Smith v. Clopton

SlMBALL, J. : This was an action of debt on sealed notes or bills single. The defense made in the first plea was, that the defendant had signed the bills as surety, of which fact the plaintiff had knowledge, and that he verbally notified him to sue, or collect by law, which notification Haughton, the plaintiff, accepted, and promised to comply, but failed. Ashly, the principal, became insolvent. The second plea, in addition to the above facts, avers, that afterwards defendant inquired of plaintiff if he had complied with the notification, who replied that he had been fully secured by Ashly * * and no longer looked to Smith, who was released, but the plaintiff did not sue nor collect by law or otherwise, and that Ashly had become insolvent. — 82 — Bonds are not negotiable by the law merchant. Our statute, however, has been construed as putting sealed notes, or bills single, upon the footing of commercial paper. Murrell v. Jones, 40 Miss. 570; Skinner v. Collie, 4 How. 396; Lamkin v. Nye, 43 Miss. 250. The argument most cogently urged against the pleas is, that the defendant being bound by a sealed instrument, cannot, in a court of law, be permitted to aver that he was surety, so as to set up his discharge or release by failure to sue on notice to the creditor. It is not controverted in this state that such defense may be made, where the foundation of the suit is a promissory note or other parol contract, and that if the relation which the defendant bears to his co-promisor does not appear on the face of the note or other contract, that it may be shown by proof aliunde. Ramsey v. Purvis, 38 Miss. 501. There never has been doubt on the subject, where the surety sues the principal debtor for re-imbursement of payment to the creditor, or for contribution against a co-surety. It very generally occurs that the relationship between the obligors or promisors does not appear in the writing. In Edge v. Kieth, 13 S. & M. 299, on this point, the court say: “In the action for money paid, the surety must prove the bond or other contract, and if the fact do not appear on the face of the bond itself, it must be proved by other means that the plaintiff became surety,” * # etc., etc. In that case the liability was upon a bond. The statute “ in relation to principal and sureties,” Code of 1857, ch. 46, pp. 362-3, proceeds on the predicate that the relationship may be occult. If the surety shall make oath “ that he is only surety on the instrument ujaon which the judgment is founded,” the sheriff shall first exhaust the property of the principal. Art. 5. To give full effect to the equity and purpose of the statute (or a similar one), if the suretyship appears on the face — 83 — of the execution, it is unnecessary to make the affidavit; the sheriff is bound in duty and may be compelled to make the money out of the principal. Moss. v. Agricultural Bank, 4 S. & M. 726; Baine v. Williams, 10 ib. 113. Surely it does not matter, under this article, whether the “ instrnment,” the foundation of the judgment, be parol or under seal. Should not the same rendering be given the first article ? “ Any person who shall be bound as surety, or accommodation indorser,” may give notice to the creditor to sue, # # etc. The words are broad enough to include every sort of surety. “Any person,” i. e, all persons — bound (for another) “ as surety ” — includes all the words and instruments by which suretyship may arise or be created, “ Avhether bound by a seal or simple contract.” The consequence denounced is, if the creditor fails to sue within the time limited, “the surety shall be discharged from liability, and the creditor barred of all recovery against him.” The “discharge” is full and complete. The “bar” is absolute against any recovery. It isa “legal” discharge, quite as effectual in a court of law as in equity. In whatever court the facts are or may be established, where recovery is sought against the surety, this bar shall be applied. If it be said that the common law would not tolerate evidence aliunde, where two or more had sealed an obligation to pay money, to show that one Avas surety for the other, because the instrument imported that all were principals, it might be enough to say that the statute so far modified Ihe rule as to let in the proof. Indeed it was impossible to give effect to what seems to be the manifest purpose and object of the statute, to limit it to those suretyships, that are created by parol contracts, such as promissory notes and bills of exchange. To so restrict its meaning, a narrower scope and import must be given to the language than the words ordinarily and grammatically bear. If the sealed promissory note — 84 — is accepted in our jurisprudence as commercial paper, with all the privileges and incidents of such paper as to negotiability, why construe this statute as depriving the surety or accommodation indorser of such an instrument, of its benefits as accorded the same party to an ordinary promissory note? The policy of the statute is wise and good. A surety, by whatever form of instrument held, ought to be permitted to demand of the creditor (on pain of his discharge), that he shall pursue a principal who is wasting his substance or who has become involved, and as against whom other more vigilant creditors are taking legal- remedies. It may be said, the surety ought to pay the debt and then sue the principal. But the statute only proposes to place the burden where it naturally belongs; and, besides, the surety may not be prepared or able, without sacrifice, himself, to discharge the debt. But is the argument sound, that such a defense in a court of law alters or contradicts the written instrument? The rule is rigid and inveterate, that parol proof shall not be received to change the instrument as written. It applies with equal force to those which are unsealed as it does to specialties. All the makers of a promissory note are, as to the payee or his assignee, co-promisors. All are equally bound to him. The statute, however, assumes that the obligors or promisors may sustain towards each other the relation of principal and surety, not expressed in the writing, and which may be shown aliunde when the exigency for it arises. Courts of equity first intervened to protect the surety against such contracts to his prejudice. Afterwards, many of the courts of law in the American states gave relief to the surety by admitting his defense. As to parol contracts, it may be accepted as the American doctrine. As to bonds and other specialties, some of the courts deny the defense, for peculiar reasons appli — 85 — cable to such instruments. In Davis v. Pendergrass, 5 Barn. & Ald. 187, the plea was held bad, on the ground that the obligation, created by a sealed instrument, could not be discharged, except by an instrument of equal validity, and therefore, the parol agreement. for time was no discharge of the surety. The court said: “ The proper remedy is in equity.” Discussing the same point, Story, J., in Locke v. United States, 3 Mason, 453, “ There are stubborn rules of the old law which forbid” such a defense. It is because all the promisors or obligors are presumed to be principals, unless otherwise expressed, that it has been' universally admitted that when the suretyship does not appear on the face of the contract, it must be communicated to the creditor in orde’r to fix upon him the consequences of dealing with the principal debtor in such manner as would discharge the surety. Without such knowledge, he may extend time by arrangement with either without release of the other. Hollier v. Eyre, 9 Cl. & F. 1; Wilson v. Foote, 11 Metc. 285. When this knowledge is brought home to the creditor, his conscience is bound not to put, by any transaction with the principal, the surety in a more precarious condition, or increase to him the hazards of loss. The court of chancery regarded it somewhat in the nature of an equitable estoppel; and if the surety was or might have been injured, denied redress to the creditor, and refused to allow him to collect the debt from the surety. In many of the states, courts of law, actuated by liberal spirit, adopted this equitable defense, without sending the surety to another tribunal, where it certainly would be meted out to him. 13 Johns. 174; 3 Comst. 446; 25 Vt. 450; Holt v. Bodey, 6 Harris, 207; 6 Ohio, 17; 4 N. H. 221. Lord Mansfield contributed much to liberalize the administration of justice by loosening the technical — 86 — trammels of the ancient common law. Since his day the same enlightened views have more or less animated the common law courts. The whole doctrine of contribution by co-sureties has been borrowed from courts of equity, and now the redress is as complete at law as in equity. It is the suggestion of enlightened reason, that whatever defense may be established and availed of in a court of equity against the collection of the debt, whatever that court has persistently declared to be a good discharge, may be averred and proved in a court of law. Upon what solid ground of reason and policy shall it be said that if the creditor, by agreement with the principal, enlarges the time of payment, a court of law will disallow the defense; but, on the next day the surety may appeal to a court of equity, and successfully set it up. The chancellor relieved indifferently, whether the obligation was by parol or under seal. In Willis & Conley v. Ives, 1 S. & M. 318, whilst holding the plea bad, because it failed to set out the consideration for the extension of time, the court considered the question as affected by the common law principles applicable to sealed instruments. The rule is stated to be, that all the obligors are principals, unless it appear on the face of the instrument that some are sureties, and they cannot by plea be allowed to change their characters. It is further said, that in all essential features the case is like Spriggs v. Bank of Mount Pleasant, 10 Pet. 257. In that case, upon craving oyer of the bond, it was set out, and became part of the declaration. The instrument, in terms in the body of it, bound the obligors “ as principals.” This recital or admission estopped them from denying that that.was their character. An intimation was thrown out that as all the obligors, unless otherwise expressed, were in law principals, and no averment by plea could be made to the contrary; the suit at law was then abandoned. In 14 Peters, 204, the same case is reported on — 87 — appeal from the chancery court. The sureties in that court set up an extension of time to the principal as releasing them from the debt, but it was ruled that the recital in the bond was as complete an estoppel in equity as at law; that these parties had assumed the character and responsibilities of principal debtors, by express contract, and therefore they must continue to sustain that chai'acter to the creditor. It was further held that to admit the defense, would be to contradict the bond by parol evidence, which was inadmissible. In Clemont Bank v. Wood, 10 Vt. 585, the recital in the instrument, which was a promissory note, was precisely as the recital in the bond, in Sprigg v. Bank of Mount Pleasant. The words were, we “each as principal, promise to pay,” etc. * * * The pleas were in effect the same. The court held that the defense could not be made as it might be to a note in the ordinary form, because the promisors expressly bound themselves to the creditor as co-principals, each assuming that character, and they could not vary by averment the contract as fixed by the writing. In Carpenter v. King, 9 Metc. 512, there had been a recovery against two on a promissory note; subsequently suit was brought on the judgment against the survivor, who claimed to be a surety. The question was, whether he could' aver and prove that the creditor had told him that the principal had paid the judgment, and that because thereof, he the surety had surrendered an indemnity from the principal. It was not denied that in equity these facts would discharge, but the controversy was whether the defense could be made at law. Shaw, C. J., said, that it is very clear that proof may be made that one was principal and the other surety, and that it is not necessary so to appear in the contract. “ It is a fact collateral to the contract and no part of it.” “ It is a collateral fact showing the relations in which the promisors stand to each other.” — 88 — Deering v. Earl of Winchelsea, 2 Bos. & Pull. 270; Harris v. Brooks, 21 Pick. 195. Nor does such proof contradict the note or bond, the original cause of action; prima facie they are equally liable, and both seemingly principals. In the case quoted from 9 Mete., which is of common occurrence, the note had been merged into the judgment; by the record both were apparently principal debtors, yet the surety was allowed to go behind the judgment, and show the true relation of himself and his co-maker of the note. That was something collateral to the note, and did not weaken or diminish the joint, or joint and several, responsibity of both to the creditor. Wyman v. Mitchell, 1 Cow. 316. In suits at law against the principal, or for contribution against a co-surety, it never has been doubted, if the original contract did not disclose the relations of the parties towards each other, that proof aliunde could be made. Doubt has been started in some of the authorities, as in Baker v. Briggs, 8 Pick. 128, whether, in suit against all the promisors, the surety can set up such separate defense. That doubt is solved in 38 Miss. 501. Most of the cases to be found in the books occurred in the chancery court. At one time it was supposed that such defenses could not be made at law. The later cases hold, however, that it may be made in either court. Bank of Steubenville v. Adm’rs of Carrol, 5 Ohio; King v. Baldwin, 2 John. Ch. 555. In the latter, the matters were set up at' law, and, failing there, suit was brought in chancery. The chancellor held, however, that it was proper to be made at law, and that was reason enough to deny the relief. People v. Jansen, 7 Johns. 332. When the facts are ascertained, the rule is the same in both courts. Allowing to the reason and spirit, as well as the text of those statutes modifying and mitigating the rigorous doctrine'of the common law, as to the sanctity of the — 89 — seal, some of which have already been alluded to (another article, 102, Code of 1857, p. 494), allowing a plea to the consideration, and we should think we were giving a fuller harmony to our jurisprudence by interpreting them as letting in this defense. Among the statutes germain to the subject is that one making bonds, promissory notes, and other contracts joint and several; and verdicts may be for some defendants and against others. Code, 357, arts. 10, 15. The views advanced in the case in 1 S. & M. are in harmony with the old common law. That decision was made in 1843, thirteen years before the statute of 1857 was passed, which allows this defense. It is not an authority against the conclusion we have reached. We think the statute has changed the common law. The first and second pleas are good, and the demurrer to them ought to have been overruled. Although the notice was not in writing, they show that the creditor accepted the verbal notice, and agreed to conform to it, which brings the pleas within the principle laid down in Taylor v. Davis, 38 Miss. 496. The third plea sets up matter subsequent, in discharge, to wit, a sale by the trustee, for cash, of enough property to'pay the debt. We think this is a good plea, and the defendants demurrer to the plaintiff’s replication ought not to have been visited upon the plea. For the reasons hereinbefore given, the demurrer ought to have been overruled to the fourth plea. The demurrer was properly sustained to the fifth plea; that plea does not disclose a contract which will discharge the surety. Newell & Pearce v. Harner, 4 How. 684; Payne v. Commercial Bank, 6 S. & M. 37. Judgment will be rendered here in accordance with this opinion, and cause remanded for further proceedings.