Yates v. Donaldson

Tuck, J., delivered the opinion of this court. By the agreement of 23rd June 1848, the appellee and Garland became indebted to the appellant. As between them Garland owned two-thirds of the property, and Donaldson one-third; and this was known to the appellant at the time. If either had paid the whole or more than his proportion he would have been entitled to recover from the other for such excess, Owens vs. Collinson, 3 G. & J., 25 ; and his right of action would have accrued on the expiration of the time at which Yates himself, could have sued upon the agreement.

It appears that before the expiration of that time, and before compliance with the agreement, by the delivery to Yates of notes for the amounts, and at the times stipulated, the purchasers made an arrangement between themselves to give separate notes for their respective interests, to which Yates assented, provided they were endorsed to his satisfaction. With this agreement the appellee complied, but it does not clearly appear whether Garland did or not. He says that he did not; but Homans slates that two of his notes, (for the amount due by Garland,) were endorsed and delivered to Yates; that he expressed himself satisfied and accepted them. Garland also states that the negotiation for the sale to Homans was carried on between them alone; and between Yates, Garland and Homans, as to the acceptability of Homans’ notes, which Yates had agreed to take from Garland if they were satisfactory to him.

The principle is well settled, that the acceptance of a security or undertaking of equal degree does not extinguish the former debt, unless it be received in satisfaction, or be intended as an abandonment of the remedy on the first contract. It is equally clear that these are questions for the jury. Such an arrangement, h.owever, suspends the remedy on the first contract until the notes mature. Glenn vs. Smith, 2 G. & J., 493 .

Hunter vs. Van Bomhorst, 1 Md. Rep., 504 . It follows, from this state of the law, that the prayers offered by the appellant should have been granted, except the ■sixth, unless there be something in the case overlooked in framing the prayers, to the benefit of which the appellee was ³⁹⁷ entitled in submitting the law of the case to the jury. And as to the sixth the instruction would also have been proper, if it had not submitted to the jury, the finding of a fact of which there was no evidence whatever, to wit, that the acceptance by Yates of Homans’ notes was at the request, and for the accommodation of both the parties, Garland and Donaldson. It is contended, however, on the part of the appellee, that the knowledge by Yates at the time of the purchase, that the purchasers held separate interests, and his afterwards dealing with them separately, for the security of their respective proportions of the debt, and accepting Homans’ notes, in the manner stated in the evidence, without the knowledge of the defendant, by which time was given to Garland, have discharged the appellee from all liability on the original contract.

If Donaldson had been merely surety for Garland this view of the case would be certainly correct; for time given to a principal will discharge the surety, because it places him in a new situation in reference to the principal debtor. But here both parties are principals according to the agreement, and how can it appear that a party to a joint contract is a surety for part of the debt, except by going out of the instrument? Can this be done at law where both are sued? If one be released both will be, except in a case where the remedy against the other is expressly reserved, as in Clagett vs. Salmon, 5 Gill & Johns., 354, and the cases there cited.

Where the act of the creditor operates a release of the storety, there can be no difficulty in enforcing this principle, mie remedy is gone entirely. But in a case where both are principals, how are the equities between them to be adjusted in a suit at law by the creditor against both? If time given to one released the other, the discharge would avail only to the extent of that portion of the debt which was due by the party to whom time has been given. The party not indulged would, at any rate, be liable for his own proportion of the debt.

Supposing that this might be easily worked out to its proper result in a case like this, where one party is liable for one-third, and the other ³⁹⁸ for two-thirds, and the verdict is to be rendered against one only, because the other has confessed a judgment, the difficulty of doing complete justice among all the parties, is apparent in a case where there are several parties to the contract, who are defendants in the cause, liable in different proportions as among themselves, though all responsible to the creditor in the first instance. It would be impossible to render a judgment upon any adjustment of these equities. The judgment at law must be for the same amount against all the defendants. It is not a sufficient answer to say that the appellee paid his share, and that therefore this difficulty could not arise.

We are dealing with a principle, upon which, the party, if discharged at all, was exonerated at the moment the indulgence was given by the arrangement with Garland as to Homans’ notes. At which time the appellee’s part had not been paid, because the notes passed for his share did not^er se extinguish his liability. We have not been referred to any case at law, in which such a defence has availed, while there are some to the contrary. In Bedford vs. Deakin, 2 Barn. & Ald., 210, one of the members of a dissolved firm undertook to pay the joint debts, and this was made known to a creditor who received his notes for the amount of the joint indebtedness, which notes were subsequently renewed, and not paid, the original partners were held liable on the joint note.

It is true that the creditor reserved his remedy on the first note and retained possession of it, and sued on it; but all this was unknown to the other partner. The creditor had given time, without his assent to the settling partner, and he had failed after being so indulged. The judges, Abbott, Bayley and Holroyd, agreed that the first debt was not extinguished. They notice the very argument employed in this case, the injury to the appellee by preventing his recourse on the agreement if he had paid the debt, by saying that as joint debtor, it was his duty to have seen the debt was paid; and the last judge says: “The dishonor of the bill gave a right of action against all the partners, and the circumstance of a creditor ³⁹⁹ giving time to one of three joint debtors will not discharge the others, nor even suspend his right of action against them.” In Manley vs. Boycot, 18 Eng.

Law & Eq., 357, the defendant, who was one of the makers of a promissory note, to an action against/him by the payee, pleaded that he made the note as surety for another and for his accommodation, which was known at the time to the payee, and that after the note had become due the plaintiff gave time to the other maker, without the consent of the defendant. It was held, that this was no defence to the action. Lord Campbell said, “that the plea was bad in not alleging that the note was delivered by the defendant as surety for the other parly. The bona fide holder of a bill or note cannot be prejudiced in the rights which he prima facie has, according to the terms of the instrument, by knowledge subsequently acquired, or even by knowledge which he has at the lime he takes it, if there is no evidence of a special agreement at the time when he takes it to affect the rights and liabilities of the parties.

If the payee of a joint and several promissory note made in the common form by two, may be placed in a situation for treating one as surety for the other, it can only be by bis express assent to do so when the note was delivered to him.” The case of Smith vs. James, same vol. 353, note, is likewise in point. Perfect vs. Musgrave, 6 Price, 111. Sprigg vs. Bank of Mount Pleasant, 10 Peters, 257. See also Rees vs. Berrington, 2 Ves., Jr., 542, and in 2 White & Tudor’s Eq.

Cases, 707, (72 Law Lib., 352,) and Forsyth on Composition with Creditors, ch. 8, in 1 Lib. Law & Eq., 34, in both of which the subject is fully treated. The same principle has been often applied in the instance of accommodation notes, where the endorser is the real debtor, as between him and the maker. Although releasing the endorser does not discharge the maker, for the reason that the latter can have no claim against the former, if he should pay the debt, it being his own, yet equities between them will not vary the legal principle, and affect the