Opinion
08-30-1851
JENNINGS v. PALMER.
Bouldin and Cooke, for the appellant, and Garland and Cabell, for the appellee,
(Absent Cabell, P. and Daniel, J.[a1])
A surety holds a security for the repayment to him of the amount of certain debts he has paid for his principal, and for his indemnity as to another large debt for which he is surety. He makes an arrangement with the creditor whose debt is yet unpaid, by which he pays a part of it, he assigns with recourse to himself, the debts he had paid for his principal; and he also transfers the security held by him, all of which is agreed to be taken in discharge of the debt for which he is bound. It is obvious that at the time of the transfer the surety is ignorant of the amount of the security which he transfers; and when the fund is finally ascertained, it proves to be much more than sufficient to discharge the debts assigned with recourse to the surety, and also the balance of the debt for which the surety had been bound. HELD: That under the circumstances equity will treat the assignment as a security for the benefit of the creditor for the payment of the whole amount due on his debt; but for nothing more.
By deed bearing date the 9th day of July 1838, Thomas A. Fourquorean, an apothecary in the town of Lynchburg, conveyed to David R. Edley his whole stock of goods, and his interest in his mother's estate, for the purpose, as stated in the deed, of indemnifying Chancey Steen as his surety in a bond executed to James A. Meriweather, dated the same day with the deed, for the sum of 1753 dollars 85 cents, and payable six months after date, and as endorser of Fourquorean upon notes discounted at the banks in Lynchburg for 500 dollars more. This deed was duly admitted to record on the 12th of July.
On the day of September 1838, Fourquorean executed another deed to Frederick Isbell, whereby he conveyed the same property in trust to pay, first, certain debts due and notes endorsed by P. & J. W. Dudley; second, a debt due to J. W. Dudley; thirdly, certain notes on which Robert Jennings was endorser, described in the deed as a note for 250 dollars, dated July 12th, 1838, payable sixty days after date, and endorsed by Robert Jennings and Joseph Marsh, another for 150 dollars, dated 5th of July 1838, on which Chancey Steen and Robert Jennings were endorsers, another for 300 dollars dated the 31st of August 1838, endorsed by P. & J. W. Dudley and Robert Jennings, another for 150 dollars dated July 5th, 1838, endorsed by Robert Jennings and Joseph Marsh, a like note for 150 dollars dated 2d August 1838, with the same endorsers, and a note for 100 dollars endorsed by Robert Jennings and held by Michael Hart, and also a bond due Reuben D. Palmer for 1460 dollars, on which Joseph Jennings and Tilden Reed were sureties; and fourth, to pay Marsh a debt due him of 689 dollars 7 cents. This deed was admitted to record on the 3d of September.
The trustee Isbell being about to sell the property conveyed in the deeds, Steen filed his bill in the Circuit court of Lynchburg to enjoin the sale, on the ground of his prior lien under the deed of the 9th of July 1838 to Edley. The injunction was granted, and in the progress of that cause the trust property was sold and deposited in one of the Savings banks in Lynchburg subject to the order of the Court.
Whilst this suit of Steen's was pending, and previous to January 1844, Jennings had paid off the four notes above mentioned on which he was the first or only endorser; and Palmer had instituted an action against him in the Circuit court of Halifax county upon the bond for 1460 dollars, mentioned in the deed of trust to Isbell, on which Jennings and Reed were the sureties of Fourquorean; and Reed, as well as Fourquorean, was insolvent. On the 25th of January 1844 Palmer and Robert Jennings, the latter acting by his brother William B. Jennings, entered into an agreement in writing whereby Robert Jennings was to execute his bond with William B. Jennings as his surety, for 500 dollars, payable to Palmer on the 25th of January 1846, with interest from the date of the agreement; to assign to Palmer with recourse to Jennings, the four notes of Fourquorean which Jennings had paid, which were then in the hands of his counsel in Lynchburg; and also to assign to Palmer all his other interest in and to all claims secured to him by the deed of trust executed by Fourquorean to Isbell in 1838: And Jennings further bound himself to pay all the costs which had accrued in the suit of Palmer against him upon the said bond, except so much as had arisen from the employment of more than one lawyer. And in consideration of this arrangement Palmer agreed to stop the suit as soon as the conditions were complied with; and that the arrangement when complied with, should be in full of the bond of Fourquorean on which Jennings and Reed were sureties. From this paper it appears the bond was executed on the 9th of March 1838, and that 60 dollars had been paid upon it.
On the 27th of February 1844, Robert Jennings executed another paper, by which in conformity with the contract of the 25th of January, he assigned to Palmer the four notes aforesaid with recourse to him, and he also assigned to Palmer all his interest in the deed of trust to Isbell, which interest was first to be applied to the payment of the said four notes, and the residue he assigned without recourse.
| The case of Steen v. Fourquorean & others came on to be heard in November 1846, when the Court held that the debt secured by the deed of the 9th day of July 1838 was usurious. A statement of the trust fund under the control of the Court and of the debts secured by the deed to Isbell was then made marked A A, from which it appeared that the fund to be divided among the beneficiaries in that deed amounted on the 12th November to | $ 5749 41 |
| The debts secured in the first and second class, amounted at the same date, to | $1127 15 |
| The amount of the four notes paid by Jennings, | 977 54 |
| The amount of the bond due to Palmer, | 2174 68 |
| These were in the third class specified in the deed. |
| The fourth class consisted of the debt due to Marsh, | 1011 91 |
| And there was in addition the note endorsed by Steen and Jennings, as to the payment of which it was doubtful whether it was by Steen or Jennings, | 223 66 |
| ____________________ | $5514 94 |
The Court then made a decree, by which the bond claimed by Steen, and the deed of trust to secure it, were directed to be delivered up to be cancelled; and the trust fund was distributed among the beneficiaries in the deed to Isbell, according to, and to the extent of their respective interests; the decree being in favour of Palmer, as the assignee of Jennings, for the sum of 977 dollars 54 cents, the amount of the four notes paid by Jennings, and in favour of Jennings for 2174 dollars 68 cents, the amount of the bond of Palmer, and which Jennings had settled with him by the agreement of the 25th of January, and the assignment of the 27th of February 1844.
After the decree had been entered, the counsel for Palmer suggested that under the agreement and assignment aforesaid, Palmer was entitled to the decree for the sum of 2174 dollars 68 cents, and that if there was any doubt of Palmer's right, on the construction of these papers, that Jennings would state that such was the intention of the parties to the agreement; and on his motion the Court suspended the decree in favour of Jennings for thirty days, in order to give Palmer an opportunity to assert his claim, if any he had, in such mode as he might be advised to adopt.
In December 1846, Palmer filed his bill in the Circuit court of Lynchburg, against Jennings and the officer of the Court who had the proceeds of the trust property in his hands, to enjoin the payment by the officer to Jennings, of the sum of 2174 dollars 68 cents, as directed by the decree in the case of Steen v. Fourquorean & als. In his bill he stated the execution of the bond to him by Fourquorean, Reed and Jennings, and that the whole thereof, except 60 dollars, was due in 1843, at which time the two first named were insolvent; his suit against Jennings, and the agreement and assignment of January and February 1844; the deeds of trust to Edley and Isbell, and the proceedings in the case of Steen v. Fourquorean & others; and he charged that by the agreement and assignment he was entitled to the whole of Jennings' interest in the trust deed to Isbell; that such was the intention of the parties to the said agreement and assignment, and in pursuance of such intention, Jennings on the 25th of November 1846, gave to the plaintiff an order authorizing him to receive the money. But that nothwithstanding said compromise and assignment Jennings had given notice to the officer not to pay over the money to the plaintiff, and demanded it for himself. The prayer of the bill was for an injunction, and for general relief. The injunction was granted. The order referred to in the bill and which was exhibited with it, bore date the 25th November 1846, and recited that by the agreement of January 1844 it was Jennings's intention to convey to Reuben D. Palmer all his interest in and to everything coming to him under the deed of trust to Isbell, and then relinquished all the proceeds of said deed of trust in his favour, to said Palmer, and authorized the payment of the same for the benefit of Palmer.
Jennings in his answer denied that the agreement and assignment aforesaid was intended to transfer to Palmer so much of his interest in the trust fund as he was entitled to for having satisfied the bond to Palmer, and insisted that there was doubt at the time whether the two notes mentioned in the deed to Isbell on which Jennings was endorser, on one of them after the Dudleys, and on the other after Steen, had been paid by him, the payments made by him having been made by his agent and attorney in Lynchburg, who had collected monies due to him in that place; and that it was these debts to which the latter branch of the agreement referred; it being intended to give to Palmer the benefit of the payments if they had been made by Jennings, and only in that event. He went into a minute statement of the circumstances under which the paper dated the 25th of November 1846 and filed with the bill was obtained from him. It is unnecessary for the purposes of this report to state the facts. The Court below was of opinion that it was not obtained under such circumstances as vitiated it; and this Court thought it was entitled to no weight in deciding upon the rights of the parties.
When the cause came on to be heard, the Court below perpetuated the injunction, and directed the officer in whose hands the trust fund was, to pay to Palmer the sum of 2174 dollars 68 cents, with the accruing interest thereon. From this decree Jennings applied to one of the Judges of this Court for an appeal, which was allowed; and by consent of parties, the case was sent to the Court at Lewisburg.
The case was argued in writing by Bouldin and Cooke, for the appellant, and Garland and Cabell, for the appellee, and turned upon the true construction of the agreement of January, and assignment of February 1844. That question was considered as upon the terms of the writings themselves, and also in connection with the facts appearing in the record.
OPINION
ALLEN, J.
The Court is of opinion, that by the literal terms of the agreement of the 25th January 1844, as carried into execution by the transfer of the 27th February 1844, it was the intention of the appellant to assign and transfer to the appellee Palmer all his interest secured by the deed of trust in the agreement referred to, embracing the amount paid by the appellant towards the discharge of the bond for which he was the security for the said Fourquorean for 1460 dollars; yet said agreement and transfer were executed under such circumstances as in a Court of equity to require it to be treated as a security for the benefit of the appellee for the payment of the whole amount due to him on his bond, and nothing more. It appears from the statement A A, referred to and made part of the decree in the case of Steen's administrator against said Fourquorean and others, that the fund collected under said deed of trust and under the control of the receiver, would have been sufficient on the 25th January 1844, the date of the agreement aforesaid, to have discharged all the debts entitled to priority of satisfaction over said bond, and the balance left unpaid of said bond after crediting the same with the amount secured by said agreement, even if the validity of the prior deed of trust had been sustained. Of this fact it does not appear that either party was apprised: It certainly does not appear that the appellant who resided at a distance from the scene of the transactions knew any thing of the state of the fund, when to obtain a discharge he paid a large proportion of the bond, and agreed to transfer his interest in the deed, under which an amount was secured sufficient under any aspect of the controversy, to discharge the balance due to the appellee on the bond, nor is there any proof of knowledge of the true state of the facts on the part of the appellee: If known to him and concealed from the appellant it would have been a fraud; but in the absence of any proof of such knowledge, and from the fact that the appellant was required to transfer the notes or bonds in the agreement set out with recourse, it is the fair presumption that both parties were ignorant of the real state of facts, and the contract was entered into under a mutual mistake; and it would be unjust, oppressive and inequitable to enforce it against the appellant according to the literal terms thereof; and full justice is done to the appellee by holding it as a security for his benefit, for the payment of the whole amount of his demand with interest.
The Court is further of opinion, that the order of the 25th of November 1846 was obtained under circumstances which entitle it to no weight in deciding upon the rights of the parties. The Court is therefore of opinion that the decree of the Circuit court is erroneous, and it is adjudged, ordered and decreed, that the same be reversed and annulled, and that the appellee pay to the appellant his costs by him expended in the prosecution of his appeal here. And the cause is remanded to the Circuit court with instructions to refer the same to a commissioner to ascertain the balance of principal and interest due to the appellee on the bond for 1460 dollars, after crediting the same with 60 dollars, the credit endorsed thereon, with 500 dollars, the amount of the bond given by the appellant and W. B. Jennings, his security, as of the 25th of January 1844, and with the sum of 977 dollars 54 cents on the 12th of November 1846, the sum decreed to be paid to the appellant for the use of the appellee by the decree of the 20th of November 1846 in the case of Steen's adm'r v. Fourqourean & others; for the balance due upon the bond after deducting said credits, together with the costs in the Chancery court the appellee will be entitled to satisfaction out of the sum of 2174 dollars 68 cents with the accruing interest thereon, mentioned in the decree appealed from, and the appellant will be entitled to the residue of said last mentioned sum with the accruing interest thereon.
[a1] Judge Daniel had been counsel in a cause from which this case originated.