Gray v. Farmers' National Bank

Page, J., delivered the opinion of the Court. In May, 1875, Dr. Benjamin R. Davidson applied through Judge Hagner to the Farmers’ National Bank for a loan of nine thousand dollars. In April, of the same year, the Judge wrote to Dr. Davidson as follows: “I mentioned your matter at the board to-day, and I think it can be adjusted in this way: You all have a note there now for $3,800. The new note will include this, and will pay it off.

It will be signed by Mr. J. Wilson Iglehart, as I understand, and some other surety, omitting Talbot. Then you will all execute a deed of trust to secure the payment of the entire indebtedness. This deed of trust can be made to sureties, or to some one else of your own selection;” and on the 28th of April, “the board has agreed to your proposition, except as to the length of time.” In pursuance of this agreement, Dr. Davidson and George Davidson executed and delivered to the bank their note for the sum mentioned, payable six months after its date, with Jane Davidson, William G. Mackall, Sr., and John W. Iglehart as sureties; and to secure the bank and the said sureties from all loss by reason ⁶³³ thereof, also executed a deed of trust to Judge Hagner, covering certain lands situate in Anne Arundel County. Judge Hagner prepared these papers, and it is insisted by the appellant that in so doing he was acting as the attorney for the bank.

The appellee denies this and affirms that though the Judge was at the time a member of the board of directors, he was not its attorney, but was in fact employed by the Davidsons. In the views we shall express, we do not regard this question as at all material. The note thus given was from time to time renewed, and on the nineteenth of December, 1884, Messrs. Iglehart & Mackall having died, Mr. Brashears and the complainant were accepted as sureties in their place.

On the fourteenth of July, 1887, the note being then overdue, the bank brought Suit and obtained judgment on the seventh day of October, 1887, against all the parties, including the complainant, for $9,264.45 and costs. On the eighth of-March, 1893, the complainant filed his bill, in which he prayed that this judgment should be declared void as to him, and an injunction issued restraining the bank from taking any steps against him to collect the same. In addition to the above facts, the bill alleges that the complainant signed the renewal note at the request of the Davidsons; that the circumstances connected with the making of the loan, and “the fact that the bank held said deed of trust upon the property as primary security,” were stated to him and “fully understood by him as a condition” for his so doing; that in the early part of 1885 he informed the Davidsons he would “no longer place his name on the renewal notes,” and that other arrangements must be made;” that thereupon the said Davidsons presented to the said bank a renewal note for said loan without the name of the complainant, and he is informed the bank accepted the same, and received from them a discount for an extension of six' months. That when suit was brought on thé note in 1887, he was falsely informed by the cashier that the renewal note had not been accepted, and in consequence made no defence, whereupon ⁶³⁴ judgment was rendered, against him.

The bill further alleges, that, he urged upon..the officers of the bank in frequent interviews, “the ..necessity for an immediate sale” of the property , covered, by. .the deed of trust, and the president agreed in the winter of 1889 that it should be sold in the following June, but despite this and ■ other-urgent requests on the part of the appellant, it remained unsold until December of 1891. That in meantime it had greatly depreciated in value, and taxes and interest had. accumulated to such an extent that it failed by .a large -sum- to bring enough to pay the claim-.of the bank. . The ■ defendant, in its answer, denies these charges, and in substance avers that the. note upon which- the suit of .1887 was instituted was the. last ever -accepted for .the .renewal of the- original note /or the Davidsons’ loan, or upon which, discount- was paid ; that no note was ever. accepted .without the-name of-the complainant; that until that suit, was brought-, no steps had been taken to enforce .collection by law, and.-that when the appellant requested it to sell the property covered-by the dee'd of trust, -it was suggested to him to “pay off the note and take such steps as .h.e deemed necessary.” That by reason of the prospect of the speedy completion-of the Drum Point Railroad, which then seemed reasonable, it was- probable the lands would greatly enhance- in value, and it would therefore be to the advantange of- all parties to wait until the road was running ;■ and that the-delay in advertising the property was due. to that cause,-the illness of Mr. Revell, and the necessity that arose- for legal proceedings to bring in other,.parties. . . . The first question that arises, therefore,-is, does the proof sustain the statement in the complainant’s, bill, .that in January, 1886;.the.

Davidsons.presented to the bank a renewal note for another.period.of six months, without .the name of •the complainant, and, if so, did the--bank accept- it and receive the discount? .. . ■ ... • . It -appears from the. proof -that -Mr. ..Gray notified Dr. Davidson that he would not. be able to • go on his note ⁶³⁵ again, by letter dated the $th of March, .1885. The note then outstanding with Mr. Gray’s name on it as one of the sureties, .became due on the 22nd June.. The directors were made, aware of Mr. Gray’s .refusal on.the 12th August, 1885.

On that day, a note for renewal, without Mr. Gray’s name, was presented, declined by the board, and.returned by Mr.. Randall to Dr. Davidson. Both the Doctor and Mr. Gray were notified by letters, bearing date the 12th August, 1885, of this action of the board, and Mr. Gray'was also notified that “unless the note, can be renewed with your name -or some other, considered equally good, the whole business will have to be closed up, by suit, against all the makers on the note, which we hold overdue, yourself among the rest.” To Dr. Davidson, the president, after stating what had been done by the board, concludes his letter of the 12th August as" follows: “I have informed Mr. Gray that the whole- business will have to be closed up by suit against him and all the others, &c. * * Mr. Gray, no doubt, has just cause of complaint, for there has been very little, if any, reduction of the note for years, but he does not avoid responsibility by refusing to sign a renewal note, for he is on the one which we hold. I return the note” (that is, the renewal note),.“ and his letter; please see him at. once, and have the matter put in shape.” Dr. Davidson also sent to the bank, on June 25th, two hundred and fifty-one .dollars and eighty-seven-cents, whereupon the cashier addressed him a note stating he “ inclosed a blank for your note due 2,2nd inst.

I credit you $251.87 ; this will leave a balance still due on discount of $11.40.” This balance was probably paid to.the bank on July 28th, so that when the-directors met on the 12th August, while the money for the discount was to the credit of Davidson with the bank, .yet Mr. Randall distinctly states that it was to the credit of the Doctor upon.“the individual ledgerthat is, as he explains, to his individual credit, and, like any other deposit, subject to check. Mr. Randall explains the course of business, in such - cases, as ⁶³⁶ follows: “ When a note has been running for more than one or two renewals,xall sums deposited for'discount or interest, by the person in whose name the note stands, or is carried on our books, is carried to the individual credit of that person on the individual ledger of the bank, like any other deposit made by him, and if the board of. directors agree to renew the note when it is presented to them for renewal, the amount of the old note is charged to the individual and the proceeds pf the new note is credited to the individual.” The proof is conclusive that the action of the board on the 12th August was to positively decline renewing the noté without Mr. Gray’s name. After this, the matter seems to have rested until late in the year. On the 31st December, the president, in reply to a letter of the 29th, urges Dr. Davidson to take some action towards renewing the notes.

He says, “ it is absolutely necessary “they can’t be allowed to remain over longer“ the bank has certainly shown its anxiety not to distress you, and if you can give us two names as good as Gray’s, as you say you can, and pay the back interest and discounts on the renewals, matters can go on for awhile, and you can have a chance to bring in your crops, &c.” “ I enclose you notes for renewal, and a mem. of back int. due and amt. of discount for renewals.” Not receiving a reply to this, on 13th January Mr. Randall writes again: “ I have heard nothing from you in regard to a renewal of the notes to this bank and substitution of two names in lieu of that of James Gray’s, as proposed by you.” He then refers to a letter from R. W. Templeman, asking, in the event of his loaning Davidson $8,500, if the bank would posptone its lien in his favor, and concludes: "The board has taken up the whole matter afresh, and in view of your efforts to improve matters and better prospects of avoiding a sale, which seemed inevitable, they now agree to renew your notes without Gray’s name, and to let matters rest; you, of course, paying all interest and discounts now due * * * I sent you notes ready for renewal, See.-, and I want you to come up this week, without fail, and see ⁶³⁷ me and fix matters.” To understand this letter properly, we must refer to the action of the board of directors. It appears from the letter of 31st December, cited above, that the president had written to Davidson in regard to a renewal of the notes and the substitutipn of two names in place of Gray’s, and had sent him the notes “ready for renewal.” As hinted at in the letter last cited, in which Mr. Randall used the words “in view of your efforts to improve matters and better prospects of avoiding a sale,” it was then thought that Davidson would be able to effect a loan from other parties, and thus be enabled to make a payment to the bank, in which event the directors were willing that Mr. Gray should be released, provided the other sureties would assent. Mr. Randall in his testimony so states, and Dr. Davidson admits that it was understood at the time he received this letter, that the release of Mr. Gray was qualified ■by the necessity of securing other security in his place; and among the proceedings of the board of the 13th January, appears the proposition of Dr. Davidson and the action of the board, as follows: “ Proposition to renew his note in full without James J. Gray’s name, all parties to note to agree in writing that the notes shall be renewed without Gray’s name, Agreed to.” What the meaning of this letter was, however, is not very important, for it is clear that no renewal was in fact accepted. The proceedings of the bank show that the subject was frequently before the board, and its repeated refusal to renew without the name of Mr. Gray.

The correspondence makes it clear that the action of the bank was always a refusal to do so, except with the assent of the other sureties. On the sixth day of October; 1886, Mr. Randall, in writing to Dr. Davidson, said: “The board has assented to the renewal of the note without Mr. Gray’s name, provided the assent of the párties to the note, particularly that of Mr. Brashears, was first obtained in writing. Yesterday Mr. Brashears was at the bank and informed us that he would not agree to renew the note unless Gray signed with him. To-day the board declined to re ⁶³⁸ lease Gray and