Hurd v. Spencer

The opinion' of the court was delivered by Peck, J. Ia order to determine on what consideration the eight hundred dollar note in suit rests, it is necessary to look back to the' original agreement and transaction out of which it grew. It was hCminally given on account of the three hundred dollar note and the five hundred dollar note which the defendant had previously executed to the plaintiff with, and as surety for Stickles under the sheep contract between Sticídes aúd the plaintiff and Woodard. The sheep which Stickles received of Hurd & Woodard to take to Columbia county, New York, to sell, were bought conditionally by Stickles, to remain the property of Hurd & Woodard till paid for, Woodard’ to accompany the sheep and receive the avails of the sale to an amount sufficient to pay for them. It was further stipulated in that contract that Stickles should, in advance, secure Hurd & Woodard to the amount of one dollar a head on the sheep, to guard IIurd & Woodard against the contingency of a loss on the sheep by the re-sale of them. In fulfilment of this last named stipulation, Stickles delivered to the plaintiff a colt worth one hundred and nineteen dollars, and procured the defendant to execute with him the three hundred dollar note, and the five hundred dollar note which were delivered to the plaintiff* the defendant being a surety, which, from the nature of the transaction and the terms of the sheep contract, must have been kuown to the plaintiff. It further appears that the’ defendant had no security for signing the notes. Tim defendant had a riglit to rely on the faithful performance of the agreement on the part of Hurd & Woodard in retaining and applying the security in their control and possession to the payment for the sheep. This duty on the part of Hurd & Woodard to see to such application is a duty which they owed to the surety, growing.out of the relation of the parties. When a creditor has security placed in his hands by the principal on account of the debt, and on which the surety has a right to rely, he has no right to part with it or appropriate it to any other purpose, without the consent of the surety ; aud if .he -does so he .thereby discharges the surety to the amount of the value of such security. ' Therefore the two checks [587] amounting to two thousand, seven hundred and fifty-four dollars and thirty-seven cents, which the plaintiff received out of the avails of the sale of the sheep in Columbia county, operated as payment upon the three lots of sheep, on account of which the three hundred dollar note and the five hundred dollar note were given. The colt, the value of which is stated in the case at one hundred and nineteen dollars, being delivered to the plaintiff for the same purpose for which these two notes were given, must be applied in the same way as the checks, and also the value of the seventy sheep left with the plaintiff. The plaintiff had no right to apply either of these sums in any other way, or appropriate them to any other debt against Stickles, to the prejudice of the surety. If we assume that the seventy sheep left by Stickles with the plaintiff were an average value of the entire lot of which they were parcel, these two notes were fully paid, and the eight hundred dollar note in suit, is, as to the defendant without any actual consideration. The plaintiff was not, by the original agreement, bound to apply these sums specifically upon these notes, if by doing so it would leave a balance still due for the sheep, as these two first notes were given to secure any balance which might be due over and above the proceeds of the sale of the sheep in New York; and that agreement should be carried out. It is claimed on the part of the defense, that the direction of Stickles to Woodard, when Woodard received the checks, to tell the plaintiff to apply them in payment of the three hundred dollar nóte, and the five hundred dollar note, and credit him with the balance, and Woodard’s reply, “ it shall be all right” made it the duty of the plaintiff to make such application, especially as Woodard was jointly Interested with the plaintiff. 'If these checks had been the absolute property of Stickles, this position would be sound. So too, if Woodard and Stickles mutually understood at that time, that such application should be made, or if Woodard knowingly suffered Stickles so to understand it, and the defendant relying on Stickles statement to him soon after, that the notes were paid, thereby lost the opportunity of securing himself. But we leave this point uudecided till the facts are more fully stated. But upon the other ground already stated, [588] the two first notes were either fully, or Vfery nearly paid. Whether anything remained due upon them depends on the value of the seventy sheep, (the culls, of the first lot,) the value of which the case does not find. The only consideration of this eight hundred dollar note is what remained due, if anything, on the two former notes at the time this note was given. But it is insisted that the giving of the eight hundred dollar note was a waiver of the defence to the two former notes on account of which it was given, and that for the purposes of a consideration of this note, they must be regarded as wholly due and unpaid. But upon the facts stated, the new note is but a substitution for the other notes, and is open to the same defence that attached to them. The judgment must, therefore, be reversed. If the value of the seventy sheep appeared, we could proceed and render final judgmeut; but as that value is not found, and cannot be assumed, the ease must b® remanded. Judgment reversed, and new trial granted.