text:
    SAMUEL RAYNOR and others, Plaintiffs and Respondents, v. PETER W. HOAGLAND, Defendant and Appellant.
    I. PROMISSORY NOTES, PAYABLE TO ORDER.
    1. TbANSEEB OE, BY DELIVEBY WITHOUT THE PAYEE’S INDOBSEMENT.

      Í. The delivery on a valuable consideration amounts to an assignment, and passes the title to the note to the person to whom it is delivered.

      a. When sueh transfer will pass the title free from the equities between the maker and pa/yee.

    1. It will, when the note thus transferred pursuant to agreement between the maker, payee and transferee to that effect, is delivered to the transferee in renewal of a former note made by the same maker, payable to the same payee, and indorsed by the payee, held by such transferee, and on which the liability of the maker and indorser had. become fixed, and to which neither of them had any defense as against the holder.
    K TRIAL.
    1, Motion to dismiss complaint, effect of making on a particular GROUND.

      a. If that ground is untenable, and there is no other ground which is incapable of being obviated, a denial of the motion is ps'oper.

    1. Direction of verdict for plaintiff.
    Upon the denial of such a motion, if no other motion or request is made, and no evidence given on the part of the defense, the court can not do otherwise than direct a verdict for the plaintiff.
    Before Freedman, Curtis and Speir, JJ.

      Decided Feb. 1, 1875.
    Appeal from judgment.
    The plaintiffs, constituting the firm of Samuel Raynor & Co., complained as follows :
    “That on or about the 11th day of January, in the year 187.0, at the City of Yew York, the defendant made Ms certain promissory note in writing, bearing that date, whereby he promised, three months after the date thereof, to pay to the order of William Wallace Perkins, two thousand dollars for value received, and delivered said note to said William Wallace Perkins, by whom the said note was, before the maturity thereof, indorsed to plaintiffs and delivered to them for value received.
    “That when the said promissory note fell due, to wit, on the 14th day of April, 1870, the defendant agreed with plaintiffs, who were then the lawful holders and owners of said note, to pay to plaintiffs five hundred dollars on account of said note, and to have the note renewed for sixty days for the balance, being fifteen hundred dollars and interest thereon, whereupon defendant, in pursuance of said agreement, paid five hundred dollars to plaintiffs on account of said note for two thousand dollars, and received said note from plaintiffs, and made and delivered to plaintiffs a promissory note in the words and figures following, to wit:
    ‘“$1,518.
    “ ‘ Hew York, April 14th, 1870.
    “ ‘ Sixty days after date I promise to pay to the order of William Wallace Perkins, fifteen hundred and eighteen dollars, value received.
    “‘P. W. HOAGLAND.’
    “That it was a part of the said agreement between plaintiffs and defendant that the said William Wallace Perkins should indorse the said last-mentioned note upon request.
    ‘ ‘ And plaintiffs further say that they have at all times since the delivery of said last-mentioned note to them, as aforesaid, held and owned, and they still own •and hold the same, and that soon after receiving said last-mentioned note from defendant they presented the same to Wm. Wallace Perkins and requested him to indorse the same, but said Perkins refused to do so, and, although frequently requested, has ever since neglected and refused to indorse the same, whereof defendant had notice; by means whereof defendant became liable to pay to plaintiffs the sum of money therein mentioned on the 16th day of June, 1870, when the same became due and payable, but defendant refused, and although often requested, has ever since neglected and refused to pay the same or any part thereof.
    “Wherefore plaintiffs demand judgment,” &c.
    The answer admitted the making of the note and its delivery to William Wallace Perkins, but denied that said Perkins indorsed and delivered said note for value, before maturity, to plaintiffs; and averred that said note was an accommodation note, made solely for the accommodation of said Perkins, and without any consideration passing to the defendant, of which fact plaintiffs had full knowledge.
    Defendant also alleged that at or about the time the said promissory note fell due, to wit, April 14, 1870, he was informed by said Perkins, that he, Perkins, had arranged witli the plaintiffs, that five hundred dollars should be paid on account of said note and a renewal note given for sixty days for the balance, and that, in pursuance of said arrangement, he paid plaintiffs five hundred dollars, and made and delivered to plaintiffs the promissory note set forth in the complaint. But he denied that such payment was made and renewal note given in pursuance of any agreement made by him with the plaintiffs; and he also denied that he at any time agreed with plaintiffs, that said William Wallace Perkins should indorse the note last mentioned.
    At the trial defendant moved for a dismissal of the complaint, on the ground that the plaintiffs had failed to prove title to the note ; that the request to Perkins and his refusal to indorse did not operate as a transfer of the note.
    The motion was denied, and defendant excepted. An abstract of plaintiff’s proof is contained in the opinion.
    The defendant gave no testimony, and the jury, under the direction of the court, rendered a verdict for the plaintiffs for one thousand nine hundred and twenty dollars and fifty-eight cents, to which direction defendant excepted. ' -
    Judgment having been entered on the verdict, the defendant appealed.

      Gillet & Stiger, attorneys, and Ira Shafer, of counsel for appellant.
    Prichard, Choate & Smith, attorneys, and Duncan Smith, of counsel for respondents.
   By the Court.—Freedman, J.

The Revised Statutes provide : “All notes in writing, made and signed by any person, whereby he shall promise to pay to any other person or his order, or to the order of any other person, or unto the bearer, any sum of money therein mentioned, shall be due and payable as therein expressed, and shall have the same effect and be negotiable in like manner as inland bills of exchange, according to the custom of merchants” (3 Rev. Stat. 5th ed. 67, § 1).

“The payees and indorsees of every such note payable to them or their order, and the holders of every such note payable to bearer, may maintain actions for the sums of money therein mentioned against the makers and indorsers of the same respectively, in like manner as in cases of inland bills of exchange, and not otherwise” (lb. §4).

According to the custom of merchants, when a notéis made payable to the order of the maker, or of a third person as payee therein named, the name of such maker or payee must appear as the first indorsement.

But in some instances title to a note may be-acquired without such indorsement. The delivery of a promissory note by the payee for a valuable consideration, without indorsement, is an assignment of the note, and conveys all his property therein. In such case the holder stands in the relation of assignee of a chose in action, and not in the relation of an indorsee, and, therefore, holds the note subject to the equities-existing between the original parties (Franklin Bank v. Raymond, 3 Wend. 69). Formerly he could not maintain an action upon it in his own name. But since the Code, the action must be brought in his name, he being the real party in interest (Code § 111; Savage v. Bevier, 12 How. Pr. R. 166; Marine Bank v. Vail, 6 Bosw. 421).

Defendant’s motion for a dismissal of the complaint was made on the sole ground, that the plaintiffs had failed to prove title to the note, or a valid transfer of the same by Perkins to them. This ground being untenable, and there being no other ground incapable of being obviated, the motion was properly denied, and as no other motion or request was made on the ground of the supposed existence of the equities hereinafter referred to, nor any evidence given on the part of the defense, the court could not do otherwise than direct a verdict for the plaintiffs.

I have thus far considered the question presented by defendant’s exception to the refusal to nonsuit, from, the standpoint most favorable to the defendant, namely, upon the assumption that the action was brought solely upon the second note of fifteen hundred and eighteen dollars. But such is not the fact. The complaint set out, and plaintiffs’ proof at the trial established, not only the title of the plaintiffs to, and their right to recover on the said note, as against the only objection which was urged against their right of recovery, but also the facts and circumstances which led the defendant to give, and the plaintiffs to accept, the said note. These facts and circumstances furnished strong additional reasons for defendant’s liability. True, they showed, among other things, that the first note for two thousand dollars had been made and delivered to William Wallace Perkins for his accommodation. But that constituted no available defense on that note as against the plaintiffs, who discounted it for the benefit of Perkins. This was fully conceded before us by the learned counsel of the defendant. Upon the maturity of that note, which had been indorsed by Perkins, the liability of the defendant and of Perkins to the plaintiffs for the amount thereof became fixed. Perkins, at defendant’s request, then arranged that the plaintiffs should receive five hundred dollars on account thereof; that for the balance they should accept a new note made by the defendant to the order of, and indorsed by Perkins, and that they should deliver up the old note. This arrangement was communicated by Perkins to the defendant, and the latter not only agreed to it, but he also carried it into effect, so far as he had the power to do it. He made out a new note for fifteen hundred and eighteen dollars, payable to the order of Perkins, and delivered the same, together with the sum of five hundred dollars, not to Perkins, but at Perkins’ request, to the plaintiffs, and thereupon received from them the two thousand dollar note. Having thus procured a surrender of the evidence of his original indebtedness, and voluntarily bound himself anew directly to the plaintiffs, so far as that was possible for him to do under the arrangement so made, and it being the manifest intention of all the parties when the said arrangement was made, and of the defen dant-when he carried the same into effect, and of the plaintiffs, when they gave up the old note and accepted the new one in lieu thereof, that Perkins should indorse the new note, the defendant can not be permitted to avail himself of the subsequent wrongful refusal of Perkins to indorse. The second note was transferred to the plaintiffs by the joint act of Perkins and the defendant, as an obligation by which the defendant meant to bind himself to the plaintiffs, and, hence, the case is not within the rule which, but for that fact, would constitute the plaintiffs mere assignees, who, as such, hold the note subject to the equities existing between Perkins and the defendant.

The remaining objections and exceptions contained in the case have not been alluded to in the points of the appellant, and, consequently, may be deemed to have been waived.

The judgment should be affirmed, with costs.

Curtis and Speir, JJ., concurred.


source: Caselaw Access Project

author: By the Court.—Freedman, J.

license: Public Domain

text:
    JOHN MURPHY AHD JOHN NESBIT, Plaintiffs and Respondents, v. JAMES F. KEYES, Defendant and Appellant.
    PROMISSORY NOTE.
    1. Accommodation, when a defense.
    1. Where the note is made at the request, and for the accommodation, of the plaintiff, without any consideration whatever between the plaintiff and the maker, such facts constitute a good defense in favor of the maker.
    3. Evidence, what sufficient to carry a case to the jury on SUCH FACTS.
    1. Where there was evidence to the effect that plaintiffs having a claim against A. (the father), requested him to give them therefor the notes of one of his sons, as they could not use his paper, and that thereupon at an interview between one of the plaintiffs, the father and his son, at which the son made the note sued on, the father, in the presence of the plaintiff said to his son that the making of the note was a mere form, and that- he, the father, would see to it, and the son would have nothing to-do with it, and thereupon the son gave the note payable to the order of the father, knowing it was for debt due by the father to the plaintiffs, which note was indorsed by the father to the plaintiffs, and also evidence to the effect that before this interview the father had told the son that the plaintiffs wanted his note, and the son objected on ground that he owed plaintiffs nothing whatever on it¡' and the father said that the plaintiffs wanted his (the son’s) note, so that they could raise money on it, inasmuch as they could not raise money on the father’s note, and that it was a mere form; and also conflicting evidence as to whether plaintiffs gave a receipt for the debt for which the note was received, or took the note in payment of the debt,
    HELD,
    that the evidence was sufficient to carry the case to the jury on the question as to whether the note was made at the request of,, and for the accommodation of the plaintiffs, without any consideration whatever between the plaintiffs and the son.
    Present, Freedman, Curtis and Speir, JJ.

      Decided February 1, 1875.

      The action was brought against James F, Keyes, as maker, and against Christopher Keyes, as indorser of a promissory note held by plaintiffs.
    The defendant James F. Keyes, by answer, denied being indebted to the plaintiffs for or on account of the cause of action alleged in the complaint, and byway of separate defense pleaded : “ That the note, set forth in said complaint, was made and given to the plaintiffs by this defendant at their special instance and request, and for their special accommodation, and that the said plaintiffs, never, at any time, paid or gave this defendant any value whatever for the said note, and he never received any consideration for the making and delivering of said note to the plaintiffs.”
    On the trial the defendant' having the affirmative, his counsel called him as a witness, and he testified : “ Eight after breakfast, on the day on which the note is dated, my father said to me, Mr. Wesbit is coming up here this morning and wants you to give him your note ; I objected to it and said I did not owe Mr. Nesbifc anything; my father said "he said he wanted your notes, so that he could raise money on them, because he could not raise money on my father’s notes.
    “ When Mr. Mesbit arrived I was called down stairs, and when I came up my father’s desk was open and Mr. Mesbit was sitting alongside the desk ; I was kind of slow; I did not want to do it, and my father says,
    ‘ go on, it is just a mere matter of form,’ and then I came to that conclusion ; I did not suppose there was anything wrong, and I drew the note; I was never called upon by Mr. liesbit to pay the note, although I saw him frequently after it became due ; I was present at a conversation between him and my father about this note after it became due.
    “ One Sunday afternoon when Mr. Kesbit was in our house we were sitting up in the parlor and we got talking about the money my father owed BCesbit, and they went to have a drink ; meantime they had taken a drink and Mr. Besbit said to my father, ‘ If you will pay this note, I will renew the other two notes for you.’ The conversation was addressed to him and not to me in regard to the note ; I frequently saw Mr. Besbit after that time, and he never spoke to me on the subject of the note ; I never had any transactions with the plaintiffs ; I never owed them anything; I wrote the note at the request of John Besbit.”
    On cross-examination he testified :
    “ I knew at the time that I signed this note that my father was owing Murphy & Besbit for bricks to a large amount, and at the same time I signed this note, I signed two other notes, each being for about the same amount. Mr. Besbit gave me on a piece of paper the figures that my father owed the firm, and the three notes were made for the amount of those figures.
    “The other note is dated December 10, for one thousand three hundred dollars ; Mr. Besbit gave me the notes and figures to put down, and I put them down according to his instructions ; I suppose the three notes were all made for the indebtedness of my father to Murphy & Besbit; I suppose that was the object of them, I so understood at the time; they were drawn payable to my father’s order. After I drew the notes, Mr. Besbit took them ; I just done it as a mere matter of form for their accommodation.”
    On re-direct examination, he testified :
    “I had known Mr. Besbit all my life ; he was very intimate with my father; whatever they said to me I believed; I had great confidence in them; when this was stated to me by my father in Mr. Besbit’s presence that it was simply signed as a matter of form, I believed it; and Mr. Besbit, did not expect me ever to lift those notes ; he knew I could not lift them ; my father’s notes at that time had gone to protest; and he was discredited at the bank.”

      Christopher Keyes, a witness, produced and sworn on the part of the defendant, testified as follows:
    ‘‘I am the father of the last witness ; I know Murphy & Kesbit, and was present at the time the note in suit was signed by my son ; it was signed in the basement of my dwelling-house, Ko. 108 Bast 70th street; the date and amount of the three notes were fixed by Mr. Kesbit; the three notes were signed together; at this time my son owed me nothing at all; there was no consideration for that note as between me and my son ; I have had dealings with Murphy & K esbit for the last twenty years, and had given them checks previous to that time which were protested.
    “At the request of Mr. Kesbit, I asked my son to make these notes.
    “ Mr. Kesbit said he could not do anything with my note ; that my checks had. been dishonored, and it would be better for me to get one of my boys to give him a note ; and this boy was the only one living in the house with me ; I thought that Mr. Kesbit would come up on Saturday night, but he left word that he would be up on Sunday morning, and I told my boy not to go away; that Mr. Kesbit was coming up there on Sunday to get some notes; my boy says, ‘ I do not owe Mr. Kesbit any money ; I do not want to be giving notes.’ I says it is only a matter of form ; Mr. Kesbit can not raise the money on my notes, and when they come duel will pay them ; he can not raise money on my notes and wants to raise it on yours. I told my boy, in Kesbit’s presence, that it was a mere matter of form, and that I would see to it, and he would have nothing to do with it. After this note became due, Kesbit called upon me for the payment of the note, and said unless I paid the notes he would put a lien on my buildings.”
    On cross-examination, he testified :
    “ These three notes were made for the amount of the debt 1 owed Murphy & IsTesbit; I asked my son to sign the notes as an accommodation of Murphy & Nesbifc; the consideration was the amount I owed Murphy & Nesbit.”
    Defendant then rested.
    The plaintiff then called as a witness John Nesbit, who testified:
    "1 saw James F. Keyes draw and sign this note ; it was indorsed by Christopher Keyes then, and delivered to me.
    “ Q. State what took place %

    “A. Mr. James F. Keyes drew three notes; Mr. Christopher Keyes gave me the three notes, and I indorsed and gave him a receipt on his bill for each and every note ; squared the bill up ; the bill was for the claim I had against Keyes for materials furnished ; it was stated that the notes were to me for our debt and I say I receipted the bill in full; that was at the time the note was given.”
    On cross-examination, he testified":
    ‘ ‘ I put a lien on this property ; a part of that lien was a debt for which these notes were given.
    “Q. The lien covers the three notes to the extent of the lien %

      "A. Yes, sir ; to the extent of the lien.”
    The defendant’s counsel then put in evidence the notice of mechanics’ lien and affidavit.
    The notice was dated March 7,1874, and the affidavit sworn to same day, and both filed same day.
    James F. Keyes on being recalled, testified :
    " “At the time these three notes were drawn, signed, and indorsed, there was no bill against my father produced, or any receipt given.”
    On cross-examination, he testified :
    “ I mean to say that I did not see any bill; all the papers I saw Mesbit with was a paper he handed me, a slip of paper with the amount of these notes ; he did not say anything about the indebtedness; that was the amount for which I was to draw the notes; how much my father owed him I did not know.”
    Christopher Keyes, on being recalled, testified :
    “At the time these notes were drawn, signed, and indorsed no bill of Murphy & Kesbit, nor any receipt was given to me.”
    On cross-examination, he testified ;
    “Mr. Nesbit did not have any bills at the time the notes were given there ; I am positive of this.”
    Testimony was then closed.
    Plaintiff’s counsel then asked the court to direct a verdict for the plaintiffs on the evidence.
    Defendant’s counsel insisted that the case should go to the jury, but the court ruled that there was no question for the jury and refused to permit the case to go to the jury, and defendant’s counsel then and there excepted. The court ordered a verdict for the plaintiffs, to which the defendant’s counsel then and there excepted.
    The jury, under the direction of the court, found a verdict for the plaintiffs.
    Defendant’s counsel moved for a new trial on the minutes, which motion was denied. ■
    Judgment having been entered, the defendant, James F. Keyes, appealed therefrom, and also from the order denying the motion for a new trial.

      J. F. Malcolm, attorney, and John E. Burrill, of counsel for appellant, urged;
    I. The evidence clearly established that the defendant James F. Keyes received no consideration for the notes. If it be claimed that there was any doubt on that point, the defendant was entitled to have the cause submitted to the jury (Stone v. Flower, 47 N. Y. R. 566; Buckman v. Jenks, 55 Barb. 468, 473).
    II. The claim of the plaintiffs that they had paid value for the note by receiving it in payment of the debt due by Christopher Keyes to them was disputed by defendant, and there was a direct conflict on this point which entitled the defendant to have the case submitted to the jury. Same cases.
    III. If it be claimed that for any other reason the plaintiffs could recover against the defendant, James F. Keyes, although Christopher Keyes could not, then we submit there was evidence sufficient to go to the jury on the question whether the note was made by James F. Keyes at the request and for the accommodation of the plaintiffs, and also on the question whether-it was not made and delivered on the faith of the representations of the plaintiff that it was a mere matter of form. Same cases.

      Nelson Smith, attorney, and of counsel for respondent, urged;
    I. The defendant’s exception to the direction, by the court, for the jury to find a verdict for plaintiff, is not well taken. The defendant, James F. Keyes, was, prima facie, liable on the notes as maker,, and he had shown nothing which released him from his-liability (Schepp v. Carpenter, 51 N. Y. 602, and cases there cited). The question here presented is a simple, although an important one. Simple, as involving but one principle of law. Important, because a decision adverse to thp plaintiffs will unsettle great numbers of transactions in commercial paper. It is an every-day occurrence, in business, for a creditor to take his debtor’s paper with a “good indorser,” to such an extent, that almost the first question which a creditor asks of a debtor who is desirous of not being pressed for a cash payment of his debt, is about: the security. “ Can you give me a good indorser? ” It was so in this-case where James F. Keyes himself says : “ My father said ‘ (Nesbit) said he wanted your notes so that he could raise money on them,’ because he could not raise-money on my father's notes.’. The debtor, therefore, does as the creditor desires. A third party indorses— or makes—the notes for the accommodation of the debtor. It is understood between all parties that they are bound, else why go through such a useless formality % Does the law then step in and say no ? Does it release the party, when he, himself, expected and intended to be bound? We submit not. This case is, however, a much stronger one than the illustration, or than the case of Schepp v. Carpenter [supra). For here it was not so much “accommodation” to Christopher Keyes, as it was payment of his debt. The plaintiffs took these notes for their debt, where plaintiff, FTesbit, says “ Mr. James F. Keyes drew three notes. Mr. Christopher Keyes gave me the three notes, and I indorsed and gave him a receipt on his bill for each and every note; squared the bill up.” It would not be pretended that James F. Keyes might not, if he chose, have paid his father’s debt to the plaintiff in cash. But where is the difference between giving the cash and giving the note ? His father’s debt to the plaintiffs, if he so chose to consider it, as he did in this case, was as much a consideration in the one case as in the other. Certainly, if he had paid the cash, he could not have recovered it back on the ground of failure of consideration, or that there was no consideration. How then can he defeat a recovery on his note upon the same state of facts ? He showed, therefore, no ground, lefeating his prima facie liability on the note, and the court, in directing a verdict for the plaintiffs, committed no error. (2.) The notice of mechanics’ lien made-no element in the case, (a.) The rights of the parties in this case became fixed December 20, 1873, at the time when the note was made, signed, indorsed and delivered, and they could not be affected by filing of a lien long subsequently. (5.) There is nothing in the notice at all conflicting with any testimony in this case, or showing anything to defeat plaintiffs’ prima facie right of recovery. It shows nothing, except that plaintiffs simply wished to do all they could to get their money.
   By the Court.—Freedman, J.

The appellant was, therefore, entitled to have the case submitted to the jury, and the direction of a verdict against him constituted error.

The judgment and order appealed from should be severally reversed, and a new trial ordered, with costs to the appellant to abide the event.

Curtis and Speir, JJ., concurred.


author: Sedgwick, J. The Court.—Freedman, J.

text:
    EMMA BRUCE and others, Plaintiffs and Respondents, v. JOSEPH KELLY and others, Defendants and Appellants.
    i. EXECUTION.
    1. Real estate, sale oe under, when set aside, although the judgment and proceedings leading thereto, and. the execution and sale thereunder and proceedings leading thereto, ave fair and regular ON THEIR PACE.
    1. Where property of the value of $13,000 was sold for $180 (the judgment being for $103), and the attorney of the judgment creditor procured a person to become the nominal purchaser, and then set on foot and conducted an ingeniously contrived system of leases, mortgages and deeds, fair and valid on their face, but in reality wholly fictitious, and on the trial of the action to set aside the execution, neither the said attorney, nor the last grantee who was in court were called to sustain the bonafides of the transaction, and explain the suspicious circumstances,
    HELD,
    that the judgment at special term, setting aside the sale, was correct.

    II. EVIDENCE.
    1. Witness, weight op testimony how considered. a. Although a witness swears that he acted honestly and in good faith, yet the trial judge, in passing on his credibility, has a right to disregard, Ms unsupported or improbable professions, and construe Ms acts in the light which the facts and circumstances of the case throw upon his possible and probable motives, designs and interests.
    2. Omission to produce material testimony, effect of.
    1. Where the testimony is elearly within reach, an assumption that the omission to produce it was the result of knowledge or fear on the part of that party to the action with whom it laid to produce the testimony, that Ms case could not be improved by the production thereof, is justified.

    3. Declaratons by alleged confederates, admission of BEFORE PROOF OF THE COMBINATION.
    1. Not error if the combination is subsequently proved.

    III. RESTITUTION ON SETTING'ASIDE A TRANSACTION.
    1. When complete restitution ordered.

      a. When property has been obtained by an active, fraudulent combination, all the guilty parties are answerable for the whole of it.

    1. Co-defendants, adjustment of liabilities between. a. If they are entitled t* any such adjustment the attention of the court must be called to it.
    IV. PLEADINGS, ADMISSION BY.—TITLE.
    1. Admission of title in the plaintiff by the answer precludes defendant from insisting that the plaintiff was a mere trustee, and had no leviable interest.

    V. TRIAL.—OBJECTION NOT TAKEN BELOW.
    1. An objection that plaintiff’s remedy was at law and not in equity, if not taken below, can not be raised on appeal.

    Before Freedman, Curtis and Speir, JJ.

      Decided February 1, 1875.
    Appeal from a judgment entered upon the decision of a judge at special term.
    The action was in equity to set aside a sheriff’s sale of real estate under execution, his subsequent deed to Joseph Kelly, the purchaser, a deed of the latter to the defendant, Emma Weeks, and a mortgage from her to the defendant, Joseph W. Frazier, and a deed from Emma Weeks to defendant Van Alstine, upon the ground of a fraudulent conspiracy to sacrifice the property and to obtain the title to and the possession of it for the defendants.

      This real estate was of the value of thirteen thousand dollars. The plaintiffs owned it, as is admitted, up to October, 23, 1869. Prior to that date, on February 20, 1859, judgment had been entered against the present plaintiffs by default, in an action pending in the supreme court, Westchester county, for the sum of ninety-eight dollars and thirteen cents. In that action Thomas M. Wyatt was the attorney of the judgment creditor. Execution was issued to the county of Hew York, and the real estate in question was levied on and sold. The property was purchased at the sheriff’s sale for one hundred and eighty dollars, by Joseph Kelly, one of the defendants, on October 23, 1869. The fifteen months allowed for redemption expired on January 24, 1871. Kelly received his deed on April 17, 1871.
    Kelly then claimed to have conveyed the premises for six thousand dollars to the defendant Emma Weeks, on May 27, 1871.
    The defendant Emma Weeks claimed to have conveyed to the defendant Philip Van Alstine, for seven thousand dollars on July 18, 1871.
    It was also claimed that the defendant Emma Weeks made a bond and mortgage for five thousand dollars, on May 27, 1871, the day she claims to have received her deed from Kelly to the defendant, Joseph W Frazier. The mortgage was claimed to have been assigned by Frazier to one Oolton B. Ward by an assignment bearing date May 27, 1871. It was claimed, too, that Ward executed an assignment to one Cotton W. Bean, bearing date August 10,1871. Heither Ward nor Bean are parties to this action. These two assignments never appeared on record till April 8, 1873
    The plaintiffs claimed that these different acts, the sheriff’s sale, the conveyances and the mortgage, were merely parts of one fraud, contrived by Thomas M. Wyatt, the attorney of the judgment creditor in the judgment for ninety-eight dollars and thirteen cents, and that the fraud was so contrived for the purpose of defrauding the plaintiffs of the real estate mentioned.
    The court below, after making the necessary findings as to plaintiff’s"title, the rendition of the judgment, the filing of a transcript, the issuing of an execution, the levy and sale, and the different instruments executed to, by and between the defendants, found the following-additional facts:

      Third. That at the time of said sheriff’s sale, on October 23, 1869, the plaintiffs, who were the judgment debtors in said action, were residents of the city and county of New York, as said Wyatt well knew, and had and possessed personal property much more than sufficient to fully pay and satisfy said judgment for ninety-eight dollars and thirteen cents, but such personal property was not subject to levy under execution. That no attempt was made by said sheriff to find any personal property of said judgment debtors, wherefrom to satisfy said judgment.

      Fourth. That said sale by said sheriff under said execution of said premises, which were of the value of thirteen thousand dollars, for the price of one hundred and eighty dollars, was an oppressive use of process, and was made at the instance oí said Wyatt in collusion with said Kelly, and with the wrongful and fraudulent intent on the part of said Wyatt and said Kelly that said property should be purchased at a grossly inadequate price without the knowledge of the plaintiffs, and to thereby deprive and defraud said plaintiffs of said premises under color of process of law.

      Fifth. That said, defendant Kelly made said purchase at said sheriff’s sale, at the instance of and in collusion with said Thomas M. Wyatt, who was the attorney of the judgment creditors in said judgment, and with the fraudulent intent on the part of said Kelly and of said Wyatt, that said premises should be sold, and. that said Kelly should purchase them at said sale for a. grossly inadequate price, and that the plaintiffs should be kept in ignorance of said sale, and should thereby be deprived of their right to redeem said premises, and should be deprived and defrauded of the said premises under color of a judicial sale. That said purchase by said Kelly was made, not in good faith, nor with any bona fide intent to become the purchaser thereof at the fair value thereof.

      Sixth. That the fair value of said premises was the sum of thirteen thousand dollars.

      Seventh. That at the time of said sheriff’s sale, there was due upon said judgment to said judgment debtors, the sum of one hundred and two dollars and eighty-six cents, principal and interest. That the amount of fees legally, chargeable by said sheriff rn executing and returning said writ of execution, and in making said levy and sale thereunder, were in all not more than the sum of fifteen dollars and seventy-five cents. That there remained of said amount of one hundred and eighty dollars, which was paid by said Kelly to said sheriff as the purchase money on said sale of said premises, at least the sum of sixty-one dollars and fifty-eight cents, which of right belonged to, and by law should have been by said sheriff paid to the plaintiffs, who were the owners of said premises, by said sheriffs, from the proceeds of said sale.
    That said sheriff, in violation of law, retained the whole of said sum last mentioned, and willfully omitted and neglected to give any notice to said plaintiffs that said sum was due to them, or to make any attempt to pay the same, or give any such notice to said plaintiffs.
    That said last mentioned acts, omissions, and neglects of said sheriff, were assented to and approved by, and were done and had at the instance of said Thomas M. Wyatt.

      Eighth. That said defendant Emma Weeks did not, in fact, pay to said defendant Kelly the sum of six thousand dollars, nor any part thereof, as the consideration for said deed. That said deed from said Kelly to said Emma Weeks was made, delivered, and received, not in good faith, nor with any bona firle intent, thereby to grant or convey said premises to said Emma Weeks, but was made, delivered, and received, at the instance and request of said Wyatt, and in collusion with said Wyatt, Kelly, and others, and with the wrongful and fraudulent intent, thereby to make it appear that said premises had been conveyed to a bona fide purchaser, for value, without notice or knowledge of the frauds aforesaid, and to deprive and defraud the plaintiffs of said premises, and to hinder and delay the plaintiffs in recovering said premises from the defendant Kelly, and with notice on the part of said Emma Weeks of the frauds aforesaid.

      Ninth. That said defendant Frazier did not loan or advance to said Emma Weeks the said sum of five thousand dollars, or any part thereof. That said mortgage was made and delivered by said Emma Weeks to said Frazier, and was accepted by said Frazier, not in good faith, nor with any bona fide intent thereby to secure the payment to said Frazier, or any other person, of any loan of money, in fact made, but was made, delivered, and accepted, at the instance of and in collusion with said Wyatt, Kelly and others, and with the wrongful and fraudulent intent, thereby to make it appear that said mortgage was a valid lien and incumbrance upon said premises, and to hinder and delay the plaintiffs from recovering said premises, and with notice on the part of said Frazier of the frauds aforesaid.

      Tenth. That said defendant, Van Alstine, did not pay to said defendant, Emma W eeks, the sum of seven thousand dollars, named in said deed from said Emma Weeks to said Tan Alstine as the consideration thereof, nor any part thereof, and said deed was made, delivered and accepted, not in good faith nor with any bona fide attempt thereby to grant or convey said premises, but at the instance of and in collusion with said Wyatt, said Kelly and others, and with the wrongful and ¡raudulent intent thereby, to make it appear that said premises had been again conveyed to a bona fide purchaser for value without knowledge or notice of the frauds aforesaid, and thereby to defraud the plaintiffs of said premises, and to hinder and delay said plaintiffs in recovering the same, and with notice on the part of said Van Alstine of the frauds aforesaid.

      Eleventh. That neither of the plaintiffs had any knowledge or actual notice of the recovery of said "judgment, or the issuing of said execution, or said sale thereunder, or of said conveyance from said sheriff to said Kelly, or from said Kelly to said Weeks, or of said Weeks to said Van Alstine, or of said mortgage from said Weeks to said Frazier, until long after the said issuing of said execution, and said sale, and said conveyances, and said mortgage.
    That said plaintiffs continued in full, quiet and peaceable possession of said premises, and the rents and profits thereof, until some time between the 1st day of May and the 1st day of June, 1871.
    Upon these facts the court found as matters of law: First.—That said deed from said James O’Brien to ■said Joseph Kelly, is fraudulent as between the parties to this action, and should be set aside, and said Kelly should execute and deliver unto the plaintiff a full release of all his interest in said premises, with covenants ^against his own acts, and that his wife, Ellen L. Kelly, should join in said deed and release all her right, title and interest, and right of dower, in and to the said premises.
    Second.—That said deed from said defendant, Joseph Kelly, to the defendant, Emma Weeks, is fraudulent, and should be set aside, and said Emma Weeks should execute and deliver unto the plaintiffs a full release of all her interest in said premises, with covenants against her own acts.
    Third.—That said mortgage from said Emma Weeks to said Frazier is fraudulent, and should, as between the parties to this action, be set aside, and said Frazier should execute and deliver to the plaintiff a full release of all his interest in the premises, and in and to said mortgage.
    Fourth.—This said deed from said Emma Weeks to said Philip Van Alstine is fraudulent, and should be set aside, and said Philip Van Alstine should execute and deliver unto the plaintiffs a full release of all his interest in said premises, with covenants against his own acts to the present owner and holder of said mortgage, for principal and interest due on the said bond, purporting to be secured by said mortgage.
    Fifth.—That an account be taken before a referee to be appointed by this court, of the rents and profits which have been received, or which might have been received, by the defendants or any of them, of said premises, and of any damage or waste done or suffered to said premises while any of said defendants have been in the possession of said premises through their lessees or otherwise, and that the plaintiffs are entitled to judgment against the defendants, Joseph Kelly, Emma Weeks and Philip Van Alstine, severally, for the amount of such rents, profits, damage and waste found upon such accounting to be charged against them severally.
    Sixth.-—That the plaintiffs are entitled to judgment, in accordance with the foregoing findings, and for their costs and disbursements of this action against the defendants, Joseph Kelly, Weeks and Van Alstine, but that the plaintiffs recover no costs against defendant Frazier, but the defendant, Frazier, is not to recover costs against the plaintiffs. And I do hereby order and direct an ad ditional allowance to be made to the plaintiffs of five hundred dollars.
    Judgment having been entered in accordance with, the decision, the defendants appealed.

       The learned judge at special term applied the doctrines of "omnia presumantur contra spoliatoremf holding,—1. That the law deemed that there could not be so much machination and concealment witnout design, and a substantial motive, viz., to prevent that being known which would set aside the sale; and 3. That, therefore, the burden* of proof rested on the parties defendant to show affirmatively that nothing occurred which would invalidate the sale, not only that all the forms as to all kinds of notices, &c., were complied with, but that the sale was fairly conducted, bidders not kept away, &c., and that nothing was done to prevent notice of the proceedings reaching the owners who, upon notice, would, without doubt, rather have paid two hundred dollars than lose their property.

   The following opinion was rendered at special term:

Sedgwick, J.

The defendant Kelly, in testifying, gave out at first, if he did not assert, that his relations with Mr. Wyatt were slight and casual. As long as possible he withheld the bank-book, which led to proof from himself, that in fact those relations were intimate and confidential. The examination of the records made by him was clearly not for the purpose of informing himself, but to give him the semblance of a person acting independently and in his own interests.

I am convinced that the conveyance to Mrs. Weeks, and^the mortgage to Mr. Frazier, did not represent substantial transactions, but were mere forms. Carter and Kelly may have moved on different lines, without personal communication, up to the time of the conveyance and mortgage, but they were consciously co-operating when they met with the others ; they took part in, as it were, a dramatic representation, which might after-wards be narrated as a real transaction.

I do not know who owned the money used on that occasion, but am satisfied that it was not lent to Mrs. Weeks, except as a form, and that it was not paid over to Kelly to be kept by him as the consideration of the conveyance.

The Dunn lease evidently was a device by which the premises were left vacant, that the parties claiming under the sheriff s sale might obtain possession without a resort to the law.

On the whole case, I believe that Mr. Van Alstine took his conveyance with notice of the real situation of the facts.

In combining all the circumstances, I can not avoid the conclusion that the parties acted as directed by Mr. Wyatt, and in concert with him, from the first, and that at first Kelly became purchaser upon instructions from him and as jointly interested with him, since the first, the real parties-interested, have retained their interest in a part of it.

These being the results of the testimony, the law .applies the rule omnia presumantur contra spoliatorem. The law does not deem that there can be so much machination and concealment without design and a substantial motive, viz., to prevent that being known which would set aside the sale. The burden of proof rests upon the parties defendant to show affirmatively that nothing occurred which would invalidate the sale, not only that all the forms as to all kinds of notices, &c., were complied with, but that the sale was fairly conducted, bidders not kept away, &c., and «that nothing was done to prevent notice of the proceedings reaching the owners who, upon notice, would without doubt, rather have paid two hundred dollars than lose their property. Every intentional deviation from the usual and ordinary course of affairs, is a circumstance ■of testimony that there is a weak point to be hid. At this point it becomes a very important consideration, that the defendant, acting, as we have-seen, in concert with Mr. Wyatt, did not call him as a witness. He is the only one who could affirmatively show that there ' was no legal or equitable cause for setting aside the sales. The witnesses who were called on that point show that such of those forms were complied with as, in favor of a bona fide purchaser, create a presumption that the sale and the subsequent proceedings were regular, but, as we have said, that does not cover the jground to be established.

The conveyances, to Kelly, Mrs. Weeks and to Mr. Van Alstine, should be set aside, and also the mortgage to Mr. Frazier, as between the parties to this action. The plaintiff should have costs against the defendants, excepting Mr. Frazier, but he is not to have osts.

Erastus New, Henry F. Pultzs, J. B. McEwen, Philip Van Alstyne, attorneys, and W. A. Beach, of counsel, for appellants.

Hammond and Stickney, attorneys, and Albert Stickney, of counsel, for appellants.

The Court.—Freedman, J.

The court at special term found, that the sale was an oppressive use of the process of the.court, made at the instance of Wyatt, the attorney, in collusion with Kelly, and with a wrongful and fraudulent intent on the part of both of them ; that the conveyance to Mrs. Weeks, the mortgage to Frazier, and the conveyance to Van Alstine, did not represent substantial transactions, but were mere forms, and as such they were gone through with to defraud the plaintiffs out of said premises, and to hinder and delay them in recovering the same; and that in these various matters all the defendants acted in collusion and concert with, and as directed by, Wyatt.

The evidence is sufficient to sustain these findings.

True, Kelly and Frazier, who of all the defendants were the only ones that were called to the witness-stand, claimed to have acted honestly and in good faith. But the judge who had them before him, and who observed the manner and the tone of their testimony, had the right to pass upon the credibility, and in doing so, he had the right to disregard their unsupported or improbable professions, and to construe their acts in the light which the facts and circumstances of the case threw upon their possible and probable motives, designs, and interests. Upon the*whole testimony, which is by far too voluminous to be satisfactorily adverted to here, it is impossible for any candid mind to believe that there could have been so much plotting and concealment, and yet so much harmony and concert of action, to accomplish a certain result, as the case discloses, without the presence of a master-mind, who organized and perfected the whole plan, and who from time to time set the parties in motion as circumstances seemed to require. That this master-mind was Wyatt, is-a conclusion which, on a critical examination of the testimony, can not be resisted. He it was, therefore, that more than any other witness could have shown by explanatory testimony, if the fact could be shown at all in the face of the facts already established by the plaintiffs, that no legal or equitable grounds existed for setting aside the sale and the subsequent conveyances. The defendants, however, did not call him as a witness, nor did they account for such omission. Neither did Van Alstine, though present in court, see fit to take the stand. In view of this failure to produce material testimony clearly within reach, the court was justified in assuming that such failure was the result of knowledge or fear on the part of the defendants that their case could not be improved by the- production of such testimony. On the other hand, upon the case as left by the defendants, the conclusion was almost unavoidable that all the defendants had been engaged in the fraudulent combination at the instigation of Wyatt.

This being so, the findings of fact made below can not be disturbed. Nor can I discover any error in the conclusions of law based upon the facts as found. The relief awarded in this case was not awarded against a purchaser for value, nor against, a purchaser at all, nor against an innocent party who had received, without fault, through the fraud of another, property which in equity belonged to the plaintiffs. It was a case of an active, fraudulent combination, and in such a case the law gives complete restitution, and all the guilty parties are made answerable for the-whole of the property (Troup v. Wood, 4 Johns. Ch. 260).

If any of the defendants were entitled to an adjustment of liabilities as between themselves, the attention of the court should have been directed to it, which was not done.

The defendants have argued that the legal estate of the property in question was in Mr. Bruce, as trustee for the plaintiffs, and that the plaintiffs had no leviable interest in the realty. But they are not in a position to raise this question, having by their answers admitted title in the plaintiffs (Paige v. Willet, 38 N, Y. 28; Thomas v. Austin, 4 Barb. 265).

The objection that the plaintiffs should have sought their remedy at law is equally untenable. The point was not raised below, and defendants submitted to the equitable jurisdiction of the court without complaint.

Finally, it is insisted that the court erred in admitting the declarations of the alleged confederates before proof of the combination. But this was a matter resting in the discretion of the court. Evidence of a conspiracy must have a beginning. The remarks and declarations of conspirators, directions given by them, and their conversations held during the carrying out of the conspiracy, are acts and as such part of the res gestee. If the conspiracy is finally, on all the evidence, clearly made out, the order in which the proof was given, is not material. It therefore rests solely in the discretion of the court to determine whether or not, at a particular stage of the proceedings, a sufficient foundation has been laid to admit evidence of such declarations (1 Greenl. on Ev. § 111).

The judgment should be affirmed with costs.

Curtis and Speir. JJ., concurred.


author: By the Court.—Curtis, J. Freedman, J. (dissenting).

text:
    THE ATLANTIC AND PACIFIC TELEGRAPH COMPANY v. WILLIAM E. BARNES, JAMES A. BARNES, AND HENRY BISCHOFF, Jr.
    SURETIES ON BOND POR THE FAITHFUL PERFORMANCE BY THE PRINCIPAL OF CERTAIN DUTIES AND TRUSTS, AND THE ACCOUNTING AND PAYING OYER OF ALT, MONEYS OF THE OBLIGEE COMING TO HIS HANDS.
    What dobs not discharge them from liability.
    Where the' principal, after the execution of the bond, received in the course of his employment, moneys of the obligee which, he failed to account for and "pay over, which was well-known to the obligee,
    ¡ETELD)
    that the obligees thereafter keeping the employee in his-service, without notifying the sureties of such default, did not discharge them from liability for future default, it not appearing either that the omission to give notice resulted' in any injury to the sureties, or that the default was fraudulent in its character.

    Before Freedman, Curtis, and Speir, JJ.

      Decided February 1, 1875.

      Exceptions ordered to be heard at general term.
    In this case a verdict of two hundred and sixty-nine dollars and sixty-seven cents was directed for the plaintiff, at the trial term, exceptions to be heard in the first instance at general term, and judgment to be meantime suspended.
    The plaintiff moved for judgment.
    No testimony was taken, but the case was tried upon admissions made by the respective parties.
    From these it appeared that the defendant, William E. Barnes, entered the plaintiff’s employ December 23, 1873, and that he and the co-defendants, James A. Barnes and Henry Bischoff, Jr., executed a bond conditioned, that so long as said employment continued, said William E. Barnes should well, truly, and faithfully perform all the duties assigned to, and trusts reposed in, him by the plaintiff, and in particular should faithfully account for all moneys and property of said plaintiff which should come to his hands.
    Upon this bond the present action was brought to recover the sum of two hundred and sixty-nine dollars and sixty-seven cents, in which amount William E. Barnes was indebted to the plaintiff at the time of his discharge (which occurred March 24, 1874), on account of moneys of the plaintiff which had come to his hands while the employment continued.
    The defendants, James A. Barnes and Henry Bischoff, Jr., wére duly notified of the deficiency, and payment of said sum was duly demanded, and refused.
    When one month of the employment had expired (January 30th), said William E. Barnes was behindhand in his accounts with the plaintiff to the amount of fifteen dollars and ninety-two cents, and plaintiff had knowledge of this fact, but did not notify said James

      A. Barnes and Bischoff; and it is claimed by these defendants, who alone have answered the complaint, that by reason thereof they as sureties are discharged.

      McDaniel, Lummis, and Souther, attorneys, and Charles Edward Souther, of counsel for plaintiff, urged;
    I. Defendants’ undertaking is absolute, by the express terms of the instrument. All are bound originally and no one collaterally. The defense of suretyship is, therefore, not pertinent.
    II. But regarding defendants as sureties, their liability on the bond has not terminated. Nothing in the admitted facts constitutes a defense to the action (Albany Dutch Church v. Vedder, 14 Wend. 165; approved, Looney v. Hughes, 26 N. Y. 522, and cases there cited; Schroeppell v. Shaw, 3 N. Y. (3 Comst.) 446; Remsen v. Beekman, 25 N. Y. 552, 557; Black River Bank v. Page, 44 N. Y. 453). Of course there is no question but that the action is well brought. The bond being joint and several, all the obligors are properly included as defendants in a single action (Code, § 120; Carman v. Plass, 23 N. Y. 286; Brainard v. Jones, 11 How. Pr. 569).

      J. Edwin Leary, attorney and of counsel for defendants, urged
    I. Equity holds the creditor or employer to good faith towards the sureties, and to the exercise of so much diligence and care in the management of his affairs as a prudent man would ordinarily make use of, and although the creditor could not be held to exercise active diligence in investigating the” accounts of his servant qr manager, still when knowledge of a default or dishonesty is brought to the knowledge, or confessed to the creditor or employer, the sureties are not responsible for any subsequent defalcation or dishonesty if the employment is continued (Story Eq. Jur. §§ 324-326; 2 Vernon (Eng.)
      518; 3 Eng. R. 272; 7 Law R. Q. B. 666; 10 Clark & F. 934; 11 Am. R. 237).
    II. There is an implied covenant on the part of the creditor or employer with the sureties that he will conduct his affairs in the ordinary manner and that he will use ordinary due care and diligence during the employment of the principal for whom the sureties bound themselves (Fell on Guaranty & Suretyship, 229).
    III. That the admissions on the part of the plaintiff constitute a sufficient negligence and laches in law to discharge the sureties from all defalcations subsequent to the first default which occurred, and of which the plaintiff had knowledge January 30th, 1874, as admitted (2 Ver. 518; 3 Eng. R. 272; 7 Q.B. 666).
    IV. By neglecting to discharge and dismiss the defendant, William E. Barnes, from the employ of the plaintiff upon discovery of the first default, and by continuing said William E. Barnes in their employment thereafter, the plaintiff condoned the offense for which they could have discharged him, and thereby entered into an agreement with him to forbear prosecution against said William E. Barnes for the amount of the first default, and should the sureties, the defendants, James A. Barnes and Henry Bischoff, Jr., have discovered the default of the said defendant, William E. Barnes, and demanded his discharge and that the plaintiff prosecute him at once, and that they be absolved from further liability, the plaintiff would have been unable so to do owing to such condonation and agreement to forbear, and thus the rights of the sureties would become compromised (Burge on Suretyship, 203; 18 Ves. 20; 7 Hill, 250; 9 Clark & F. 1, 45, 47; Fell on Guaranty & Suretyship, 449, 518).

       Whether the sureties would have been discharged if either the-element of fraud in the default,"-or that of injury resulting from the omission to give notice, or both, had existed, seems to have been regarded by the court as not presented by the case for decision.

   By the Court.—Curtis, J.

The three defendants jointly and severally executed a bond, conditioned that one of their number, William E. Barnes, would faithfully perform certain duties and certain trusts, and account for all moneys belonging to the plaintiffs coming into his hands.

Two of the defendants answer claiming that they are discharged from liability, because on an occasion previous to the one in question, Barnes was indebted and in default to the plaintiffs in the sum of fifteen dollars and ninety-two cents, of which they were not notified at the time, though plaintiff knew about it, and Barnes was kept in plaintiff’s employment. The facts thus alleged by the answer are admitted. Ho other evidence was introduced at the trial.

The difficulties of sustaining the defense are, that it is not shown that this indebtedness of Barnes for fifteen dollars and ninety-two cents prejudiced or injured in any way the other two defendants, or that Barnes is not able and ready to indemnify and save them harmless, and further that there is no provision in the bond that any notice of default should be given them, and that it was their duty if they wished to protect themselves, either to have required this, or else to have looked into Barnes’s accounts, and found the extent of his defaults, and required the plaintiff to prosecute, when they would have had a defense in equity.

It does not appear that Barnes was guilty of a fraud in owing the plaintiff the fifteen dollars and ninety-two-cents. They knew of it, and for aught that appears, there were proper reasons why he should have retained that sum. If every omission, or negligence, or failure of duty, however trivial, on the part of the person for whose conduct sureties have become responsible, is to operate to exonerate them from future liability unless they are forthwith notified, or the employee discharged,, then very little protection would result from that form of security. A collusion between two employees^ as for example, the cashier and the collecting clerk of a corporation, would defeat all recourse by the defrauded stockholders against the sureties of these officers.

Bat whatever may have been the earlier decisions in this State, the law in respect to the liabilities of sureties appears to be settled. In The People v. Berner, 13 John. 383, it was held that negligence in not calling upon their principals, after numerous defaults, did not exonerate them unless an injury resulted from the negligence. In The Albany. Dutch Church v. Vedder (14 Wend. 169, 171), the plaintiffs neglected to call their treasurer to account for seven years after his defaults from year to year, until he became insolvent, when by their own by-law he was bound to render his account every six months, and it was held, that, whatever may have been the moral duty of the plaintiffs to have called their officer to account, it was the legal duty of the defendants, the. sureties, to have examined into the state of the accounts of the person for whose correctness they had become responsible,” and that the facts pleaded constituted no defense in law.

This case appears to have been carefully considered, the previous adjudications were to some extent reviewed, and there seems to have been no decision since, that changes or affects the obligations of sureties, by reason of any of the matters shown in the present action.

If these views are correct, the exceptions should be overruled, and the plaintiff should have judgment on the verdict, with costs.

Speir, J., concurred.

Freedman, J. (dissenting).

By the bond in question the obligors named therein, among other things not necessary to be mentioned, bound themselves, jointly and severally, in the sum of three hundred dollars, that William B. Barnes should “faithfully account for all moneys and property belonging to-said Atlantic and Pacific Telegraph Company, which shall come to his hands, whether the same shall be-paid or delivered to him by said Atlantic and Pacific Telegraph Company, to be disbursed or used for its account, or shall be received by him from other persons for the use and benefit of said Atlantic and Pacific Telegraph Company, or shall come to his hands in any other manner.”

It is admitted that William E. Barnes, at the time of his discharge, viz., March 24, 1874, was indebted to the plaintiff on account of moneys which had come to his hands during his employment, in the sum of two hundred and sixty-nine dollars and sixty-seven cents.

The defendants insist, however, that they are not liable beyond the sum of fifteen dollars and ninety-two cents, because on January 30, 1874, William E. Barnes was in default to the plaintiff in the sum of fifteen dollars and ninety-two cents, of which plaintiff' had knowledge,- but of which fact plaintiff gave no-notice to the defendants, and because the employment of William E. Barnes was continued with such knowledge until his default amounted to two hundred and sixty-nine dollars and sixty-seven cents.

In my judgment the defendants’ claim is well-founded.

It is undoubtedly true, as plaintiff claims, that the-undertaking of the defendants, is absolute by the-express terms of the instrument. In such case the-rule in this State has always been that when one guarantees the act of another, his liability is equal to that of his principal, and that he is not entitled to notice of the principal’s default as a condition precedent to the bringing of an action against -him, unless the contract expressly provides for such notice. If the guarantor-intends to .insist on such notice, he must expressly make it a condition of his contract (Union Bank of Louisiana v. Coster, 1 Sandf. 562, affirmed, in 3 N. Y. 203: Allen v. Rightmere, 20 Johns. 366; Douglass v. Howland, 24 Wend. 36; Smith v. Dann, 6 Hill, 544; Sterns v. Marks, 35 Barb. 565; Heebner v. Townsend, 8 Abb. 238; East River Bank v. Rogers, 7 Bosw. 493; Brown v. Curtiss, 2 N. Y. 225).

So it may also be conceded that, even where a different rule prevails, as for instance in the courts of the United States, all that the law requires is that the guarantor shall have reasonable notice of the failure of the principal debtor and of the intention of the guarantee to enforce the guaranty. What that notice should be, or when it should be given, is not settled, as it is by the law merchant in the case of an indorser of negotiable paper, and consequently the- question of reasonable time is left to be varied according to the facts of each particular case. The rule to be deduced from the authorities upon this point, is that the guarantor, though entitled to notice, can not defend himself by the want of it, unless the notice and demand have been so long delayed as to raise a presumption of waiver or of payment, or unless he can show that he has lost by the delay opportunities for obtaining securities, which a notice, or an earlier notice, would have given him. Under the operation of this rule a very brief delay has sometimes been held fatal to the claim of the guarantee, if it appeared that the notice could easily have been given, and that, if given, it would have saved the guarantor from loss. But in every such case the proof showed that actual negligence had caused actual injury.

And finally it may be conceded that a surety does not ¿possess the -right, to debar the principal debtor from all favor or indulgence. It was once uncertain whether a forbearance of the debt did not discharge the surety. But it is now well settled that a mere forbearance leaving to the creditor the power of putting his claim in suit at any time, does not have this effect. In no case is a surety discharged by mere laches of the creditor, unless after a request to prosecute the principal (Looney v. Hughes, 26 N. Y. 514; Remsen v. Beekman, 25 Id. 552; Schroeppell v. Shaw, 3 Id. 446; Albany Dutch Church v. Vedder, 14 Wend. 165). And such request imposes no absolute duty upon the creditor to proceed at once, if delay is consistent with good faith (Black River Bank v. Page, 44 N. Y. 453).

But these several propositions which have been advanced by the plaintiff, though true as abstract propositions of law, do not touch the real question presented by the exceptions in this case.

A guaranty of the fidelity of a servant is to be presumed as founded on the trustworthiness of the servant so far as that was known to the contracting parties at the time of the contract. Any concealment, inconsistent with good faith, practiced by the employer upon the surety at the time of the making of the contract, has the effect of releasing the latter; and one of the reasons usually given for so holding, is that it is only reasonable to suppose that the fact so concealed, if known to the surety, must necessarily have influenced' his judgment as to whether he would have entered into the contract or not. If this doctrine is sound, and it is not only sound, but is established law, it seems equally reasonable to suppose that it never could have entered into the contemplation of the parties that, after the servant’s dishonesty in the service had been discovered, the guaranty, though on its face a continuing one, should continue to apply to the servant’s future conduct, when the master chose for his own purpose to continue the servant in his employ, without the knowledge or assent of the surety. If the obligation of the surety is continuing, the obligation of the creditor should be equally so, and the representation and understanding on which the contract was originally founded, should continue to apply to it during its continuance and until its termination.

This will still more strongly appear, when, in connection with the proposition last discussed, it is considered that in certain cases and under certain circumstances the right of revocation exists. In Parsons on Contracts, vol. 2, p. 31, the rule is stated as follows: “If the guaranty be to indemnify for misconduct of an officer or servant, this promise is revocable, provided the circumstances are such that when it is revoked, the promisee may dismiss the servant without injury to himself on his failure to provide new and adequate sureties.” It was for this reason, that in Burgess v. Eve. (Law Rep., 13 Eq. 150), Malins, V. C., says : *1 But if there is misconduct on the part of the person whose fidelity is guaranteed: for instance, if a man guarantees that a collecting clerk shall duly account for all moneys received by him, and that a collecting clerk is found to have embezzled his employer’s money, reason requires that the man who entered into the guaranty, because he believed the person to be of good character, when he finds that he is not so, and not to be trusted, should have the power of saying: £ I now withdraw the guaranty I gave you ; I give you full notice not to trust him any more.’ Notwithstanding all that has been said, I am clearly of opinion, that a person who has entered into such a guaranty, and who is therefore responsible' for the person whose fidelity is guaranteed, has a right to withdraw from that guaranty, when that person has. been proved guilty of dishonesty.” He afterwards proceeds: “My •opinion is—and I have no hesitation in expressing it —that a person who gives a guaranty, would have a right to say to the person taking it, You will continue at your own peril to employ the person on whose behalf I gave the guaranty, provided that the clerk or other person has been guilty of embezzlement or gross misconduct, or has turned out to be unworthy of the confidence reposed in him by the person giving the guarantee for him.’ If the employer, under such circumstances, refused to give the guarantee up, the person giving it would have a right to file a bill in this, court, and in my opinion would succeed in the contest, because the court would direct the bond to be delivered up to be canceled. And I think that is only what good sense, propriety, and fair dealing between man and man would dictate.”

This opinion, though not necessary for the decision of the case before the Vice-Chancellor, was adopted (as founded on equity and good sense) by the court of queen’s bench in Phillips v. Foxall (3 Eng. R. 272; S. C. 7 Law R. Q. B. 666), which was a case almost identical in its legal aspects with the case at bar.

In that case it- was distinctly held, after an examination of many authorities, that “ in case of a continuing guaranty for the honesty of a servant, if the master discovers that the servant has been guilty of acts of dishonesty in the course of the service to which the guaranty relates, and if, instead of dismissing the servant, as he may do at once and without notice, he chooses to continue in his employ a dishonest servant, without the knowledge and consent of the surety, express or implied, he can not afterwards have recourse to the surety to make good any loss which may arise from the dishonesty of the servant during the subsequent service.” As to the alleged right of revocation the court of queen’s bench came to the following conclusion: ■“ The discharge of the surety in the present case seems to us to arise rather out of the nature and equity of the contract between the parties than upon any assumed right of revocation. We think the surety is discharged unless he assents or agrees, after he has-had knowledge of the dishonesty, that the guaranty shall hold good for the subsequent service; but, as a revocation of the guaranty as soon as the dishonesty has come to his knowledge, will be the best evidence of dissent, whether his discharge from the contract is founded on express revocation or want of assent after notice of the dishonesty, seems rather a question of words than of substance.”

The present case is within the limitation of the rule laid- down by Parsons as above stated, and in all respects covered by the decision in Phillips v. Foxall. When on January 30,1874, the plaintiff became fully aware that William E. Barnes was in default to the extent of fifteen dollars and ninety-two cents, good faith and the true intent and meaning of the contract of guaranty required either that William E. Barnes should be dismissed, or that notice of the defalcation be given to the defendants. True, they were bound to the extent of that defalcation without any notice whatever. But it is equally true, that after a breach of the contract of guaranty had once taken place and a liability had once attached under it, which the defendants then and there had the right to terminate and discharge by payment, the plaintiff could not, by a suppression of the fact of an existing defalcation, keep the guaranty alive and continuing so as to cover possible future contingencies not contemplated by the original contract. “It is the clearest and most evident equity” (says Lord Loughborough, in Rees v. Berrington, 2 Ves. 540) “not to carry on any transaction without the knowledge of him (the surety) who must necessarily have a concern in every transaction with the principal debtor. You can not keep him bound and transact his affairs (for they are as much his as your own), without consulting him. You must let him judge whether he will give that indulgence contrary to the nature of his engagement.”

The case of Pittsburgh, Fort Wayne & Chicago R. R. Co. v. Schaeffer (8 Am. Law Reg. N. S. 110), differs in many essential particulars from the case at bar. It was, as stated by the court, a case of simple indulgence and forbearance, and that under circumstances which were not such as to call for any extraordinary diligence. The corporation itself had no knowledge of previous defalcations and it was for this reason that Sharswood, J., held, “ The fact that there were other unfaithful officers and agents of the corporation who knew and connived at his (the principal debtor’s) infidelity, ought not in reason, and does not in law or equity relieve them (the sureties) from the responsibility for him. They undertake that he shall be honest, though all around him are rogues. Were the rule different, by conspiracy between the officers of a bank, or other moneyed institution, all their sureties might be discharged.”

The People v. Berner (13 Johns. 382), and Albany Dutch Church v. Vedder (14 Wend. 169), also differ for about the same reason. They merely hold that, in the absence of actual knowledge, mere negligence on the part of the creditor, however long continued, will not discharge the sureties.

The admission made in the present case, is that the plaintiff’s corporation had knowledge of the first default of fifteen dollars and ninety-two cents, and that with such knowledge the employment of William E. Barnes was continued' until his default amounted to two hundred and sixty-nine dollars and sixty-seven cents. The word “default” was used to raise a question of law and to obtain a ruling thereon. It, therefore, did not mean an innocent default, and as the court, in making the ruling, in effect held that the first default, no matter how grave or fraudulent, did not exonerate the sureties, it is too late to urge on appeal for the first time that the default meant might have been an innocent one. The defendants are therefore not liable beyond the sum of fifteen dollars and ninety-two cents, except upon proof of their assent, with knowledge of tire facts, to the continuance of the employment after the first defalcation. Such assent, if given, would have revived and continued their liability. Por it is well established that a surety, after lie has been discharged from his contract by the act of the creditor, may revive his liability by a subsequent promise or assent (Mayhew v. Crickett, 2 Swan. 185; Smith v. Winter, 4 M. & W. 454).

No such proof having been given by the plaintiff, defendants’ exceptions should be sustained, the verdict should be set aside, and a new trial ordered, with costs to defendants to abide the event. But in case the plaintiff elect to consent to a reduction of the verdict to fifteen dollars and ninety-two cents and interest, plaintiff may have final judgment for that amount. In such case the defendants are entitled absolutely to the costs of the general term.