Russell v. Buck

Bennett, J.

dissenting.

The principles of this case, as well as the case itself, being somewhat important, and as I cannot concur in the opinion expressed by my brethren, I deem it proper to state the grounds of my dissent.

The declaration is upon the special contract set forth in the bill of exceptions.

The questions arising upon this bill of exceptions have been fully and ably discussed by the counsel, and some of them are not without considerable difficulty. The leading proposition sought to be established by the defendant’s counsel is, that, from the facts detailed in the bill of exceptions, no action can be maintained on this contract, on the ground of its being without consideration. If this objection is well founded, it must be fatal to the action ; and whether it be well or ill founded, must dépénd upon the question whether the evidence detailed shows a legal claim in the plaintiff against the defendant as one of the indorsers of the note. If the defendant was legally liable, at the time of making this special promise, as one of the indorsers of the note, it would seem that there can be no good reason to question the validity of this contract as a new, independent and substantive agreement. It has long been settled, that where there has been a pre-existing obligation, which has become inoperative by some positive law, (as in the case of debts barred by the statute of limitation, debts contracted by infants and debts discharged by insolvent laws,) this forms a sufficient basis for an express and effective promise.

It is believed to be the law, that in all such cases, where there is air express promise, it may be declared upon as the substantive cause of action. The new promise springs out of, and is supported by the original consideration, and the moral obligation uniting itself with the new promise, makes •what Lord Mansfield calls, in the case of Trueman v. Fen ton, 2 Cowp. R. 544, “a new undertaking and agreement.” In cases where the new promise is conditional, and where the promise is to an executor to pay a debt due his testator, in }iis life time, it may well be inquired whether the declaration *179 must not be on the new promise. Chitty on Con. 654.— Short v. McCarthy, 3 B. & A. Reports. 626. In Depuy v. Swart, 3 Wendell’s R. 135, it was held that a promise t.o~ pay a debt, discharged under the insolvent laws of New York, was a new contract, and that a suit on such contract could only be brought in the name of the person with whom it was made, and that the note, given for the original debt, had no connection with the suit, further than as furnishing a consideration for the new promise. On this subject I would refer to Dean v. Crane, 1 Salk. 28. Hickman v. Walker, Willes’ R. 27. Little v. Blunt, 9 Pick. R. 491. Levy v. Cadet, 17 Sarg. and R. Rep. 416. Longdale v. Brown, 4 Wash. C. C. R. 148. Bell v. Motrison, 1 Peters’ R. 317; and Jones v. Moore, 5 Binney’s R. 576, where chief justice Tilghman, with his usual ability, has entered into an elaborate examination of this subject. If debts barred by the statutes of limitations, discharged by insolvent laws, and debts of infants not for necessaries, furnish a sufficient basis for the consideration of a new and effective express promise, as a substantive ground of action, it would seem to follow, a fortiori, that the existence of a debt, where the promisor had not been released from either the legal or moral obligation of payment, might have the same effect. But this point is not without authority. In Watson v. Turner, Bull. N. P. 147; it was adjudged that the overseers of the poor were bound by a mere subsequent express promise to pay an apothecary’s bill for taking care of a pauper, and that such promise was not nudum pactum. This case rests upon the ground that, in England, a legal obligation is imposed upon the overseer, personally, to provide for the poor. This formed the basis of the subsequent promise. See also Church v. Church, T. Raym. R. 260, and Pow. on Con. 351. That a legal obligation alone is a good consideration for a promise, is fully admitted in Cook v. Bradley, 7 Conn. R. 62, in which Daggett, J., reviews the authorities at length. Mills v. Wyman, 3 Pick. R. 217. See also Warner v. Booge, 15 Johns. R. 233. As to the validity of the subsequent promise, it can make no difference whether the prior legal obligation arose from an express promise, or from one implied in law.

In Moar v. Wright, 1 Vt. R. 58, in which the distinctions are marked with great accuracy, it was held that a promise *180 to the assignee to pay a debt which had been assigned to him for a valuable consideration was not nudum pactum. It is " well said in that case, that “the obligation of the debtor to the assignee is more than a mere moral duty; it is, at least, an obligation binding in equity.” Every legal obligation necessarily involves the moral duty of discharging such obligation.

In the case under consideration, however, it seems that the promise of the defendant was induced by a new and an additional consideration, to wit, that he should not be called upon till 1st May, 1831. An agreement to forbear for a certain or reasonable time the collection of a well founded legal or equitable claim, is a sufficient consideration for the promise of the debtor, to pay the debt, as well as for that of a third person. No doubt, to render an agreement to forbear, and the forbearance of a claim, a sufficient consideration, it is essential that there should have been a well founded claim, or, as it is said in Longridge v. Dorville, 5 B. & A. Rep. 117, there must have been, at least, a doubtful right of action. It is admitted in the argument for the defendant, that if there is an agreement on the part of the plaintiff to give to the defendant time, there is a good consideration, provided there be a debt to be forborne. It is, however, said that there is no evidence of an agreement on the part of the plaintiff to give time, and we have been referred to the case of Lees v. Whitcomb, 5 Bingham’s Rep. 34, to sustain the position. The evidence in that case, to support the declaration, was a written extract, as follows ; “ I hereby agree to remain with Mrs. Lees two years from the date hereof, for the purpose of learning the business of a dressmaker.” Best, C. J. says, “ there is no obligation by the terms of the contract upon the defendant to serve the plaintiff; her engagement is merely to remain with her for two years and there is no agreement on the part of the plaintiff to insure to the defendant instruction in the business.” This certainly cannot sustain the position that there was no agreement in the case before us, on the part of the plaintiff, to give time. If the defendant in the case in Bingham did not agree to serve the plaintiff, but simply remain with her for two years, it would indeed be preposterous to infer,- from the *181 nature of the case, an agreement on the part of the plaintiff to give instruction in a business in which the defendant had not agreed to serve. The usual form of a declaration on an agreement to give time, after setting out the indebtedness, is, “ in consideration whereof, and that the plaintiff, at the special instance and request of the defendant, would forbear and give time, &c. the defendant promised, &c.and then the forbearance is averred.

Forbearance of the collection of a debt by the plaintiff, at ¿he request of the defendant, is a good consideration for a promise. 2 Chitty Pl. 83. 1 Saunders’ R. 211, a.n. 2. It is not necessary in this case that time should have been given to the makers of the note. If the defendant, Buck, was liable as indorser, the plaintiff, by the forbearance, has been delayed in his remedy, not only as to Buck, but also as to the other indorsers, and, it is to be presumed that Buck has been benefitted; so that both the ordinary grounds, upon which a sufficient consideration rests, concur. In Lent et al. v. Padelford, 10 Mass. Rep. 237 , it is expressly determined that a declaration alleging, that in consideration that the plaintiffs would delay the service of their execution, the defendants promised, &c. is sufficient, it being averred that they did delay.

In the case of Breed v. Hillhouse, 7 Conn. Rep. 523 , the declaration states that in consideration that the plaintiff would delay the collection of a certain note for a given time, and of the promise of the plaintiff to forbear the same for that time, the defendant promised, &c. The promise or guaranty was in these words: “ I hereby guaranty the payment of this note within four years from this date.” The declaration averred the delay to collect the note of the maker for the time specified. The court say, “ the acceptance of the guaranty by the plaintiff, and his consequent forbearance, prove the agreement to forbear, and are incompatible with any other supposition.” Suppose a lease is executed by A. to B. in which it is provided that B. shall pay A. certain quarterly rents. The lease is not executed on the part of B., but he accepts of it, and goes into possession. Would not this furnish evidence against B. of an agreement to pay the rent as stipulated in the lease ?

If the facts detailed in the bill of exceptions do not show *182 that the defendant was liable to the plaintiff, as one of the indorsers of the note, it must be admitted that this agreement is nudum factum; and though the court have decided that the defendant is entitled to a new trial on the ground of variance between the declaration and the evidence, leaving the question, as to the binding effect of this new promise, undecided; still as the question has been argued at length and is the important question in this case, I would suggest a few reflections as they occured to me on the trial.

The written contract of the defendant being without date, and no evidence in the bill of exceptions of the time when, in fact, it was executed, whether before or after the note became payable, the time when it was executed must be a matter of inference; and, perhaps, it will make no essential difference in the defendant’s liability. If the indorser of a note, before it becomes payable, agree with the holder, that, in consideration of time being given, he will pay the note, this, no doubt, would be a waiver of a demand and notice, and the indorser, on this evidence, becomes absolutely liable on the new contract; or, if declared against as indorser in common form, he would be chargeable on the ground of waiver of demand and notice. Norton v. Lewis, 2 Conn. Rep. 478 . Leffingwell v. White, 1. Johns. Cases, 99.

It has been frequently adjudged, that if, after a bill has become due, the indorsee calls upon the indorser for payment, and the latter promises to pay it, this evidence is sufficient to warrant the jury in finding a demand of payment, and notice to the indorser of the dishonor of the bill. Horford v. Wilson, 1 Taunton’s Rep. 12. Gibbon v. Coggon, 2 Camp. Rep. 188. Pierson v. Hooker, 3 Johns. Rep. 67. Lundie v. Robertson, 7 East’s Rep. 231. Potter v. Rayworth, 13 East’s Rep. 417. Breed v. Hillhouse, 7 Conn. Rep. 528 . Bayley on Bills, 479. No doubt the effect of this evidence may be neutralized, by the indorser’s showing that in point of fact there was no demand and notice ; but if the promise is made by the indorser, after being discharged by want of notice with a full knowledge of all the material facts, it may be well inquired whether this is not a waiver of such want of notice, and whether the party is not estopped from setting it up as a defence ?

*183 It is true, that in the case of Trimble v. Thorne, 16 Johns. Rep. 154, it is held that a promise to pay the note by an indorser, after due,is not prima facie an admission of pre- ‘ sentment and notice ; but that it must also appear affirmatively that the indorser, at the time, knew it had not been presented and notice given. It is believed this case is opposed to the whole current of decisions, and establishes a rule of evidence, not supported upon principle or by authority.

It is said, that though the evidence furnished against Buck by this new promise, might, in ordinary cases, be sufficient, per se, to charge him as indorser, yet, in this case, the indorsement was obtained by the fraud of Gibson ; and that, therefore, the plaintiff can have no action against the indorsers without proof that he became possessed of the paper in the due course of business, and for. a valuable consideration. It is undoubtedly true, that where a suspicion is cast upon the title of the holder of commercial paper, by evidence, showing it had got into circulation by fraud, it is incumbent upon the holder to show that he became possessed of it in the due course of business and for a valuable consideration ; otherwise he is not protected against the effect of the fraud. The question, however, may well be asked, whether in this case the rule, that the onus is cast upon the plaintiff, is not satisfied from the special facts in evidence ? The agreement of Buck recognizes in direct terms the indorsement by Buck & Bailey, and admits the note to be the property of the plaintiff-, and shall Buck, after having induced a delay by his promise of payment to the plaintiff, be permitted to urge that the latter has not even, prima facie, a right to recover on this paper, without showing how he came by it ? No doubt, for the purpose of testing the question whether there is a debt to be forborne, so as to form ' the basis of a new promise, the rule should be the same as if the declaration was against Buck as indorser. If this.suit had been on the indorsement, as against Buck, would the plaintiff, after the admissions in this writing, be compelled to go further, and show he paid value for it in the due course of business ? Is it not the effect of the admissions of Buck to dispense with this requisition ? If the evidence, in this particular, would, per se, be sufficient to sustain an action on the indorsement, *184 as against Buck, it must follow that it is sufficient to sustain the consideration for the new promise. To give effect to this agreement, so as to charge the defendant as indorser, does not require a consideration. It is, per se, an admission, prima facie, that every pre-requisite step, necessary to charge him on the indorsement had been taken. If then, this evidence shows a liability as indorser, it is not, it is conceived, arguing in a circle to make such liability the basis of a new and effective promise.

It was also urged on the trial that there was no liability on the defendant on his indorsement, on the ground that Bailey had no authority to make it in behalf of the partnership; but is this objection well founded ?

It is a general rule, that one partner may bind his co-partner by accepting drawing, or indorsing a bill of exchange, or by making or indorsing a promissory note in the name and behalf of the firm. The bill of exceptions does not furnish any evidence of notice to the plaintiff that it was not indorsed on the partnership account, and for their use.

Third persons are not bound to inquire whether the partner indorsing a note was acting on the partnership account. The presumption is, that he was, and this is sufficient, unless the contrary be shown, or unless it be shown that the person taking the paper had notice or reason to believe that the partner, signing the paper in behalf of the firm, was acting on his own account. Besides, Buck, by his new promise, recognizes the indorsement made in behalf of the firm by the other- partner.

Some other objections of minor importance were urged at the trial, in regard to the invalidity of this promise, but as the court have determined to grant a new trial on a single point, that is, on the ground of variance, leaving all other questions undecided, I might have well saved myself the labor of throwing out any suggestions on the principal question, though very fully argued at the bar, and necessarily connected with the final merits of the case. In the consideration of the question whether the promise given in evidence was an absolute one, or conditional, I shall, of course, assume the ground that it is a valid and effectivé promise, as it would seem to me to be idle to be debating'the question whether this is in law an absolute or a conditional undertaking, and be, at the same time, of the opinion that it is nudum pactum. If it is an agree *185 ment without consideration, it matters not whether it is absolute in its ternjs or conditional, it is fatal to the plaintiff’s action.

In giving a construction to a contract, where the intention of the parties can be regarded as doubtful, it is proper, not only that we should have recourse to the whole contract, but also to the subject matter, and the circumstances, under which it was made, and the situation of the parties at the time. The defendant stands as indorser of the note; and if he has due'notice of its presentment and dishonor, he becomes absolutely fixed with the payment by means of his indorsement. No further diligence js required of the indorsee, tó attempt ifs collection of the makers. It would, indeed, be strange for the indorsee to give further time, and agree with this indorser to forbear to take the necessary steps to charge him, and thereby discharge the other indorsers, for the sake of obtaining from him a conditional promise to pay the note, in case the indorsee could not collect it of the makers. If the indorsers had become absolutely fixed by presentment and notice, it is equally improbable that the indorsee would have given time upon a conditional undertaking of this defendant, less beneficial to himself than the one he already had. Our experience of mankind shows us that men do not so act.

It is much more rational to suppose that the makers and, perhaps, the other indorsers, had become bankrupt or had absconded ; and that this defendant was compelled to take the payment of this note upon himself; and that in this situation, as matter of fayor, this indorsee should give him time, upon his agreeing to make payment at a given day. Such a supposition comports with our experience in business, whilst the idea of substituting a conditional liability, for one that was absolute, is in my view absurd, and contrary to the whole course of our experience. If there is any consideration for this new promise, and, for the purposes of this question, I assume that there is, it is a new and distinct consideration, independent of the liability of the ma= kers of the note, and.moving between the immediate parties to the new promise. It is the giving of time to the defendant upon his.own liability, upon his agreeing tp see such liability discharged upon a given day. Such agreements have always' been considered in the light pf original and absolute under *186 takings, and not as collateral or conditional ones. See Tomlinson v. Gill, Amb. Rep. 330. Williams v. Leper, 3 Burr. Rep. 1886. Roberts on Frauds, 232, 237. 1 Saunders’ Rep. 211, note 2; and Leonard, v. Vredenburgh, 8 Johns. Rep. 39. It makes no difference that at the time this agreement was made, the note was left in the hands of the indorsee in full force against the makers. If the indorsee had collected it of the makers, in the meantime, it would no doubt have been satisfactory to all; but it is a non sequitur,that, because he might have done it, the contract of the indorser was conditional; and the indorsee bound to attempt its collection of the makers. Whenever a person undertakes to perform some act himself, or that a third person shall do it, the undertaking is absolute. The defendant guarantees the collection and payment of the note to ihe plaintiff, and agrees to pay the same, if not “ called on before the 1st of May, 1831.” In giving a construction to this contract, it is important to keep in mind the fact that it is based upon a new consideration, moving between the immediate parties to this suit, and disconnected with the original note, except so far as it serves as a basis for a consideration for this new promise. Though the contract commences with the words, “ I hereby guaranty the collection of said note and though these words, standing alone, may be appropriate to express a collateral undertaking, yet when the contract closes up, by the defendant’s agreeing to pay the note, if not called on before a given day, and upon a new and independent consideration, I think, to hold this a collateral or conditional undertaking is at war with the intention of the parties and with adjudged cases. In the case of Breed v. Hillhouse , 7 Conn. Rep. the language of the contract was, “ I hereby guaranty the payment of this note within four years from this date.” The consideration of this promise was the giviug of time to the maker of the note ; at the end of which it would of course be in full effect against the maker ; yet still this was held to be an absolute undertaking. In Upham v. Prince, 12 Mass. R. 15 , a negotiable note was indorsed by the defendant who was the payee in these words: “ I guaranty the payment of this note within six monthsand the court say, “ the defendant’s engagement amounts to a promise that the note should at all events *187 be paid within that time.” In Allen v. Rightmyre, 20 Johns. Rep. 365, the payee of a negotiable note indorsed it in these words: “For value received, I sell, assign and guaranty to the plaintiff or bearer the payment of the within note ;” and the court say that “ this is not a conditional undertaking to pay, if the maker does not; but is absolute, that the maker shall pay the note when due, or that the defendant will himself pay it.”

In Williams v. Granger, 4 Day’s R. 444. the defendant, after guarantying to the plaintiff that one Phelps, the maker of the note, then was and would continue to be, until the day of payment mentioned therein,, of sufficient responsibility to pay the same, proceeds, “and I further engage with said Williams, the promisee, that if the moneys mentioned in said note are not paid by the 5th of September, 1807, I will, on that day, advance the same to him, taking and holding the note as my own, at my sole risk.” The suit on this contract was defended on the ground that Phelps was, and continued to be, up to the commencement of the suit, a man of abundant property, that Williams had commenced no suit against him, and had made no demand of him for payment, or given the defendant notice of non-payment. The court say this is a new, separate, and independent contract between Granger and Williams, relative to the note, though it begins with a warranty of the responsibility of Phelps, and that no act was required on the part of Williams for obtaining the money of Phelps. He was merely bound to receive it, if offered, and, on failure of payment, Granger’s contract became absolute on that day, and no notice was necessary to render Granger liable.” If this contract is but a conditional undertaking to pay the debt of the Gibsons, in case of their failure, then it is true there is a variance between the declaration and the evidence. The plaintiff, in such case, to charge the defendant, must show reasonable diligence to collect the note of the Gibsons, or special facts that would excuse the use of such diligence. I cannot, however, concede that this is the construction of the contract. The note became due in June, 1829, and it is rather to be presumed that this agreement of the defendant was made after there was a failure to pay the note, at maturity. Must the plaintiff *188 present a note that is past due to the makers, and give notice 6f the failure to pay, to charge the defendant on his contract ? Or shall he be required to institute a suit ? The defendant does not guaranty the collection and payment of the note by the makers, in direct terms ; but suppose he does by implication, does he not undertake absolutely that it shall at all events be paid? And can there be any doubt when he adds, “and I agree to pay the same if not called’on by the plaintiff till a given day ?” In the case in 4 Day’s R. it was clear that the first part of the contract was but a guaranty of the responsibility of the maker of the note, but when it was added that the defendant would, if the note was not paid by a given day, advance the money to the plaintiff to pay it, the court say, no diligence was required of the plaintiff to collect the note of the maker. The contract, in the case under consideration, was absolute. The defendant agreed, in direct and positive terms, with the plaintiff, to pay the note, on condition that the plaintiff would not call upon him till the 1st day of May, 1831 ; and where the parties have expressed the condition, upon which the defendant is to become liable, to superadd to this a further condition by implication, is, as I think, making a contract for the parties, and not construing one already made. If we regard the first part of the contract as an absolute undertaking, on the part of the defendant, for the payment of the note by the makers, we give effect to the whole contract. The latter part, in which the defendant agrees himself to pay the note, simply expresses in direct terms what would be his legal liability upon the failure of the makers to pay the note, limiting, however, the time when this liability to pay shall accrue. If this is not the legal construction of the contract, the latter clause in it is incompatible with the former, unless we superadd to the latter a condition which the parties have not done. In the case of Foster v. Barney, 3 Vt. R.60, the words of the contract were, “ I warrant the within note due and collectable.” The word collectable necessarily imports some action by the holder to determine whether the warranty shall prove false, and the judge, who gives the opinion of the court, says, that to determine this the party must commence his suit and pursue it to final judgment and execution. It may well be held, in such a case, that there is an implied agreement that the party will use reasonable diligence in attempting the collection of the *189 note. The effect of such an agreement is not that the party undertakes that a third person shall perform some act, but that the holder shall be able to collect the note, and the use ' of due diligence is a duty which the law imposes.

The case of Sage v. Wilcox, 6 Conn. R. 81, seems to be somewhat opposed to the current of authorities. In that case the guaranty is in these words, “I hereby guaranty the payment of the within note, one year from this date, whether a suit is brought against the signer or not.” It was held that this was not an absolute promise to pay the note at the end of the year, but was a conditional engagement, requiring, on the part of the holder, demand and notice. This case, it may be remarked, is entitled to very little weight as an authority. It was decided by four judges, two in favor of the decision, while .the other two were opposed to it; and the judge, who gives the opinion of the court, says, “had the indorsement stipulated, as the one in Williams v. Granger, 4 Day, did, not for the ability of the maker only, but the advancement of the money on a day certain, the contract would have been absolute.” This case is evidently opposed to the case of Breed v. Hillhouse , which is decided by the unanimous opinion of the court, and, I think, to the whole current of authority. • The conclusion, then, to which I come, is, that the contract of the defendant is an absolute engagement on his part to pay the note on the 1st of May, 1831, provided he is not called on for payment before that time; and that it is declared on, according to its legal effect, and that no new trial should be granted on the ground of variance between the evidence and the declaration.