Opinion
(December Term, 1844.)
1. A, being indebted to certain infants, of whom B was the guardian, agreed with B that he would give his note to D for a debt which B owed the latter, and accordingly did so, taking from B a discharge for the debt due to his wards for that amount: Held, that C having no notice of this arrangement between A and B, was not responsible for the amount so received from A.
2. Merely signing a paper a an instrumentary witness creates neither a legal nor a natural presumption that such witness knew the contents of the paper.
CAUSE removed from the Court of Equity of CASWELL, at Fall Term, 1844.
Badger for the plaintiffs.
Kerr for the defendant.
The following is the state of the case as presented by the pleadings and proofs:
John H. Graves was, on 16 September, 1841, and for several years before, the guardian of the plaintiffs, Samuel P. Hill, Sarah J. Hill, and Maria W. Hill, and had also married their sister. At that time, James Mebane, as executor of the will of John Mebane, deceased, owed to the plaintiffs and their sister, Mrs. Graves, a considerable sum of money, on account of legacies given to them by his testator, who was their grandfather. James Mebane was also, with others, the surety for Graves, for his guardianship. The defendant, Johnston, was a shopkeeper, with whom Graves had dealings for several years for supplies for his family, and also for his said wards, respectively; on all which accounts the demand of the defendant upon goods exceeded $1,500, in September, 1841, and the defendant urged him to make some payment. Graves then informed the defendant that James Mebane owed him a considerable debt, and that he expected to receive a payment on account of it in some short period, and promised that, when he did, he would pay the defendant, in whole or in part; and the defendant then stated to him that if Mr. Mebane would give his bond to the defendant, in case it was not then convenient to him to (433) pay the money, the defendant would accept it, and discharge Graves. Accordingly, Graves and Mebane went together to the defendant's shop, on 16 September, 1841, and Graves then gave to Mebane a receipt for the sum of $1,008.27, expressed to be "in full of a balance due from him as executor of...... Mebane, on account of my wife, and as guardian of Samuel P. Hill, Sarah J. Hill, and Maria W. Hill," and the defendant, Johnston, attested the receipt as subscribing witness; and, at the same time, Mebane gave to the defendant his bond for the sum of $841.79, part of the said sum of $1,008.27, and settled the residue thereof with Graves, in some other way. In May, 1842, Mebane paid his bond to the defendant. During the dealings between Graves and the defendant, as above mentioned, the former was in the habit of making payments to the latter, in bonds taken by him for the hire of slaves belonging to his wards, and payable to him as guardian, amounting altogether to the sum of $495.75.
Graves had similar dealings with Harvey Gunn, who were also shopkeepers in the same place, and gave to them his bond for a balance of $262.85, and made them a payment thereon in cash of $151.21, leaving a balance of $155 due on the bond, when Harvey Gunn endorsed it to the defendant. In April, 1842, it became known that Graves was insolvent, and he executed to a trustee an assignment of certain property, in trust, to indemnify Mebane and his other sureties for his guardianship, and removed from this State; and James Mebane was then appointed guardian of the plaintiffs.
The bill was filed in January, 1843, and charges that, when Mebane gave his bond to the defendant, on the 16th September, 1841, he, Mebane, believed Graves to be solvent and fully able to answer to his wards for all their effects, that had or might come to his hands, and that the defendant then knew or believed Graves to be insolvent, and that he also knew the contents of the receipt given by Graves to Mebane, which the defendant attested, and that the money, or a large part of it, for which Graves had the demand against Mebane, was due for a balance of the (434) legacies to the plaintiffs. The bill insists, that the defendant holds all the money and bonds received by him from Graves, over and above the defendant's accounts for supplies to the plaintiffs, as trustee for them — and the prayer is, that an account may be taken of all the dealings, on account of the plaintiffs, with the defendant, and that he may be decreed to pay and to deliver over to their present guardian, James Mebane, all such money, and also deliver over the bonds that may be found in his hands.
The answer admits that the defendant became uneasy at the delay of Graves in making payments, on his debt, when he urged him to it in September, 1841; but states that the defendant did not then suspect Graves to be insolvent, and, on the contrary, was induced to believe that he was solvent, inasmuch as he represented Mebane to be largely indebted to him, and as Mebane was nearly related to Graves, and the defendant knew that he was surety for Graves for large sums of money, besides for his guardianship, and as Mebane so readily assumed so large a part of Graves's debt to the defendant. The answer states, that, in consequence of his belief, from that conduct on the part of Mebane, that Graves was entitled to credit he indulged him on the residue of his debt, and lost it.
The answer states, that, at the time Mebane gave to the defendant his bond, the defendant did not know on what account Mebane was indebted to Graves, and though he admits that he witnessed a receipt from Graves to Mebane, he states that he does not know the sum for which it was given, nor whether it expresses that the money was paid by Mebane, as executor of John Mebane, or not. The answer states that the arrangements between Mebane and Graves were not communicated to the defendant, and that the defendant considered that Mebane gave his bond, instead of Graves, either for his own accommodation, inasmuch as he could not conveniently then raise the money for which Graves was pressing, or to sustain the credit and for the accommodation of Graves, to whom he was a particular friend, and for whom he was bound as surety in many instances, as before mentioned. The answer then sets forth the defendant's account for supplies to the plaintiffs for several years, including those for 1842, and states the several bonds received (435) from Graves on account, which were payable to him as guardian.
The answer was put in at May term, 1843, and a replication taken to it, and at the same term a reference was made to the master, "to take an account between the parties."
At November term, 1843, the master reported, and submits to the Court, whether the defendant is chargeable to the plaintiffs for the sum of $841.79, received from Mebane as aforesaid; and, in case he should be chargeable, the master finds that, of the said sum, the plaintiffs were together entitled to $594.42 principal money, which he divides amongst the plaintiffs in proportion to their several legacies. The master finds the bonds, received by the defendant from Graves, to amount to $495.95, as stated in the answer, and that some of the debtors, to the amount of $53.75, are insolvent. The insolvent bonds belonged to the plaintiff, Samuel P. Hill; and of the good ones $162.25 also belonged to him; and the residue of the good bonds belonged to the plaintiff, Maria W. Hill. The master submits, whether the dealings with Harvey Gunn are to be included in the amount. If they are, he gives the plaintiffs severally credit for their shares of the fragment of $151.21, made by Graves on that bond; and if they are not, then the master gives the plaintiffs severally, a further credit for the amount of the dealings of each of them with Harvey Gunn, which was included in Graves' bond. Upon the whole, the master finds that Sarah J. Hill (after deducting the sum of $10.44, as her share of the cash fragment to Harvey Gunn) is indebted to the defendant in the sum of $181.44; that Samuel P. Hill (after deducting $10 as his share of the payment to Harvey Gunn) had overpaid the defendant the sum of $41.78; and that Maria W. Hill (after a like deduction of $17.55) had overpaid the sum of $184.28.
The answer also states, that in the year 1842, the plaintiffs still dealt with the defendant, Samuel P. Hill, to the amount of $12.09; Maria W. Hill, $27.62; and Sarah J. Hill, $60,23, making in all, (436) the sum of $99,94. The master, although he says such dealings did take place in 1842, and that the accounts have not been paid, yet does not report the amount of them, nor assign any reason for not doing so.
The defendant took no proofs, and the plaintiffs took but a single deposition, that of John H. Graves, in February, 1844. The cause was then set for hearing and sent to this Court, and has been brought to a hearing on the pleadings, the deposition of Graves, and the report of the master on the inquiry ordered. Graves states, that, by agreement between Mebane, Johnston and Graves, the bond of Mebane was given to Johnston, as a mode of payment from Mebane to Graves, and from Graves to Johnston; that he did not inform Johnston, when the latter agreed to take Mebane's bond, how the money was due, except that it was coming to him from his wife's grandfather's estate; that, after Mebane had given his bond to the defendant, he, Graves, gave Mebane a receipt for that sum, and others paid by Mebane for him to other persons, but that it was not read to Johnston, nor by him, nor was Johnston informed by the witness or Mebane that Mebane owed that money, or any part of it to Graves, as the guardian of either of the plaintiffs, or otherwise, than on Graves' own account.
The principal purpose of the bill is, to throw on the defendant the loss of the sum paid to him by Mr. Mebane, who has brought this suit, as the next friend and guardian of the plaintiffs, all of whom are infants. It is obviously the guardian's own bill, in the name of the wards, and brought with the view of relieving the guardian from a liability for the sum paid by him, when he, at all events, knew that the use then made of it was a misapplication of the fund by the person, who was then the plaintiff's guardian, and for whom the present guardian was then surety. Thus viewed, the present suit is, certainly, not entitled to much favor, and as the infants have undoubted redress from any loss in the premises against their present guardian, either as the surety (437) of their former guardian, or as concurring in his breach of trust, there would be much ground for hesitating to grant relief against the defendant, as primarily liable, were it true, that he also knew that the fund belonged, even in part, to the plaintiffs. Mebane has surely no equity of his own against the defendants, and unless he were unable to make their legacy good to the plaintiffs — of which there is no suggestion — there seems to be no more propriety in the ward's insisting on payment from Johnston instead of Mebane, than there would be in their thus insisting against Johnston instead of Graves himself, were he upon the spot and fully able to answer the demand. It was the voluntary act of Mebane to become paymaster for Graves' debt to Johnston; and if, in so doing, he did not, in this Court, become discharged from his debt to the present plaintiffs, it would be difficult to maintain that the defendant became chargeable therefor to the plaintiffs, in such manner as to be liable to them, even before Mebane, their original debtor, and before Graves, the guardian for whom Mebane had bound himself as surety, and in whose devastavit he concurred. But the Court is relieved from the necessity of considering the case as turning on that point of equity, because we are of opinion that the defendant accepted Mebane as his debtor in the place of Graves, innocently, and without having any reason to believe that either of the plaintiffs had any interest whatever in the matter. It did not lie on the defendant to inquire what motive induced Mebane to assume the debt of Graves; and, among men of business, such an inquiry would be deemed impertinent and offensive. It was sufficient for the defendant, that he did not know nor have reason to suspect that the other parties were doing wrong in taking the money or legacy of the wards to pay their guardian's own debts; and, therefore, he can not be considered as intending to do wrong, by accepting payment of what one person owed him in property, which belonged to another person. Now, both the answer and the only witness examined in the cause (Graves himself, who is examined for the plaintiffs), state that the whole representation made to the (438) defendant by Graves and Mebane, before and at the giving of the bond, was merely that Mebane owed Graves, and, says Graves in his deposition, "that the money was coming to me from the estate of my wife's grandfather," whose executor Mebane was. It is true, that in a receipt given at the time for a large sum, which includes this, Graves says that the whole sum, $1,008.27, was in full of a balance of the legacies to his wife and her brother and sisters from their grandfather, and that Johnston witnessed it. But that neither creates a legal nor a natural presumption that Johnston knew the contents. Plummer v. Baskerville, 36 N.C. 252. And the defendant says that he does not remember distinctly that he did witness a receipt at all, and, if he did, that he has no recollection of the contents of it, or that he ever knew them; and Graves is very positive that Mebane and he only read the paper, and that neither of them made the contents known to the defendant. Under such circumstances the plaintiffs can not follow this fund into the hands of the defendant. If Mebane had paid the debt to Graves in cash, and the latter had taken the coin or notes to the defendant in payment, it could not be contended that the plaintiffs could recover merely upon proof that it was the particular money received for their legacy by their guardian, without something to affect the defendant with a knowledge of it and with bad faith in the transaction; for if they could recover, when the defendant acted without bad faith in receiving payment of a just debt, no one would be safe in receiving money, and the course of trade would be arrested. There is no difference between that and the present case, in which Mebane gave a security for the money, as if it was simply a debt from himself to Graves or to the defendant, and without allusion in it, or intimation otherwise to the defendant, of any fact to the contrary. So far, therefore, as respects the sum paid by Mebane to the defendant, the bill must be dismissed; and, as that is the principal subject of controversy, and was no doubt, of this suit being brought, the bill must be dismissed with costs, to be paid by the plaintiff's next friend himself.
As to the other part of the case, the plaintiffs, upon (439) the authority of Lockhart v. Phillips, 36 N.C. 342, and other cases of that kind, were entitled to an account of the bonds belonging to them, which the defendants received from their guardian, and for a decree for what the defendant thus received that was not applicable nor applied to debts, which the plaintiff ought to have paid. But, as far as those bonds went in discharge of debts, contracted by the plaintiff for necessaries, or by their guardian for them, it was a proper application of them, and the defendant has, to that extent, the right to retain the bonds or the money received on them. It is stated by the master, that, in his guardian accounts, Graves annually debited the several plaintiffs with their respective accounts to the defendant, which were transferred to Graves' own account at the end of the year, and included in his bonds given from time to time to the defendant. But that makes no difference, because Graves has never paid his bonds thus given on account of the plaintiffs, except, in part, by the transfer of the bonds he had taken as guardian, and with which he also charged himself to his wards in his guardian accounts. Therefore, Graves' bonds are to be regarded merely as securities for the debts really contracted for the plaintiffs, and those debts are to be considered as paid, only by the bonds belonging to the plaintiffs, as far as they extend. The money which Graves paid either to Johnston or to Harvey Gunn, was, as far as appears, Graves' own money; and, therefore, it was applicable to that part of Graves' debt to those persons, which he contracted on his own account. Hence, the master erred in not charging to each of the plaintiffs his or her debts to Harvey Gunn (which is included in the bond assigned by them to the defendant) without deducting therefrom or crediting the plaintiffs for any part of the payment of $151.21, made by Graves on that bond. That the defendant had a right to charge the plaintiffs with that debt, or, rather, their accounts included in the bond is clear from the consideration, that, while Harvey Gunn held it, Graves might have transferred to them bonds taken by him as guardian, in payment; and, therefore, he might pay their assignee in like manner. Equity looks at the consideration of the bond, (440) as constituting the debt, and the bond as merely a security, or one of several securities. Now, it is nothing to the creditors, that upon the accounts between Graves and the plaintiffs, he might have been their debtor, if such was the fact in the case, for they had no means of ascertaining the state of those accounts, and, as they knew that the plaintiffs had contracted so much debt with them, there was an apparent propriety of their receiving payment of those debts of the plaintiffs, in money or bonds belonging to them, in their guardian's hands. According to the statements in the master's reports, there is, perhaps, a small excess of those bonds over and above the sums due by the plaintiffs, upon their dealings, to the end of the year 1841, after striking out the credits for parts of the sum of $151.21, paid to Harvey Gunn. The omission of the master to report on the dealings of 1842, was probably owing to an opinion that those dealings did not concern this controversy, because they were subsequent to the transfer of the bonds which the plaintiffs are seeking. But that would be a mistaken opinion, for, as those dealings were prior to this suit, they formed a just demand then against the plaintiffs, and they ought not to have a decree against the defendant to pay them the money when he has a just ground for a deduction or set off.
The only difficulty, which the Court has felt in the case, arises out of the circumstance that the bonds assigned to the defendants belonged to two of the plaintiffs only; so that, while the three plaintiffs are together, probably, indebted to the defendant, the balance may be due from one of the plaintiffs only, and to the other two, respectively, a balance may be due from the defendant. But under the circumstances of the case, we have not felt much embarrassed by that consideration. The plaintiffs have not relied on it, and those, to whom a balance may be due, could not, perhaps, insist on a decree in a case, in which they have imprudently united with a person, who has no claim against the defendant, in a joint suit for a matter, in which all three of the plaintiffs have several interests. Indeed, we suppose the point of importance to the (441) plaintiffs is, whether there is, upon the whole, a balance due from the defendant; for, as the same person is guardian for all the plaintiffs, and there is no suggestion that each has not a competent estate in the guardian's hands to pay his or her debt, neither plaintiff could lose by the application of the effects of one for the benefit of the other. It could only affect the costs, and they have already been disposed of, and, moreover, ought not to be allowed to one plaintiff, who unites with another, against whom there should be a decree for costs. The Court would therefore have no hesitation in ordering the guardian, in case a balance be found against one of the plaintiffs, to bring it into court out of the estate of that plaintiff, in order to answer a sum that may be found due from the defendant to any other plaintiff. We suppose that these declarations will satisfy the parties as to the principles on which, in the opinion of the Court, the case turns, and that they can adjust the accounts without the expense of a further reference. But if it should turn out otherwise, the cause must be sent back to the master to make the proper inquiries, and state the accounts as now directed.
PER CURIAM. DECREED ACCORDINGLY. (442)