Jones v. National Building Ass'n

Where one is induced to become surety on a promissory note by the representations of the secretary of a building association, the association cannot allege a want of authority in the secretary to make such representations when the surety makes defence on the terms of the agreement. The association cannot have the benefit of the security, and at the same time repudiate the contract by means of which they obtained it.

Error to the Court of Common Pleas of Lackawanna county: Of January Term 1880, No. 235. Feigned issue, wherein the National Building Association was plaintiff, and David L. James and David T. Jones, defendants, to determine the’liability of the latter as surety on a promissory note given by James to the association. On the 16th of May 1870, James borrowed of the National Building Association, then an unincorporated association, $680, and gave as security for the same to said association his judgment note for $1000. On this note Jones became surety, upon the secretary of the said association representing to him that he would only be security on the same for about three months, or until the principal could get a policy of insurance on his house and deposit it with the association. About ten weeks after this, James, the principal, procured a policy of insurance on his house and deposited it with the association. When Jones, the surety, demanded of the secretary of the association a release of his obligation as surety, the secretary then assured him he should be released. ■ Subsequently, Jones, finding that he had not been released, demanded of the secretary of the association a release as surety, and notified him that he must no longer look to him as surety, but must look to James, the principal, for the money. In the meantime, on the 27th of June 1870, the National Building Association was incorporated under the provisions of the Act of Assembly of 12th April 1859, by a decree of the Court of Common Pleas of Luzerne county. The secretary of the association failed to release Jones and issued a scire facias to revive and continue the lien of the judgment against both James and Jones. Jones immediately made application to the court, and upon affidavit setting forth the facts, obtained a rule to show cause why the judgment should not be opened as to him and he be let into a defence. This rule was made absolute, an issue was framed, and the case was referred to a referee, James H. Torrey, Esq., under the Act of 1869 and supplements, Pamph. L. 725. The referee found the facts substantially as they are set forth above, and among his conclusions of law found “ that D. T. Jones, the surety, is estopped to set up as a defence to this action the fraudulent representations of the agent of the association. ■ Perhaps this would not be the case if the association had been incorporated. The relations between a corporation and her members are nardly intimate enough to make the representations of her agents affect the members’ private interests. But being unincorporated, the members of the association stood toward each other in the relation of partners. As a partner Mr. Jones is estopped to set up the representations of the agent and a member of the partnership.” He then found for the plaintiff. Jones assigned this finding for error, and the court, Hand, A. L. J., confirmed the finding of the referee, saying: “ The defendants must all, in contemplation of law, have had notice of the authority, whatever it was, of the secretary to bind the association. They were all members. The referee practically finds that the secretary had not authority to make the arrangement he did, as he finds it to have been fraudulent, which it would not have been if authorized. This is not the cáse of an agreement to exchange securities at a definite time, made with authority and clearly proved. The judgment in this case is affirmed.” The defendants took this writ, alleging that the court erred in this action.