Fox v. Corry

Statement of the Case. MONROE, C. J. Plaintiff having bound himself jointly and severally with defendant and defendant’s son, Arthur Corry, within a limit of $12,000, for loans, made or to be made by the First National Bank of Laurel, Miss., to the Laurel Lumber Company; the bank having made loans to the company of $1,000 and $6,500 upon its notes for those amounts, executed by Arthur Corry, its secretary, treasurer and active manager, and bearing interest at the rate of 8 per cent, per annum; the company having gone into bankruptcy, leaving the notes unpaid; and Arthur Corry having become insolvent; the bank haying sued plaintiff for the full amount of the debt; defendant having promised to pay his proportion and given his note for the balance — this suit was instituted to compel defendant to reimburse plaintiff one-half of the total amount so paid, and for which he had so bound himself, as, also, to reimburse one-half of $5,000 and interest, paid by plaintiff in satisfaction of a note for that amount issued by the lumber company to the Merchants’ & Manufacturers’ Bank of Ellisville, Miss., and indorsed by plaintiff and defendant; and to reimburse the sum of $1,100, with interest, paid by plaintiff in satisfaction of a note given by Arthur Corry for money loaned to him by the Commercial Bank & Trust Company, of Laurel, Miss.; the payment of which was guaranteed by plaintiff and defendant, but the whole amount of which defendant agreed to reimburse and for which he now admits liability to plaintiff. There was judgment in the district court, in the more important respects, in favor of plaintiff, defendant has appealed, plaintiff has answered, praying for amendment of judgment. The details of the transactions upon which the suit is based, as disclosed by the evidence and admissions, are as follows: The instrument of guaranty in favor of the First National Bank was executed by the three guarantors in May, 1913, in the office of the bank in Laurel, in agreement with the cashier, and, as we infer, was left in the possession of the bank, though not signed by it On June 26, 1914, the bank loaned the lumber company $1,000 on its note for that amount, payable in 90 days, with interest at 8 per cent., which note contained a promise to pay all expenses that might be incurred in its collection, “including reasonable attorney’s fees.” On July 22, 1914, the bank loaned the company $6,500 on a similar note. In the meanwhile, on June 18, 1914, the Merchants’ & Manufacturers’ Bank of Ellisville had loaned the company $5,000 on its note for that amount, payable in 90 days, with like interest, and indorsed by plaintiff and defendant. On August 12, 1914, the Commercial Bank & Trust Company of Laurel made the loan of $1,100 to Arthur Corry, on his note for that amount, payable in four months, with interest at 8 per cent, the payment being guaranteed in writing by plaintiff and defendant. On October 20, 1914, the lumber company went into voluntary bankruptcy, and shortly thereafter the First National Bank brought suit against plaintiff for the recovery of the amounts represented by the two notes, of $1,’-000 and $6,500, held by it (omitting to make defendant and Arthur Corry parties thereto,' — 449 — because defendant was a nonresident of Mississippi and Arthur Corry was insolvent); and action was subsequently taken by the different parties in interest, as follows: On January 4, 1915, the trustee declared a dividend of §574.30, payable on the debts aggregating $7,500, due to the First National Bank, and on January 14, the whole of that dividend was attributed to the payment, in part, Of the note of §1,000, and interest ($20.67) accrued up to September 28, 1914, leaving due a-balance •of §446.37, plus §24, of interest accrued from September 28, 1914, to January 14, 1915, which was increased, by February 6, 1915, to the extent of $2.40 interest, showing the balance due on that day to be §472.77, of which plaintiff then paid §236.39, as covering the one-half, leaving a balance due of $236.39, which, by January 6, 1916, was increased by the interest charge ($14.76) to §251.14. On February 6, 1915, plaintiff paid §3,250, being one-half of the face of the note for §6,500, and §143.72, being one-half of $287.44, the interest due on that day, making a total payment of §3,393.72. On April 9, 1915, the trustee declared dividend No. 2, of $574.30 on the debts due the National Bank and one-half of that amount (§2S7.15) was attributed to the principal of the note for §6,500, reducing the balance due to §2,962.85, and the other half was credited to plaintiff. On November 10, 1915, the trustee declared dividend No. 3 of §382.S7, and one-half of the amount (§191.44) was similarly attributed, reducing the balance, of principal, to $2,771.-41, to which was added §364.66 of interest, so that on January 5, 1916, the balance of the principal and interest due on the $6,500 note was §3,135.71; the other half of the dividend having been credited to plaintiff. On January 5, 1916, the balance of §251.14 due on the note for §1,000 was added to the balance of §3,135.97, due on the note for '§6,500, making $3,387.11, for which plaintiff gave his note of that date, and on February 4, 1916, he paid §87.11 on account, -thus reducing the face of the note to $3,300. On May 6, 1916, he made a further payment of $1,000 on account, and, as we understand, paid the interest (§90.78) accrued up to that date, leaving due a balance of $2,300 principal and interest. On May 8, 1916, dividend No. 4, of §298.72, was declared by the trustee, and credited to plaintiff. On April 12. 1916, service was accepted and citation waived on the petition herein; on May 19, 1916, the petition was filed in court; and on June 6, 1916, plaintiff made a payment of §322.47 on account of principal, and of $42.81 on account of interest. On November 6, 1916, he made a further payment, on the principal of the debt of §700, and §30 on account of the interest. ■ On February 5, 1917, the balance of principal and interest amounted to $816.18, and he paid it in full. . Upon the note of $5,000 held by the Merchants’ & Manufacturers’ Bank plaintiff gave his secured note on January 16, 1915, upon which, on February 19, 1917, he made a cash payment of §2,448.11, and, on March 6, 1915, he paid, in full, the balance of principal and interest amounting to §2,833.25. The dividends declared by the trustee on that debt were: January 5, 1915, §386.24; April 6, 1915, $386.24; November 3, 1915, §257.49; May 8, 1915, $200. ' Ooncerning the note of §1,100, counsel for defendant say, in their brief: “It represents a credit extended to defendant’s son. The defendant verbally agreed with Fox that he would reimburse Fox, not only the virile portion of defendant, as coguarantor, but would reimburse Fox the entire amount of this note. The defendant therefore instructed us to admit, in the answer, liability to the plaintiff for the total amount paid by the plaintiff on this note; and therefore this note passes out of consideration in considering the merits of this case. We make this admission without prejudice to our exception to the jurisdiction of the state court, and exceptions of no cause and no right of action, urged by defendant.” — 451 — It is alleged and proved, without attempt at contradiction, that, after the lumber company had gone into bankruptcy, defendant not only promised plaintiff to pay the $1,00(1 note in full' but to pay one-half of the amount for which he and plaintiff were liable on the other notes. Opinion. [1] I. Before otherwise pleading, defendant filed a petition, alleging diverse citizenship, and praying for the removal of the cause to the District Court of the United .States for the Western District of Louisiana, and it was so ordered; but, on plaintiff’s motion, in that tribunal, the case was remanded to the state court, in which defendant filed a plea, alleging that the order of removal had been properly made, and that the jurisdiction had been thereby divested, which plea was properly overruled; the question presented having been decided adversely to defendant’s contentions and the doctrine recognized by the federal courts being that, where a nonresident plaintiff brings suit in a state of which the defendant is a resident, such defendant cannot remove the same to a federal court, on the sole ground of diverse citizen-ship. Martin v. Snyder, 148 U. S. 663, 13 Sup. Ct. 706, 37 L. Ed. 602; Thurber v. Miller, 67 Fed. 371, 14 C. C. A. 432; Schofield v. Demorest (C. C.) 40 Fed. 273; Telegraph Co. v. Brown (C. C.) 32 Fed. 337. II. Defendant then filed an exception of no right and no cause of action, which, as we infer from the argument in this court (though the pleading, itself, contains no specification), was based upon the failure of the petition to allege that the debts in question had been paid in cash and in full, at the time that this suit for reimbursement was instituted; and the failure to allege that payment had been made in consequence of a suit instituted against plaintiff, as provided by article 3058 of the Civil Code. The excej»tion having been .overruled, defendant answered, filed an amended answer, the case was set for trial, and the evidence adduced, after which defendant again excepted, alleging that plaintiff, “in his ijroof and upon the trial hereof,” shows no right of action, for the following reasons, namely (we state them in substance): That his transactions with the banks, instead of -being actual payments, “as alleged,” with subrogation to the rights-of the banks, were partial payments of his proportion of the debts due to the banks, followed, after the institution of this suit, by the giving of his notes' for the balances, with the result that the original debts were paid in part and novated, and defendánt released as to the balances, but, even if that were not the case, that plaintiff has no right of action with respect to any of said obligations, without proof of actual payment of the same, in its entirety, prior to the institution of this suit; and that the giving of his notes therefor was not such payment, they being merely promises to pay. [2-4] Subj'ect to certain exceptions, which do not arise in this case the interpretation and effect of a contract, in every other state, must be the same as where it is made and to be executed. Clague v. Creditors, 2 La. 115, 20 Am. Dec. 300; Spears v. Shropshire, 11 La. Ann. 559, 66 Am. Dec. 206; Bacon v. Dahlgreen, 7 La. Ann. 601; Hawley v. Sloo, 12 La. Ann. 815; Oliver v. Lake, 3 La. Ann. 78; Bent v. Lauve, 3 La. Ann. 88. Inasmuch, therefore, as the contracts here sued on were made and to be executed in Mississippi, this controversy, concerning the rights and obligations arising therefrom, should be determined in accordance with the law of that state, as brought to our knowledge, or, in default of such knowledge, upon the assumption that it is the same as the law of this state. Harris v. Alexander, 9 Rob. 151; Clampitt v. Newport, 8 La. Ann. 124; Syme v. Stewart, 17 La. Ann. 73; Hebert v. Winn, 24 La. Ann. — 453 — 387. According to the testimony, taken under commission, of a member of the bar oí Mississippi, the systems of common law and equity are established in that state, and the petition in this case discloses a case cognizable in the courts of equity; there being no statute, to the knowledge of the witness, governing the issues so presented, and, according to the ruling of the Supreme Court of the state (in Stone v. Buckner, 12 Smedes & M. [Miss.] 73): “Where a surety has paid the debt of a principal, he cannot make a cosurety liable to him without proof that he has actually paid the debt, and had made an ineffectual effort to obtain payment from the principal, or that he is insolvent; nor where there are more than two sureties, and one has paid the whole debt, can he compel one of the others to repay him one-half, without proof of the insolvency of the other sureties.” The witness cites various publications, as of recognized authority in the courts of Mississippi and elsewhere to the effect that: “In equity, if some of the sureties are insolvent, or out of the jurisdiction, the amount for which the cosureties are liable, in contribution, is apportioned among the solvent sureties, within the jurisdiction. 32 Cyc. 2S6.” And the counsel for defendant quotes authority for the propositions: “While contribution is based upon equitable doctrine and was first enforced in courts of equity, it is now generally recognized in courts of law,, and, when practicable, enforced there, on the theory of quasi contract, or an implied contract between sureties to contribute each his proportionate share of what one alone is' required to pay. * * * 20 Cyc. 496, note 10, verbo ‘Guaranty.’ “The action at law for contribution is generally brought, not on the original debt, but on the contract which the law implies, in the absence of express agreement, and it is enforced in an action of assumpsit under the common counts for money paid. 32 Cyc. 925, verbo ‘Principal and Surety.’ See, also, 9 L. R. A. 411; 1 A. L. R. 1355.” [5, 6] These authorities are cited by plaintiff’s counsel on the question of the removal of the cause, but, though they are not -controlling upon that question, they serve to support the conclusions that we reach: That, as to plaintiff’s claim for reimbursement of money expended in paying defendants’ proportion of the debts represented by the notes issued to the First National Bank of Laurel, he is not entitled to recover in this' suit, for the reason that the debts had not been wholly paid when the suit was brought, and its bringing was therefore premature, but that, as to his demand for contribution on account of his payment of the notes issued to the Merchants’ & Manufacturers' Bank, that note having been wholly paid prior to the institution of this suit, the suit was well brought. We also conclude that it was well brought with respect to the contention, set up in the exception, filed after the hearing of the evidence in the case, to the effect that plaintiff’s transactions with the different banks, instead of being, as-alleged in the petition, actual payments, with subrogation, were shown to have been payments in cash of plaintiff’s virile share of the solidary obligations in question, and a novation of said obligations by the Substitution of plaintiff’s individual notes therefor, and their surrender by the banks and consequent extinction, without the accession of defendant, thereby operating defendant’s release. We have just held that, according to the law by which the question is to be determined, it is a condition precedent to the enjoyment by a surety of the right to demand contributions from a cosurety that he shall first have wholly paid the debt for which they were bound, and we have no warrant for construing the same law to mean that the payment required to secure the right to contribution destroys that right by discharging the debtor from whom the contribution is due. Under • our law (Civ. Code, art. 2190): “Novation * * * is not presumed; the intention to make it must clearly result from — 455 — the terms of the agreement, or by a full discharge of tho original debt.” The furnishing of a new note is not a novation, and does not release the pledge securing the original note. Union Nat. Bank v. Slocomb, 34 A. 927. Where the note of a dissolved partnership was surrendered and the note of a succeeding partner taken, he having assumed the liabilities of the old concern, it was held no novation or release of the retiring partner. Lisso v. Navra & Offner, 34 La. Ann. 1111. The delegation by which a debtor gives to the creditor another debtor, who obliges himself towards such creditor, does not operate a novation, unless the creditor has expressly declared his intention to discharge his debtor who made the delegation. Choppin v. Gebbold, 13 La. Ann. 238. To constitute the contract of novation on tho essential point of the extinguishment of tho pre-existing obligation, there must appear tho consent of both contracting parties. Studebaker Bros. Mfg. Co. v. Endom, 51 La. Ann. 1206, 26 South. 90, 72 Am. St. Rep. 489. In the instant ease, it- is quite evident that nothing could have been further from the intention of the plaintiff than the discharge of tho defendant. The amount expended by plaintiff in paying the note of $5,000 (principal and interest) appears to have been $5,281.36, but, in fixing the proportion for which defendant is liable, there should he credited upon the whole debt, as it stood on January 5, 1915, the dividend of $386.24, declared on that day by the trustee of the bankrupt debtor, With interest at 8 per cent, until March 0, 1915, when the balance due upon the original debt, bearing interest at that rate, was finally paid; and, tho amount of the original debt, with interest, and as thus credited, as of the date of the final payment, being thus ascertained, defendant should he held liable for one-half of it, less half of the dividends subsequently declared by the trustee, the amount due by Mm and the dividends, alike, to bear interest at 5 per cent, from March 6, 1915, until he pays said amount and interest. According to our calculation-, the original debt, with interest, amounted, on. January 5, 1915, to $5,220. Deducting therefrom the dividend of $386.24, declared on that day, left $4,883.76, which, with interest at 8 per cent., was increased by March 6, 1915, to $4,899.75. Hence defendant is liable for one-half of that amount, or say $2,449.87, with interest at 5 per cent., until paid, less one-half the dividends subsequently declared by the trustee, bearing like interest from their respective dates. Those dividends were declared as follows: April 6, 1915, $3S6.24; November 3, 1915, $287.49; May 8, 1916, $200; and the amounts to be so credited, as of these dates respectively, are therefore $193.-12, $12S.74, and $100.- No agreement having been shown as to the interest to be paid by defendant in the contingency that has arisen, and no evidence having been introduced as to the interest allowed by the law of Mississippi, it is presumed to be the same as under our law, to wit, 5 per cent, per annum from tlie time the debt falls due, unless otherwise stipulated, C. C. art. 1938; C. P. art. 554; Bent v. Laure, 3 La. Ann. 88; Hawley v. Sloo, 12 La. Ann. 815; Red Cross v. Lumber Co., 139 La. 1082, 71 South. 191; Watson v. Feibel, 139 La. 407, 71 South. 585. The judge a quo seems to have found that the note for $1,100 was paid on January 4, 1915, and, with accrued interest, amounted to $1,134.95, for which lie gave judgment with legal interest. We find no complaint as to the amount or date of payment. I-Ie also gave judgment for contribution to tho payment of the notes issued to the First National and Merchants’ & Manufacturers’ Banks, respectively. AA’e think there was error in allowing the claim of the First National Bank, and in the calculation of the interest on tlio claim of -the Merchants’ — 457 — & Manufacturers’ Bank. The decree will therefore be set aside and recast. For the reasons thus assigned, it is ordered and decreed that the judgment appealed from be set aside, and that there now be judgment in'favor of plaintiff and against defendant in the sum of $2,449.87, with legal interest thereon from March 6, 1915, until paid, subject to credits for the following amounts and from the 'following dates, to wit: $193.12, with legal interest from April 6, 1915; $12S.74, with like interest from November 3, 1915; and $100, with like interest from May S, 1916; and that there be further judgment in favor of plaintiff and against said defendant in the sum of $1,134.95, with legal interest thereon from January 4, 1915, until paid. It is further ordered and decreed that in other respects plaintiff’s demands be denied, and this suit dismissed as in case of nonsuit. It is further ordered that the costs of both courts be paid by defendant and plaintiff in the proportions of two-thirds by defendant and one-third by plaintiff.