Case Name: Jacob R. Valk vs. The Bank of the State of South Carolina
Court: South Carolina Court of Errors
Jurisdiction: South Carolina
Decision Date: 1842-02
Citations: 1 McMul. Eq. 414
Docket Number: 
Parties: Jacob R. Valk vs. The Bank of the State of South Carolina.
Judges: Before Johnson Chancellor,
Reporter: South Carolina Equity Reports
Volume: 16
Pages: 414–421

Head Matter:
Jacob R. Valk vs. The Bank of the State of South Carolina.
The holder of a negotiable notéis not bound to give notice of the non-payment of the note by the drawer, to the first endorser, and a neglect to give notice to the first en* dorser does not discharge a subsequent endorser who had regular notice: S. P. Baily on
Before Johnson Chancellor,
Charleston,
Jane Term^SMi.
Who made the following decree, which will be found sufficiently explanatory of the case.
“This is a bill to restrain the defendant from enforcing against the complainant a judgment obtained at law. The complaint and the defence are set out very fully and at large in the bill and the answer, but the questions really involved appear to me to be embraced in a very narrow compass.
In June, 1815, one Sami. Champlin obtained a judgment in the Common Pleas against one Charles J. Steed-man, for $7000; and in April, 1817, he assigned it to Brown & Moses, and one Samuel Warren, the friend of Steedman, undertook to guarantee the payment of it. Brown & Moses afterwards assigned it to the complainant; and on the 16th June, 1826, the complainant, being in want of the money, entered into a compromise with Steedman and Warren, by which he agreed to accept a note, drawn by Steedman, and endorsed by Warren, for 20 per cent, less than the amount due on the judgment, with an understanding that the judgment was to remain as a security for the payment. This note was endorsed by the complainant, and discounted by the defendant for his accommodation. It was renewed from time to time until February, 1828, when it was protested for non-payment, the sum then due being $3,000.
The last note being unpaid, the Bank brought suit against complainant, and in February, 1830, recovered a judgment against him for the amount, no defence having been made; and this judgment the bill prays the Bank may be enjoined from enforcing, on several grounds, which I shall proceed to notice.
1st. The first is, that by the neglect of the Bank to give Warren notice of the non-payment, by which the complainant lost his remedy over against him as a prior endorser; and that he was induced not to defend the suit against him, by the representations of the Bank, that the debt had been abundantly secured by Warren and Steed-man, and that a judgment against him'was a mere matter of form, and was never intended to be enforced.
It appears from the evidence, that some time after the judgment against complainant, the Bank brought an action against Warren on his endorsement, to which non-assumpsit and. the statute of limitations were pleaded and came on to be tried before Mr. Justice Evans, at January Term 1835. Mr. Memminger, who was examined as a witness, stated, that in the hearing of that cause notice of non-payment was given to Steedman, who had endorsed the note in the name and as the agent of Warren, and no notice in fact was given to Warren, and the judge being of opinion that the notice was not sufficient to charge Warren, would have non-suited the plaintiff, but on the solicitation of the solicitor of the Bank, the case was postponed until the next term, to give him an opportunity of supplying the necessary proof. The cause was tried at the next term, but no other evidence was offered of the notice; and by consent, a verdict was found for the defendant, on the plea of the statute of limitations.
The circumstances under which the judgment was obtained by the Bank against the complainant, were stated by Mr. Petigru, who was then the solicitor of the Bank. He states, that about the time, or after that suit was brought, the complainant had an interview with him, in which he objected earnestly that the Bank ought not to proceed against him, without first pursuing their remedy against Steedman, the maker, and Warren, tire first endorser; and witness knew that that was the usual course, and thinking the complaint reasonable, had a conversation on the subject with Mr. Elliott, the President of the Bank, who told him that the Bank was secured by a judgment against Warren. Witness communicated this to complainant, and told him it was nonsense for him to object to the suit, as there was nothing to object to. The Bank had other demands against Steedman and Warren, which were secured by judgments and mortgages; and there is no question that Mr. Elliott supposed that this was included — but this turns out to have been a mistake. Complainant had employed counsel, who put in a plea, but no defence was made at the trial.
The allegation in the complainant’s bill, that he was induced not to defend the suit, by the representations of the President of the Bank, that the debt was abundantly secured, and that it was not intended to enforce the judgment against him, is not, I think, sustained by the facts. It does not appear that any assurance was ever given that the judgment would not be enforced; and the idea that it was not to be enforced under any circumstances, is utterly incompatible with taking the judgment; no one would ever be guilty of the folly of suffering or taking a judgment, which could be used for no other purpose than charging the defendant, if it was not intended to be enforced. Nor do I think that the declaration of Mr. Elliott, that the debt was secured by a judgment against Warren ought to have misled the complainant, or induced him to pretermit any defence he might have had. It does not appear that Warren was then, or has, at any time since, been insolvent; his liability, as endorser, made the debt equally secure as a judgment; and when the President said it was secured by a judgment, he could have intended nothing more than to express his opinion that it was secured. There was no guarantee that such was the fact; and his insisting on a judgment against the complainant, is conclusive that, by possibility, it might be necessary to have recourse to him.
According to the case of Harth vs. Johnson, 1 Bailey, 482, it seems that it is incumbent on the holder of-a note to give notice of non-payment to all the endorsers, and it may be that the complainant would have been protected under this rule against his liability to the Bank. But no evidence on the subject of notice was offered, but that of Mr. Memminger, before stated, and that does not make out the case contemplated by the rule. Nor do I regard it as material. If notice to Warren was necessary to discharge the complainant, the Bank never could have recovered against him without proof of it; and he might, and ought to have availed himself of it, on the trial at law; a,nd having neglected it, this Court will not relieve against the judgment.
2d. The second ground of complaint is, that the Bank have other securities against Warren, for the payment of this debt; and that they ought to be compelled to exhaust these, before they resort to complainant; this is denied in the answei*, and from any thing that appears, is without foundation in fact.
3d. A third ground is, that defendants are concluded by not proceeding against Warren, until the.demand was barred by the statute. This cannot be maintained. The Bank was under no obligation to complainant to sue Warren at all. If the complainant had paid the debt when it was due, as by law he was bound, he would have had the remedy in his own hands, and the Bank is not answerable for his neglect.
4th. A fourth and last complaint is, that the Bank has sold, under judgments and mortgages against Rteedman, property toa large .amount, on which the judgment of Sami. Champlin was a lien, and he claims that the proceeds which they have received, ought to be applied to the payment of this debt. This judgment, it will he recollected, was obtained in June, 1815, and was assigned to the complainant; and he states in his bill, that when he accepted the note drawn by Steedman, and endorsed by Warren, it was agreed, that the judgment should stand as a security; and without this, as matter of law, the judgment was not extinguished by the note, unless it had been accepted as satisfaction, of which there is no proof.
From the facts stated in the bill, and admitted in the answer, it appears that Warren had endorsed notes for Steedman, for a large amount, in the Planters’ and Mechanics’ Bank; and, to secure him, Steedman, on the 1st June, 1814, gave him a bond, in the penalty of $36,000; and, to secure the payment, mortgaged a number of slaves; and on the same day, Warren assigned the bond and mortgage to the Planters’ and Mechanics’ Bank, as a collateral security for the payment of the notes. Warren had incurred other liabilities for Steedman; and on the 8th of April, 1815, to indemnify him, Steedman confessed judgment to to him for $16,000. In February, 1816, the Bank (the defendant,) also obtained and entered up judgment against Steedman, for $6,800, on notes endorsed by Warren, and in pursuance of an agreement entered into between the parties interested, the Planters’ and Mechanics’ Bank, in April, 1824, assigned to the defendant, in consideration of its having paid the amount due to them by Steedman, on the bond and mortgage, assigned to them the bond and mortgage; and Warren, on the same day, assigned to the defendant the judgment against Steedman for $16,000, of 8th April, 1815; in which assignment, it was stipulated, that both the mortgage and judgment should remain as a security “for all and every other sum or sums now due and owing,” by Steedman to the defendant; the whole of Steedman’s property was sold under the mortgage and judgments, and the proceeds were applied to thejpayment of his debts to the Bank; he lived and died insolvent, and hence this litigation. The mortgage by Steedman to Warren, and the confession of judgment by Steedman to Warren, were both anterior to Champlin’s judgment, and is, therefore, entitled to precedure of payment out of the sales of Steedman’s property; but the judgment of February, 1816, is subsequent, and ought to be postponed until Champlin’s judgment is satisfied.
It does not appear whether the sales of Steedman’s property did, or did not, pay the balance due on the mortgage and j udgment confessed to Warren; and that is a proper subject for a reference.
It is, therefore, ordered and decreed, that it be referred to the Commissioner, to ascertain and report what was the amount of the proceeds of the sales of Steedman’s property; and what was the amount to which the Bank was entitled, under the assignment of the mortgage and judgment confessed to Warren; and other special matters which he may deem relevant to the matters in controversy.
From this decree, the complainant appealed, on the subjoined grounds:
1. Because the omission of the Bank of the State, the holder of the note, to give Col. Warren (the prior endorser,) due notice of the non-payment, discharged such endorser, and thereby deprived the complainant of the recourse which he ought to have had against a prior party; and that the Bank ought not, therefore, to be permitted to recover against the complainant the amount of such note.
2. Because the complainant is not barred from now setting up this objection, by the judgment against him, inasmuch as that judgment was given by consent, under such a mistake of fact, and under such misrepresentations, as would now allow it to be opened and set aside.
3. Because the defendant, by taking an assignment of the judgment against Steedman and Warren, held by the complainant, became trustees, for his benefit, and were bound to apply all assets received by them, in such manner as not to defeat the operation of such assignment, and that they had no right to tack together their various demands, prior and subsequent, and thereby oust the complainant from the benefit of his judgment.
4. Because the decree is otherwise contrary to the principles of law, and ought to be reversed, or modified.
Memminger, for appeal —
Cited and relied on Riley’s Law" Cases, 81; Thompson vs. the Bdnk, 3 Hill, 77. The Bank was bound to give notice to Warren; and if they neglected, they were liable over to Valk. Bailey on Bills, 274. An authority to endorse, is not authority to accept notice. Cross vs. Smith, 1 Mane & Selw. 545, 554;'16 Martin Rep. The misrepresentations of the Bank threw complainant off his guard, and he should not be prejudiced by it. Dickens, 469 ; 7 Cranch. 336. The Court will open a judgment obtained by fraud, accident or mistake, unless party complaining has been in default. 15 Peters. 233, 253. An agreement will be reformed, if one party has been drawn into it by a misrepresentation of the other; 8 Eng. Con. Ch. 152; 5 Peters. 99. Union Bank vs. Garey; in point. The neglect to give notice to Warren, did' not discharge complainant, but gave him an action against the Bank, for negligence; 12 East. 434; Roscoe vs. Hardy.
Bailey, contra, said —
the holder of a note is not bound as between the endorsers, to give notice to any except him whom he intends to charge. Chit, on Bills, 228, 320, 340. 2 Bur. 669. 2 Camp. 539; not necessary to give notice to the drawer of a bill to charge to intermediate endorser. 1 Leigh. N. P. 450; 14 Law Lib.; Byles on Bills, 164, 2 Stark. E. 268. Each of the endorsers have a duty to give notice to the prior endorser, and that would be unnecessary, if the holder was bound to give notice to all. Complainant’s liability had attached long before he was sued by the Bank, or assumed that it was secure. He was not, therefore injured. Harth vs. Johnson, and Thompson vs. the Bank, were both cases in which the Bank was the mere agent to collect.
Memminger, in reply,
referred to 7 Peters. 128, 17 Mass. Rep. 94. Decree Book, 1836, p. 56, Harper’s Decree.

Opinion:
Curia, per Johnson, Chancellor.
The Court have authorized me to express their concurrence, generally, in the circuit Court decree ; but it has been thought advisable to add something to what is said in the decree, in relation to the first ground of appeal. Divested of the circumstances of the case, it presents the naked question, whether the neglect of the holder of a negotiable note to give notice of the non-payment to the first endorser, discharges a subsequent endorser, who had regular notice.
In Bailey on Bills, 228, it is laid down, that the holder is not bound to give notice of the non-payment to any of the endorsers of a bill or note, except those that he intends to charge with the payment, and no cáse book, or record, of any authority, will be found to the contrary. Byles, in his Treatise on Bills, p. 164, advises that it is safest to give notice to all the parties against whom the holder intends to proceed; for, if he merely gives notice to his immediate endorser, all the rest will be discharged, unless the notice be regularly transmitted to them. The endorser who has had notice, is bound, to give his prior endorsers notice, if he intends to look to them for indemnity, and such is the language of all the books. The cases of Johnson vs. Harth, 1. Bailey, 482, and Thompson vs. the Bank, 3 Hill. 77, are referred to as the foundation of this ground of appeal; but, on referring to them, it will be found, that the question was not involved, nor is there a dictum countenancing the position. In the first, the questions were: 1st, whether the death and insolvency of the maker of a note, dispensed with the necessity of any demand of payment; and 2d, whether notice had been given to the endorser, within the time 'lipiited by the rules of law. In the second case, the question was, whether the Bank was liable for the neglect of its Notary, to give notice to the endorser of the non-payment, by the maker of a note, deposited in Bank by the plaintiff for collection, and there is not one word said in either, as to the discharge of the endorser sued in consequence of the neglect of the holder to give notice to a previous endorser. It follows, therefore, that the complainant lost nothing by suffering judgment to go against him at the suit of the Bank. In the language of the Solicitor of the Bank, addressed to him, "he had nothing to object against it." Appeal dismissed.
DAVID JOHNSON.