Court Opinion

ID: 6467161
Source: CourtListenerOpinion
Date Created: 2022-06-26 14:07:25.785491+00
Date Added: 2024-06-11T15:53:38.722461
License: Public Domain

BANTZ, J. (dissenting). I most earnestly dissent from the opinion of the majority of the court in this case. There is a clear and reasonable distinction between the case of one who signs an obligation as surety for the future good conduct or honesty of his principal, and a case like that at bar, where the surety signed for the payment of a past indebtedness, then definitely fixed. In the former instance it may be true that it is the duty of the obligee to disclose to the surety known past delinquencies which materially affect the risk he is about to assume; but when the surety signs for a specific debt there is no obligation on the creditor to disclose past delinquencies, nor the circumstances out of which the debt arose. With all proper deference* I think the court has misapplied to a case of the latter sort a rule relating to the former, and in doing so has launched a new and very dangerous doctrine. Stripped of verbiage, the rule thus announced is that a surety on a note can defeat recovery, unless the payee discloses the circumstances out of which the debt arose, if it arose out of a breach of trust. Such a proposition is not sustained by any cited casé, and is a departure in the law of commercial paper. The distinction between a suretyship for future honesty and one for an existing debt must be obvious upon reflection, and, is quite clearly pointed out in Machine Co. v. Farrington, 16 Hun. 591; and in the same case on appeal the New York court of appeals say: “The bond, in terms, referred to an existing indebtedness of Davis (the principal). The defendant made no inquiry of the company to ascertain the particulars, and the company made no representation. If the defendant deemed it material to be informed of the origin, nature or extent of the existing indebtedness, he should have inquired of the company before executing the bond. The company was under no duty to seek the defendant and make the disclosure. It was bound to act with good faith towards the defendant; but to hold the surety discharged by the omission to advise him of the particulars of the 'previous transaction with Davis, in the absence of any injury upon the subject, would establish a rule which would make instruments of the character of the one in question of comparatively little value.” 82 N. Y. 125. See, also, Burks v. Wonterline, 6 Bush 24. But the facts in this case do not warrant the application of the doctrine, even if sound. Walker knew that the debt was claimed to be for a shortage as agent, and he admits that he was apprehensive that Gilbert would be sent to the penitentiary. He knew enough to put a prudent man ,up011 inquiry. In MaGee v. Insurance Co., 92 U. S. 98, the court say (while fully recognizing that the slightest fraud by the creditor will relieve the surety): “But there is a duty incumbent on him (the surety). He must not rest supine, close his eyes and fail to seek important information within the reach. H he does this, and a loss occurs, he can not, in the absence of fraud on the part of the creditor, set up as a defense facts, then first learned, which he ought to have known and considered before entering into the contract.” “In such circumstances the creditor is under no obligation, legal or moral, to search for the surety, and warn him of the danger of the step he is about to take. No case has gone so far as to require this to be done.” “The company had the right to presume that the sureties knew all they desired to know, and were content to give the instrument without further information from any source.” Much stress is laid on the failure to communicate to Walker that Gilbert’s employment and promotion had been suspended, and that Gilbert had admitted the receipt of the money. But the undisputed testimony shows that the express company’s agent never knew that Walker contemplated becoming a surety until he came in and signed the note. The transaction itself was notice to him that there was a shortage in Gilbert’s accounts. Hamilton v. Watson, 12 Clark & F. 109. If the creditor was bound to go further, and communicate such collateral matters as that the business relationship with the debtor had ceased, it is hard to tell where the limit would be fixed, and contracts of suretyship and guaranty would become valueless. The range of disclosures would become vexatious and annoying to the principal in the extreme. Lee v. Jones (Eng. Exch. B.), 4 Am. Law Reg. (N. S.) 487. While it is true that the findings of fact by a master upon conflicting testimony will not be reviewed in cases referred by consent, yet it has never been held by this court that a mere scintilla of evidence is sufficient to support such a finding, or that it will be upheld when based upon illegal testimony or on erroneous legal principles. In Field v. Romero (N. M.), 41 Pac. 519, such a finding was likened to the special verdict of a jury. ‘ But while a verdict which is supported by sufficient evidence, or which is based upon conflicting testimony, or involves the relative credibility of witnesses, is unassailable, it is not otherwise conclusive. Davis v. Schwartz, 155 U. S. 631. There must be something more than a scintilla of evidence. The preliminary question for the court is “not whether there is literally no evidence, but whether there is any upon which a jury can properly proceed to find a verdict for the party producing it, upon whom the onus of proof is imposed.” Coughran v. Bigelow, 164 U. S. 301; Improvement Co. v. Munson, 14 Wall. 442. In Kimberly v. Arms, 129 U. S. 517, the court say that such findings of a master will not be disturbed “unless clearly in conflict with the weight of the evidence upon which they are made.” In Tilghman v. Proctor, 125 U. S. 149, the court say that such findings are not to be set aside “unless there clearly appears to have been error or mistake on his part.” In Crawford v. Neal,. 144 U. S. 585, and Furrer v. Ferris, 145 U. S. 132, the court use this language: “Unless some obvious error has intervened in the application of the law, or some serious or important mistake has been made in the consideration of the evidence, the decree should be permitted to stand.” All those cases were cited and approved in Davis v. Schwartz, supra. In De Cordova v. Korte, 41 Pac. 528, the court say: “If the findings of the master had been based upon illegal testimony, or if he had misapplied the law to the facts, in drawing his conclusion as to them, there would undoubtedly have been good ground for setting his findings aside. Nail Factory v. Corning, 6 Blatchf. 332, Fed. Cas. No. 14,196.” A master, in such case, can not be upheld, who bases his findings upon vagrant newspaper items or on hearsay testimony. The conversations between Walker and Gilbert should, have been excluded. Machine Co. v. Farrington, 82 N. Y. 125. Strip this case of the conversations between Gilbert and Walker (which the latter was suffered, under objections, to detail) and the newspaper items, and there is nothing left of the defense. The majority of this court admit that the express company was not bound by the newspaper items, yet by some process an estoppel in pais is assumed, and raised against the company, for failing to contradict them. Walker says he thought that, by paying or securing the shortage, Gilbert would retain his employment and secure promotion. But this belief was founded upon Gilbert’s representations made in private conversations and upon newspaper items. Walker never made any inquiry of the company’s agent. With all submission, the company was not bound to deny newspaper items, nor probe the mind of Walker to learn what induced him to go on Gilbert’s note. Walker admits that he never made any attempt to learn the truth -as to any of the representations made to him by Gilbert, because he had implicit confidence in Gilbert’s honesty. It is this overconfidence of Walker in Gilbert that is now laid as a fraud at the door of the company. The majority say the company should have had Gilbert arrested at once, and thus proclaimed to the public his true character. The company did not owe any such duty. If ■suspicious circumstances carried notice of Gilbert’s crime to Young, why does it not reach to Walker? But my learned brothers do not, I think, give credit to the uncontradicted testimony that Gilbert represented to the company’s agent .just as he represented to Walker, that there was some mistake in the matter, which in time could be cleared up; that he was not criminally guilty, although! responsible legally, and would make the shortage good. If Walker could ■credit that statement, Young had the right to do so, also. Mr. Young quite sensibly and justly observes, “In view of the most positive declarations on his (Gilbert’s) part as to his innocence, and in consideration of his long, faithful, and honorable services, we felt it our duty to give him the benefit ■of the doubt which was hanging over the situation, and that it would be entirely wrong, and a gross injustice, to lead the public to believe that he was a thief and a scoundrel, when possibly he was not.” It was not until long after, when other ■defalcations were discovered, and no explanations were forthcoming, that the conclusion as to his criminality was reached, and his arrest was made, some twenty days after the note was ■signed. In the meantime an unaccounted shortage appeared, and the company’s agent, as a prudent man, required it to be made good or secured. Walker vainly endeavored for several days to induce other persons to lend Gilbert the cash to meet that demand, but without success, and at Gilbert’s request he signed the note as surety. When asked why he took so much interest in Gilbert, he answered, “Well, Gilbert had been kind to me, and I knew that, whether accused wrongfully or not, that, the indemnity company and Wells-Fárgo being one and ■almost the same, that he would have to go to the penitentiary.” Eeally, the record in this case discloses no material conflict in the testimony at all; and the conclusions of the master, in my judgment, were based upon suspicions, rather than competent evidence. A jury would not be at liberty to arbitrarily disregard unimpeached and uneontradicted testimony, and neither can the master. The court below committed no error in setting his recommendations aside. The judgment of the-district court should be affirmed.