Hickok v. Farmers' & Mechanics' Bank

Aldis J. The orator, as surety for Morton Cole, signed a note to the Farmers’ and Mechanics’ Bank for the sum of $1500. By this bill he seeks relief from his liability upon the note, and his claim to relief rests upon four grounds, which are thus stated in the brief of his counsel: “ 1st. Upon the understanding, had at the time the note in question was executed, that it should be collected when it should fall due — the failure, not only to collect it, but to notify the orator an unsecured surety, that the note was unpaid, and allowing it to run nearly eighteen months, the orator reasonably believing it to have been paid, until Cole, the principal, had become insol — 482 — vent, and the’orator had lost the opportunity of securing himself against loss. 2nd. Upon an agreement between the bank and Cole to extend the time of payment of the note. 3rd. Upon the neglect and refusal of the bank, upon the orator’s request under the circumstances stated, to attach Cole’s personal property. 4th. Upon the agreement of the bank, through its attorney, Wires, to attach Cole’s personal property, and its neglect to do so, relying upon which agreement the orator has suffered loss'.” We will consider, 1st. The alleged agreement with Wires in New York. The proof of this rests upon the testimony of the orator. He says that on the 4th and 5th of March he requested Mr. Wires to attach all Cole’s personal property upon the writ already issued against him and Cole. Wires objected to doing so, because he did not want to quarrel with Cole. The orator still urged the request. Wires then proposed he should write to Warner, and if Warner would direct it he would do it. 'I he orator said he would think of it, and let him know the next day. The next day he said to Wires he would not write to Warner, as he had not been well treated by him in this business ; that Warner had given Cole a year and a half’s time on the note, contrary to their understanding. The orator insisted Wires should attach Cole’s property — made an earnest'appeal to him to do so, as an act of simple justice. Finally, Wires reluctantly consented, and said he would attach Cole’s property, if any could be found when he got home. ■ Mr. Wires testifies in direct contradiction of the material points of Mr. Hickok’s statement. He says that in reply to Mr. Hickok’s request he said that he personally had no objections to doing so, but that the board of directors insisted that he should take up the note and secure himself; that they were opposed to making search for the odds and ends of Cole’s personal property, but if he would write to Warner requesting it, he thought it would be done ; that he understood Mr. Hickok to agree that he would write to Warner, and he (Wires) on his part agreed to make inquiry as to Cole’s property, and be ready, on the receipt — 483 — of the letter and the consent of the bank, to attach ; that Mr. Hickok did not express any unwillingness to write to Warner, or make any claim or complaint that Warner had agreed to collect the note when due, and had not done so. Thus between these gentlemen there is this plain and direct contradiction upon all the material points in their testimony. Each testifies positively, and to facts inconsistent with the statements of the other. The contradiction can not be reconciled by saying that one asserts what the other forgets. The letter of Mr. Hickok to Chittenden corroborates his testimony, and shows that he understood the matter at the time as he now testifies ; while the declarations of Mr. Wires to Mr. Chittenden, and his letter to Mr. Hickok corroborate his account. The omission to set up these facts in the original bill is entitled to much consideration, and does not seem to be fully accounted for. The surrounding circumstances and the various suggestions made on behalf of the one and of the other, we have carefully considered. They do not seem to be at all satisfactory or conclusive, and we are compelled to the conclusion, that at the outset there was a misunderstanding between these parties as to this matter. As the burden of proof rests with the orator, we must come to the conclusion that he fails to establish the facts stated in the bill by the requisite preponderance of proof. '2nd. The request to the bank to sue Cole and attach his property is proved. It is not claimed that such request of the surety obliges the creditor to comply with it, and to make good to the surety the amount that might then have been secured by attachment. It has long been settled in our courts to the contrary. But it is claimed that in this case there are circumstances which give a peculiar force to this request, . and entitle the orator to relief: that the orator resided out of the state — that the bankruptcy of Cole was imminent, and his personal property was known, and easily attachable — that it would have made no expense to the bank — that the orator’s counsel was ready to see that it was faithfully done — and that-the orator was then embarrassed, so that he could not pay the note, were circumstances that commended Mr. Hickok’s request to the most favorable and — 484 — courteous consideration of the bank ; but we do not think that they furnish any sufficient ground for making this ease an exception to the general rule, or justify us in establishing a precedent that would tend to break down a plain boundary line of the law. The rule as now settled is a plain and practical one, and well understood byf business men. If we begin to make exceptions to it in cases that seem to involve peculiar hardship, it will soon become unsettled and uncertain. 3rd. It is also claimed that the bank agreed with Cole to extend the time of payment. Upon this point the orator relies on the testimony of Mr. Cole and the circumstances which it is claimed( corroborate his testimony : the defendant on the testimony of Warner, Wires, and W ales. Without recapitulating the evidence on this point, we deem it sufficient to say, that the testimony of Mr. Cole and the circumstances relied on are quite insufficient to -outweigh the counter evidence of the defendant, and the improbability that the bank would agree to an act which the directors and the cashier must well have known would discharge the surety. 4th. This brings us to the more important and difficult point in the case, — the alleged agreement or assurance of the cashier at the time of the execution of the note, that he would attend to the collection of the note when it fell due — the reliance of the orator upon this assurance — the failure of the bank to do as agreed, and the consequent loss to the orator of all security against Colé. If this alleged agreement or representation of the cashier were to be treated as a part of the contract, and to vary its terms, it is clear that no parole evidence could be admitted to prove it. Neither is there any evidence to prove that in the making of the agreement, either fraud or falsehood was intended. But the orator claims to have proved, that at the time of the execution of the note he was known to be merely a surety on it, that he resided in the 'city of New York, and was therefore unable to keep himself informed of the pecuniary circumstances of Cole, and to protect himself by getting security if Cole should become embarrassed ; that the note had been long due and often — 485 — renewed before, and the orator was unwilling to remain liable as a surety; that Cole promised to pay it punctually when it became due; that the orator told the cashier Warner of all these facts, and that he would not then renew the note unless the cashier would give him the assurance that if the note was not paid at maturity the cashier would attend to the immediate collection of it, and collect it out of Cole’s property; that the cashier did give him such assurance ; that he relied upon it, and in consequence of his reliance on it did not, when the note fell due, or afterwards, take any measures to secure himself from loss on account of so being surety ; that the bank neglected to collect it for a year or more after it matured, during' all which time it ■could have been collected of Cole, and that he had no notice of such neglect until Cole had failed and the orator could obtain no security. The defendant claims that if all these facts are fully proved they do not amount to a defence. We think, however, that if these-facts are proved they should operate as a diech-irge of the surety, upon the ground that the defendant by its assurances to the orator, has lulled him into a false security — has induced him to omit to do what he would otherwise have done, vis : pay the debt and secure himself by attaching Cole’s property, or otherwise obtaining security ; and has thus subjected him to the loss of the whole debt. It is properly an equitable estoppel. Suppose that Hickok had gone to the bank a few days before the note fell due, and said to the cashier : “ The note I signed as surety for Cole becomes due on the 24th of October. I am about to go away, and shall not return till next year. Cole is now solvent, but may not long remain so. I wish before I leave to provide means for the payment of the note when due, so that I can proceed against Cole and secure myself, and shall do so unless you will proceed to sue Cole and attach his property as Soon as the note is due ;” and that the cashier had replied to him, “ You need not provide for the payment of the note, for if Cole dees not pay it at maturity we will sue him and attach his property, and so secure the debt. Y ou need not trouble yourself further about it;” and that relying on this assurance he had left the state and taken no further trouble about it. Would it not be — 486 — gross injustice for the bank to neglect the collection of the debt till Cole had failed, and deceive the orator by this assurance, and still claim to hold him liable as surety ? Clearly so. It is not the request to the bank, or any notice the surety could give, that binds them to proceed against the principal; it is their assurance thus given and thus relied upon that binds them, and which they may not omit to make good except at their own risk. If they assume the risk, which the surety will not run, of extending forbearance t.o the principal when they have promised not to forbear but to sue and attach, and when they know the surety relies upon the promise, and therefore does not secure himself, they must bear the loss that ensues from it, and not seek to charge it upon the surety. Nor can it make any difference that this assurance is given when the note is executed, instead of just before or after it fall's due. It is not the time when the assurance is given that is material, but the deceiving of the surety by it. No intent to deceive may exist when the assurance is given ; but the surety is induced by it to forego what he would otherwise have done for his own protection, and thus is in substance deceived. This principle of obvious justice has heen recognized by our own courts, and in the decisions- of our sister states. See Hogeboom v. Herrick, in the 4th Vt. 131, where the principle is recognized as just, though the facts are not found so as to make an application of it to the case. Judge Redfield also, in Wilson v. Green, 25 Vt. 450, recognizes it. In Massachusetts, Harris v. Brooks, 21 Pick. 195, and Carpenter v. King, 9 Met. 511, stand upon the same principle. Sue, also, 7 Watts 523; 2 Leading Cases in Eq. 371: It therefore becomes necessary to cousider the evidence to sustain and to disprove this alleged assurance from the bank through Warner to the orator. As to the following facts there is substantially no controversy : That Hiekok was surety for Cole, and this known to the bank ; that he resided in New York from August, 1854, to April, 1858, and that his residence in New York was known to the bank in July, 1856, when this note was executed ; that Hiekok signed as¡ surety for Cole as early as August 6th, 1853 ; that that original — 487 — note was frequently renewed between that date and July, 1856, and twice during the orator’s residence in New York, viz: on the 13th November, 1854, and the 20th December, 1855 ; that the note here in controversy was given June 24th, 1856, for the renewal of the one given December 20th, 1855, on which the orator was surety for Cole. Mr. Hickok testifies in substance that at the time of the renewal of this note he was reluctant to renew it; that he inquired of Cole as to his circumstances, and became satisfied that he would be able to pay it when due, and that it would be safe for him (the orator.) to sign it, and then told Cole that he would sign it if he would pay it when due, but that before he signed it he must see Warner, the cashier, and have an understanding with him that he should collect the note when due, and that as he was to be out of the state he would not have it lie over due, as it had before ; that they went to the bank, and he then told Warner, in the presence of Cole, that he (the orator) should be out of the state for a long time to come, and would not sign.the note except with the understanding that it was to be collected when due ; and that if he could have the understanding with Warner that it should be collected when due, he would sign the note. Warner replied that the note should be collected when due, or words to that effect. Now the turning pointof the evidence and of the case is, what Warner said to Hickok. What Hickok said to Warner could not bind the bank. It is the assurance that Warner gave to Hickok in reply, that we must ascertain, and what Hickok said is of no consequence, except so far as it shows what Warner must have understood and assented to. When Mr. Hickok says that Warner said the note should be collected when due, or words to that effect, it is obvious that he states what he understood was the substance of the reply, rather than its language. A slight change of phraseology would most materially modify the meaning, and leave it to signify nothing more than a desire on both sides that it might be collected when due. Again, there is nothing in what Hickok says to Warner, or in Warner’s answer, to indicate that it should be collected by suing — 488 — Cole and attaching his property ; but this is the allegation in the' bill as sworn to, and is important as directing Warner’s attention to the all-important consideration that if not so collected, and Cole should fail, the neglect would operate .to Hickok’s injury. Indeed, it is obvious that nothing was directly and plainly said by Hickok to Warner to the effect, that Warner should of his-own motion, and without further direction, collect the note out Of Cole when due, and relieve Hickok from further trouble or' attention to it. That may have been, and doubtless was, Mr.Hickok’s intent, but he did not directly and expressly say so, and call Warner’s attention to that exclusive responsibility on his part. We can not but doubt, even upon the conversation as stated by Mr. Hickok, whether Warner understi' od and intended to give the assurance to Hickok that he would, when the note fell due, assume the responsibility without further directions of suing and attaching Cole’s property for the benefit of Hickok, or else give notice to Hickok and require the collection of him. It is doubtless true that sureties ft squently express the desire to-cashiers that the notes they sign should be collected if not paid, and that cashiers in reply express a similar Wish or intent even. But it would be putting^ strained and unjust construction-upon such conversations to say that thereby an assurance was given tke surety that the bank would immediately upon the maturity of the note, and without further request from the surety, proceed to sue and attach the property of the principal for the benefit of the surety, and that the surety might safely rely that this would be done, or he be discharged if it was not done. To establish the giving of such an assurance it should plainly appear that both parties clearly understood that such was the meaning of their language, and an interpretation that creates so serious and unusual a liability, ought not to be given to language that does not either fairly or plainly express it, or require it as the natural and obvious inference. Mr, Cole states the language used- by Mr. Hickok thus : “ If Warner would see that the note was paid at maturity he would sign it,” and by Mr. Warner thus: “ that the note should be paid — 489 — at maturity, and that he would see to it.” Again “ he would not sign it unless Warner would see that the note was collected at maturity or paid at maturity.” “ Warner and I both agreed that the note should be paid and taken up at maturity.” This testimony seems more explicit than Mr. Hickok’s that Warner should “ see to ” or proceed with the collection. Taken in connection with the fact that Mr. Hickok resided in New York and gave that as a reason why he wished to have Warner take upon hiinself this duty, the natural inference would be that he relied upon Warner to collect the debt when it fell due ; and if this was all the evidence in the case we might perhaps feel required to put this construction upon it. We say this even with some hesitation, for the assuming of such a responsibility would be so unusual — such an assurance would be so extraordinary — that it would seem that there ought to be something in the conversation to show explicitly that the idea was fully comprehended by Warner that he was to act without further request and for the benefit of Hickok, and that Hickok understood that he relied upon Warner’s so acting, and was not expected to guard his own interests. But on the part of the defendant, Mr. Warner testifies that he made no agreement with Mr. Hickok as to the collection of the note at its maturity — that Hickok attached no condition to his signing the note — that it was taken in the ordinary course of business, as a renewal. On cross examination he says that he has no recollection of any conversation with Hickok . or Cole when the note was renewed. Besides this testimony of Warner, we can not overlook the important consideration that such an agreement on the part of the bank would be unusual and contrary to the practice of banks ; and that there was no motive for their assuming such a singular .and burdensome responsibility, for they already had the note of Cole and Hickok for the debt and free from' any such duty to Hickok. It seems to us highly improbable that the Bank would assume such a burden on itself when it had nothing to gain by it. Comment has been made by counsel upon the manner in which these witnesses have testified, and the bias, and the interest they are under. Cole seems to have a strong hostility to the bank — 490 — and its directors, which may not be unreasonably thought to affect his testimony. The other two seem' to testify with fairness and according to their honest convictions and recollections. The practice which seems to have been adopted by the orator in this case, of having the questions shown to the witness, and his answers prepared before hand and reduced to writing, and examined by counsel before coming before the master to testify, is one not allowable by the practice in chancery in this state, of pernicious tendency, as tending to color the testimony and adapt it to the necessities of the case, and justly subjecting the evidence so taken to suspicion.' Although we do not see in the orator’s testimony so taken, anything to indicate that it was either resorted to or used in this instance for an improper purpose, yet we feel that the precedent ought not to pass without receiving the censure of the court. When witnesses testify in contradiction of each other, as in this case, Hickok and Cole on one hand, and Warner cn the other, the mind naturally turns to the surrounding circumstances, to the probabilities of the two stories, and to the interests and motives of the parties as furnishing the most satisfactory means of ascertaining the truth. These we think are with the defendant. That the bank already held Cole and Hickok’s note, and had no motive for making such an agreement; that such an agreement was burdensome, involving the bank in trouble, expense, and perhaps litigation; that it was unusual and against the interest and the custom of banks: these are circumstances of. much weight, and require strong and positive evidence to counterbalance them. When we add to this the positive testimony of Warner, we feel that the testimony of Hickok and Coléis not sufficient to establish that, preponderance of proof which is requisite to sustain the bill. The case is remanded to the court of chancery with a mandate affirming the decree of the chancellor.