Court Opinion

ID: 8058128
Source: CourtListenerOpinion
Date Created: 2022-09-09 04:35:03.012171+00
Date Added: 2024-06-11T16:37:56.595337
License: Public Domain

Brown, J.
(dissenting.) This action is founded upon an •implied contract. Kaighn, Paulin, and one Cooper, in 1852, executed to William Champion a bond for a sum of money due to him from the South Camden Ferry Company, as sureties for that company. The contract implied at the time of the execution of the bond was that each of the obligors would pay one-third of jthe debt if the company failed to pay it. The company did not pay, and Kaighn and Cooper did, in August, 1855, each pay one-half. Kaighn was then entitled to receive of Paulin one-sixth of the debt, being the amount he had paid for Paulin. This cause of action was proved on the (rial below, and a verdict properly rendered for Kaighn, unless the defence offered and overruled was a legal answer to the whole or part of the demand.
The offer was to prove — 1st, that the ferry company, in December, 1854, gave to Kaighn, Paulin, and Cooper, and others not named, a mortgage on most of their property to secure them for moneys advanced or to be advanced, pro rata, to the amount of $30,000, and that Kaighn and Cooper canceled and discharged the mortgage after the payment to Champion, without the consent of Paulin.
2d. That said company, in March, 1855, gave a mort*498gage Ur one Stephen Coulter on most of their property, to secure coupon bonds to the amount of $55,000, to be issued to such persons as had or should advance any moneys for its benefit; that Kaighn received twenty bonds of $500 each as security for bis advances made or to be made for the company, and that the said bonds were surrendered and mortgage canceled without the conseut of Pauliu. It was further proposed to prove a third arrangement and issue of bonds, which presents a difierent question, and will be considered separately.
It is not contended that while these obligations remained unpaid in the hands of Kaighn and Cooper, they could have availed anything in defence of this action ; nor, on the other hand, is it denied that if the company had paid Kaighn and Cooper on these collateral securities and on account of this demand an amount equal to it, such payment would have satisfied Paulin’s contract to contribute, Kaighn and Cooper would have been reimbursed their outlay by the proper party.
The complaint is that those obligations remaining unpaid, Kaighn and Cooper, after the payment to Champion, surrendered them to the ferry company without the consent of Paulin. The question is, whether the facts stated, if proved, constitute a defence to this action.
They could not be made the foundation of a suit by Paulin in any court. He is not in position to ask an account of these obligations. He lias paid nothing — tendered nothing — sustained no damage. It is not contended that he could sustain such actiou, but that in a court of equity the proposed defence would be available; that Kaighn and Cooper would be held in that court chargeable, as trustees,, with the value of these obligations; that the surrender of them was a constructive fraud or breach of trust, and that Paulin would, in au account with them, be entitled to credit on their demand against him for so much as tiiey were worth. There is no doubt this is the rule in that court.
*499The counsel for the plaintiff in error insisted upon the propriety of this defence here as a rebutting equity to the extent of the value of the obligations; and farther, that the surrender of them was a fraud, which constituted a bar to the action. The one view having an aspect ex sontr-aetu, and the other ex delisto.
1st. Is the equity of the ease a defence at law?
It is said, in justification of this effort, as it appears to me, to erase the line dividing the legal and equitable jurisdictions, that the action brought by the plaintiff is an equitable action. The answer is, that it is not an equitable action in the.sense here intended5 on the contrary, it is one of the most ordinary of the legal actions, assumpsit, and the counts in the declaration are of the well-known common counts.
The plaintiff’ declares for a certain sum of money paid by him for the defendant, at his request, on the defendant’s promise to repay it. The request and promise are both implied under the circumstances of the case, and the promise is ■the gist of tiie action.
It is no more an equitable action than is every action founded upon an implied promise. All of these actions are founded upon principles of equity, which, in its true and genuine meaning, is said to be “ the soul and spirit of all law.” The common law is not indebted to the courts of equity for the discovery of these principles — they were adopted from the civil law by the common law judges before the system of equity rules and practice had made much progress in England.
This action at common law was based upon a promise implied or a legal liability arising from duties which at the civil law were termed quasi ess contractu. It is true that the assumpsit by a surety for contribution was adopted more recently, but without any variation of the principle underlying the whole of this class of contracts. When three persons execute a bond, of whom two are sureties, the contract implied at the time of the execution *500is, that if the principal fails to pay or perform, the sureties will bear the loss equally. If one of the sureties is left to pay the whole, or more thau his proportion, this contract is broken. The other surety becomes thereby liable to an action for so much money paid for him, either in debt upon the legal liability or assumpsit upon the implied promise. The recovery does not depend upon the form of action — the same rules would govern this case if the action had been debt, and the defence set ,up by special plea. There is no more reason for allowing an equitable defence in this action than in every action. Cases are exceedingly numerous where a defendant has an equitable defence to an action on contract. It is the office of a court of equity to relieve him from the sharpness of the legal rule. For this purpose that court is maintained in New Jersey — by its aid, law and justice are harmonized. One who has been induced to give a bond by fraudulent representations as to the consideration has equity in his favor; but can that avail him to repel an action on the bond? One who has bought and paid for land, and entered upon the possession of it without deed has a very excellent equity; but will it serve him as a defence to an action of ejectment? In all such cases the remedy in equity is prompt and efficacious, and at the cost of him who would press the hard action unjustly. In this'case the remedy in the court of equity is as easy as at law it is difficult. There, if the securities surrendered were worth anything, Kaighn and Cooper must account for (hem. The only question would be the amount. In order to ascertain this, an account must be taken involving the value of property pledged hy the $30,000 morlgage, and the title to it, the number of persons interested in it, and a statement of their accounts, respectively, with the company, before it could be «known how much the pro raid due to this debt would amount to.
Again, Kaighn and Cooper would not be liable for the surrender of this mortgage, if of less value to this debt *501than the coupon bonds issued to Kaighn under the second arrangement; so that on this trial the same process of accounting would he needful to determine the value of the coupon bonds as of the first mortgage, an easy process for the accounting officers in the Court of Chancery, but very uncertain, inconvenient,, and inapt in trials by jury. In taking these accounts in this suit, while Kaighn would be bound, the other creditors and the ferry company, not parties, would not be bound by the result. Kaighn might be left to the choice of farther litigation or submission to injustice. These difficulties would be avoided, not only in this case but in many like cases, by leaving the equity to be determined, where it properly belongs, in a court of equity, where all persons interested could be made parties and bound by the decree.
But it is further insisted that courts of law have already taken concurrent jurisdiction with courts of equity in cases arising between the creditor and surety and principal and surety, and therefore should do so as to sureties inter se. But the law courts in New Jersey have not followed the lead of other states in this. On the contrary, the cases of The People v. Jansen, 7 J. R. 336; Paine v. Packard, 13 J. R. 174; King v. Baldwin, 17 J. R. 384; Manchester Iron Co. v. Sweeting, 10 Wend. 162, in which it was held that if the creditor, on being requested by the surely to sue the principal, while solvent, refused, and the principal 'after-wards became insolvent, the surety was discharged, have been expressly overruled by the Supreme Court and this court in the case of Pintard v. Davis, Spencer 205, 1 Zab 632. The law courts in this state have gone no further than to approve those cases in which the surety has been held discharged by a now and binding agreement between creditor and principal, changing the terms of the original agreement; and that for the very reason that the surety could not be bound by the new agreement, unless he was a party to it.
The State of New Jersey has not on this subject gone *502out of the common law track. The decision of the Supreme Court in this case and of the Circuit Court is such as would be expected from lawyers, whose pride it is to preserve the common law, without adventuring beyond its prescribed limits, and to leave the Court of Chancery to its office of ameliorating the ruggedness of fixed rules/ when they are in particular cases opposed to equity.
Most of the states have no distinct courts of equity; and when equity and law are both administered by the same tribunal, experience shows that the line between the two jurisdictions constantly grows more and more obscure. New Jersey has the advantage of such states in having a court established for the very purpose, and entirely competent to enforce equities which have not been covered and secured by legal rules, and which cannot be so well enforced at law by reason of the precision of the pleadiugs therein and the nature of the trial.
The plaintiff is in court to enforce not an equity in an equitable action, but a legal right in a legal action. The breach of the defendant’s contract occurred, and his liability was fixed before the surrender of the bonds by the plaintiff. The cause of action is admitted; it must be avoided by a legal defence. The plaintiff having been obliged to pay money for the. defendant, the defendant owes him a debt. He must show that it has been discharged. If the proposed defence operates this discharge, it is not because it is an equity. If it has a legal existence, it must have a legal name. The debt should be recovered unless paid or released. Payment has a precise meaning. It may be made in money or goods, but in whatever mode, the delivery must be made as payment, and accepted as such. In this case the delivery of the mortgage and bonds was expressly as security, and so accepted. The company and Kaighn did not mean payment, and therefore there was no payment. Waiving any difficulty as to the form of the issue, Paulin cannot claim anything by way of deduction or set-off for *503the surrender of these bonds. That right could only result from payment. The bonds unpaid cannot be considered as money received by Kaiglm for the use of Paulin. The action for money had and received only lies for money or things which have been converted into money. The proposed defence shows neither. Nor is there any release; express or implied. The latter only occurs when the facts show such to have been the intent of the parties, of which there is no pretence in this case.
But it is said there is fraud. In a court of law this must mean actual fraud. Constructive fraud is a creature of the courts of equity not recognised at law, and, in Sherron v. Humphreys, 2 Green 217, expressly repudiated by the Supreme Court. Is there actual fraud ? Suppose there is. It is said that fraud vitiates everything; but it is beyond its reach to vitiate a contract made and broken before the fraud occurred. Fraud, in the execution of a contract, avoids it if under seal. Fraud in procuring a contract avoids it, if not under seal. But fraud subsequent to a contract, and the breach of it cannot be a defence to an action on the contract in any case whatever. The fraud supposed here is subsequent to the breach of defendant’s contract. If it occurred, it is ground for an independent action, but no defence to the action. There is no such thing as a rebutting fraud, any more than a rebutting equity, in a legal court.
But was there any fraud ? There was no offer to prove that the bonds were surrendered fraudulently, nor can any fraud be inferred from the offer made.
If the bonds were of no value, there was no injury and ho fraud in the surrender of them. If the second arrangement was better than the first, and the third, as proposed, better than the second, there was no fraud. As to this and the value of the bonds, the offer of the defendant is silent.
But it is said that these securities for money are presumed to be worth what they purport to be worth, and *504cases are cited to show that in trover for bonds the presumption prima facie is, that they are worth the amount they are given to secure, that is, if one takes and tortiously converts to his own use the bond of another, there is such presumption against him, for the reason that he is a wrong-doer. But is there any such presumption against one who holds or surrenders a collateral security ? If it be said yes, if he does it fraudulently, the answer is, that is the very thing to be proved. The presumption of value cannot be made the basis for a presumption of fraud. It would be repugnant to the legal mind to establish a charge of guilty fraud in this way.
The further offer of the defendant was to prove an agreement of Kaighn, Cooper, and other creditors with the company, to take bonds for their advances, payable in five years, on condition that all the creditors would accept such bonds. It was not in the offer that all the creditors did accept, or agree to accept, nor that Kaighn did, in fact, accept such bonds. This part of the case was not pressed by counsel upon the argument. If proved, it shows no defence to the action. My conclusion is, that the judgment should be affirmed.
For affirmance — Judges Brown, Cornelison, and Swain.
For reversal — Judges Haines, Van Dyke, Combs, Kennedy, and Wood.
Cited in-, 1 Dill. (U. S.) 157.