Godwin v. McGehee

CHILTON, J, Since this cause was before ús at a previous term, (15 Ala. 232,) it has been re-tried in the court below, and is again before us upon cross assignments of errors, both ¡parties being dissatisfied with portions of the chancellor’s decree.- We will first dispose of the errors assigned by the defendants to the bill. 1. It is insisted for them that the chancellor erred in charging them with interest on the amounts ascertained to be due from them to the Rail Road Company for stock. According to the previsions of the charter of the company, if the defendants to the bill had failed to pay within sixty days after the stock was called for, the company could have sued for and collected it. The right to 'declare the stock forfeited was clearly but a cumulative remedy given by the charter to the company against defaulting stockholders, If, then, a call had been made, and these defendants had made default, and suits bad been instituted by the company, we apprehend there would be no question but that they would be bound to pay interest on — 474 — their bonds from the time they were payable,, namely, from the-expiration of‘the sixty days from the date of the call. The complainants,, however, by their bill, have acquired a lien upon this stock, so that the company cannot control it, and the defendants would'be bound, at their peril,, to disregard any call which the company might make, after this lien attached. The company and its debtors having been brought before the Chancery Court,, that court became the rightful’repository of the fund until the controversy concerning it was endéd, when by its final decreer the same would be ordered to be paid out according to the equitable rights of the respective parties. The fund being-called'for in the Court of'Chancery", if was the cbvious duty of the defendants who desired'to rid themselves of the payment of interest upon their unpaid bonds, to have tendered the money in court, and, if "instead of doing so, they engage in a protracted,, expensive, but fruitless litigation concerning it, and hold on to it until obtained at' the extremity of the law, it is but equitable and right that they should be required to pay interest. The parties knew, or might' have known, the amount of their indebtedness. They were likewise hound to know that after the service of the bill' upon them, no demand which they might- acquire should be allowed to defeat the right of the complainants to a condemnation of the amounts due from them to the company to the payment of the complainants’ judgments. In other words,, that the state of'the accounts existing 'between them and!the company at the time tile Bill was served upon them, which brought actual knowledge t'o them of the’ pen-dency of the chancery proceeding, must be that upon which tbfe court would determine their liability.. And knowing this, their • efforts to obtain credit for demands against the company, which were acquired by them after they knew of the pendency of this ■ suit,, instead of furnishing a reason- for exonerating them from • the payment of interest, constitutes a strong inducement forcharging them with it.. It is, moreover, manifest that this-ease is readily distinguishable from.-those in. which if is necessary to go into a protracted,. intricate accounting, .in order to ascertain the true balance between the parties. In T. & J. Kirkman et al. v. Vanlier et al., (7 Ala. 217,) if-wa's held by our predecessors, and we think very correctly, that — 475 — Where a bill is filed fox' the purpose of subjecting a sum1 of money in the hands of a third' person, to the payment of a debt due the complainant,' if su'ch- person, though enjoined from using it, does not offer to bring it into court, but insists upon his right to retain it, both as against the complainant and his debtors, he will be charged with interest.- This decision is well sustained by thé authorities cited in it, and as the case before us is clearly brought within its influence, We deenv it unnecessary to cite further authority to the points But it is supposed that the frame of this bill will not justify a decree for interest, as'it contains no specific'prayer for the same. In general, a court will not decree interest on a balance, unless .it is specially asked’ for in the bill, but this rule applies to interest due at the time the bill was filed.- Where the interest ac - crues subsequently, it is the practice of the eourt, upon further directions, to order the interest to be computed, although there is no prayer in the bill t’o that effect. In Turner v. Turner, (1 Jacobs' So Walker, 43,) Sir Thomas Plumer, Master of the Rolls, said, ct for although the bill does not pray for interest, and there is nothing on the fa’ce of the pleadings to affect the executors with it, yet, it is,-1-think, now open to the' court to charge it against them.” And as to bringing-'the money into court, he Says; “ It was urged that no application was made for the payment of the balance into court, but the defendants should have brought it in without any.” See also Loyd v. Jones, 12 Simons, 491, and Daniel’s Ch. Pr. 439; ib. 1507. Having disposed of this objection to the decree, which is taken-by all the defendants,-let us turn'to the alleged error, which is severally assigned.- We have carefully • examined the additional proof taken by the register upon’ the last reference as to the bond of the company N-o.- 78,- which Mr. Cowles insists should be allowed as a* Credit upon' his stock. The testimony of Mr .-Gilmer tends to weaken to some éxtent the evidence adduced against-hiitf as to the'time he'acquired this bond, but his memory'is unaided by any memorandum-in writing made at the time,* and" besides,-he cannot identify this as the bond deposited by Cowles with Bell to be credited on his stock. Without stating the testimony previously taken, which will be found in 15 Ala. 240, We feel constrained to hold that the proof clearly preponderates in favor of- the master’s report,- and shows that- this bend-'w?¿'> — 476 — purchased from Wm. Knox on the 28th day of June, 1841, nearly one month after the bill was served upon the defendant Cowles. Consequently, the Chancellor very properly refused to allow it as a credit upon the amount due from him for stock. This disposes of the errors assigned by the defendants to the bill, and shows that the Chancellor did not err in the matter of their objections to his decree. Next we come to consider the question raised by the assignment of errors on the part of Allen et ah, the complainants in the court below. It appears that the subpoena in the cause was executed on Abner McGehee on the 26th day of May, 1841, and the register reports that said McGehee became the owner of three of the bonds insisted on as credits by him, two of them for $1,000 each, and one for $100, on the first day of June, 1841. According to this report these bonds could not have been allowed as sets-off against McGehec’s indebtedness, but it was excepted to as to these items, and the chancellor sustained the exception and allowed McGehee the benefit of them.. The evidence in regard to these two items shows that on the 5th day ox November, 1840, William McGehee, being tbe owner of these bonds, with other demands against the company, amounting in all, with interest to 1st November, 1840, to the sum of $6,701, and being indebted to Daniel Moseley in the sum of $3,000, to John Chaney in the sum of $900, to T. Baldrick in the sum of $500, and to the bank in the sum of $2,300, amounting in the aggregate to $6,700, (for the payment of which debts it appears that Abner McGehee was the security for William,) placed the aboye bonds and estimates in tbe hands of Abner, and took his receipt in the following words: “ Received, 5th November, 1840, of William McGehee, the above demands, ■which I promise to try to collect and pay the following writs and executions, viz.” Here follows a description of the debts above designated. It appears that the demand due Moseley, amounting to $4,177 15, besides costs and commissions, was paid by Abner McGehee to the sheriff of Montgomery County, on the 1st day of January, 1841. The Baldrick debt was also paid by him for William Mc-Gehee, but at what time does not appear. The matter between William and Abner McGehee stood thus until the Fall of 1842, — 477 — when, according to the testimony of William, Abner told Mm that he had caused said bonds and estimates to be passed to his (Abner’s) credit on the books of the Rail Road Company, but that he (William) could take the amount of said bonds, &e., in stock in said company, or if he preferred it, he would give William other bonds against said company. Nothing, however, was done in regard to the matter, until, in 1843, William being dissatisfied with the disposition made of the bonds and estimates by Abner, the parties agreed to submit the matters of difference between them to the adjustment of arbitrators, by whom it was awarded that Abner should account to William for said bonds and' estimates at the rate of fifty cents on the dollar; and upon a settlement based upon such arbitration and award, W illiam fell in Abner’s debt to the amount of about $900. It appears that the settlement or entries upon the books of the Rail Road Company, by which these two bonds were placed to the credit of Abner McGehee, was made on the 1st of June, 1841, after the service of the subpoena in this case upon him. It no where appears that he had any authority to use these bonds in settlement of his indebtedness to the company, unless such authority can be deduced from the receipt above spoken of, coupled with the subsequent payment by him of the Moseley and Baldrick demands. We may then leave out of view the settlement, since we must look to the rights of the parties and their equities, growing out of the relation which they occupied towards each other at the time this bill was filed. The question then is, what interest had McGehee (Abner) in these two bonds at the time the lien of the complainants attached to his indebtedness to the R. R. Company 1 It is clear that he had no legal interest, for there was no assignment of the bonds to Mm. Had lie an equitable interest, and by this we mean such an interest as a court of equity would protect and enforce 1 Ho was certainly more than a mere collecting agent for William, as the written receipt upon its face would indicate. In arriving at the intention of the parties, we should construe the obligation imposed by the receipt with reference to the surrounding circumstances attending its execution, and the object intended to be effected by the parties. Abner vras the security for William, and to provide the means to meet the demands so secured, William placed these bonds, &e., in his hands — 478 — to collect and pay them. It then became hia duty to collect them as it was his privilege to apply the proceeds to the payment ,of the debts specified, -fpr his own protection .-and indemnity. It was an agency coupled with an interest which William could not have revoked or affected,, without fii’st having paid the debts designed to be settled out of the proceeds. .If Abner paid the debts due to Moseley and Baldrick before .collecting the claims thus placed in his hands., he became subrogated to the rights of the creditor thus .paid off, and retained the right to indemnify himself out .of the proceeds of said bonds and estimates. But the payment by the surety would not give him the absolute pro.perty, either in law. or in equity, .to these bonds. They still belong to William, .charged with Abner’s right ¡to collect and re-imhurse himself the amount ¡paid. And, notwithstanding this arrangement for his indemnity, Abner had the right, immediately upon the payment., to sue William, and recover at law the amount which he had paid. This right, however, to sue upon .the demand at .law, does not affect his remedy to r.ely upon the security which he hasand whether William be solvent or insolvent is immaterial in this view ,of the case. The Bail Road Company is shown to he insolvent, and. this proceeding in equity to collect -the demand which Abner owes to ' the company but subrogates the complainants to the rights of the company in respect to such demands. The company being insolvent, it would be clearly inequitable to allow it to collect the whole of Abner’s indebtedness ,tp it, while he holds against it the right to reimburse himself the .amount he has paid for William McGehee out of collections ;to be made upon these claims. As to all the .debts mentioned in the receipt, except those due Moseley and Baldrick, ,we must .presume William McGehee paid them, as there is no proof that Abner paid any of them, and no charge for such payment appears to have been brought, up on the settlement based on the arbitration. Nor .does it appear that Abner claimed any amount on account of the demands for which he was .originally hound as security, In regal’d .to all of the demands which William had placed in his hands, Abner was the mere collecting agent .of William, except .as to the amount required to reimburse him the sum which he paid as his security, with interest on that sum. As to this amount he held an equitable lien^ and if ¡the company or the complainants in ,thp bill had re..- — 479 — Imbursed him the amount be had thus .paid, he would, in respect of the balance, have had no right to insist upon it as an off-set to the amount due from him to the company; for, as to the remain\der, he would have had no personal interest whatever. In equity, then, he can be said to be the owner only of so much of 'the demand as he had the right, had the whole been collected, to appropriate to his re-imbursement. And to this extent, under the previous decisions .-of this court, we think the court of equity might well affordhim .relief, (T., C. & D. Rail Road Company v. Rhodes, 8 Ala. 206, and cases cited; Donalsoh’s Ex’r. v. Pope & Posey, 13 ib. 770;) but further than this we think the court should not have. gone. But it is insisted that the amount paid by Abner McGehee to Moseley and Baldrick was more than equivalent to the entire market value of the bonds and estimates placed by William in his hands, and that having treated them as his own in procuring a credit upon his stock by the consent of the company, he is only to be charged the market value of these claims. Such too appears to have been the principle upon which the arbitrators acted in 1843, for they allowed William only a credit, estimating said claims at the rate of fifty cents on the dollar, notwithstanding Abner had used them at par in the payment of his debt to the company.. It must be borne in mind that the complainants5 lien upon Abner McGehee’s indebtedness to the company attached before the allowance by the company of these bonds, &c., as a credit upon it, and consequently no arrangement which they may have subsequently made could defeat the equitable rights of the complainants. To divest the case of the embarrassment which these subsequent proceedings throw around it, we may regard Abner McGehee in possession of the bonds, &c., handed him by William, and that he is summoned to pay to the complainants what •he owes to them debtor, the company- Let us suppose that he had brought the amount he was due in money Into court, with .the claims of William McGehee which he held, and the evidence of so much paid by him on the demands which these claims were intended to secure. The court, upon an inspection of the receipt which Abner gave, at once determines that these claims were designed for his indemnity . and protection against these debts .for .which.he.is surety,.and orders-that.he shall’be fully indemni — 480 — fied by being reimbursed any sums which he may have paid, out of his indebtedness, or, in the case supposed). out of the money: which he brings into courts When-this is done, and the balance of the money is appropriated to the complainants, it is manifest tliat complete justice will have been done between all the parties.. Abner McGehee’s equity extends to-his indemnity, no further It enables him to resist the payment of the amount on.-, his indebtedness, which he has paid on the demands mentioned in the receipt to- William McGehee, with the interest on that amount, but no more.. Although William and' the company agree, after' the complainants acquired their lien,, that these bonds and estimates shall be computed at fifty cents to the dollar, yet this-agreement, can have no. such effect as to override the lien of the complainants which had previously attached. The subsequent agreement and settlement between Williamand Abner, whether regarded as a purchase of these bonds, &c-., or as the ratification by William of the previous unauthorized act of Abner in. procuring a credit on the books of the company upon his indebtedness to-the amount of them, cannot disturb the equities existing between the complainants and Abner at the time the bill was-served upon the latter,, nor dispense with the application of the-rules of equity which define the rights of the parties. See this, case (15 Ala. 232,) and Wood v. McCain, (7 ib. 800.) The surety is not to speculate upon his principal. If he compromise for less than, the amount of the debt,, he can recover no-more from- his principal than he actually pays.. And if he undertakes the settlement of the debt, it is his duty to procure the discharge of the debtor upon the best terms he can obtain it.—Burge on Surety, 361; 14 Ves. Jr., 567;; 2 Mylne & Cr. 361. If he holds in his hands means in trust for the payment of the cküms for which he is liable, like all other trustees, he is not to - make profit by his trust. If by payments, he acquires a lion upon the fund so deposited, he can take no advantage out of' such fund beyond the principal and interest which he has paid,—Gordon v. Lewis, 2 Sumner’s Cir. Ct. R. 143. To allow Abner McGehee to retain of the amount due from him double the amount he has paid out, upon the idea that bonds of the company could haye been purchased for half their nominal, amount, would be to violate the spirit of the above rules, and in effect to, make a contract between him and, William to. the preju— — 481 — dice of the complainants which had no existence when the bffl was served upon him. We repeat, that according to the facts disclosed by this record, all that Abner McGehee could claim when this bill was served upon him on the 26th day of May, 1841, was to retain in Ms hands, as if he had collected it from, the company, an amount equal to the sum he had paid of the debts named in the receipt to William McGehee. The subsequent acquisition of the entire interest in these demands against the company by Abner from William, does not,, as we have said, affect the equities existing between the complainants and the defendants at the time the bill was filed. Abner must look to the company for such after acquired interest. The case made by the record, and the matters assigned for error, will not justify relief to the extent which the principles settled by tMs opinion would authorize, as the errors assigned by tke complainants in the bill go alone to the allowance of the $1000 and $100 bonds as a credit to McGehee. The decree, then, as to said Abner McGehee, must be reversed and here rendered, charging him, in addition to the'amount heretofore decreed against him, with the sum these two bonds were allowed t(y extinguish of his indebtedness to the company,, and interest on, that sum, tobe computed after the expiration of sixty days from the service of the subpoena upon him. As to all other matters, the decree is affirmed. Let the complainants in the bill recover their cost.