Douglass v. Mundine

Watts, J. Com. App. Appellant claims that the court erred in admitting evidence under J. C. Mundine’s plea of suretyship, and release by subsequent transactions between appellant and F. M. Mundine. As claimed, there is no evidence in the record tending to show that J. C. Mundine was in fact a surety and not a principal on the note. Manifestly, the case was decided upon the other issue; and if the admission of the evidence objected to was erroneous, then it must be considered an immaterial error. But one question is presented by the record for disposition, and that is, was the appellant liable to appellee, F. M. Mundine, under the circumstances of this case, for the loss of the collaterals transferred to him? Resulting from the view of the case entertained by us, it becomes unnecessary to determine the character of the instrument by which the notes were transferred as collateral security to appellant. An examination of that instrument clearly develops the fact that these notes were transferred as collateral security for the note upon which this suit was brought; that F. M. Mundine guarantied the payment of these notes, and authorized appellant to collect the same and apply the proceeds to the payment of the note, in suit. It also appears that, by the terms of that instrument, the legal title to these notes was vested in appellant, and that all control over the same had passed from F. M. Mundine. That these collateral notes became entirely worthless by reason of the negligence of appellant in failing to use ordinary diligence in the collection of the same, is clearly and unmistakably shown by the record. It also appears that he declined to accept from Harrington a deed of trust on" valuable land to secure a portion of these notes; that after obtaining judg [348] ments on a portion of them, he failed and neglected to have these judgments recorded, so as to secure a lien upon the land of the defendant therein, and that other parties recovered subsequent judgments, under which all the property of that defendant was sold and the proceeds applied to the subsequent judgments. Also, that when executions were issued by the justice of the peace upon these judgments, and were in the hands of the constable, that appellant had them returned without levy, notwithstanding the defendant therein had an abundance of property at the time out of which the judgments could have been made. It also appears from the record that the parties who owe these notes have become hopelessly insolvent, and the notes are entirely worthless. Under the facts and circumstances of the case, the court below concluded that the appellant was liable for the loss thus occasioned by his negligence. To meet that view of the case, appellant urges as a sound proposition, that, as appellees were in default all the while in not paying the note sued on, and assuming the control of these notes, that no complaint of negligence in the management of them by appellant will be heard from appellees. The authorities cited to maintain this proposition, among them' Schroeppell v. Shaw, 3 Comst. (N. Y.), 456, are cases where sureties have sought to relieve thémselves from liability on the ground that the principal had placed in the hands of the creditor some collateral security, which has been lost by reason of the negligence of the creditor. In such cases, courts have generally held that the surety should have paid the debt, and assumed the control of the collateral; failing to do this, that he remained bound for the debt. Here a different question is presented. The debtor transfers and delivers to the creditor a lot of solvent notes, in amount more than sufficient to pay the debt, and guarantees their payment; by the fault of the creditor these collaterals become entirely worthless. It will not do to say that because the debtor was in default in not paying his note, that therefore the creditor could, without incurring liability, inflict loss upon the debtor through his negligence and fault. It might be that these collateral notes constituted the available property of the debtor from which he could pay the debt, and perhaps without them he might not be able to pay; it would then be unjust to hold, because he was unable to pay the debt without these collaterals, that therefore the creditor could, by his negligence, impose such a loss without incurring liability for the, same. The debtor could, with much more show of justice, under the circumstances, say to his creditor, you had the absolute control and man [349] agement of iny available property; why did you. not apply it to the payment of your debt against me? Johnston v. Mills, 25 Tex., 704, in many of its features, is very similar to the case before ns, and we think is decisive of it. We conclude that the judgment of the court below ought to be affirmed. Affirmed. [Opinion delivered June 16, 1882.]