author: Granger, C. J.

text:
    National Bank of Washington v. Insurance Company.
    1. Although the charter of a life insurance company provided that its “ capital stock and funds shall be invested either in loans upon bonds and mortgages upon real estate of double the value of the debt secured, or in loans upon or purchase of United States stocks and bonds, bank stocks, or stocks and bonds issued by any of the States of this Union, or by municipal or other corporations,” a mortgage to such company, upon land in Ohio, made, acknowledged, attested, delivered, and recorded, as required by the statutes of Ohio, securing a promissory note, given in consideration of a loan of its funds made by the company, is valid; and, after condition broken, maybe enforced at the suit of the company.
    2. Section two of the act entitled “An act amendatory of and supplementary to an act entitled ‘An act to regulate insurance business in the State of Ohio,’” passed April 24, 1873 (70 Ohio L., 153), as amended February 20, 1874 (71 Ohio L., 12), did not prohibit such a loan by such a company.
    3. The fact that the company restricted its loans to its policy holders, and that the mortgagor contracted for a policy in order to obtain the loan, did not affect the validity of either note or mortgage.

      4. The charter being silent as to the rate of interest to be charged by the company on its loans, a stipulation for a rate higher than the maximum fixed by the usury laws of this State did not invalidate the note. The principal and interest thereon, at the legal rate, may be collected.
    5. Bank of Chillicothe v. Swayne, 8 Ohio, 280, and like cases distinguished.
    Error to the District Court of Fayette County.
    The Continental- Life Insurance' Company of Hartford, Conn., incorporated under a special charter by the legislature of that State, and holding a certificate of authority from the Ohio Superintendent of Insurance, was doing business in Ohio in 1874. The charter named the company, and, in the first section, provided: “and by that name shall be, and hereby are empo wered:to purchase, have, hold, possess, and enjoy, -to themselves and their successors, lands, tenements, hereditaments, goods, chattels, and effects of every kind, and the same to grant, alien, sell, invest, and dispose of, to sue and be sued, plead and be impleaded in all courts of justice, to have and use a common seal, &c.” Section'twelve of the'charter provided thus: “The capital stock and other funds of said corporation shall be invested, either in loans upon bonds and mortgages upon real'estate1' of double the value of the debt secured thereon, or in loans upon or purchase of United States stocks and bonds, bank stock or stocks and bonds issued by any of the States of this Union, or by municipal or other corporations, and the sáme may be called -in and re-invested under the provisions of this act.”
    A rule of the Company provided • that loans from their capital and funds should be made to-policy-holders only.-.
    Samuel C. Roberts, of Fayette County, Ohio, desiring a loan,- applied for and obtained a policy of insurance, in said Company, on his own life* to the amount of $10,000, paying the usual premium therefor. He then borrowed from the Company $10,000, for which, he gave his promissory note,-dated Jan-. 1, 1875, for $10,000, payable to the order of said Company, at its office in Hartford, Conn., five years after date, with interest thereon at eight per cent, per annum payable semi-annuálly. To secure this note he duly executed and delivered to the Company a mortgage upon his real estate in Fayette County,- Ohio, conditioned in the usual form. This was duly entered for record on the 7th day of January, 1875; at 3 o’clock p. m., and duly recorded.. At the time of the delivery of said note and mortgage, he also made and delivered ten other promissory notes, for $100 each, payable at intervals of six months ;• each one hundred dollar note falling due at the same time with an instalment of interest on the $10,000 note. These notes were however made payable to the order of the person who acted as agent of the Insurance Company. . They were nominally given as said person’s commission for procuring the loan for Roberta, but were actually intended to enable the Company to realize ten-per cent, on the loan.
    In November, A. d.,. 1876, said Roberts borrowed $19,794.18 from the First National Bank of Washington C. H., Ohio, and gave to the bank' his three notes, each for one-third of that sum, secured by a mortgage upon the land covered by the mortgage to the Insurance Company. The mortgage to the bank was duly entered for record on November 29, 1876.
    At November term, 1879, of Fayette Common Pleas, in a proper action for foreclosure, said court, having confirmed a sale of the mortgaged premises, made a decree, holding that the mortgage to the insurance company was a lien' prior to that of the bank, and ordering that the principal, and the legal interest due thereon, should be paid before any payment should be made to the bank. By proper pleadings the facts as hereinbefore stated were in issue. The bank contended: —
    That the mortgage and note were void:
    1. Because the charter authorized only loans upon bond and mortgage;
    2. Because illegal interest was stipulated for ;
    3. Because the Ohio Statute (71 Ohio L., p. 12) provided that “No company or corporation organized under the laws of any other State, or of the United States, or of any foreign government, doing a, banking, or any other kind of business,'in connection wRh insurance, shall do business in this State.”
    Upon appeal, the district court made substantially the' same decree as the common pleas had rendered. A motion for a new trial was overruled; a bill of exceptions containing all the evidence was made part of the record, and a petition in error filed in this court by the bank.

      M. J. Williams, for plaintiff in error.
    I. We claim that the note and mortgage set up by the Continental Life Insurance Company are void, constituted no valid lien upon the property, and consequently are not entitled to be paid out of the proceeds of the sale.
    The said insurance company is, and at the time of the transaction and the taking of said note and mortgage, was a foreign corporation, incorporated by and organized under the laws of the State of Connecticut, and located therein, and Avas so incorporated and organized as a life insurance company only, and for no other purpose. As such, it had no corporate power or capacity to enter into said transaction, or to take said note and mortgage. The New York Firemen's Insurance Co. v. Ely, 5 Conn., 560, followed and approved in N. Y. Fireman's Ins. Co. v. Bennett, 5 Conn., 574; Fuller v. Plainfield Academic School, 6 Conn., 545; The Philadelphia Loan Company v. Towner, 13 Conn., 248; Bank of Chillicothe v. Swayne, 8 Ohio, 257; Bonham v. Taylor et al., 10 Ohio, 108; Creed v. The Commercial Bank, 11 Ohio, 489; Head & Amory v. The Providence Ins. Co., 2 Cranch, 127; Dartmouth College v. Woodward, 4 Wheat., 636; Grezzler v. The Corporation of Georgetown, 6 Wheat., 597; Bank of U. S. v. Owens et al., 2 Pet., 527; Miami Exporting Co. v. Clark, 13 O. R., 1; Bartholomew v. Bentley, 1 Ohio St., 37; Bank of Wooster v. Stevens et al., 1 Ohio St., 233; Vanetta v. State Bank, 9 Ohio St., 27; Kilbreth v. Bates, 38 Ohio St., 187.

      Under the well-settled law of Connecticut, and of Ohio, this Continental Life Insurance Company is as absolutely powerless to enter into the transaction, or take the note and mortgage in question, as if it was directly prohibited.
    Besides, the transaction contravenes and is in direct conflict with the settled policy of this State.
    On the 24th day of April, 1873, the legislature of this State passed an act (which took effect at its passage) entitled “ An act amendatory of and supplementary to an act entitled ‘An act to regulate insurance companies doing an insurance business in the State of Ohio, passed April 27th, 1872,’” the second section of which reads as follows: —
    “No company or corporation, organized under the laws of any other State, or of the United States, with authority to do a banking, or any other kind of business, in connection with insurance, shall do business in this State.” See Ohio L., Vol. 70, pp. 147, 153.
    On the 20th day of February, 1874, by an act which was that day passed and took effect, the foregoing section was amended so as to read as follows: —
    “ No company or corporation, organized under the laws of any other State, or of the United States, or of any foreign government, doing a banking business or any other kind of business in connection with insurance business, shall do business in this State.” Ohio L., Vol. 71, p. 12.
    These statutes show that the pronounced policy of our legislation is to discourage and prevent foreign insurance companies doing business, as such, in this State, from exercising any banking privileges or powers, or being involved in any kind of business whatever, except the legitimate business of insurance.
    II. The power to loan money on note and mortgage is nowhere conferred upon the Continental Life Insurance Company by its charter.
    The provision of the charter “that the capital stock and other funds of said corporation shall be invested in loans upon bond and mortgage,” does not expressly or impliedly confer the power to loan and mortgage. . On the contrary, it impliedly excludes such power. Bartholomew v. Bentley, 1 Ohio St., 41; N. Y. Fireman's Insurance Co. v. Ely, 5 Conn., 560.
    Bonds and notes, are essentially different instruments, and the rights and liabilities of the parties thereto aré materially and substantially different. .
    The word “ bond,” ex vi termini, imports a sealed instrument.: Bouvier’s Law Dictionary, Tit. Bond; 1 Bald., 12; 2 Porter, 19; 1 Blackf., 241; Harp., 484; 6 Vt., 40.
    .A bond imports a consideration.. The .existence of a consideration is conclusively presumed. An obliger is not •allowed to prove want of consideration. 1 Parsons on Contracts., 354, and note S., and- cases, there .collected.
    A bond, like .all other, instrumentamade under seal, can only be varied or modified by an instrument of the .same character. Addison on Contracts, Sec. 362-3. . -
    A bond taken for a note or simple contract debt, merges it in the bond, becanse it is.'of a-higher nature, while .a note taken for a note or simple -contract debt, does' not. McNaughten v. Partridge, 11 O. R., 232.
    A declaration on a. bond and mortgage would not be supported by a. note and mortgage, and vice versa. • The variance would be fatal. Avery v. Lattimer et al., 1 W. L. J., 310.
    The foregoing are some of the material differences between a bond ” and a promissory note:. Others may suggest themselves.
    III. The insurance company had-no. authority to'loan money on bond and mortgage in the State- of- Ohio. -..

    The charter is an act of the Legislature of the .State of Connecticut. -As such it can have- no operation or effect beyond the territorial limits of that State. McGregor v. Covington & Lexington R. R., 1 Disney R., 509 ; Goodsill v. Brig, St. Louis, 16 O. R., 179; Woodward v. M. S. & N. I. R. R., 10 O. R.

      Sayler & Sayler, and Maynard & Hadley, for defendant in error.
    1. The company had corporate- capacity -to , make the loan in Ohio.
    The authority of the company- as given to it-by its charter to loan money is general so far as the question- of territory in which it may make loans. Green's Brice’s Ultra Vires (2d Ed.), 65; Bank of Augusta v. Earl, 13 Peters, 587, 590 ; Relfe v. Rundle, 103 U. S., 226; Silver Lake Bank v. Nutt, 4 John., Ch., 370; Bard v. Poole, 12 N. Y., 495 ; Christian Union v. Yount, 101 U. S., 352; Ins. Co. v. Wilcox, 8 Ins. Law Jour., 815.
    The mere fact that a note was taken instead of :-a:bo.nd is of no moment in- the case.
    The power given by the charter is to loan money on real estate security. . Whether it be by a note rand mortgage, or by a- bond and mortgage, or by -a mortgage alone, is of no material difference. The intention of the,charter is without doubt to require the company to make its investments in mortgages. If the intention is complied with, .it is all that is necessary.
    The'rule of statutory construction that a thing which ¡is within the intention of a. statute is ,as much within the statute as if it were within the letter, and a thing which is within the letter of the statute is ,not within the- .statute unless it be within the intention of the' makers, is .equally applicable to all written instruments. Northwestern Mutual Life Ins. Co. v. Gridley, 100 U. S., 615 ; Ins. Co. v. Dhein, 43 Wis., 421.
    The act complained of was not the exercise of banking privileges. Ins. Co. v. Ely, 2 Cowen, 697; Bank v. Baker, 15 Ohio St., 87; Corwin v. Ins. Co., 14 Ohio, 12.
    The- loan was not void by reason of the legislation, referred to by counsel for plaintiff, in error.,.- But -it -certainly cannot be claimed that.the Continental Life ¡Insurance Company had authority to- do a' banking,business in connection with-life insurance; , and .therefore the .act of April 24th, 1873, cannot be applicable to this case. But that act was repealed, and the act of February 20th, 1874, was in force at the time the mortgage was recorded. But the Continental Life Insurance Company did not do a banking or other kind .of business in connection with insurance. The testimony shows that it is and was an insurance company, engaged exclusively in life insurance, and that under the powers contained in its charter it loaned its money as investments of its surplus capital. The statements made by the plaintiffs’ attorney, in his brief, that it did .a banking business, are entirely without foundation, except in his own imagination. Therefore, this law does not apply to this case.
    But these laws do not declare that the acts done by such prohibited companies shall be void. They do no more than require that the insurance commissioner shall not give a certificate of authority to such' a company to do business in Ohio, or if such company is doing business, to require him to revoke the authority. If such company is doing business in the State, then all its acts are valid. The Union Mutual Life Insurance Company v. McMillan, 24 Ohio St., 67; Lamb v. Bowsir, 7 Bissell, 372; Clay Fire and M. Ins. Co. v. Huron S. & L. Co., 31 Mich., 346; Hartford Live Stock Ins. Co. v. Mathews, 102 Mass., 221; Ehrman v. Teutonia Ins. Co., U. S. Dis. Court, E. D. Ark., 9 Ins. Law Journal, 393; American Ins. Co. v. Wellman, 9 Ins. Law Journal, 422.
    The fact that the agency of a foreign insurance company fails to take out a license according to law, will not prevent the company from maintaining or defending suits. Columbus Ins. Co. v. Walsh, 18 Mo., 229.
    Now we submit that, if a contract made by an insurance company not having authority to do business in the State, is valid as against the company, it must be binding as against the other contracting parties, otherwise there would be no mutuality in the contract. And the same principle applies, of course, to a contract of loaning money as to a contract of insurance.

      The Continental Life Insurance Company is authorized by its' charter to invest its funds in loans upon mortgage securities, but there is no limitation as to the rate of interest for which it may contract. Therefore, under the terms of its charter, it may contract for any reasonable rate of interest. There is no prohibition as to the rate, and, therefore, so far as its charter is concerned, there can be no illegality in any contract it may make as to the rate of interest. 14 Ohio, 6.
    It will be noticed that all of the Ohio cases, in which the contracts of corporations are held void, turn on the prohibition or limitation contained in the charters. Had there been no prohibition, the reason of the decisions would have failed, and as there is no limitation or prohibition in the charter of the Continental Life Insurance Company, we submit that these cases are not in point.
    These Ohio decisions are against the prevailing authorities in the other States, and of the United States Courts; and the court, in Rock River Bank v. Sherwood, 10 Wis., 238, referring to the cases of The Bank of U. S. v. Owens, 2 Pet., 527; Bank of Chillicothe v. Swayne, 8 Ohio, 252 ; Creed v. The Commercial Bank, 11 Ohio, 489; Spaulding v. Bank of Muskingum, 12 Ohio, 544, and Orr v. Lacy, 2 Douglas, as cases holding that a usurious contract made by a corporation is void, says: “ I am not prepared to follow these decisions. In my judgment, the reasoning in these cases is clearly and successfully and completely answered by the opinions given in the Commercial Bank of Manchester v. Nolan et al., 7 How. (Miss.), 508, and McLean, assignee, etc. v. The Lafayette Bank et al., 3 McLean, 587.” And, therefore, while these Ohio cases are the law of Ohio, they should be kept strictly within their limits, and should not be applied to the charter of corporations having no limitations or prohibitions. That the supreme court of Ohio recognizes this distinction between charters containing prohibitions and charters containing no prohibitions, is, we. think, fully demonstrated-by the case of Corwin v. Urbana and Champagne Ins. Co., 14 Ohio, 6, given above, and may also be seen by the language of, the court in the case of Ehrman v. Insurance Company, 35 Ohio St., 337.
    The loan and securities are .valid ,to -the amount, of the principal, with legal interest. Farmers and Traders' Bank v. Harrison et al., 57 Mo., 503; Farmers' Nat. Bank v. Deanny, 91 U. S., 35; Littlewort v. Davis, 50 Miss., 403; Vansands v. Middlesex Co. Bank, 26 Conn., 145; Rock River Bank v. Sherwood, 10 Wis., 231; Quinsigamond Bank v. Hobbs, 11 Gray, 251; 33 Pa. St., 33, 38; 33 Vt., 346.
   Granger, C. J.

The first section- of its, charter granted to the insurance company power to. possess and invest effects of every kind, and to su.e. and be sued in all courts of justice. This grant of power clothed the company with capacity to make the loan and take the mortgage and note from Roberts. Did section twelve take away, this capacity? The object of that section is plain. The safety of policy holders required safe investments by the company. This section was intended primarily-for the protection of policy holders and stockholders. No word in it. directly concerned either governmental policy, or community, or third parties; but, as .a whole,, it prevented the pompany from doing a banking business. ,Well-settled;rules require that the courts shall construe its provisions, so as to promote the legislative intent, if this can reasonably be done. The plaintiff in error, insists that because the officers of the company did not literally obey the- legislative direction, and take a bond instead of a. note, therefore the company cannot enforce any lien under the mortgage. This construction would souse a. section intended to secure policy holders and stockholders from loss, by reason of bad investments made by the officers of the company, as to make sure a loss of the .entire principal invested, because of an error in the form of the evidence.of investment taken by those officers. . Counsel support this claim by Ohio cases from Bank of Chillicothe v. Swayne, 8 Ohio, 280, to Kilbreth v. Bates, 38 Ohio St., 187. Ohio policy as to banks and their powers and privileges. is. clearly stated and enforced in these cases.- Peculiar dangers to the community were supposed to lurk in such corporations. But we can find no evidence of like fears touching insurance, companies that make no attempt to.-exercise banking powers. Legislation has labored to secure, .policy holders and stockholders from losses by the frauds and misconduct of company officers and agents-. It seems,to .us that this current of Ohio authority furnishes no reason for not applying to section twelve of this Connecticut charter the rule,of construction before stated; to wit, that which.will give effect to the legislative intent. -

We think that, by taking the note and mortgage, the company substantially complied with ..the charter.- The investment had nothing of the nature of a banking-transaction. Although the. note.was not under seal, it was so worded that, prima facie, it. imported a , consideration. Under Ohio practice and pleading, precisely the same form of petition, or cross-petition, enforces fore closure, or asks for a personal judgment on. the note, as would be used if a bond had been taken.

Since Judge Hitchcock decided The Bank of Chillicothe v. Swayne, a radical change has. occurred in the relation of corporations to the State and to the people. -Then, and theretofore, special charters granted to-persons.-named, -and to such others as they associated with themselves; gave special powers and rights, that, as a rule, were beyond legislative control: only in the rare cases .where the power to amend, alter, or repeal was expressly reserved,- could the legislature modify, limit, or take away power-once granted. In those days a- corporation was a monopoly. It was necessary to strictly construe the grants made, in order-to protect the interests of the State and of people generally. But now the legislature has far more power over .corporations than over individuals. It may alter, or repeal, all acts granting corporate power, it may impose new conditions of its exercise. It can mould the statutes as experience or legislative caprice may dictate. There is no longer reason to hesitate to apply to the language of acts of incorporation precisely the same rules of interpretation as are applied to like words in any contract or statute. -

This charter was granted in Connecticut. Counsel for the bank cite N. Y. Fire Ins. Co. v. Ely, 5 Conn., 573. In that case the third, or granting, section authorized “ loans on bottomry, respondentia, or mortgage of real estate.” The act there in question was a simple discount of a note. Moreover the sixteenth section of that charter expressly prohibited such transactions by the company. But years afterwards, in 26 Conn., 157, in Vansands v. Middlesex County Bank, the Supreme Court of Connecticut, applying a statute that declared “ no bank shall make any loan or discount on pledge of its own stock,” say “ the directors of banks whose exclusive business it is to make loans and discounts, and perhaps the banks of which they are the agents, might be amenable to the courts for a violation of this law, if they should disregard its prohibition, as they clearly would be to the legislature; but there would seem to be no sufficient reason why the loan or pledge should be declared void. Especially is it questionable whether it can be • treated as invalid, in the absence of any provision in the act declaring that the loan or pledge shall be void, or imposing any punishment .for its violation. There is therefore much reason for the claim that the act is only directory.”

Although the court did not in that case directly decide whether the words then under consideration were merely “ directory,” the opinion plainly indicates that such a provision as the one now before us would not be so construed in Connecticut as to make void either mortgage or note.

Counsel upon both sides have industriously collated the authorities.- It is apparent that the modern cases do not follow the harsh strictness of the earlier decisions. In different States different distinctions are drawn: the grounds of departure from the old rule are variously stated. For myself, I am content to say that the maxim, “ Where the reason of the law ” (the common law, — and our rules of construction are common-law rules) “fails, the law fails,” is a sufficient ground. The corporation of to-day in Ohio is so different from the corporation of Judge Hitchcock’s day, that it would not be exaggeration to say that the two are wholly unlike; that is, in their relations to the legislative power.

We think, then, that neither under the law*of Connecticut, nor under that of Ohio, is the note and .mortgage of the insurance company invalid because of the terms of the charter.

Proceeding to the second objection, we find no provision in the charter limiting the rate of interest to be stipulated for, or received by, the company. The general usury law of Ohio applies alike to such artificial persons and to natural persons. The note is not void. Only legal interest can be collected upon it. It is unnecessary to cite cases on this point.

The third claim is based upon section two (2) of the Act entitled, “An act amendatory of and supplementary to an act entitled, ‘An act to regulate insurance companies doing an insurance business in the State of Ohio’” (70 O. L., 153), as amended by the act of February 20, 1874 (71 O. L., 12). It reads thus:

“ Section 2. No company or corporation organized under the laws of any other State, or of the United States, or of any foreign government, doing a banking or any other kind of business in connection with insurance, shall do business in this State.”

A note running for five years, drawing interest payable semi-annually, and secured by mortgage on real estate, made and given for a loan of money made by mortgagee to mortgagor, is not such a note as belongs to “ banking business.”'- Owing to' circumstances a banking house sometimes may make such a loan, but when it does so it engages in a transaction outside of “banking business.” This is too well known to require further remark.

In making such 'a loan, did the company “ do any other kind of business ” within the purview of said section?

It is a necessary part of'insurance business to make payment of policies, when the money thereon becomes due. Would the'care of-that money be “doihg any other kind of business ”? '■ Would the deposit of that money in some bank, upon certificates of deposit drawing interest, be such “other business”? Is the placing of that money in the hands of the policy holder in his lifetime, upon his secured promise to pay interest thereon, “ such business ” ?

Is not the care of the money required to pay policies a necessary part of the insurance business itself? Is not the lawful investment of that money* so'that its interest will pay taxes and commissions, and strengthen the company, et part of the insurance business itself?

The act: containing' said section- 2' (see 69 O. L., 141), recognizes this fact. ■' The first section authorizes the company “ to carry on the business of insurance.” Under that simple general power, the legislature supposed that the company could make investments' of its capital. The act nowhere 'expressly "grants power to invest. Section 6 recognizes the power as impliedly granted by section 1, and proceeds to limit it by making it “unlawful to invest” otherwise than said section 6 provides. This section is very similar to section 12 'of the Connecticut Charter. Is not this a legislative construction ? . “ To carry on insurance business ” implies the power to make investment of the moneys required to pay policies.

Moreover, section 18, of'the same act (69 O. L., p. 156) requires each'foreign company to'have at least $100,000 of its capital invested in bonds and mortgages on unincumbered real estate in this State, or in other, specified securities. If the making of loans and the taking of mortgages be “any other kind of. business .in- connection with ‘insurance,’ ” section 2 seriously conflicts with section 18. We think this objection also unfounded.

■ Under objections two and three, or under one of them, the bank urges that the rule of the company under which loans are made to policy holders only, invalidates this note or mortgage-. We are unable to understand why this should be so. Such a rule tends to increase the legitimate business of the company, and also to secure the loan itself. We think the judgment of the district court giving prior payment to the insurance' company was right.

Judgment affirmed.

Martin, J'., did not sit iii this case.


source: Caselaw Access Project

author: By the Court.

license: Public Domain

text:
    David D. Dungan v. William C. Safford.

      W. A. Hutchins and Irvine Dungan, for plaintiff in error.

      Hoffmans §• Payne and Creo., D. dole, for defendant in error.
    Error to the District Court of Pike County.
   By the Court.

The S., J., & P. R. R. Co., a corporation doing business, but actually insolvent, on August 21, 1878, in payment of a debt due to D., assigned to him an instrument reading thus:

“I hereby 'agree‘to pay to W. C. Safford, his heirs, executors, administrators or assigns, five hundred dollars, upon the completion of the Springfield, Jackson, & Pomeroy Railroad, from Springfield, in Clarke County, Ohio, to Jackson, in Jackson County, Ohio, and the cars are actually running on Said: road between said two designated points, provided that the said Safford shall subscribe one’ thousand dollars of stock to said road, to be paid upon the completion of- said road, and when the cars are actually running thereon between Springfield and Jackson, as above stated.
Dated June 24, 1875. - G. W. A. Clough.”
“I hereby accept the above offer to which G. W. A. Clough has affixed his signature, and I here subscribe twenty shares of stock of fifty dollars each to said Springfield, Jackson, & Pomeroy Railroad, to be paid when said Clough has fulfilled his obligation in the above contract.
Wm. C. Safford.”

The road was completed, and the cars running on July 20, 1878. On February 14, 1879, D. sued S., averring, in addition to these facts, that S. had refused to sue C. for the $500, and that a reasonable time had elapsed, but did not aver that the money could have been collected by suit.

After his demurrer to the petition was overruled, S., by answer, claimed to set off scrip owned by him like this:

The Springfield, Jackson, & Pomeroy R. R. Co. (Narrow Gauge),

Will pay the bearer on demand, at the offices of the sub-treasurers of said company, in Springfield, South Charleston, South Solon, Jeffersonville, Washington, Greenfield, Bainbridge, Waverly or Jackson, ONE DOLLAR on their subscription to the- capital stock of said company.

Waverly, O., Sept. 1, 1876. No. 837.

Jas. Emmitt, President.

Geo. A. Bathes, Secretary.”

When notified of the transfer, S. owned $250 in scrip, and afterwards bought more.

Held: . 1. The assignment was valid.

2. S. was not bound to sue for the $500 unless it was collectible. Would he be then bound to sue? Queere.

3. S. had a right to set off the $250 of scrip; but if his liability on his subscription had matured, he could not set off against D. scrip bought after notice of the assignment.

Judgment affirmed.


text:
    Edwards v. Bedford Chair Company.
    After a promissory note had been protested, the maker asked the holder “ for additional time as a favor.” The holder said that he “ was willing to show any reasonable favor.” The maker then said that he would give paper drawn on his customers, and did so when he got it. No time for the indulgence was named.

      Held: 1. As the time granted was not specified, and the arrangement furnished no means for determining it, the holder retained the right to sue the maker at pleasure.
    2. The fact that the maker afterwards delivered to the holder drafts on his customers did not cure this defect.
    3. As the proceeds of the drafts did not pay the note, the indorsers were not discharged.
    Error to tbe District Court of Cuyahoga County.

      Mix, Noble, White, for'plaintiffs in error.
    There was no such valid extension of time as to release sureties.
    The following authorities show that to discharge sureties an agreement for an extension must be for a definite, fixed, specific period. Jenkins v. Clarkson, 7 O. R. (pt. 1), 72, 74, 75; Ward v. Wick Brothers, 17 Ohio St., 159, 164, 165; Gardner v. Watson, 18 Ill., 347, 351, 352; Menifee v. Clark, 35 Ind., 304, 306, 307; Bucklin v. Huff, 53 Ind., 474; Jarvis v. Hyatt, 43 Ind., 163, 164; Hayes v. Welles, 34 Md., 512, 516; Newell v. Hamer, 5 Miss. (4 How.), 684, 691, 692; McGee v. Metcalf, 20 Miss. (12 S. & M.), 535, 537; Thornton v. Dabney, 23 Miss., 559, 562; President etc. v. Covington, 26 Miss., 470, 473; Freeland v. Compton, 30 Miss., 424, 426, 427; Winne v. Colorado Springs Co., 2 Col., 155, 161; Woolfolk v. Plant, 46 Ga., 422, 426; Miller v. Stem, 2 Penn. St. (2 Barr), 286, 288; Deal v. Cochran, 66 N. C., 266, 272; McKinney v. Waller, 1 Leigh (Va.), 434; Alcock v. Hill, 4 Leigh, 622, 626; Parnell v. Price, 3 Rich. L., 120; Bayliss on Suretyship and Guaranty, 241; Brandt on Suretyship and Guaranty, § 298, p. 404; 2 Pars. Cont., 26 n. f. Taking collateral security is not an ’extension of time. Hayes v. Wells, 34 Md., 513, 517; Austin v. Walker, 31 Vt., 64; Wade v. Staunton, 5 How. (Miss.), 631; Emes v. Widdowson, 4 C. & P., 151; S. C., 19 Eng. C. L., 316; Pring v. Clarkson, 1 B. & C., 14; Twopenny v. Young, 3 B. & C., 208; Dugan v. Sprague, 2 Ind., 600 Mills v. Gold, 14 Ind., 278; 2 Pars. on Cont., 685 ; Miller v. Knight, 6 Baxter (Tenn.), 503, 504. Merely taking further security does not release sureties. Austin v. Walker, 31 Vt., 64; Oxley v. Stone, 54 Ill., 159; Sequeny v. Wetherel, 6 Met., 553, 564; Norton v. Eastman, 4 Green, 521; Poindexter v. Vernon, 9 Humph., 84, 90; Burke v. Cruger, 8 Tex., 66, 72; Globe Mutual Ins. Co. v. Carson, 31 Mo., 218, 223; Morgan v. Martien, 32 Mo., 438; Remsen v. Graves, 41 N. Y., 471, 472; Bangs v. Strong, 10 Paige, 11, 16; Thurston et al. v. Jones, 6 R. I., 104, 115; Shubrick v. Nelson, 1 Dessaus, 315, 322, 323; Green v. Warrington, Dessaus, 430; Seaveland v. Settle, Meigs, 169; Adamson v. Logan, 27 Gratt., 206; 2 Story on Cont., 429; Bayliss on Suretyship and Guaranty, 247, 248, 258, 259; Brandt on Suretyship and Guaranty, §5 319, 820, pp. 480, 488.

      Caskey & Calhoun, for defendant in error.
   Granger, C. J.

On Nov. 4, 1876, William Edwards and others, partners as Edwards, Townsend, & Co., sued in Cuyahoga Common Pleas upon a note reading thus:

$¡164.38. November 15, 1874.

Turn months after date we promise to pay to the order of Shields and Ford, One hundred sixty-four and 38-100 Dollars, at The Ohio National Bank, Cleveland, Ohio.

Value received. Bedford Chair Co.,

Due Jan. 15-18-75. M. B. G. Wheelock,Pres.

[Indorsed,]

Shields & Ford,

A. J. Griswold.

The indorsers, Shields & Ford and A. J. Griswold, by-separate answers, presented the same second defence. Shields & Ford stated it thus: “ And for this second defence, these answering defendants say that 'they sustain to said piece of commercial paper, simply the relation of indorsers, and so far as plaintiffs are concerned, are simply sureties for the payment thereof, that about the time of the maturity of said note, plaintiffs without the knowledge or consent of these defendants made and entered into an agreement with the defendant, the Bedford Chair Co., the maker of said note, by which they agreed to and did extend the time of payment to said Bedford Chair Co., for the period of sixty days to the great injury and -detriment to these answering defendants in this, to wit: that, at the time said note matured said Bedford Chair Co. was solvent, and said note could have been collected from it; but, that before the expiration of said sixty days, said Bedford Chair Co. became insolvent, and made a general assignment of its property for the benefit of all its creditors, and that said note cannot now be collected from it.” The plaintiffs by separate replies denied all the averments in. these defences except the one stating that said defendants were indorsers only.

If any agreement to extend time was ever made, it was so made in a conversation between Wheeloek, president-of the chair company, and Amos Townsend, one of the plaintiffs, in presence of Norval W. Chamberlain, also a plaintiff. At the trial, Wheeloek related it thus: —

“I made the arrangement with Mr. Townsend. I asked for additional time as a favor to the company. He said, as near as I can recollect, that he was willing to show any-reasonable favor. I think I said to him that I would give them paper drawn on our customers, and when I got them I left them with the book-keeper. I had no other talk with Mr. Townsend then, or at any time after the first talk. When I went there with the paper it was in pursuance of my talk with Townsend. I cannot say what time was given, nor whether any definite or fixed time was given. My recollection is not sufficient to say whether there was a definite fixed time or not. Nothing was said as to the time the paper which was to be turned over was to run. Have stated all that occurred with Townsend that I recollect. I told him as we got paper we would turn it over. He said nothing in reply. This was in the same talk in which I asked for an extension. Had but one talk with him.
My principal talk was with Townsend, but the bookkeeper took some part in the conversation. Townsend said he was willing to grant, under the circumstances, any reasonable favor or leniency. This was in answer to my request for time. This is not the substance of his language, but rather the result. I asked Townsend, as a favor, for additional time, and he said, I am willing to grant any reasonable favor. I received the communication of June 7th from Edwards, Townsend, & Co. One $800 note was retxxrned in it, axxd $125 credited oxx the next note falling due. All of the other notes fell due before the one ixx suit. I think the oxxe returned in that letter fell due in Decembex’, 1874. In the talk with Townsend I think I spoke of my intention of turning over paper.
“ In my talk with Towxxsend, I can’t say whether any definite time .was fixed or not. I think the receipt for paper turned over was sexxt to the office of the company by the book-keeper of Edwards, Townsend, & Co. I think I left the paper turned over to thexn, with their book-keeper, in a hurry, and he xnade up a statement and sent it to the compaxiy. It was soxxxe time before I left the paper that I had the talk with Towxxsend — several weeks • — • I can’t tell exactly. I saw the letter of June 7th, and it was entered upon the books of the company. I don’t recollect that there was anything said in my talk with Townsend about interest. We were not released from paying. I think Mr. Townsend gave additioxxal time. He said that he was willing to grant the favor. I asked him for time. I understood distinctly he said he would give additional time. That was what I asked for. I remember I went to Townsend and asked for additional time. That was the whole thing. I asked for time and it was granted.”

The following is a copy of the receipt given for the drafts referred to by Wheelock, when delivered by him: —

April 26, ’75.
Ree. from Bedford Chair Co. the following drafts, the proceeds of which, when paid, to apply on our claim against the Bedford Chair Co. Notes: J. W. Wheelock, Treas., April 1, ’75, @ 60 days, on J. G. Weiss, Pittsburgh, for $138.50. Also J. W. Wheelock, Treas., Mar. 25, ’75, @ 60 days, on C. Walter & Co., Allegheny, for $175.17. Also J. W. Wheelock, Treas., Mar. 29, ’75, @ 60 days, on F. & H. Brewster, Buffalo, for $123. Amounting to $436.67. The above described drafts will be sent forward for collection and when paid the proceeds will be endorsed on the Bedford Chair Co. notes and we will advise.
Edwards, Townsend & Co.”

■ And the following showed what was done with the proceeds of said drafts, and when: —

‘•‘■June 7, ’75.
Bedford Chair Co., Bedford.
We make the following disposition of the drafts received from you April 26th, ($436.67.). Your note of Nov. 24, ’74, @ 30 days given up, (enclosed herewith,) . $300.00
Interest on same, .... 7.25
Protest fee “ ..... 1.65
“ “ “ note of Oct. 6, . . 1.65
Indorsed • “ “ “ “ . . 125.62
$436.67
Yours, &e.,
Edwards, Townsend & Co.”

Townsend being absent in Congress at. the time of the trial, Chamberlain alone testified for the plaintiffs thus: —

“ Wheelock came and had a talk with Mr. Townsend in my presence. He said the company were expecting remittances soon, and were expecting to make drafts on its customers, and which he would send in, or bring, to apply on the notes'we held against the company. '.There was no agreement to give any specified time. Neither was anything said about the time these drafts were to run. In a few days Wheelock brought them in, and I gave a receipt for them. The Bedford Chair Co. owed us in all, I think, about ($700.00) seven hundred dollars. The talk between Wheelock and Townsend was not over a week or ten days before the date of the receipt (April 26,1875). Wheelock came and introduced himself, and spoke of the Bedford Chair Co. paper, held by us, past due; that they were making- collections as fast as possible; that they had a right to draw for goods sold, and suggested that we take them, and, when paid, apply on our debt. Townsend said to bring or send them in, and we would collect and apply. Wheelock asked for no specified time, and none was given.”

A. J. Griswold, the indorser, testified: —

■' “I received the note in suit from Shields and Ford, and turned it over to plaintiffs to apply on my indebtedness to them. I went to see plaintiffs immediately after the note was protested. Shields and I went together. I told Chamberlain we had come to fix up that paper. He said Wheelock had come a day or two before, and they had given an extension of time. Shields then said, ‘that lets us out.’ Chamberlain made no reply. I asked him if security had been given, and he said ‘of course,’ or ‘ yes.’ He said they had given time on that as well as on other paper they had. This was' in the office of Edwards, Townsend, & Co. The talk did not last five minutes. We left the store. This was a few daj^s after the protest. We were prepared to take up the paper. I expected to pay it. I had the money in bank to my credit or to that of A. J. Griswold Co. I said to Chamberlain, ‘ we have come to fix up that note.’ He said Wheelock was in a day or two before, and they had given an extension. Afterwards he mentioned having received security. Think the only part Shields took in the conversation was to say ‘ that lets us out.’ Think there was no reply either by Chamberlain or me. Chamberlain could hear the remark. I did not think the fact of his making no reply singular. Don’t recollect any further conversation. Think Chamberlain asked what I was doing, or how I was making it, or something of that sort, and I answered. Do7i’t recollect any pa7'ticular conversation about this note with Shields. Did not know he expected to pay it.”

A. J. Shields, another indorser, testified thus: —

“I reside in Hudson Township, Summit Co., Ohio. I am a member of firm of Shields & Ford, who indorsed this paper. We got it from the Bedford Ghair Co7npany for lumber, and tu7'ned it over to Griswold to pay a debt. I was served with notice of protest. Came to Cleveland, hunted up Griswold, and went to plaintiffs. Saw the bookkeeper. Can’t say whether it was Chamberlain. Did very little talking. Griswold said we had come to take care of the note, to pay it. I expected to pay it. I had the money in my pocket. The answer we got was, that they had made arrangements in regard to that, as well as other paper, to give further time. Then I or Griswold said that released us or released the indorsers. Don’t recollect whether there was any talk about security. I consulted Mr. Foster, after the note was protested, as to what I had better do. He advised me to take up the note, and prosecute the Bedford Chair Co. at once, as they were good and the note could be collected from it. I made arrangements to do so, and came to Cleveland for that purpose. Hunted up Griswold, and we went to see E. T. & Co., and there learned of the extension to the Chair Co. When Grisivold and I went to plaintiffs, I had the money in my pocket to pay the note, and so told Griswold. I was the one who was going to pay it, and Griswold knew it. There was no talk with Griswold that he was to pay. He knew I was to pay. We did not ask for time, nor for two or three weeks further time. There was no such talk. Don’t recollect whether there was anybody present but Griswold, and Chamberlain and I. There may have been somebody at the desk. Think Chamberlain made no reply to the remark that we were let out.”

As to this alleged conversation, Chamberlain testified thus:—

“ Griswold, the defendant, came into the office with Shields, the defendant, a few days after this note was protested, and said they had come in' to see about that note. They both said they were not prepared just then to take care of it, and asked if they could have a few days’ additional time. I said I did not care which one paid it, and that Are had no objection to giving them a feAV days’ time. With this understanding they left. They did not say they came to take it up, or to take care of it. Neither of them said it. They both said they were not prepared to pay, and that it would be a great accommodation if we would Avait. If Wheelock had been in before, it was in my absence. I am sure Shields and Griswold came in soon after the maturity of the note, and that Wheelock came in a short time before the date of the receipt.”

In rebutter, Griswold testified: —

“ At the time Shields and I went into plaintiffs’ office, Ave did not ask for an extension of time, and we did not say Ave Avere not ready to pay. I owed plaintiffs other paper, and supposed the talks on the street referred to by Chamberlain were in reference to this other paper, and not in reference to this one in suit.”

The verdict was for the indorsers upon said second defence.

A motion for a new trial urged the following grounds: —

Said verdict was against the evidence in the case.

Said verdict Avas against the law of the case.

Said plaintiffs were prevented by surprise, which ordinary prudence could not have guarded against, and which prevented plaintiffs from obtaining evidence material to sustain their cause.

Newly discovered evidence material for the plaintiffs which they could not, with reasonable diligence, have discovered and produced on the trial of said cause.

In support of the third and fourth grounds, affidavits by Amos Townsend (one of plaintiffs), W. L. Hemshert, their book-keeper, the former recounting the talk with Whee-lock, and the latter stating what was said between Gris-wold and Shields and Chamberlain, were filed; also one by Chamberlain, verifying copies of letters addressed by plaintiffs to Griswold, dated respectively June 4, Sept. 1, Sept. 25, and Nov. 17, 1875, dunning him on the note in suit; also copies of letters to Shields & Ford, dated Dec. 9 and 14,1875. The defence put in the affidavit of H. B. Foster, a lawyer consulted by them after they got notice of the protest of the note. The affidavit showed that Foster, having had a full conversation with Wheelock, shortly after his arrangement with plaintiffs for delay, was satisfied that although Wheelock thought the indorsers were released, yet in his (Foster’s) opinion, what had occurred between Wheelock and plaintiffs, as then related by him, did not release the indorsers, and he advised them to take up the note and sue on it themselves. He further said that afterwards Shields told him that he had been to Cleveland to take up the note as advised by me, and had been informed by some one in the office of Edwards, Townsend, & Co., the book-keeper, I think he said, at all events some one in charge of the office, in substance that Mr. Wheelock had arranged this note (with other matters) Avith them, that they had given Wheelock further time, and that it Avas all satisfactory.”

The court overruled the motion, and rendered judgment for the indorsers. The district court affirmed this judgment, and we are asked to reverse it.

The evidence as to the real transaction between Whee-lock and the plaintiffs seems to us all on one and the same side; and we concur in the opinion, given to Shields & Ford by their counsel, that there was no such agreement for an extension of time as discharged the indorsers. Wheelock asked for .“indulgence,” “favor”; Townsend said he would grant anything reasonable. Wheelock said, in substance, that the company had no money to pay; but, as it had a right to draw on its customers, he would leave drafts with plaintiffs, who could apply the proceeds on the indebtedness of the company to them. The total amount of the drafts so left did not equal the sum due to plaintiffs on notes of the Chair Company that matured before the note herein sued on.

It is clear that neither party to this arrangement then had in view anything except such indulgence as a reasonable creditor ordinarily gives to a debtor who shows a purpose to do what he can to make payment. True, Wheelock, soon after, told Foster that in his opinion the indorsers were discharged; but at the same time, while the occurrence was fresh in his memory, and while he seemed anxious to convince the counsel for the indorsers that they were released, he related the facts; and in that counsel’s judgment these facts did not release his clients.

Nothing was said as to the number of days, or months, asked for or granted; no time was nam'ed for delivering the drafts. The authorities are united in holding that unless the extension agreed upon is for a time certain, or so described that it can be rendered certain, it does not discharge the surety; it does not take away the right of the holder to bring suit against the maker at pleasure. Such a receipt of the drafts did not constitute an agreement to defer suit until the drafts were due. They were held as collateral, and could be applied on judgments in case of suits by Edwards & Co. before the drafts matured.

But the defence urged that, granting this fact and law, Chamberlain’s statement to Griswold and Shields should estop plaintiffs from, claiming that there was no enforceable agreement to extend time. Is this claim tenable ? Before that interview Shields had consulted Ms lawyer, Foster, who had heard Wheelock narrate what had occurred at the time the arrangement (whatever it was) was made. Wheelock had stated that time was given, and that he had promised to place drafts in plaintiffs’ hands. Foster advised Shields that the arrangement, as related by Whee-lock, did not release the indorsers. It is a fair inference upon this record, in the absence of evidence to. the contrary, that Shields informed Griswold of these facts. If Chamberlain told them what they testified to, he told them nothing new. He said “ Wheelock had come a: day or two before, and they had given him time.” . . . “ He said they had given time on that as well as on other paper they had.” ... “I asked Mm if security had been given, and he said, ‘Of course,’ or ‘Yes.’” . . . “The talk did not last five minutes. We left the store.” Shields recollected no t¿dk about security. When they left the store, what facts additional to those stated by Wheelock to Foster had they learned? It seems to a majority of the court that if “ security ” was referred to, Shields’ previous information showed him that it related to the drafts spoken of by Wheelock. If Chamberlain heard the words, “ that lets us out,” he made no reply, gave no express assent. Under certain circumstances “ silence gives consent.” But, before drawing.such an inference, we must find that Chamberlain heard the words. He denied that he did. Griswold’s opinion was that he could hear it. Shields said nothing on that point. Under the circumstances, “ silence ” by Chamberlain might justify an inference that he did not hear. If Griswold and Shields had heard Chamberlain’s statements, Avithout any knowledge of the arrangement made by Whee-lock, the claim to an estoppel would, after verdict, seem fully established. But a majority of the court think that such statements, made to them after they had been told Avhat Wheelock had actually done, do not establish an estoppel. Upon the whole record, a majority of the court holds that the motion for a new trial should have been sustained.

Judgment reversed.


author: Martin, J.

text:
    Clark v. Osborn.
    1. The notice required by section 5833 Rev. Stats., in order to be available to a surety, must be in writing,'and require the creditor to commence an action forthwith on the obligation m which the surety is bound. No particular form or words are required. A substantial compliance with the statute is sufficient.
    2. The requirement that the notice shall be in writing confers a personal privilege on the creditor, which he may waive.
    3. The -executors of a deceased surety gave a written request to the creditor to commence an action forthwith on a note in which the decedent was bound as surety. The creditor held two notes m which the decedent was so bound for the same principal to which the notice would apply indifferently. Thereupon the creditor went to the executors, and, exhibiting the notes, said he accepted the notice as applicable to both. The executors explained the danger of delay, and urged him to sue at once. He promised to commence forthwith, and without further notice, an action against the principal on both notes, and collect them with due diligence.
    In an action against the executors, they, by answer, set up this arrangement and the creditor’s failure to comply.

      Held: The arrangement was a valid parol substitute for a formal notice, and the answer was a good defence.
    Error to the District Court of Coshocton County.
    Osborn sued one McKee and the executors of William Clark before a justice of the peace of Coshocton County. McKee was not served with summons. The suit was on two promissory notes made by McKee and the decedent who was surety thereon. Judgment passed, and the case was appealed to the common pleas.
    In the common pleas a demurrer to the second count of the answer was overruled. And an issue joined by that count and reply was tried to a jury. Verdict for the executors and judgment accordingly.
    On error to the district court this judgment was reversed for error in overruling the demurrer. The case is here on error to reverse the judgment of the district court. The question is: Is that count good in law ? It reads as follows :
    “2d. The said defendants, Samuel B. Clark and Hannah B. Clark, as executors as aforesaid, for a second defence to the petition of plaintiff, and to the two alleged causes of action therein contained, say, that the said defendant, Alexander McKee, was the principal maker of the two promissory notes described in plaintiff’s petition, and that said William Clark, deceased, signed said notes merely as the surety of the said McKee, and received no part of the consideration for which said notes were given, all of which was well known to plaintiff at the time said notes were delivered to him. That after the appointment of these defendants as executors as aforesaid, and after a right of action had accrued to plaintiff on said notes, and on the 21st day of January, A. d., 1878, they, the said Samuel B. Clark and Hannah B. Clark, as executors as aforesaid, served upon the plaintiff a notice in writing, requiring plaintiff forthwith to commence an action against said Alexander McKee, on said promissory notes, a copy of which notice is hereto attached, marked ‘ Exhibit A ’ and made a part of this answer. These defendants say that at the time of serving said notice on said plaintiff, they supposed and believed that the whole indebtedness of said Alexander McKee to plaintiff, and for which said William Clark, deceased, was surety, was all embraced in one promissory note, and had no knowledge that plaintiff held two notes of said McKee, upon which said William Clark, deceased, was surety, until after said notice had been served as aforesaid; and these defendants say that on the 22d day of January, A. d., 1878, after said notice had been served as aforesaid, said plaintiff came to said defendant, Samuel B. Clark, and exhibited to him said two notes in the petition described, when these defendants learned for the first time, that said indebtedness of said McKee to plaintiff Avas embraced in two promissory notes; and these defendants further say, that at the time plaintiff exhibited said notes to Samuel B. Clark as aforesaid, he then stated to these defendants, that although said notice, in terms, mentioned but one note, yet he accepted said notice as applicable to both of said notes, that he understood it to comprehend both of said notes, and would proceed accordingly to commence an action forthwith against said McKee, on both of said notes, and to collect the same in the ordinary course of law, with due diligence, without further notice from these defendants; these defendants further say that after the service of said notice on plaintiff as aforesaid, and after he accepted the same as applicable to both of said notes as aforesaid, he did not proceed with due diligence in the ordinary course of law to recover judgment against said Alexander McKee, for or by execution to make the amount of money or any part thereof, due by said promissory notes or either of them, but they say that said plaintiff neglected and failed to recover a judgment on said notes against said McKee, although at the time of the service of said notice as aforesaid, and for twenty days and more thereafter, said McKee was a resident of said township of Bethlehem, and during which time Avas entirely solvent, had property both real and personal, subject to execution, amply sufficient to have fully paid a judgment for the amount due on both of said notes and costs of suit, all of Avhich was well known to plaintiff during all of said time. These defendants further say, that at the time-plaintiff exhibited said notes to said Samuel B. Clark as aforesaid, he, the said Samuel B. Clark, then notified'plaintiff that there was danger that said McKee Avould dispose of his property within a short time, then urged plaintiff-not to delay, but to proceed at once to make. off. said McKee, by suit and. legal process, the amount due on said notes; and these defendants say, that some time thereafter said McKee did commence disposing of his property, and continued to dispose of and convert his property into money until he had nothing left subject to execution, and that plaintiff had full knowledge of the same during the time it was being done by said McKee; and although he had ample time and opportunity before said property was so disposed of as aforesaid, and after said notice had been served on him as aforesaid, to have collected the amount due on said notes by legal process, yet he neglected so to do. Wherefore and from all the premises these defendants ask to be released from any judgment in the premises against them.”
    “ Exhibit A” referred to in answer.
    “ Coshocton, Ohio, January 21 st, 1878.
    To Truman Osborn, Sir: You are hereby requested to commence an action forthwith, against Alexander McKee, on a promissory note which you now hold against said Alexander McKee, and signed by said McKee, and also signed by one William Clark, now deceased. Said McKee is principal debtor in said note, and said Clark was at the time of his death bound as surety.
    Hannah B. Clark,
    S. B. Clark,

      Executors of said William Ciarle, deceased.”

      John T. Simmons and Nicholas & James for plaintiffs in error.
    First — We maintain that the notice contains all that is required by the statute; or at least that it is a substantial compliance. In the case of Baker and Brim, administrators, against Kellogg and Nickols, 29 O. S. Rep., p. 665, the court, in discussing the sufficiency of such a notice, uses the following language: “ The statutory notice is to be one which shall ‘ require ’ the creditor ‘ forthwith ’ to commence an action against the principal debtor. The requirement must be unconditional; it must be a requirement to proceed by action, and to proceed forthwith.”

    All these elements are contained in the notice in this case. The word “ require ” is not used, but the word “ request ” is synonymous with it; it is not necessary to use the exact language of the statute. To “request” the payment of a note, payable on demand, would certainly be a legal demand — such as would entitle the holder to bring suit. The words “You are hereby requested” would indicate to the creditor as clearly and unmistakably a demand on him as the words “You are hereby required,” and would be a substantial compliance with the statute in that respect. This notice comes fully within the rule laid down by this court in the case cited. The requirement is unconditional; it is a requirement to proceed by action, and to proceed forthwith.

    It is not the mere expression of a “ wish ” that the creditor would “proceed” in some way to “collect the debt,” or “have it arranged in some way,” as the court said about the notice under consideration in the case above cited.
    Second — We maintain that, even if the notice is insufficient, its defects were fully and expressly waived by Osborn, and that he having agreed to accept it as a valid notice for both notes, and having expressly waived any further notice, and agreed to bring an action forthwith, he cannot now avail himself of any right to require a different notice. It is admitted by the demurrer that on the next day after the notice was served, and at the time the executors first learned that there were two notes, Osborn said to them, “ That although said notice, in terms, mentioned but one note, yet he accepted said notice as applicable to both of said notes; that he understood it to comprehend both of said notes, and would proceed accordingly to commence an action forthwith against McKee on both of said notes, and to collect the same in the ordinary course of law, with due diligence, without further notice from these defendants.” (Plaintiffs in error.)

      If the statutory notice can be waived at all, certainly no more positive or comprehensive waiver than that made by Osborn would be required to bring it within the rule.
    It has been settled by an unbroken line of authorities that the giving of the written notice by the surety to the creditor to sue, provided for by statute, as well as the execution of its requirements after it is given, may be waived by parol. Brandt on Suretyship and Guaranty, Sec. 508, p. 647; Taylor v. Davis, 38 Miss., 493 ; Smith v. Clopton, 48 Miss., 66; Hamblin v. McCallister, 4 Bush (Ky.), 418; Simpson v. Blunt, 42 Mo., 542; Gillilan v. Ludington, 6 W. Va., 128.

      Spangler & Pomerene, for defendant in error.
    The notice on its face is indefinite and uncertain. It does not specify to which one of the notes (there being two) it is intended to apply.
    The notice is insufficient under the statute, and therefore ineffectual for any purpose.
    The notice is only a “request” to commence an action.
    It does not, in the language of the statute, “ require ” Osborne to commence an action. It only requests.
    As to what a notice under this statute should contain in order to release a surety, we refer the court to the case of Baker v. Kellogg, 29 Ohio St., 663; and as to what will and will not release sureties, see Bank v. Reynolds, 13 Ohio, 84; Dye v. Dye, 21 Ohio St., 86; Moore v. Gray, 26 Ohio St., 525; Camp v. Bostwick, 20 Ohio St., 337.
    We think it is clear that the notice served upon Osborn is not a notice in compliance with the statute. It was-nothing but a request, which he might comply with or not, as he saw fit.
    The notice being insufficient as a statutory notice, availed nothing by being in writing, and amounted to nothing more than a verbal notice.
    If the court should be of opinion that ,the creditor may waive the notice, in writing, then we submit that the verbal notice, accepted by the creditor, should contain all the elements required to be in the notice, in writing.
    It cannot be claimed from the answer that any such verbal notice was given Osborn, or that he waived the notice, in writing, as required by the statute.
    As to the authorities cited in the brief for plaintiff in error herein, we submit that they are not, in any way, or to any extent, binding upon this court, and can have no influence whatever in this case, excepting in so far as this court may be impressed with the arguments upon which they are based, and in this connection we would quote the language of the supreme court in the case of Luckey v. Brandon and others, 1st Ohio 59, viz.: “ The court have not looted into the authorities cited by the plaintiff on this point; they could not adopt them if they sustain his position. The question stands too clear upon principle, and sound, practical good sense to be decided against these in deference to any authority.”
    We submit, therefore, as a summary of the whole argument : —
    1. That the written notice to sue, served upon Osborn in this case, is void as a notice under the statute, and therefore unavailable to work the release of the sureties in case Osborn failed to comply with it.
    2. That the written notice being a nullity under the statute, the parties stood in the same relations towards each other as they would at common law, and in the absence of any statute upon the subject, and that according to common law rules regulating the rights and obligations of sureties and creditors, nothing was said or done by or between these parties — according to the averments of the answer — that would impose any legal obligation upon Osborn to sue or operate to release the sureties in case Osborn failed to sue, as is shown by the authorities hereinbefore cited.
   Martin, J.

We are to inquire as to the sufficiency of the notice to sue in the circumstances stated in the answer. It is claimed that the notice was given to secure the benefits of section 5833 Rev. Stats., which reads: —

“ Any person bound as surety in a written instrument, for the payment of money, or other valuable thing, may, if a right of action accrue thereon, require his creditor, by notice in writing, to commence an action on such instrument forthwith, against the principal debtor; and unless such creditor commence such action within a reasonable time thereafter, etc. . . . The creditor or assignee of such instrument so failing to comply with the requisition of such surety, shall thereby forfeit the right which he Would otherwise have to demand and receive of such surety the amount due thereon.”

Section 5834 provides that the executors or administrators of a surety may serve such notice with like effect.

The notice authorized by this section is simple in its elements. Is. it to be, (1) in writing; (2) a requirement to sue the principal forthwith, and inferentially; (3) a sufficient description or indication of the instrument.

It seems to be admitted that the written notice given by the executors is defective, for want of the last requisite. And it is claimed it is defective also because it is a request, and not mandatory in its terms. The statute does not require the use of any particular words; but the notice to be effectual must embrace the enumerated particulars.

Doubtless the use of the word request instead of the word require, or any of its synonyms, would not vitiate a notice, if the context showed it to be peremptory and adversary.

The defence set up in the answer is not based on the written notice. It consists of a series of facts, one of which is service of the defective notice. The complete statement discloses a waiver of written notice, and an express acceptance of verbal notice. It recites in substance that Osborn, in fact, held two notes against McKee, in which the decedent was bound as surety, and to which the notice would apply indifferently. That he thereupon went to the executors, and, exhibiting .the notes, said that he accepted the notice as applicable to both. The executors then explained to him the danger of delay, and urged him to sue at once. And he then promised that he would, without further notice, commence an action forthwith against McKee on both notes, and collect the same with due diligence.

In our opinion, the arrangement thus made was a valid parol substitute for a formal notice.

If the creditor had remained silent, or refrained from stipulations as to his duty, the written notice would have to be tested by its words alone. But a valid notice may be withdrawn, or a defective notice confirmed by consent of the proper party. And the question is, as to the meaning and effect of the arrangement set forth in the plea. We think that both parties understood at the time that the written request was a direction made in the assertion of a right, and not merely a friendly request. Its formal character indicates that such was the intention of the executors. And we are satisfied, as already stated, that the adjustment was, in intent and effect, a substitute for the formal notice prescribed by the statute. It was a waiver of an explicit and mandatory notice covering both notes, and which might otherwise have been given, and was calculated, naturally, to lull the executors into a feeling of security, and cause them to omit giving a corrected notice.

It is denied, however, that formal notice may be waived. The statute, in a sense, is a part of the contract. The suretyship is accepted with knowledge of its terms. It gives rights to both parties. The right of the creditor is to disregard with impunity any notice not in strict conformity to its terms. This is his privilege, and concerns him alone, and- is unaffected by considerations of public policy. Like other personal privileges, it may be waived. The enforcement of similar waivers is an every-day occurrence in our courts.

Even in criminal cases, an accused may waive a merely personal privilege. He may waive his right to a speedy trial, but he may not waive his right to a jury trial because of the most obvious considerations of public policy.

Again, it is objected that the answer is fatally defective, because it does not aver a failure to commence an action in due time.

It does aver a failure to prosecute it with due diligence.

As we have seen, the statute provides that the creditor shall forfeit his right against the surety, unless he commence the action within a reasonable time, and prosecute it to judgment against the principal with due diligence.

The duty of the creditor is to commence and prosecute the action. It is not sufficient to commence in due time. The language of the statute is distributive, and no service having been made on McKee, it would have been accurate to have laid the default either entirely or additionally in a failure to commence the action in due time.

Be this as it may, we think the default is sufficiently well pleaded to resist a general demurrer.

Judgment reversed.