Court Opinion

ID: 6667557
Source: CourtListenerOpinion
Date Created: 2022-07-20 21:07:12.907935+00
Date Added: 2024-06-11T16:00:23.147891
License: Public Domain

Archer, J.
delivered the opinion of the court. We do not conceive, that by any transactions which have taken place between Phillips & Co. and the Union Bank of Maryland, in relation to the promissory note, which is in this suit the subject of litigation, there has been an extinguishment of the original contract. The mortgage taken by the Union Bank *100was only for the purpose of securing to that institution the payment of the securities mentioned in it. The parties to that instrument never intended that it should constitute a new debt, nor did it bind Phillips & Company by any new obligations; hut it was a recognition of the existing liability, and was intended to operate merely as a security for its discharge. It contains an express stipulation that it is to be void upon the payment of the notes, of which Phillips & Co. were the endorsers. The notes given by Phillips & Co. after the execution of the mortgage, would not operate as an extinguishment of the notes drawn by Clapper, and endorsed by Phillips & Co. unless they were received by the bank in substitution, and in satisfaction of the prior notes. The record contains no evidence from which such an inference would be deducible.
It is urged, by the counsel for the appellant, that being only a security for Phillips & Co. and being known to be such by the Union Bank at the date of the mortgage given by Phillips & Co. by which an extension of time was granted to them, by such indulgence he has been discharged from all liability as the drawer of these notes. That in the ordinary case of principal and surety, time given to the principal discharges the surety, is a legal position as well settled as any other appertaining to the science. But its application to a case of this description may well be questioned.
In every bill of exchange, the acceptor, and in every promissory note, the drawer, is in law the principal, and is first liable, and every endorser in the order in which his name appears on the -bill or note. The endorsee may sue all or any of the parties he may choose. He has the entire dominion of the property in the bill, and a perfect right to make any arrangements he pleases with any of them, but he does it at his peril; for if he thereby alter the situation of any other person on the bill, to the prejudice of that person, he cannot afterwards proceed against him. Therefore, though he may give time to, or discharge his immediate endorser, he cannot grant indulgence to the drawer or acceptor, and afterwards proceed against the endorser-. The discharge of, or the giving time to, any of the parties liable, does not discharge prior parties, but only those whose names are subsequent to the party thus discharged, or to *101whom indulgence is granted. This doctrine is laid down in Gwynne vs. Heaton, 1 Brown’s Chancery Reports, 4, in a note by Mr. Eden, and is abundantly supported by the numerous authorities there referred to. Whether the note is one springing out of a consideration actually passing between the parties, or is only an accommodation note, does not seem to make a difference in the law in this respect. It is certain that a contrary doctrine has been held by Lord Ellenborough, in the case of Laxton vs. Peat, 2 Campb. 185. But this decision has, in the English courts, been since uniformly considered a de • viation from established principles. Its authority was doubted by Chief Justice Gibbs in Kerrison vs. Cooke, 3 Campb. 362; and although in his decision in that case he attempts a distinction between it and Laxton vs. Peat,, he does in effect overrule Lord Ellenborough’s decision, and he expressed his regret that the term, accommodation bill, ever found its way into the law, or that parties were allowed to get rid of the obligations they profess to contract by putting their names to negotiable securities. Lord Eldon, in Ex parte Wilson, 11 Vesey, 411, denounces any such distinction as that attempted to be made in Laxton vs. Peat. In the case of Fentum vs. Pocock, 5 Taunt. 192, the doctrine decided in the case referred to, came in review before the judges of the court of common pleas, and-it was there expressly overruled, and it was determined that nothing could discharge an acceptor but a release or payment, and that there was no difference between an accommodation acceptance, and an acceptance for value. Indeed in Mallet vs. Thompson, 5 Espinasse’s Rep. 178, decided five years before the case of Laxton vs. Peat, Lord Ellenborough made a determination directly contrary to the case of Laxton vs. Peat. From this review of the adjudications, we can have no hesitation in pronouncing that the case of Laxton vs Peat is not law. Courts of justice seem disposed to consider accommodation notes in the same light, as far as practicable, with notes for value. In this court, in the case of Wood vs. Repold, 3 Harr. & Johns. 125, it was adjudged that accommodation endorsers, as to their liability to each other, stood precisely in the same relation as did endorsers on notes for value, and that a subsequent endorser paying the amount of *102the bill, was not bound to look only for a contribution upon its payment from his co-endorsers, but that he had a right to recover the whole amount from his prior endorser. They were not held at all in the light of co-securities, but each was considered as impliedly engaging to indemnify whomsoever should place his name on the instrument subsequently to him. As it regards the principle upon which notice has been required to be given, there does not appear to be any distinction between the different species of notes. Notice of nonacceptance and nonpayment, is required to be given, that the anterior parties to the bill may 'take the necessary measures to obtain payment from the parties respectively liable to them; and if notice be not given, it is a presumption of law that the drawers and endorsers are injured by the omission. And in the application of this principle, it is necessary that the courts should inquire into the liabilities of the respective parties to a note or bill, for the purpose of ascertaining whether this injury, either actual or presumptive, could take place. Where a note is drawn for the accommodation of the endorser, he is not entitled to notice of nonpayment, because the presumption of injury could by no possibility arise, the drawer not being answerable over to him upon his payment. But this enquiry into the situation of the parties, their liabilities, and the circumstances under which it is drawn, is not peculiar to accommodation paper, but is applicable also to other notes. Thus a drawer, who has no effects in the hands of the drawee, and has no reason to expect the bill would be paid when it became due, is not entitled to notice. There seems to be a disposition of late manifested by the courts, to discountenance many of those subtle refinements which have, by a kind of judicial legislation, recently crept into the law of bills of exchange and promissory notes, and which have threatened to render it a science of cases merely, and not of principle. That this is the case may be seen by a reference to the opinion of Chief Justice Abbot, in Cory vs. Scott, 3 Barn. & Ald. 619, (5 Serg. & Lowb. 401.) When any system of laws is governed by plain and intelligible rules, it becomes known to the public, and the interests of a commercial people will thereby be better promoted than by trusting each case to judicial discretion. We do not believe that the appellant was discharged by the time given to Phillips & Co.
*103It is objected that this suit, having been instituted by the Union Bank, in contravention of its agreement with Phillips & Co. not to sue Clapper for three years, has been prematurely brought. It is laid down in 5 Bacon’s Ab. tit. Release, (A 2,) 683, that a covenant perpetual, as that the covenantor will not sue without any limitation of time, is a defeasance or absolute release, and is pleadable in bar as such; and a distinction is there taken between such a covenant and one stipulating not to sue for a limited time; and that in the latter case it could not be pleaded in suspension of the action, but the covenantee must seek his redress in an action upon the covenant. Such is the undoubted law in an action of covenant; but we do not find, from an examination, that it has ever been extended to the action of assumpsit', and we do not feel disposed, by adjudication from analogy to extend it; for it cannot but be admitted that it is a principle tending to inconvenience, and producing circuity of action. Besides, we^conceive that by giving the agreement the effect of defeating the action, until the time of indulgence has expired, a greater certainty of justice will be attained between the parties, than by driving the defendant to his action for damages on the agreement. But independent of this view of the case, we may observe, that the cause of action here, is one which may be sustained under the general count for money had and received; and in such an action the defendant is at liberty to place himself upon such defences, as will shew that ex aequo et bono, the plaintiff is not entitled to recover. We consider him, therefore, at liberty to give in evidence an agreement granting indulgence, where that agreement is founded on a proper consideration, and from which it would appear to be inequitable to allow the plaintiff, by violating his engagement, to recover. We cannot believe that this agreement is void for want of a consideration, for the inducement to its consummation is the mortgage which was entered into by Phillips & Co. to the bank.
Whatever might be the force of the objection, that this agreement not to sue could have no obligation, its consideration relating to land, and the mortgage containing the stipulation between the parties, it is sufficient to say that it preceded the mortgage, and that the testimony does not shew whether it is *104in writing or not. This court cannot say it was a verbal agreement, for the purpose of invalidating it. If any reliance could have been placed on the fact of its having been merely verbal, it should have so appeared in the bill of exceptions.
We entertain no doubt but that the agreement is valid, and that Clopper may avail himself of it, although made by Phillips & Co. One man may surely malee a contract for the benefit of another, which will enable that other to institute a suit upon it.
We consider that this suit has been prematurely brought, and that therefore the judgment of the court below must be reversed.
JUDGMENT REVERSED.