Johnston v. Mills

Roberts, J. This is a suit by appellees against appellants upon a written contract. The appellants presented in their defence two issues, one of which was presented by filing a general denial, and the other by a special plea. The defence under that one made by the special plea was negatived and disregarded by the court in the charge to the jury, so that the cause was tried upon the issue made by defendants’ general denial of the facts alleged in the petition. The contract set out in the petition reads as follows, to wit: “ Cherokee county,-July 12th, 1852. “Whereas, we have transferred and assigned to R. & D. Gr. Mills, of the city of Ualvéston, the following notes, viz:" the note of James Colthorpe in favor of Moses Cox, Jr., and by him endorsed, due 8th of June, last, for eighteen hundred and ninety-one and seventy-seven one-hundredth dollars, and the note of W. P. — 715 — Hayne, also in favor of, and endorsed by Moses Cox, Jr., due 15tb of January, 1853, for four thousand five hundred and one and fifty-one-hundredth dolíais; which notes are placed to our credit in account with R. & D. Gr. .Mills'; therefore, it is understood that the said R. & D. Gr. Mills shall be authorized to use their discretion in arranging for the collection and recovery of these notes, by renewing of the same, or by taking of other notes or security in substitution of the note of W. P. Hayne, provided, that the said Moses Cox, Jr., shall be held and remain bound, and we hereby agree to hold ourselves ultimately responsible with the above parties. (Signed) “Johnston & Dewberry.” The petition alleges that R. & D. G-. Mills caused suit to be instituted in the name of Robert Mills, upon the note made by Hayne and endorsed by Cox, in due time, and regularly prosecuted to judgment; that Hayne and Cox both became insolvent and died; that they have not collected any money upon the said note and judgment; and that they could collect nothing by the- exercise of a sound and prudent discretion by virtue of the judgment. In the amended petition it is averred that the plaintiffs “have in every particular complied with and performed their undertaking and agreement, by using all legal means, and taking all steps, which the law requires or would permit, to collect the said sums of money in said instrument in writing mentioned and specified.” These taken together certainly amount to an allegation that R. & D. Q-. Mills had used reasonable diligence in the collection of said note on Hayne and Cox, and had failed to collect it, or any part of it. The general denial put in issue these facts, and imposed upon the plaintiffs the burthen of their proof, if it was necessary for the plaintiffs to allege them to present a cause of action. The only allegation about which there could be any question as to its necessity, is that R. & D. Gr. Mills had used reasonable diligence in the collection of this note. The cause was tried on the supposition that it was necessary for R. & D. Gr. Mills to make' this allegation to present a cause of action against the defendants. This is fully evidenced by the proof adduced by plaintiffs and the order of its introduction, as well as by the charge of the court, which made the case turn upon the question whether or not the — 716 — jury were satisfied of its truth from the evidence. We think the allegation was necessary. The discretion given to R. & D. Gr. Mills in arranging for the collection and recovery of the note, was m relation to renewing it, or to take other notes or security in substitution for it. ' Neither of these tilings was done, and therefore the discretion expressed in the instrument was not exercised, and need not be further noticed. The Colthorpe note is not involved in the litigation. The legal effect of the balance of the instrument, and the respective duties and obligations imposed upon th& parties to it, by its execution on the one hand and by its acceptance on the other, may be arrived at by considering first the nature of the consideration which passed between the parties as the foundation of the contract, and secondly, the nature of the promise contained in it. The terms of the instrument show that the consideration was not any benefit to Cox or Hayne, or any matter having any connection with the original consideration of the note made by ITayne, and endorsed by Cox, or of its endorsement; but that it was a new matter entirely passing between R. & D. Gr. Mills and Johnston & Dewberry. The benefit to Johnston & Dewberry was the amount passed to their credit in account with R. & D. Gr. Mills. The note being endorsed by Cox, was delivered and received as a' conditional payment of Johnston’s & Dewberry’s debt due to R. & D. Gr. Mills. The legal interest in the note was passed by delivery to R. & D. Gr.. Mills, and Johnston & Dewberry had received a credit on their account for the amount of it. The promise of Johnston & Dewberry to remain bound, had for its object a guaranty that this conditional payment should eventuate in an absolute payment of their debt to R. & D. Gr. Mills. They agreed to remain bound not for the debt of another, but for their own, not for Cox and Hayne but with Cox and Hayne, for that amount of money according to the terms and legal effect of the note, or in other words, that their conditional payment should be rendered absolute by a collection of the note by R. & D. Gr. Mills from Cox & Hayne. They agreed to remain bound ultimately; that is, not presently, but finally; not in the first instance, but in the last resort. The object of the whole arrange — 717 — ment, as developed upon the face of the contract, was for Johnston & Dewberry to extinguish this amount of their debt due to R. & D. G. Mills. For the consummation of this object, R. & D. G. Mills accepted the attitude of being the actor. And Johnston & Dewberry guaranteed its ultimate success. Now it must necessarily have been contemplated by the parties to this arrangement, that R. & D. G. Mills, for the consummation of this object, would either exercise the discretion expressly conferred, or pursue the usual remedies for collection, (according to the exigencies of the case,) which their position as the legal owners and holders of the note would enable them to adopt. Under the view here presented of the contract, it can hardly be said that Johnston & Dewberry are ordinary guarantors of a note, for in such case they would be liable in the first instance, upon non-payment by Cox & Hayne at the maturity of the note. (Douglas v. Reynolds, 7 Peters’ U. S. R., 128.) Nor can it well be understood that they are sureties for Cox & Hayne. Theirs seem to be more in the nature of an original undertaking upon a new consideration entirely distinct from that of the note. Johnston & Dewberry in effect guarantee the note to be good, and that it can be collected so as to complete the extinguishment of their debt to R. & D. G. Mills. Such a guarantee imposes on R. & D. G. Mills the duty to use reasonable diligence in the collection, by due process of law, in its ordinary and regular course, in the absence of any stipulation to the contrary. (Edwards on Bills and Notes, 222-3-4-5, 229, 231-3, 235; Curtis v. Smallman, 14 Wend. R., 231; Cooke v. Nathan, 16 Barb. R., 342; Loveland v. Sheppard, 2 Hill R., 139; Leonard v. Vrendenberg, 8 Johns. R., 29.) Under this view of the case the court below instructed the jury that ■“ they are to determine from the evidence whether the plaintiff used due diligence to collect the money on the note, &c.” And again, “ if the jury believe that the plaintiffs used ordinary diligence to collect the money, they may find for the plaintiff.” “ If they believe that they have failed in diligence, they will find for the defendants.” It is evident that this was the main question upon the trial. — 718 — Plaintiffs, in order to show their diligence in collecting the note, introduced in evidence the transcript of the record of the suit of Robert Mills v. Hayne and Cox, brought upon this note in Anderson county. The judgment contained in said record in favor of Mills, concludes as follows: “and by agreement of the plaintiff by his attorney, the issuance of execution hereon as to defendant Cox is stayed until the first of February next.”" This judgment was rendered in September, 1853. The judgment against Hayne was by default, and against Cox by nihil dicit, upon his pleas being withdrawn; so that it appears that the execution was stayed over four months by agreement between Mills and Cox. What effect this stay had in the immediate enforcement of the judgment against Hayne, need not now be considered under the state of facts as they ai‘e now presented. Whether it, of itself, operated as a release of Johnston and Dewberry need not now be considered, because it is not pleaded as such; and because the facts, in addition to those contained in the agreement, (if any such existed,) showing that Johnston and Dewberry were really sureties only, were not alleged or proved. The question to be considered under the pleadings and evidence is, what effect should this four months stay of the execution as to Cox have upon the question of reasonable diligence in the collection of this note by R & D. Gf. Mills? Had Johnston & Dewbeny been sureties only, a valid binding stay of execution upon the judgment for a definite time by Mills might ordinarily have been set up in defence as a release of them. (The Commonwealth v. Miller’s Admr’s, 8 Serg. & R., 452.) This is upon the principle that the contract has been changed. The sureties cannot pay the debt at once and have an immediate remedy against the principal. They would have been placed at disadvantage by the dealings of the plaintiffs, and the law will not permit a calculation to be made of the diminished value of their remaining remedies against the principals, but will hold the sureties released, whether injured or not in fact by the delay. (Samuel v. Howarth, 3 Merivale’s R. 272; 2 Story Eq., § 833.) While this rule may not apply to this case in all its technical force, still it shows the importance attached to such stipulated delay in collection in a case — 719 — where there are relations of mutual duties and obligation between parties. (Story on Prom. Notes, sec. 485.) In the case before us, Johnston & Dewberry had given up all legal direct control of this debt to R. & D. Gr. Mills, who had assumed to use reasonable diligence in collecting it. Upon the faith of this assumption they had guaranteed that it would be collected. Their hands were tied. R. & D. Gr. Mills alone could move in the matter. Here there is a relation of mutual duty and obligation which invokes strongly the spirit of the rule which attaches such importance to such delay by the acting party. The evidence shows that the time when this stay was given, was a most critical period in reference to the collection of this debt. Cox had four or five days previously sold allof his property to R. & D. G. Mills in payment of other debts due them, and had received from them in said trade one thousand dollars in cash, which was all that he had; all of which must have been well known to R. & D. Gl. Mills, or their agent. Haynes, as the sequel showed, was able to pay but a small portion of all of his debts. It must have been then quite plain to any one that if this debt was ever collected, it must be done by prompt action. Haynes had several thousand dollars worth of property then liable to execution, but no execution was issued on the judgment at all, and he died in ten or fifteen-days after the adjournment of the court at which' the judgment was rendered, and his estate, upon distribution, paid but a small portion of this debt. -The one thousand dollars in possession of Cox was levied on and appropriated to other creditors a few days after this judgment was rendered and stay given. Without refering to any other fact affecting this question of diligence, it will be sufficient to consider this stay of execution. Such a stay is not provided for or contemplated as a part of the legal proceedings in the regular process of law in the collection of a debt. Such a proceeding is contemplated in suits in justice’s courts, and, when adopted, the indulgence is supposed to be paid for by the increased security which it is provided shall be given. There is no such proceeding provided for in suits in the District Court. If it be entered upon the records as a part of the judgment, as in this ease, it is by virtue of the agreement of the — 720 — parties, and not in pursuance of any prescribed rule of proceeding in the suit. It is because the parties have the power to make an agreement concerning the subject matter of the suit, or the mode of using the process of the court in reference to it; and the court may permit them to give such agreement conclusive sanction by making it a part of the judgment, if, in doing so, no rule of law be infracted.' Staying the execution, therefore, is no part of the regular ordinary proceeding of- a suit instituted for the collection of money in the District. Court. However common it may be in practice, in a legal sense it is extraordinary, and out of the regular course of legal proceeding. That is a matter of legal cognizance. It presents a question of law arising upon the evidence adduced in this case^upon which the court should have instructed the jury. This was especially important in this case; as the common practice of parties in staying executions, of which the jurors were doubtless aware, if unexplained, was well calculated to lead them to the erroneous conclusion that it was a regular step in judicial proceedings. It is a step dependent entirely upon the discretion of the plaintiff in the action, and it places the case out of the regular course of the law. If a party, who is bound to the exercise of reasonable diligence in the ordinary regular course of the law, as were the plaintiffs in this "case, should use this .discretion and give such stay, he does it at his own risk of losing the amount he might have collected but for the stay. Like any one else who varies from a prescribed and well defined line of duty, in transacting the business entrusted to him, he would he prima facie in default by the act which constituted the variance, and must be prepared to show that such act has resulted in no injury, in order to relieve himself from the consequences of his apparent departure from duty. It was incumbent on R. & D. G. Mills, in order to recover, to show that they had not collected the money on this note, and having shown that in the steps taken by them, they had departed from the regular course of the law by giving a stay as to Cox", that imposed upon them the burthen of showing that their failure to collect was not in whole or in part caused by the stay which they gave. And so the court should have charged the jury, upon, the pleadings and — 721 — evidence as they are now presented in the record. Had such instruction been given, the jury might have concluded that this debt was not allowed an equal chance in the race after the one thousand dollars in cash which it was shown R. & D. G. Mills had paid to Cox upon other transactions. Indeed they may have been warranted in the conclusion that the act of staying the execution four months as to Cox under the circumstances, was a virtual abandonment of all opportunity to secure this one thousand dollars towards the payment of this debt. And if a reason should be shown for such a sacrifice, the same facts which would develop that reason might point to the duty of hastening this execution against Hayne as soon as possible, from whom alone after the stay there could have been any reasonable hope of collecting the judgment. We cannot say that the jury under proper instructions might not have found differently under this issue, and, therefore, upon this point the judgment must be reversed and remanded. Upon the issue formed by the special plea, we are not prepared to decide that the court erred in the charge given. This special plea alleges in substance that R. & D. G. Mills became agents for Johnston & Dewberry in the collection- of this note, and that they prevented its collection by purchasing all of Cox’s property in payment of debts due to themselves, and thgj/ in said purchase they, in addition to their debts, paid over to Cox for his property, one thousand dollars in cash, instead vf retaining that amount in part discharge of ihis debt. What further facts should be stated to make this a good plea, if it can so be made at all, it is unnecessary for us to consider. It will suffice now to say, that no authority has been furnished which would justify us in saying that the facts as stated, or as proved, constitute a good defence under this special plea. Only such matters have been noticed as have been deemed necessary to bring properly to view the point here decided, and to disconnect from it matters not properly affecting it. Reversed and remanded.