud and an act done in violation of a public law enacted for the public welfare. It is conceded that any mere private fraud between the assignor and assignee of a negotiable instrument, can not be set up by the maker to defeat the title of the assignee; but it is otherwise if the assignee acquired his title in violation of some public law. In the latter case the assignment is void, as to everybody, on the ground of public policy.
2. The district court erred in not treating the note as paid.
In. June, 1842, when the note matured, McCleary was still one of the assignees of the bank. If he had resigned his trust before the maturity of the note, perhaps a different question might have arisen, for then it might be said payment could not have been made to him. But when this note matured, McCleary was the one by whom, and to whom., it was to bo paid. In default of actual payment, he could not sue himself. The same hand was to receive and pay, and payment is therefore conclusively presumed: McCleary was entirely solvent when the note matured, and for four years afterward, during all which time he, as assignee, held the note. It is true, there were two other ^assignees besides McCleary, but the trust was strictly a joint trust, and payment to one was payment to all. 2 Greenl. Ev., sec. 518. The two other assignees could not have sued without joining McCleary as co-plaintiff. The right of action being thus gone, the law says the note shall be treated as assets in the hands of the trustees. See Stephens’ Adm’r v. Gaylord, 11 Mass. 257; Winship v. Bass, 12 Mass. 199; Salk. 306, 296; -v. Du Rhone, McNaughton Select Eq. Cas. 180; Cox (N. X), 15-3.
The same principle was held in Bigelow v. Bigelow, 4 Ohio, 138. See also Com. Dig. 337.
3. Admitting that we are wrong in claiming that the note should be treated as paid, yet we think there can be no doubt, as the right of action against McCleary, the principal in the note, was suspended by the act of the assignees in holding the note until its maturity, that this discharged Rossman, who was merely the surety. See Bank of Steubenville v. Leavit, 5 Ohio, 207.
The surety had a right to pay the note and sue the principal. He had a right under the statutes then in force, to notify the holder of the note to put it in suit. Swan’s Stat. (1841) 878;
He had a right to proceed in equity to compel the principal to pay the note. Burge on Surety, 378.
But all these rights were rendered unavailable ; for the holder was the maker of the note, and could not sue upon it.
N. G. McFarland, argued:
1. It is claimed that as the assignment made by the Bank of Hamilton, is declared “unlawful,” and as it is in violation of a public statute, that therefore no rights could pass to the assignees. But in order to determine this question, we must look at the true intent of the act. Against whom is it unlawful ? And when is it to be so held? Evidently only as between the bank commissioners and the bank or its assignees; for such assignments “ shall *be hold absolutely void as against the operations and provisions of said acts.” Did the legislature intend that if the bank commissioners never appeared to claim the assets, that thereby the debtors of the bank should all be released from.liability ? This is the position taken in the argument submitted on the other side. But suppose it to have been proved that the assignment was made in fraud to prevent the bank commissioners from closing up the bank. It is a well established rule, that none but the defrauded can take advantage of it. There is no fraud practiced on Rossman that he can complain of. And whether the bank has exceeded its powers, or violated law, is not a question that can be inquired into in this collateral way. See Banks v. Poitiaux, 3 Rand. 136; Grand Gulf Bank v. Archer, 8 S. & M. 151; Chester Glass Co. v. Dewey, 16 Mass. 94; Gilman’s Dig. 84; Voorhes v. Receivers of Circleville Bank, 19 Ohio, 463.
The' defendant, in an action upon a promissory note, is not allowed to contest the plaintiff’s title to sue, except for the purpose of protecting himself from a subsequent suit in the name of some one having a better title to sue, and who has not acquiesced in the suit commenced. . Hackett v. Kendall, 23 Vt. (8 Wash.) 275; Varner v. Lamar, 9 Ga. 589.
But especially does the defendant below not stand in a position to dispute title. By the very terms of the note sued on, he has accounted with the assignees in that capacity, and consequently is estopped from denying such capacity and ownership. 2 Greenlf. Ev. 127, 129; 1 Saun. P. & E., 46, 49; 2 Phillips Ev. 125 ; 1 Chitty’s PL 308.
2. But it is said that the court erred in not treating the note as paid.
No act of the parties having occurred after the giving of the note, which would discharge the surety, what is the nature of the contract entered into by him when this note was given ; and has it any binding validity ? And here counsel for plaintiff in error seem to be laboring under *a total misapprehension. They treat the note as though it were joint only, whereas it is joint and several, which, in many respects, makes the rights of the promisors very different. Here is a distinct and several obligation on the part of Rossman to pay this note to the assignees. They are not willing to take McCleary & Johnson. Rossman says, I will pay it. Not that he will pay, if the others do not, as a guarantor, or as an indorser if duly notified, but absolutely, as a several maker of the note. Hence all the authorities cited by counsel on this branch of the case, are inapplicable, as there is not one of them that contemplates such a contract as is here made. True, McCleary can not sue himself; but what legal objection is thereto McCleary, Millikin, and Corwin suing Rossman? None whatever. His contract is with them, to pay the note io'them.
It is well settled that a creditor, where the contract is several, may resort, first, to the surety for the payment of his debt, without applying to the principal. Geddis v. Hawk, 1 Watts, 280; 5 Ohio, 104; 13 Conn. 412.
All the payers of a joint and several promissory note are principals, and their relation to each other does not affect their liability to the payee. Carson v. Hill, 1 McMullen, 76; Bull v. Allen, 19 Conn. 101; 13 Id. 412.
The sureties of a note are liable, although the note is void as to their principal, because she was a feme covert when it was signed. Smyley v. Head, 2 Rich. 590.
The assignees, then, could have supported this action against Rossman; and if there is anything to prevent, it is a technical !egal objection <3nly, which is disposed of by the indorsement of the note to the defendant in error. That he can sustain the action, though the payees might not, is clearly established by authority.
It is not a valid objection to a suit against a surety upon a promissory note, that it is brought for the benefit of the principal in the note and two others as executors of an estate. Hampton v. Shehan, 7 Ala. 295. A case quite analogous to the one at bar, because this suit is not brought *for the benefit of McCleary, he having no personal interest in it.
See also American Bank v. Doolittle, 14 Pick. 123; Smith v. Lusher, 5 Cow. 688; Smyth v. Strader, 9 Port. 446; Norton v Downer, 15 Vt. 569
Where a note is made payable to two of the makers, their indorsement will pass the property in the note. Pitcher v. Barrows, 17 Pick. 361.
3. But it is said the right of action was suspended. If there never was a right of action on this note, there never could have been a suspension of that right. But the law of 1850 (Swan’s R. S. 250, sec. 183) preserves the right to this action in the name of the corporation. See Stetson v. City Bank of New Orleans, 2 Ohio St. 167.
4. It is further argued that Rossman had a right to pay the note and sue the principal, or to notify the holder to put it in suit, or proceed in equity to compel the principal to pay the nóte; and that those rights were all unavailable, for the holder was the maker, and could not sue upon it. I admit that he had all these rights, but deny that one of them was unavailable. They were all at his command. Suppose that he had notified the holders in writing, under the statute; could they not have sued him alone upon his several agreement to pay it? This will not be denied. What obstacle was there in the way of Rossman proceeding in equity to compel the principal to pay it, or to pay it himself, and then sue McCleary & Johnson? It appears to me none. If Rossman had notified the holders in writing to sue, true they might have sued him alone at law, or gone into equity for the settlement of the whole matter; but he would immediately have had his remedy against the principals.
Clark & Millikin, for plaintiff in error, in reply:
It is claimed by defendant in error that the plaintiff in error is estopped from denying the character of the assignees, having treated them as such assignees. But the ^doctrine of estoppel does not apply when the party stands in a character which is against the policy of the law. The capacity which we are estopped from denying must be one which the law will tolerate.
Much is claimed by the defendant in error from the fact that the promissory note sued upon is several as well as joint. The case of Chandler’s Ex’rs v. Shehan, 7 Ala. 251, is directly in point, and, with the authorities cited in it, clearly establishes the following propositions, peculiarly applicable to the case before the court-: 1. Where one of several joint trustees, with a surety, executes a joint and several promissory note to himself and his co-trustees, the amount of the note, when it falls due, if it still remains in the hands of the trustees, and if the maker still continues to be one of the trustees, becomes assets in the hands of the trustee who is maker, and is treated as if paid to him ; 2. In such a case, the trustees who are not makers, can not sue their co-trustee and his surety, even in equity; 3. A payment by one of several joint trustees to his co-trustees, of a debt due from him to all the trustees, will not discharge him from his liability to account to the beneficiaries of the trust.
To the position that if Rossman had notified the holders of the note to sue upon it, in pursuance of the “ act for the relief of sureties and bail,” an action might have been commenced against him alone, we reply : 1. When a surety has given notice under the-statute, a suit against him alone is not a sufficient compliance with it. Sterling v. Buttles, 2 Ohio, 304. 2. We have already shown that no suit, either at law or in equity, could have been sustained by 1he assignees, or any of them, against either principals or surety, on the note in question, because it had become extinguished by payment, eo instanti that it fell due.

Opinion:
Peck, J.
The only points relied on for the reversal of the judg ment in this case, are : 1. The improper exclusion, *by the court below, of testimony offered by the plaintiff in error; 2. That the original note, of which the note sued is a mere renewal, was in law paid, and consequently that the note in suit was without any consideration to support it; 3. That even if the note in suit was, at its inception, a valid note, it having been retained by the payees until alter its maturity, should have been treated and regarded by the court below as paid off and discharged.
1. Did the court below err in excluding the testimony offered by plaintiff in error?
The object of the plaintiff in error was to show that the assignees acquired no title to the note by its transfer to them, and could confer none on their assignee, who received it merely for collection. The 29th section of the act relating to bank commissioners, etc., in Swan's Statutes of 1841, page 133, reads as follows:
" It shall be unlawful for any banking institution, or any company or society exercising banking powers in this state, to make an assignment or transfer of any of ;ts real estate or personal property, or any of its rights, credits, moneys, or effects whatsoever, with intent to hinder or prevent such institution, company, or society from being closed up by the bank commissioners, under this act, or the act to which this is an amendment, or for the purpose of avoiding any of the provisions of said act; but all such institutions, companies, or societies, shall be subject to the operation and j>rovisions of said acts, notwithstanding such assignment or transfer; and all assignments and transfers with intent, or for the purpose aforesaid, shall bo held absolutely void as against the operations and provisions of said act."
' The statutes of 1839 and 1840, creating a board of bank commissioners, and authorizing them, under certain circumstances, to close up the business and distribute the assets of banking institutions among the creditors, were ^enacted for the safety and protection of the public; and the 29th section, above quoted, was especially required to render effective the salutary provisions of those statutes. As a general rule, it is undoubtedly true, that where a statute, designed for the protection of the public, prohibits in express terms the making of a contract, such contract is absolutely void, whether the thing contracted for is malum in se, or merely malum prohibitum.
But where the law which prohibits the contract, at the same time also limits the effect, or declares the consequences which shall attach to the making of it, the general rule does not apply.
The 29th section declares all assignments made by banking institutions, with intent to prevent the interference of the commissioners, unlawful; and if this were all, the general rule might possibly be applied; but in the latter part of the section, the legislature has seen fit to declare what consequences shall follow the making of such an assignment, by the words: " But all such institutions, companies, .or societies, shall be subject to the operations and provisions of said acts, notwithstanding such assignments or transfers; and all assignments or transfers, with intent or for the purpose aforesaid, shall be held absolutely void as against the operation and provisions of said acts." The statute, then, does not stop with the prohibition, and leave the courts to adjudge the assignment void for all purposes, as a thing prohibited for the protection of the public, but provides that the institution shall still be subject to the operation of the law, and then declares that the assignment " shall be held absolutely void as against the operations and provisions of said act." In other words, if the exigency should arise, the bank commissioner's may take possession of, collect and distribute the assets, as if no such assignment had been made.
The intention is manifest. The assignment was to present no obstacle to the interference of the commissioners. As against them, it was to be void, if they had cause to, *and did interfere; but not void as to others, unless the commissioners, in the discharge of their duties, should vacate and annul it.
The mere fact that the bank had made the assignment, with the intent specified years before, but which was not followed by any action of the board of bank commissioners, would not vacate or annul the assignment to McCleary and others; and proof of it was very properly excluded by the court. Its introduction could not, in law, have availed the plaintiff in error, and its exclusion has not, in law, injured him.
Did the court below err in finding upon the facts; proved and admitted, that the note sued on was valid and subsisting, as against plaintiff in error ?
It is claimed that the original note delivered to the assignees (McCleary being one of the makers), on its maturity in their hands, became and was assets in the hands of McCleary, though not, in fact, paid; and that its subsequent surrender was not, in law, a sufficient consideration to support the note sued on. It is also insisted, that even if the note sued on was valid at its inception, still, on its maturity in their hands, it, in law, 'became assets in the hands of McOleary, and should have been regarded by the court as paid.
These results are claimed on the authority of the case of Bigelow v. Bigelow., 4 Ohio, 138, which, on principle, is not distinguishable, it is said, from the case at bar. In that case, a debtor of an intestate had been appointed administrator; whereby the right to sue and the obli•gation to pay centered in one and the same person ; and it was held that, inasmuch as the administrator could not sue himself and thereby collect the debt, it became assets in his hands; and the court intimate that the rule should be applied to trustees generally. The court say the debt was not thereby extinguished; but it was a "quasi" release at law, because the administrator could not sue himself, and a personal action, once suspended, is always suspended. • *The authority of this case is somewhat shaken, and its practieal application limited, in the subsequent cases of Hall v. Pratt, 5 Ohio, 72, and Miller v. Donaldson, 17 Ohio, 265. In Hall v. Pratt, Wright, J., dissents from much of the reasoning, and especially questions the universality of the maxim, that personal actions once suspended are always suspended; while in Miller v. Donaldson, Avery, J., remarks, that the holding a debt in such case to be assets in the hands of an administrator, is a mere fiction of law which can' not be allowed to work injustice. In that case, a mortgagor who had been qualified and had acted as executor of the mortgagee, had failed to pay the debt while in office, and the court permitted a foreclosure of the mortgage after his removal, at the suit of an administrator de bonis non; thus showing, clearly, that the debt was not discharged by his appointment to and acceptance of the trust, and was not, in equity at least, to be regarded as paid. It is not pretended that either the original note or the renewed note was-ever in fact paid to the bank or its assignees; and to hold it paid under this fiction of law, would work injustice toward the bank and its creditors. The case of Bigelow v. Bigelow, is plainly distinguishable from the case at bar in this: The debt duo to the estate, in, that case, was the sole debt of the administrator, and was held to be assets in his hands, because he could not sue himself, and the estate would therefore lose it unless the fiction were resorted to; while in. the case at bar, the note is not the sole promise of McClear/, nor the. joint obligation of himself and Rossman, requiring all the makers to be joined in a suit upon it; but is the joint and several note of McCleary, and Johnson, and Rossman. McCleary could not sue himself and the other makers, but he and his co-assignees could, at any and all-times, have sued the other party to the note. The necessity, therefore, did not arise for resorting to and applying this legal fiction. This proposition is too plain to require the citation of author- ities to support it, *as the mere statement carries conviction to every legal mind. "Where two or more are bound jointly and severally, and one of them makes the obligee his executor, the obligee may, notwithstanding, maintain an action against the other obligor. Bradford et al. v. Williams, 4 How. (U. S.) 576; Cook v. Cross, 2 Levinz. 73; 5 Bac. Abr. 816, Tit. Oblig. D. 4. These authorities, if authorities are required for so obvious a proposition, establish that an action may be sustained by the payees of a joint and several note or obligation against one of the makers, and that it is no objection to a recovery that one of the makers, who is not sued, is a .a plaintiff in the cause. But it is said, inasmuch as Rossman, inter partes, is the surety for McCleary & Johnson, who would in law be .'bound to reimburse him the money he is compelled to pay, that 3£eCleary, as one of the assignees, should not be permitted to remover money from him, upon the recovery of which he (McCleary) would be forthwith bound to refund. It is true, that if McCleary 'had the sole beneficial interest in the money when recovered, the Jaw, whieh discountenances circuity of action, would exempt Ross-man from liability upon the note. But in the case at bar, the money, when collected, belongs to the three assignees, in trust for .the bank .and its creditors, and not to McCleary in his own right. The.-assignees were not bound, nor was McCleary as assignee, bound to-reimburse Rossman. As between Rossman and the assignees of the bank, he by his contract had bound himself severally to pay, if required, and could not have claimed exemption if sued by them at any time after the maturity of the note. Hampton v. Shehan, 7 Ala. 297; Webster v. Randall, 19 Pick. 13.
It is hardly necessary to notice the objection that there was no legal consideration for the note sued on. We hold that the note ,for the renewal of which it was given, was, at the time of the reinewal, a valid and .subsisting note, and was therefore a sufficient consideration for ithe ¿renewal. A moral obligation, arising out of a pre-existing liability *which had been discharged by a mere fiction of law, would of itself support the promise.
The long period during which the note remained in the hands of the assignees after its maturity, without any effort on their part to collect it, and the solvency of the principals for several years after the note became due, and their subsequent insolvency, were circumstances proper for the consideration of a court or jury, as raising a presumption of payment. The court doubtless did so consider them in trying the issues submitted. They are not, however, so significant and conclusive, that a reviewing court would be warranted in acting upon them.
Judgment affirmed.
Brinicerhoer, C. J., and Sutlife and Gholson, JJ., concurred.
Scott, J., having formerly been of counsel, did not sit in this case.