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Smith v. United States (69 U.S. 219)

An act of Congress, relating to marshals of the United States, provides, that before the marshal enters on the duties of his office, he shall become 'bound' for the faithful performance of the same, before the judge of the District Court of the United States, jointly and severally, with sufficient sureties, 'to be approved by the district judge.'

With this act in force, Pine was appointed marshal, and gave bond on which the name of Smith and others had been signed, and appeared as surecties. Suit having been brought against the marshal, Smith, and the others, his sureties, in the Circuit Court for the Northern District of Illinois, upon this bond, Smith pleaded that the bond was not his deed.

On the trial the United States offered the bond in evidence. The instrument showed on the face that it had been signed by a certain Hoyne as one of the sureties; but that his name was now erased. The defendants, accordingly, objected to the admission of the bond in evidence, on the ground that there was an erasure and alteration thereon, which it was the duty of the plaintiff to explain. The plaintiff then called the district judge, who had approved the bond. The learned justice testified that when it was brought to him for approval, it presented the same appearance exactly as it did now at the trial, except that the names of the sureties were inserted by him in the first part of it; that it was brought either by one McGill or by the defendant, Pine; that Pine had difficulty in getting sureties, and had, some time before, told him, the witness, that Hoyne had objections to having his name on the bond, and Hoyne afterwards told him the same thing. The judge had not then seen it. Afterwards it was brought to him, with Hoyne's name erased. Not knowing the signatures of all the parties, he held the bond several days, and all the sureties came in and acknowledged the execution of it before him, except the defendant, Smith. He then approved the bond, and being personally acquainted with Smith's writing, certified to the genuineness of the signatures. The bond was then admitted in evidence, under objection.

At a subsequent stage of the trial the defendant, Smith, called the district judge as a witness, when he testified that some time before the approval of the bond by him, Hoyne stated to him that he had signed the bond, with others, for Pine, but that he had become dissatisfied, and that McGill and Pine had both agreed that his name should be taken off;-that he wanted it off, and was not willing it should remain on the bond. The witness said, further, that when the sureties who acknowledged the execution of the bond appeared before him, he might have called their attention to the erasure of the name of Hoyne, but was not positive; was inclined to think he did; thought he handed it to each one of them, and asked them if they signed it; he didn't know that they read it.

Hoyne himself testified that 'he signed the bond,-which was circulated for signatures,-with others;' but that soon after, and before its approval, he became dissatisfied, and requested McGill and Pine to have his name erased; and that they promised to do this. Not being able himself to get the bond to do it, and knowing that it would have to be approved by the district judge, he went to that officer and informed him of his wish; said he had signed it, and wanted to have his name erased, &c. The judge told him, that in justice to the other signers, he should tell them that he wanted his name off; that accordingly, in a very short time, he, the witness, spoke to all the parties who had signed, except Smith, who was absent, and told them that he wanted his name off. A few days after, in response to his inquiry, the judge told him that his name had been erased. When it was done, and by whom, he did not know.

On this state of facts, the counsel of the defendant, Smith, requested the court below to charge, among other things, as follows:

1. That if the jury believed, from the evidence, that the name of Hoyne was erased from the bond in suit, without the knowledge or consent of him, the defendant, Smith, and that he, Smith, did not acknowledge the bond as his, subsequently to such erasure, the jury should find in his favor.

2. That the law places the burden of proving such consent upon the plaintiffs, and if they have failed to make such proof, they are not entitled to a verdict.

The court refused so to charge, and the defendants excepted. Verdict and judgment having gone for the United States, the defendants took this writ of error.

Mr. Coffey, special counsel for the United States, defendant in error: There is no evidence in this case that Smith, or any of the signers of Marshal Pine's bond, made any condition when signing as to what persons, or what number of persons, should unite with them. Indeed, it is quite evident not only that there was no agreement or condition made by any of them on signing, but that each signed independently of the others, and without knowing, except so far as they had signed, who their co-sureties were to be. For Hoyne testifies that he 'signed the bond, which was circulated for signatures, with others;' and the district judge testifies that when he approved the bond he inserted the names of the sureties in the first part of it. It was the common case of a person carrying around an official bond, and getting any persons whatever who are willing to oblige, to a certain extent, the principal. When, therefore, the sureties signed, they must have done so without knowing who were to be their co-sureties, and, of course, without any agreement as to who or how many were to sign. This, then, we think may be assumed as part of our case.

The erasure of Hoyne's name, of which Smith now seeks to avail himself,-the first point, and one which, if decided as we think it ought to be, will render the others unimportant on the proofs,-was made, not only before the delivery of the bond to the plaintiff, but before the essential preliminary to its execution of approval by the United States district judge; and it was evidently made by Marshal Pine himself, or at his instance, and before the plaintiff had any connection with it. Certainly it was not made by or at the instance of the plaintiff. The explicit direction of the act of Congress relating to marshals, that the marshal shall 'become bound' before the judge of the District Court, with 'sureties to be approved by the district judge,' shows that the bond is in no manner executed until it is brought to the judge and approved by him. That approval is as essential to its valid execution as is the acknowledgment made in court to a valid recognizance. Before it is given, the signatures do not bind the sureties, for one important element to a good contract is wanting, viz., the agreement of the United States to accept them; that agreement being, by the law, expressed by the judicial approval. When, therefore, Hoyne's name was stricken off the bond, the erasure left him, as to the obligation which the sureties were about to assume, precisely where he would have stood if he had only promised to sign it, and had not done so. And surely if, having promised to sign it, he had never done so, it could not be pretended that his failure to sign would discharge the sureties who had signed and been approved, even though he and they had previously agreed that unless all signed, none should be bound; unless, indeed, the United States had been a party to that agreement. Such an agreement might bind all the sureties who made it, but could not affect the obligee, who was not a party to it, nor furnish any of them with a good defence to the bond, whatever right of action, in the event of loss, it might give to the sureties who signed, against one who did not sign. If, then, the erasure of Hoyne's name before approval, and without the connivance of the United States, no more affected the obligation of the other sureties than his failure to keep a verbal promise to sign would have done, it follows that it cannot relieve Smith from the bond. And this result follows, if Smith, when his name was approved, had no knowledge of the erasure, as it would follow if he had had a special agreement with Hoyne that one was not to sign without the other.

But even if the erasure be treated as a material alteration of the bond, after it was so far executed as to bind the signers, still, if it was made by or at the instance of Marshal Pine, without the knowledge or consent of the United States, it does not discharge Smith from liability. In such case the alteration must have been made by or with the knowledge or consent of the obligee. And, however, in the absence of evidence, that knowledge or consent might be inferred, where the bond had been delivered and was in his possession, in a case like this, where the alteration was made before it was delivered or came into possession of the United States, the knowledge or consent of the obligee to the alteration must be affirmatively proved by the party alleging and availing himself to it. To this effect is United States v. Linn et al., in this court, an action on Linn's official bond. Duncan, a surety, pleaded as special matter in bar that he had signed and delivered it to Linn to be transmitted to the plaintiff, and after the sureties had been approved by the district judge, it was, without the consent or authority of Duncan, materially altered in this, that scrawls by way of seals were affixed to the signatures of Duncan and the other signers, whereby the instrument was materially changed and vitiated, &c. In considering this plea, the court said: 'The plea does not indicate in any manner by whom the alteration was made. It does not allege that it was done with the knowledge or by the authority or direction of the plaintiff, nor does it even deny that it was done with the knowledge of the defendant, Duncan. The plea does not contain any allegation inconsistent with the conclusion that it was altered by a stranger, without the knowledge or consent of the plaintiff; and if so, it would not have affected the validity of the instrument. The demurrer admits nothing more than that the seals were affixed after the instrument had been signed by the parties and delivered to Linn, to be transmitted to the plaintiff, and that this was done without the consent, direction, or authority of him, the said Joseph Duncan. Is this enough to avoid the instrument and bar the recovery? It certainly is not, for the seals might have been affixed by a stranger, without the knowledge or authority of the plaintiff, and would not have affected the validity of the instrument.'

If this principle be true of an alteration made after the bond is judicially approved, it certainly is true where the alteration is made by the principal co-obligor before the judicial approval, which, as we have seen, is the legal method of expressing the consent of the United States to the contract, and before which the obligation involved in signing does not begin.

But it is settled that even where the face of a joint and several bond shows that it was intended to have been executed by others, in addition to those whose names are appended to it, and those others have not united in signing it, still it is the valid and binding deed of those who do sign, unless they show an express reservation or condition at the time that it was not to be binding on them, without being also executed by the others.

In Pawling v. United States, in this court, where the sureties in an official bond proved expressly that they signed on condition that others should sign, who did not sign, this court held that it was evidence for a jury to infer a delivery as an escrow. It is evident that without proof of that condition they would have been held bound.

To relieve the defendant, Smith, under these circumstances, would enable the obligors, in an official bond like this, to practice an easy fraud upon the Government. For it would only be necessary for those who sign such a bond to make a collusive arrangement with some one who did not sign, and, when sued on the bond, prove that arrangement in discharge of themselves.

Mr. E. S. Smith, contra: The assumption that Smith signed without knowing who else was to sign is not according to the evidence. It is obvious that each party in signing expected certain others would sign. Their names, we can hardly, in the nature of things, doubt, were stated. Any man in signing such a bond would naturally ask who else was to sign it, and according as responsible or irresponsible persons were named, might consent or refuse. This is plain. Hoyne may have signed with Smith. There is nothing to disprove that theory. At all events, the direction of the district judge to Hoyne, that he must notify to all the others his wish to have his own name erased, makes it obvious that all the others did know that his name was there, and did rely, as the condition of their putting their own there, on the fact.

Smith never personally appeared before the district judge and acknowledged his signature at all. The spirit of the statute requires the sureties to acknowledge the bond before the judge; to do under his eye, or else to acknowledge before him that they have done, whatever they ought to do. Signing and sealing alone does not bind them. Acknowledgment before the judge, and his approval after that, are superadded requisites to give efficacy to the sureties' act. This position is, in reality, taken by the other side to show that Hoyne's signature was a nullity, and, therefore, its erasure no alteration of a deed. But it is an argument that cuts two ways. It operates quite independently of Hoyne, and goes to destroy the whole ground of suit against Smith.

The taking away of Hoyne's name, therefore, was a material alteration; one going to the foundation of the obligation. It is said that the alteration was made without the knowledge of the United States, without the knowledge of the obligee, therefore; that the alteration accordingly does not affect the validity of the instrument. But the district judge was the representative of the United States. It was made with his knowledge. His acts and consents are those of the Government.

These principles would decide the case against the Government in any case; but in this one it is to be observed that Smith and others were but sureties. The rule of law in regard to this class of persons is settled. Standing in no equity to the plaintiff, a surety will be bound only to the extent and in the manner set out in the words of his contract. No implication can be made against him. The case, therefore, is to be decided with special reference to this fact.

Mr. Justice CLIFFORD delivered the opinion of the court.

title: Smith v. United States (69 U.S. 219)


text: Talk:Smith v. United States (69 U.S. 219)

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Smith v. United States (69 U.S. 219)/Opinion of the Court

This case comes before the court upon a writ of error to the Circuit Court of the United States for the Northern District of Illinois. Suit was instituted by the United States, and the record shows that it was an action of debt on the official bond of Charles N. Pine, late marshal of the United States for the district where the suit was brought. Service was not made on the principal in the bond, nor on four of the sureties as named in the declaration. Of those served, three were defaulted, and the remaining three, Thomas Hoyne, William B. Snowhook, and Ezekiel S. Smith, appeared and made defence. First two pleaded,-1, non est factum; 2, performance by principal. Smith filed separate pleas, 1, Nil debit; 2, non est factum. Issue was joined upon those several pleas, and the parties went to trial. Verdict and judgment were for the plaintiffs, and the defendants excepted and sued out this writ of error.

I. Record shows that the plaintiffs, at the trial, offered the bond described in the declaration in evidence, to prove the issue on their part, but the defendants objected to the reading of the same as inadmissible, because, as they alleged, it had been altered by the erasure of the name of one of the sureties. Yielding to that objection, the plaintiffs called the district judge, and examined him as a witness. He testified to the effect that the bond, when it was brought to him for approval, was precisely as it appeared when offered in evidence, except that the names of the sureties were inserted by him in the introductory part of the instrument. His statement was, that it was brought to him for approval either by the marshal or his principal deputy, and that the erasure as described was there, just as it appeared at the time the witness was examined. Witness did not see the bond till it was brought to him for approval with the name erased; but he had previously been informed, both by the marshal and the person whose name was erased, that the latter had objections to having his name remain on the bond. Signatures of some of the parties not being known to the witness, he held the bond for several days after it was presented, and during that time all of the sureties, except the defendant, Smith, came in and acknowledged its execution. Whereupon the witness approved the bond agreeably to the certificate in the record, which is under his signature. Substance of the certificate is that all of the parties to the instrument, except the defendant, Smith, acknowledged the genuineness of their signatures; and that the district judge, being satisfied from his own knowledge and from evidence that the signature of Smith also was genuine, approved the bond. Being asked by the defendants if Smith had ever consented to the erasure, the witness answered that he had no knowledge upon the subject. Relying on the explanations given by the witness, the plaintiffs again offered the bond in evidence, and the court, overruling the objections of the defendants, admitted the same to be read to the jury, which constitutes the first exception of the defendants.

Certain treasury transcripts were also produced by the plaintiffs, exhibiting the official settlement of the accounts of the marshal at the Treasury Department, together with the statement of certain treasury warrants and drafts in his favor, showing a balance due to the plaintiffs. Evidence was then offered by the defendants tending to show that the settlement of the marshal's account as stated in the treasury transcripts, was not correct. Most of the documents offered for that purpose were objected to by the plaintiffs, and were excluded by the court. Defendants excepted to the rulings in that behalf, but in the view taken of the case it will not be necessary to examine the questions which the exceptions present.

Having offered evidence upon the merits, they recalled the district judge, and examined him again as to the erasure. Among other things, he testified that before he approved the bond, the person whose name was erased told him that he had signed it with others for the marshal, and that he had become dissatisfied, and wanted his name taken off; that the marshal and his deputy had both agreed that his name should be erased, and that he was not willing that it should remain.

Same parties also called and examined Philip A. Hoyne, whose name was erased from the bond. Material statements of the witness are that the bond was circulated for signatures by the principal deputy of the marshal, and that the witness signed it with others at that time; that he, the witness, became dissatisfied some days before it was approved, and requested to have his name erased, and that the marshal and his deputy promised to do it; that not being able to get hold of the bond, he mentioned the subject to the district judge, and explained to him that he 'could not consent to have it there at all.' Suggestion of the judge was that he, the witness, in justice to the other signers of the bond, should see them and tell them what he wanted, and the witness stated that in a short time he spoke to all of them except defendant, Smith, who was then absent, and told them that he wanted his name erased, and that he was not willing to let it remain there as one of the sureties. Erasure was made before the bond was approved, but when, or by whom, the witness did not know.

II. Theory of the defendant, Smith, was, that he was discharged from all liability on the bond in consequence of the erasure, and he accordingly wished the court to instruct the jury in substance and effect as follows: 1. That if the jury believed from the evidence that the name of P. A. Hoyne was erased from the bond in suit, without the knowledge or consent of the defendant, and that he did not acknowledge the bond as his, subsequent to such erasure, the jury should find the issue in his favor. 2. That the law places the burden of proving such consent upon the plaintiffs, and if they have failed to make such proof they are not entitled to a verdict. 3. That notice of the erasure to the district judge who approved the bond was notice to the Government. But the court refused so to instruct the jury, and the defendant excepted.

III. Principal question for decision arises upon the exception of the defendant to the refusal of the court to instruct the jury as requested in the first prayer presented by the defendant.

Tendency of the evidence plainly was to show that the person, whose name was erased, signed the bond before or at the same time with the defendant. Nothing else can be inferred from his own testimony, in which he states that he signed with others at the time the bond was circulated for signatures; and his ready acquiescence in the suggestion of the district judge, that in justice to the other signers he ought to see them and tell them what he wanted, strongly favors the same view. Testimony of the district judge also confirms that theory, and makes it certain that all had signed before the erasure and before any interview had taken place between him and the person whose name was erased. Record does not show who made the erasure, but the proof is satisfactory that the marshal and his deputy agreed to do it, and that it remained in the possession of one of them, until it was presented to the district judge for approval.

Defendant insists that the erasure from the bond of the name of one of the sureties after Smith had signed it, and without his knowledge or consent, and before the approval of the bond, was sufficient to discharge him from all liability

On the other hand the plaintiffs, although they concede that the erasure was after the defendant had signed the bond, and that it was done without his knowledge or consent, yet insist, that inasmuch as the erasure was made before the bond was approved by the district judge, it left the liability of all concerned precisely as it would have stood, if the person whose name was erased had only promised to sign and had not fulfilled his engagement.

Proposition as stated may be correct as applied to all the sureties who subsequently appeared before the district judge, and acknowledged the bond as altered to be their deed, and it certainly is correct as to the person whose name was erased. Liability cannot attach to the person whose name was erased before the instrument was approved, and all those who subsequently consented to remain liable, notwithstanding the alteration, are estopped under the circumstances to interpose any such objection. They have waived the effect which the alteration in the instrument would otherwise have had, and consented to be bound, and therefore have suffered no injury. Volenti non fit injuria. Granting all this, still it must be borne in mind, that the alteration in this case was without the knowledge or consent of the defendant, and the case shows that he never appeared before the district judge and acknowledged his signature, or in any manner ever waived the right to insist that the instrument was not his deed. Materiality of the alteration is not denied, and the plaintiffs admit that it is apparent on the face of the instrument, but still they insist that inasmuch as the marshal, before he enters on the duties of his office, is required by law to become bound before the district judge with sufficient sureties for the performance of the conditions, it is clear that the bond is in no manner executed, until it is presented to the district judge and is by him approved. Approval, say the counsel, is as essential to its execution, as is the acknowledgment made in court to a recognizance, and the argument is that no alteration made in the instrument before such approval, can have the effect to discharge any one of the sureties, unless it be shown that it was made with the knowledge or consent of the obligees. Reason for the conclusion, as suggested by the plaintiffs, is that, where the alteration precedes the approval, the presumption is, that it was made by a stranger, and not by the party seeking to enforce the obligation.

Support to the proposition, as stated, is attempted to be drawn from the case of United States v. Linn et al., and it must be confessed that there are expressions in the opinion of the majority of the court which give some countenance to that view of the law. Question in that case arose upon the demurrer of the plaintiffs to the plea of the defendants, and the judgment of the court was in fact based upon the ground that the allegations of the plea were insufficient to establish the defence. Alteration charged in that case was that the seals had been attached to the signatures after the instrument was signed and before it was delivered, and the allegations of the plea were, that the alteration was made without the consent, direction, or authority of the surety, but it was not alleged that it was done without his knowledge, or by whom it was done.

Referring to those omissions in the plea, the court say, that in view of those circumstances, it was not an unreasonable inference, that if the plea had disclosed by whom the alteration was made, it would have appeared that it did not affect the validity of the instrument. Much stress also was laid upon the fact, that there was nothing upon the face of the instrument indicating that it had been altered, or casting a suspicion upon its validity, and the court held, that the burden of proving when and by whom the alteration was made under the state of facts alleged in the plea, was properly cast upon the defendants. But the court admitted that a party claiming under an instrument, which appears on its face to have been altered, was bound to explain the alteration, and show that it had not been improperly made. Reference was also made by the court, at the same time, to two decided cases as asserting that doctrine, and it is clear that both the cases cited fully sustain the position.

General rule is, that where any suspicion is raised as to the genuineness of an altered instrument, whether it be apparent upon inspection, or is made so by extraneous evidence, the party producing the instrument and claiming under it, is bound to remove the suspicion by accounting for the alteration. Exceptions to the rule undoubtedly arise, as where the alteration is properly noted in the attestation clause, or where the alteration is against the interest of the party deriving title under the instrument; but the case under consideration obviously falls under the general rule. Every material alteration of a written instrument, according to the old decisions, whether made by a party or by a stranger, was fatal to its validity if made after execution, and while the instrument was in the possession and under the control of the party seeking to enforce it, and without the privity of the party to be affected by the alteration. Grounds of the doctrine, as explained in the early cases and by text writers, were twofold. First. That of public policy, which dictates that no man should be permitted to take the chance of committing a fraud without running any risk of losing by the event in case of detection. Secondly. To insure the identity of the instrument and prevent the substitution of another without the privity of the party concerned. Courts of justice have not always adhered to that rule, but the decisions of recent date in the parent country, show that her courts have returned to the old rule in all its vigor. Judge Story, in United States v. Spalding, condemned so much of the rule as holds that a material alteration of a deed by a stranger, without the privity of the obligor or obligee, avoids the deed, and the weight of authority in this country is decidedly the other way. He objected to the rule as repugnant to common sense and justice, because it inflicted on an innocent party all the losses occasioned by mistake or accident, or by the wrongful acts of third persons.

IV. Present case, however, does not depend upon that rule; nor, indeed, is it necessary to express any opinion as to what is the true rule upon the subject, except to say that where the alteration is apparent on the face of the instrument, the party offering it in evidence and claiming under it is bound to show that the alteration was made under such circumstances that it does not affect his right to recover.

Defence in this case, as exhibited in the prayer for instruction, was based not only upon the ground that there was a material alteration in the bond, but also upon the ground that the defendant was a surety, and, consequently, both considerations must be kept in view at the same time. True inquiry, therefore, is, what is the rule to be applied in a case where it appears that the contract of a surety has been altered without his knowledge or consent, and where it appears that the effect of the alteration is to augment his liability? Mr. Burge says, that an alteration in the obligation or contract, in respect to which a person becomes surety, extinguishes the obligation, and discharges the surety, unless he has become, by a subsequent stipulation, a surety for, or has consented to the contract as altered. Same author says, if there be any variation in the contract made without the consent of the surety, and which is, in effect, a substitution of a new agreement, although the original agreement may, notwithstanding such variation, be substantially performed, the surety is discharged.

Authorities are not necessary to show that the alteration, in this case, was a material one, as it obviously increased the liability of the defendant; and in case of the default of the principal and payment by the defendant, diminished his means of protection by the way of contribution; and the rule is universal that the alteration of an instrument in a material point by the party claiming under it, as by inserting or striking out names without the authority or consent of the other parties concerned, renders the instrument void, unless subsequently approved or ratified.

Responsibility of a surety rests upon the validity and terms of his contract, but when it is changed without his knowledge or authority, it becomes a new contract, and is invalid, because it is deficient in the essential element of consent. Where, after the execution of a bond by the principal and the surety, conditioned for the performance by the former of his duty as collector in certain townships, the name of another township was added with the consent of the principal, but without that of the surety, this court held, in Miller v. Stewart, that the latter was discharged from all obligation, because the duties imposed by the instrument in its altered state were not those for the performance of which he had made himself responsible, and that the defect could not be cured by declaring on the condition as it originally stood. Opinion of the court was given in that case by Judge Story, and his remarks upon the subject are decisive of the question under consideration. Indeed, nothing can be clearer, both upon principle and authority, than the doctrine that the liability of a surety is not to be extended by implication beyond the terms of his contract. To the extent, and in the manner, and under the circumstances pointed out in his obligation, he is bound, and no farther. He has a right to stand upon the very terms of his contract, and if he does not assent to any variation of it, and a variation is made, it is fatal.

When the contract of a guarantor or surety is duly ascertained and understood by a fair and liberal construction of the instrument, the principle, says Chancellor Kent, is well settled, that the case must be brought strictly within the guaranty, and the liability of the surety cannot be extended by implication. Liability of a surety, say the court, in McClusky v. Cromwell, is always strictissimi juris, and cannot be extended by construction; and this court, in the case of Leggett et al. v. Humphrey, adopted the same rule, and explicitly decided that a surety can never be bound beyond the scope of his engagement.

Argument is unnecessary to show that a variation of the contract was made in this case, because it is admitted, and it is equally certain, that the person whose name was erased is fully discharged, and, consequently, that the plaintiffs cannot declare upon the original obligation as it stood before the alteration was made. Neither a court of law or equity, said this court, in McMicken v. Webb et al., will lend its aid to affect sureties beyond the plain and necessary import of their undertaking, nor add a new term or condition to what they have stipulated. Sureties must be permitted to remain in precisely the situation they have placed themselves; and it is no justification or excuse with another for attempting to change their situation to allege or show that they would be benefited by such change. Such, say the court, in that case, is the doctrine in England, in this court, and in the State courts, and the authorities cited fully justify the remark. Whenever the contract is varied, whether by giving time to the principal or by an alteration of the contract, it presents a new cause of action, to which the surety has never given his assent, and with which, therefore, he has nothing to do.

Evidence shows that the alteration was made without the knowledge of the defendant, and there is neither fact nor circumstance in the case from which to infer any subsequent assent. Undoubtedly, he knew when he signed the bond that the law required that it should be approved by the district judge; but his knowledge of the law in that behalf furnishes no ground of inference that he authorized the alteration, or that he consented to be bound in any other manner, or to any greater extent, or under any other circumstances than what was expressed in the instrument. Supreme Court of Massachusetts held, in the case of the Agawam Bank v. Sears, that a surety did not authorize the principal to make a material alteration in the note, by permitting him to take it to the bank for discount, and that such an unauthorized alteration discharged the surety; and where two sureties signed a probate bond, subject to the approval of the judge of probate, and it was subsequently altered by the judge of probate by increasing the penal sum, with the consent of the principal, but without the knowledge of the sureties, and was then signed by two additional sureties, who did not know of the alteration, and then was approved by the judge of probate, the same court held that the bond, though binding on the principal, was void as to all the sureties. See, also, Howe v. Peabody, 2 Gray, 556; Burchfield v. Moore, 25 English Law and Equity, 123. Analogous as those cases are, however, they are not as directly in point as that of Martin et al. v. Thomas et al., which is the latest decision upon the subject pronounced by this court. Suit in the court below, in that case, was against the sureties in a replevin bond. Statement of the case shows that the bond was given by the defendant in replevin with sureties, to obtain the return of the property which was the subject of the replevin suit. Defendant subsequently erased his name from the bond with the consent of the marshal, but without the knowledge or consent of the sureties; and this court held, that the bond was thereby rendered invalid against the sureties. Principle of these decisions is, that the alteration varies the terms of the obligation, and that the contract thereby ceases to be the contract for the due performance of which the party became surety, and wherever that appears to be the fact, and the surety is without fault, he is discharged.

Correct rule, we think, is stated by Lord Brougham in Bonar v. Macdonald, and which is substantially the same as that adopted by Mr. Burge in his treatise on surety. Substance of the rule is, that any variation in the agreement to which the surety has subscribed, which is made without the surety's knowledge or consent, and which may prejudice him, or which may amount to a substitution of a new agreement for the one he subscribed, will discharge the surety, upon the principle of the maxim non haec in faedera veni. Intentional error cannot be imputed to the district judge, but the undisputed facts show that the erasure was made after the defendant signed the instrument, and before its approval, and without the knowledge or consent of the defendant.

For these reasons, we are of the opinion that the first prayer for instruction, presented by the defendant, should have been given.

JUDGMENT of the Circuit Court, therefore, is REVERSED, and the cause remanded, with direction to issue a new venire.


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text:
Miller v. Sherry

SHERRY had obtained a judgment in ejectment for some lots and a house on them, in Illinois, against Miller, in the Circuit Court for the Northern District of that State, and this was a writ of error to reverse it.

It appeared, on the trial below, that W. & W. Lyon had obtained a judgment against Miller in October, 1858, and sued out a ''fi. fa.; on which nulla bona'' was returned. In February, 1859, they filed a creditor's bill against the same Miller, his wife, and one Williams (son-in-law of Miller), charging that Miller had, on the 6th of April, 1857, conveyed the premises now in controversy-describing them, and describing them, moreover, as lots, which at the time of the conveyance, and at the time of the bill filed, Miller occupied, and, with his family, resided on-to this Williams, to defraud creditors; and praying that the deed should be set aside, the premises sold, and his debt paid out of the proceeds. Miller and Williams answered the bill. In June, 1860, the cause was heard, the deed set aside as fraudulent, and the master in chancery for the court ordered to sell the premises, and to execute to the purchaser good and sufficient deeds of conveyance, and that the sale so made shall bar and divest all, and all manner of interest or right, which the said Miller or any of the defendants might have in the property, or in any part of it. The master accordingly did sell, for $1867, and by deed convey, in September, 1860, the premises to one Bushnell, who conveyed to Sherry, plaintiff below

It further appeared that a firm named Mills & Bliss had also obtained a judgment against Miller in the same court, in October, 1857,-that is to say, a year before the judgment of W. & W. Lyon,-and that on a ''fi. fa. issued upon it, nulla bona'' was also returned. In April, 1858, Mills & Bliss filed a creditor's bill against Miller and a certain Richardson; Williams, the son-in-law of Miller, and person to whom, by deed of 6th of April, 1857, he had conveyed the house and lots in controversy, not being made a party. This bill-which, it will be noted, was filed several months before the bill of W. & W. Lyon,-charged a variety of frauds in general terms, against Miller, and particularly, that he had 'made a sale of his stock of goods and merchandise, notes and accounts, at Ottawa aforesaid, and of great value, to this defendant, Richardson.' It also charged that Miller was, at the time when the judgment was obtained, 'and now is, the owner, or in some way or manner beneficially interested in some real estate in this, or some other State or Territory, or some chattels real of some name or kind, or some contract or agreement relating to some real estate, or the rents, issues, and profits of some real estate.' But the bill, unlike that of W. & W. Lyon, contained no reference to the specific property, the subject of the ejectment. And there was no reference to real estate in the charging part of the bill, other than the general one of 'some real estate,' &c., as above given. There was a special prayer that the sale to Richardson should be declared void, and that the property or its avails should be applied to the payment of the judgment of Mills & Bliss.

The matter being referred to a master, Miller, was examined before him. He, Miller, then disclosed the fact of the conveyance of the house and lots to Williams, his son-in-law, by the deed of April, 1857. In March, 1860, the master filed his report containing the evidence just stated. Upon this, Mills & Bliss (December, 1860), filed an amendment to their original bill, making Williams a party; process being issued against him, but the process not being served. This amendment charged that the deed of Miller to Williams, of April, 1857, was fraudulent and void. Williams did not answer, and the bill as to him was dismissed. A receiver was appointed July 13th, 1861, and Miller was ordered to convey to him, which he did on the 26th of that same month. The deed embraced, by description, the premises in controversy, but they were conveyed, subject to the rights which Miller might have in them 'under the homestead law of Illinois.'

Pursuant to an order of court, the receiver, on the 23d of August, 1861, sold and conveyed the property for $500 to one Benedict; the deed, like Miller's own to the receiver, being subject to the reservation of the 'homestead right.'

In reference to this reservation, it is necessary here to state, that a statute of Illinois enacts that 'the lot of ground and the buildings thereon, occupied as a residence, and owned by a debtor being a householder, and having a family,' to the value of one thousand dollars, 'shall be exempt from levy and forced sale, under any process or order from any court of law or equity in this State;' and it further declares, that 'no release or waiver of such exemption shall be valid, unless the same shall be in writing, subscribed by such householder, and his wife, if he have one, and acknowledged in the same manner as conveyances of real estate are by law required to be acknowledged, it being the object of this act to require, in all cases, the signature and acknowledgment of the wife as conditions to the alienation of the homestead.'

At the time of the ejectment below, Miller was living with his wife and children in a house on the premises sold; which were worth about $2700.

Upon these facts, the counsel of the plaintiff below asked the court to charge the jury:

1. That Mills & Bliss, by filing their bill against Miller, and service of process, obtained a lien upon all the property and effects of Miller; which lien had, by the decree and sale of the receiver, passed into a title in Benedict, which title related back to the service of process, and had become paramount to the title of the plaintiff.

2. That the defendant was entitled to a homestead right under the laws of the State of Illinois, in such cases made and provided, which he could set up as a defence in this case.

The court gave neither instruction, but gave instructions in substance the reverse of them. Its action herein was the question before this court.

Mr. E. S. Smith, for the plaintiff in error:

1. A plaintiff in ejectment recovers, of course, on the strength of his own title, and that title, in the Federal court, must be a legal one. Now was the legal title in Sherry, assignee of Bushnell, under the proceeding of the Lyons?

The sale by the master, under the bill of the Lyons, did not convey the legal title to Bushnell. Miller did not join in that deed. He was not even ordered or asked to. It is a deed by the master. Now, a court of equity can only compel the party to convey the legal title, and upon a sale thereby give it to the purchaser. The power of such a court to set aside a legal title for fraud, does not confer power to decree the legal title in another by operation of the decree. The title must be conveyed, and if the party refuse, the court can order that a commissioner convey the legal title for the obstinate party, so that the title will be perfected on the sale by the receiver or master. In the great case of Penn v. Lord Baltimore, it is said, that courts of equity act upon the parties by decrees, and not upon the property, except through the party; that is, in all suits in equity the primary decree is in personam, and not in rem. In our own country we have often declared the same thing. In a Mississippi case, the court says: 'The chancery court cannot, by its decree, divest the legal title to land out of one party and vest it in another. It is necessary, in such cases, to appoint a commissioner to convey.' So in Kentucky, the court held that 'the chancellor may decide on the equitable right to have a transfer of the legal right of entry, and may enforce a compliance with the decree by compelling a conveyance; but until the conveyance is actually made, the right of entry remains as it was before the decree.' So in North Carolina, the court says, that a decree in equity cannot, of itself, divest a title at law to land, but can only compel the person who has the title and who is mentioned in the decree, to convey. So in Ohio, it was held that a decree does not, of itself, pass a title, but that a deed has to be actually made conveying the title, so that a sale, by order of the court, would convey the legal title. The same principle is enunciated in a New York case, where Gardner, J., says: 'In all cases of fraudulent trusts, the court may, in its discretion, direct a sale by a master, and compel the debtor and trustee to unite in the conveyance to the purchaser, or it may order an assignment to a receiver, as was done in this case, to the end that the property may be disposed of under the special instructions of the chancellor; or the fraudulent conveyance may be annulled, and the creditor permitted to proceed to a sale upon his execution.' We need not cite additional authorities. Independently of merits, therefore, there is an outstanding legal title, which technically barred the right to sue in ejectment below.

But, on merits, the plaintiff in the ejectment had no case. Benedict was actual owner. The bill of Mills & Bliss, under which he claims, was filed in April, 1858; that of the Lyons some months afterwards, to wit, in the month of February, 1859. Both bills were what are called creditors' bills; that is to say, bills in equity after judgment for a sum certain had been obtained at law, after execution had issued on such judgment, and after a return of nulla bona had been made on that judgment. Now, of such bills in chancery,-though, of course, not of ordinary chancery bills,-it is a property that on service of process they operate as liens from the time of their being filed. And well they may. They rest on and recite a prior solemn judgment at law unsatisfied. They declare a previous debt, of which the party stands 'convict' of public record. They are, in fact, but a prolongation and extension of the judgment, making it apply, by the bill, to equitable rights, as without them it will to legal. In Chittenden v. Brewster, at this term, Nelson, J., speaking for this court, and referring to a contract upon 'creditors' bills,' says: 'The bill in the Circuit Court. . . was first filed, and, consequently, operated as the first lien.' The fact that such bills will operate as liens, and in the order of their being filed, is here assumed as of course. Now a creditor's bill will operate on every species of property. Le Roy v. Rogers, in the Chancery of New York, thus declares. That was a creditor's bill, filed on the return of an execution unsatisfied. The bill stated the judgment and return of execution, and charged that the defendant was entitled, or interested in, or possessed of, personal property, money, bank stock, insurance stock, choses in action, &c. The bill further charged that the defendant, since making the covenant on which the judgment was recovered, had made some assignment, or transfer of his property, upon some secret trust, or other trust, for the benefit of himself, &c.; and it prayed a discovery of the property and effects of the defendant, &c. The case was heard on demurrer to the bill, and the chancellor says: 'The complainant was entitled to a discovery of all the real estate of the defendant which he had within the city of New York at the time of the docketing of the judgment, although such property may have been fairly disposed of since that time.'

It may be said that because the bill in the case of the Lyons contained the description of the real estate conveyed more definitely than the bill of Mills & Bliss, therefore that such a description gave the bill and proceedings greater efficacy. But the case of Mills & Bliss being, like that of the Lyons, what is called a creditor's bill,-a bill filed upon the return of an execution unsatisfied,-praying for discovery and relief-there was no necessity of describing the land asserted to have been fraudulently conveyed. If, indeed, the creditor levies his execution upon the real estate fraudulently conveyed, and then asks the aid of a court of chancery to give to his execution levy full form and effect, to enable him to sell the legal title, and give the purchaser a title free from obstruction, then the property must be described, and the facts of the levy and fraudulent obstruction must be stated, as it is that which gives the court jurisdiction of the case. But that is not this case. The court, here, had jurisdiction because of the allegations in the bill that the property was beyond the reach of an execution at law; that the defendant had an interest in real estate fraudulently disposed of, and that the complainant had no definite knowledge as to the property and its condition and the interest of Miller in it. When discovery was obtained, and the description of the property and condition of the title ascertained, then the court had power to subject the property to the payment of the debts in the manner best calculated to reach the object at the least expense. If a creditor had all the knowledge as to the situation of the property and title which discovery would give them, there would be no need of asking discovery, and he could proceed to effect a specific lien at once upon the property.

In Conrad v. Atlantic Insurance Company, in this court, Story, J., says: 'Now, it is not understood that a general lien, by judgment on lands, constitutes, per se, a property or right in the land itself. It only confers a right to levy on the same to the exclusion of other adverse interests, subsequent to judgment; and when the levy is actually made on the same, the title of the creditor for this purpose relates back to the time of his judgment, so as to cut out intermediate incumbrances.' We submit that the title or right acquired by the filing of the bill and service of process, is as perfect and absolute as the right of a judgment lien given by statute; and when the title is obtained, under the decree, it relates back to the time of filing the bill, the same as a levy and execution does to the date of the lien of the judgment. Under the rule, thus interpreted, all parties can obtain their rights, when fixed, without conflict, and in a manner least expensive, and according to sound principles of equity.

2. As respects the homestead reservation. The law which thus protects a man and his wife and children from a cruel and remorseless creditor, and gives to them at least a humble home, one peaceful shelter from the misfortunes of the world,-is a law which does infinite honor to the refinement of America. Such a law was quite above the civilization of our British ancestors; they have never yet reached it; though they have before them in ancient Rome record of the honor that was given to the 'domus in qu a pater decessit; in qu a minores creverunt.' It is a law worthy of honest support from every court in the land. It will receive it from this, the highest of them all.

This statute prohibits a forced sale of the homestead upon any process or order from any court of law or equity. Now, Miller was a householder, and had a family, and resided upon the property. The act states that no release or waiver of the exemption shall be valid, unless the same shall be in writing, subscribed by such householder and his wife, if he have one, and acknowledged in the same manner as conveyances of real estate are by law required to be acknowledged. Without this requirement of law being complied with, the conveyance is invalid, and cannot become a valid conveyance of the property even after the homestead right ceases to exist. The legislature put the same construction upon the law, in declaring the intention to be to require, in all cases, the signature of the wife as a condition to the alienation of the homestead. If the homestead exemption given by law has direct reference to the land and building thereon, then the householder can control the fee of the property, and no lien can attach, unless made as provided by law; nor can any sale by the debtor, or by order of court, be made, except as provided by law. A forced sale would be as invalid as a sale by the debtor. The law gives the right and bestows the benefit, and no act of the parties, either voluntary or otherwise, can have the effect to defeat the right, except in the manner prescribed by law. In cases where the householder and his wife are made parties to suits, as in the Lyons case, and they make default, a decree cannot divest them of the rights conferred by the law. It follows, as a matter of law, that the conveyance by Miller to Williams was invalid, and conveyed nothing; and, also, the decree and sale, in the case. On the other hand, the conveyance by Miller to the receiver is not invalid, nor is the deed of the receiver to Benedict, as the homestead right was reserved in both deeds. The receiver's deed to Benedict, under the proceeding of Mills & Bliss, differs from that made by the master in the Lyons case, which did not convey subject to this right; although, on the bill being filed by the Lyons, they state that the place which they sought to get was the home of Miller and his family; a statement which proves as well a knowledge of the law which secured it to them.

Messrs. Browning and Ewing, contra:

1. Under the bill filed by the Lyons,-a true 'creditor's bill,'-the conveyance to Williams was found to be fraudulent, and the master in chancery of the court was directed to sell the lots in question, and to execute deeds to the purchasers, 'which shall bar and divest all, and all manner of interest or right, or right of redemption, which the said Miller, or any of said defendants, may have in and to the said property, or any part thereof.'

The master sold, pursuant to decree, and conveyed to Bushnell, the purchaser, whose title Sherry holds. Under such an order, we submit that a legal title did pass.

The lien of the elder judgment, the one in favor of Mills & Bliss, if still subsisting, does not affect the transfer of title by the master's sale in the Lyons case. The bill in equity of Mills & Bliss is not a general creditor's bill. Its end is the satisfaction of their own judgment. They ask to set aside transfers which they allege to be fraudulent as to them and their judgment, not as to any other judgment creditors. They designate such property as they choose to go against to satisfy their judgment, and they bring in such fraudulent assignees as they choose to charge. Their original bill could have no effect on persons and property not named in it. For example: the lots in controversy might have been conveyed by Williams to an innocent third person for a full and fair consideration, without actual notice, and the lis pendens, such as it was, would have been no notice. The averment in the bill that Miller was, at the time of the judgment entered, and is now the owner of or in some way or manner beneficially interested in some real estate in this or some other State or Territory, amounts to nothing; it is notice to nobody and of no thing. Neither Williams nor the lots were parties to the bill of Mills & Bliss. The principle of lis pendens is, that the specific property must be so pointed out by the proceedings as to warn the whole world that they meddle with it at their peril.

3. As to the homestead. Proof of a homestead in a large property, many times the value of the homestead reservation, cannot, in ejectment, bar the recovery of the whole property. The lots here were worth about $2700. The exemption is for $1000. Some judicial mode must be resorted to of determining the extent of the reservation, and he who sets up the special and indefinite defence ought to define it. Perhaps, if the homestead be worth no more than is reserved, the presentation by evidence of the fact were enough, but if worth more, if should be set up by some appropriate form of motion or petition, so that the issue could be tried, and the value of the homestead set out, so that the jury could find defendant not guilty of the homestead, and guilty of the excess. But with this the court could do nothing of their own mere motion. The defendant, who relied upon the defense, should be some kind of petition or plea, or special motion for instructions, have placed the case in such position that the court could give its charge without making pleading or representations for him, or otherwise shaping his case.

If the homestead exemption had been set up in the chancery proceeding by the Lyons, as it should have been, if intended to be relied upon at all, it would not have been a full defence to the action, but a defence pro tanto only. It would not have prevented a decree, but have produced a modification of it only,-either that the property be divided, and the excess sold, or all sold, and the excess over $1000 applied on the judgment. But here it is insisted upon as a defence to the entire action. It would be a fraud upon judicial proceedings for a party to withhold what would be only a partial defence, if presented at the proper time, in a direct proceeding, and set it up collaterally to defeat the entire action.

Mr. Justice SWAYNE delivered the opinion of the court.

title: Miller v. Sherry


text: Talk:Miller v. Sherry

title: Talk:Miller v. Sherry


text:
Miller v. Sherry/Opinion of the Court

The proceedings under the bill filed by the Lyons appear to have been, in all respects, regular. W. & W. Lyons had obtained a judgment at law and issued an execution, upon which the return of nulla bona was made. This laid the foundation for a creditor's bill, and such a bill was filed. The necessary parties were brought before the court and answered.

The court had full jurisdiction, both as to the parties and the property. The decree was regularly entered, and the sale and conveyance by the master to Bushnell were made in pursuance of it. The only objection taken to the proceedings is, that Williams, in whom was vested the legal title, was not ordered to convey, and did not convey. A conveyance by him was not necessary.

Where a court of equity has jurisdiction, as in this case, a sale and conveyance in obedience to a decree is as effectual to convey the title as the deed of a sheriff, made pursuant to a sale under an execution issued upon a judgment at law. When the object of the suit is to compel the conveyance of the legal title by the defendant, and the decree does not require a sale, the title will not pass until the deed is executed,-unless it be provided, as has been done in some of the States, by statute, that the decree itself shall operate as a conveyance. In all such cases, the court has power to compel the defendant to convey. When the property is beyond the local jurisdiction of the court, and the defendant is before it, the court can compel him to convey, as it may direct, for any purpose within the sphere of its authority. This is an ordinary exercise of the remedial jurisdiction of those courts, and the power is one of the most valuable attributes of the equity system. The principle of those cases has no application here. The title derived by Bushnell from these proceedings must be deemed perfect, unless it be invalidated by that derived to Benedict from the sale and conveyance under the bill of Mills & Bliss.

The judgment obtained by Mills & Bliss, was the elder one, but it was subsequent to the conveyance from Miller to Williams. It is not contended that the judgment was a lien on the premises. The legal title having passed from the judgment debtor before its rendition, by a deed valid as between him and his grantee, it could not have that effect by operation of law. The questions to be considered arise wholly out of the chancery proceedings.

The filing of a creditor's bill and the service of process creates a lien in equity upon the effects of the judgment debtor. It has been aptly termed an 'equitable levy.'

The original bill was in the form of a creditor's bill, as found in the appendix to Barbour's Chancery Practice. It contained nothing specific, except as to the transactions between Miller and Richardson. There was no other part of the bill upon which issue could have been taken as to any particular property. It was effectual for the purpose of creating a general lien upon the assets of Miller,-as the means of discovery, and as the foundation for an injunction,-and for an order that he should convey to a receiver. If it became necessary to litigate as to any specific claim, other than that against Richardson, an amendment to the bill would have been indispensable. It did not create a lis pendens, operating as notice, as to any real estate. To have that effect, a bill must be so definite in the description, that any one reading it can learn thereby what property is intended to be made the subject of litigation. In Griffith v. Griffith, it is said:

'To have made such a bill constructive notice to a purchaser from the defendant therein, it would have been necessary to allege therein that these particular lots, or that all the real estate of the defendant in the city of New York, had been purchased and paid for, either wholly or in part, with the funds of the infant complainant. Or some other charge of a similar nature should have been inserted in the bill, to enable purchasers, by an examination of the bill itself, to see that the complainant claimed the right to, or some equitable interest in, or lien on, the premises.'

It is evident that the premises in controversy were not in the mind of the pleader when this bill was drawn.

There is another reason why the bill could not operate as constructive notice. Williams, who held the legal title, was not a party. 'We apprehend that to affect a party as a purchaser pendente lite, it is necessary to show that the holder of the legal title was impleaded before the purchase which is to be set aside.' The principle applies only to those who acquire an interest from a defendant pendente lite. The title passed from Williams to Bushnell.

The amended bill was undoubtedly sufficient, and it made Williams a party. But he was not served with process, and if he had been, this bill could have operated only from the time of the service. Where the question of lis pendens arises upon an amended bill, it is regarded as an original bill for that purpose. It was a gross irregularity to take a decree against Miller without Williams being before the court, and if the attention of the court had been called to the subject, the amended bill must have been dismissed. The decree against Miller as to the premises in controversy is a legal anomaly. But it is unnecessary to consider this subject, because before the amended bill was filed, the proceedings under the bill of the Lyons had been brought to a close, and the title of Bushnell consummated. His rights could not be affected by anything that occurred subsequently. He had no constructive notice of the proceedings in the case of Mills & Bliss. Had he and his alienee actual notice? This, also, is a material inquiry. We have looked carefully through the record and find no evidence on the subject. Had the suit below been in equity, it would have been necessary for the defendant in error to deny notice to himself or to his grantor. The want of notice to either would have been sufficient. The form of the action rendered a denial unnecessary. The plaintiff having exhibited a title, apparently perfect, the burden was cast upon the defendant of proving everything upon which he relied to defeat it. As the case was developed on the trial in the court below, the title of the defendant in error properly prevailed.

2. In regard to the homestead right claimed by the plaintiff in error, there is no difficulty. The decree under which the sale was made to Bushnell expressly divested the defendant of all right and interest in the premises. It cannot be collaterally questioned. Until reversed, it is conclusive upon the parties, and the reversal would not affect a title acquired under it while it was in force.

We think that the learned judge who tried the case below, was correct in refusing to give the instructions submitted by the plaintiff in error, and in giving those to which exception was taken.

JUDGMENT AFFIRMED WITH COSTS.

title: Miller v. Sherry/Opinion of the Court


text: Talk:Miller v. Sherry/Opinion of the Court


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Marine Bank v. Fulton Bank

IN the spring of 1861, the Fulton Bank, of New York, sent for collection to the Marine Bank, Chicago, two notes, one of Cooley & Co., for $2000, and one of Hunt & Co., for $1037; both due May 1-4, in that year. The currency at Chicago had become at that time somewhat deranged, and consisted exclusively of bills of the Illinois banks. The Marine Bank, just afterwards, addressed a circular to its correspondents, informing them that, in the disturbed state of the currency, it would be impossible to continue remittances with the usual regularity, and that until further notice it would be compelled to place all funds received in payment of collections to the credit of its correspondents in such currency as was received in Chicago,-bills of the Illinois Stock Banks,-to be drawn for only in like bills.

On the 1st May, the cashier of the Fulton Bank thus addressed the cashier of the Marine Bank:

'Please hold the avails of the collections I have sent you, subject to my order, and advise amount credited.'

The two notes were collected by the Marine Bank, in Illinois currency, at that time ''from five to ten per cent. below par''. Immediately after the notes were collected, the Chicago bank, in reply to an inquiry from the Fulton Bank how the account stood, advised the latter bank thus:

'May 1. You have credit as follows: Cooley & Co., $2000.'

'May 6. Your account has credit as follows: Hunt & Co., 1037.'On the 21st April, 1862, that is to say, about a year after the collection made, the New York bank made a demand of payment from the Chicago bank, which was refused, unless the former bank would accept Illinois currency, now sunk fifty per cent. below par.

The Marine Bank was a bank engaged, like other banks, in receiving deposits, lending money, buying and selling exchange, and the money collected on the two notes in question was not retained in any separate or specific form.

On suit brought in the Northern Circuit for Illinois by the Fulton Bank, the court charged that the said bank was entitled to recover the value of the Illinois currency at the time the money was received by the defendant, and judgment went accordingly. The question in this court was, whether this was right, and whether the court below ought not to have charged, as it was requested but refused to do, that the Fulton Bank was 'only entitled to recover of the defendant the value, in coin, of such currency so received by the defendant at the time of demand made by plaintiff for payment with interest, and from that date,'-the only instruction asked for by the defendant's counsel.

A question was also raised in this court as to the form of action below,-trespass on the case for having wrongfully received the depreciated paper; but this point had not been raised in the court below.

Mr. Fuller, for the Marine Bank, plaintiff in error, contended that this bank, in receiving the money and passing it to the credit of the Fulton Bank, was acting as the plaintiff's agent. If this was so, and it obeyed instructions and acted in good faith, it could not be held responsible for the depreciation of the currency while in its hands; a position for which the counsel relied on the American Leading Cases. The Marine Bank had of course mixed the currency it received with other like currency, and perhaps used a part or the whole in its ordinary banking business. In this, however, it did but follow the only course possible among banks. No depositor, correspondent, or customer, when dealing with a bank, ever expects that anything else will be done. This being the settled and only practicable course of business, the plaintiff understood that when the notes were collected and the proceeds placed to his credit, they would pass into the general funds of the bank, and be used till drawn for. This intermixture, having been made in the usual course of business, the counsel contended was proper, and did no wrong to the principal. The ordinary rules of law, with regard to confusion of goods, applied, and the proprietors had an interest in common in the entire fund, in proportion to their respective shares.

The counsel also called attention to the form of action,-case for negligence in receiving the depreciated paper. In such form of action nothing was before the court but the question, whether the Marine Bank was liable for having received the paper; and to that question the bank's circular was a complete reply. The question, whether the Chicago bank was liable for one rate or for another did not arise on the pleadings; judgment had been given below on a thing not at all in issue; and was, accordingly, to be reversed.

Mr. E. S. Smith, contra.

Mr. Justice MILLER delivered the opinion of the court.

title: Marine Bank v. Fulton Bank


text: Talk:Marine Bank v. Fulton Bank

title: Talk:Marine Bank v. Fulton Bank


text:
Marine Bank v. Fulton Bank/Opinion of the Court

The Chicago bank was unquestionably the agent of the Fulton County Bank, up to and including the receipt of the money from the makers of the notes. If no change was made in their relation subsequent to that time, then the former bank, having obeyed instructions, should not be held liable to the latter for the depreciation of its money. The agent, however, in this case was a bank engaged in the usual banking business of discounting notes, buying and selling exchange, and receiving deposits from its customers, and some confusion may grow out of the peculiar character of the agent.

If any person not a banker had received this sum of money for an Eastern correspondent, with instructions to hold it subject to order, he would probably have locked it up in his own safe, or that of some one else, until called for; and when demanded, he would have delivered the identical money which he had received, thus discharging his whole duty as agent. If, however, instead of this prudent and safe course, he had the same day that he received it bought with it a bill on New York at thirty days, which, when matured, was worth in Chicago one-half per cent. premium, it will hardly be contended that when the principal demanded his money the agent could pay him by buying in the market other bills of Illinois banks fifty per cent. below par.

This, however, is substantially what the Chicago bank did, and what it claims the right to do. It is true that it is not in evidence what precise use was made by it of the money received for these collections. But it is proved that it was placed with other money of defendant, and used in its daily business as its own. That business was to buy such drafts, to pay its own debts to its depositors, to discount notes and bills. If it was defendant's money it was all right, because he could do as he pleased with his own. But if it was plaintiff's money, held by defendant as its agent, then this use of it by defendant would seem to be a conversion.

But here we are reminded of the banking character of the agent, who insists that it was impossible to keep plaintiff's money separate from its own, and that plaintiff knew this fact; and, secondly, that from the course of business it was understood that, when the money was collected and placed to the credit of plaintiff's account, the defendant would use it.

As to the first proposition, it cannot be admitted that there was any impossibility in keeping plaintiff's money separate from defendant's. It is every day business for bankers, who have vaults and safes, to receive on special deposit small packages of valuables, and even money, until the owners call for them. There is not only no impossibility in this, but there is no serious difficulty in it. It is simply an inconvenience, and but a slight one, as a small slip of paper around the bills, labelled with the owner's name, would have marked their identity and their separation, without occupying any additional space. Even this inconvenience the defendant could have avoided at any time by refusing longer to hold the deposit. But the truth undoubtedly is, as stated in the second branch of the proposition, that both parties understood that, when the money was collected, plaintiff was to have credit with the defendant for the amount of the collection, and that defendant would use the money in his business. Thus the defendant was guilty of no wrong in using the money, because it had become its own. It was used by the bank in the same manner that it used the money deposited with it that day by city customers; and the relation between the two banks was the same as that between the Chicago bank and its city depositors. It would be a waste of argument to attempt to prove that this was a debtor and creditor relation.

All deposits made with bankers may be divided into two classes, namely, those in which the bank becomes bailee of the depositor, the title to the thing deposited remaining with the latter; and that other kind of deposit of money peculiar to banking business, in which the depositor, for his own convenience, parts with the title to his money, and loans it to the banker; and the latter, in consideration of the loan of the money and the right to use it for his own profit, agrees to refund the same amount, or any part thereof, on demand. The case before us is not of the former class. It must be of the latter. The parties seem to have taken this view of it, as is shown by the reply made by the Chicago bank, May 1st and 6th, to the New York bank, when inquiring how the account stood.

The counsel have argued as to the effect of mixing the money of plaintiff with that of defendant. In the view we take of the matter, there was no such admixture. It being understood between the parties that, when the money was received, it was to be held as an ordinary bank deposit, it became by virtue of that understanding the money of the defendant the moment it was received.

But let us look for a moment at the equity of defendant's position. It receives this money when it is worth ninety cents on the dollar. It places it with its other money; and, perhaps, in the course of a week, all the specific bank bills it then had on hand are paid out by it. It uses it in paying the checks of its depositors, in other words, its debts at par. It buys with it bills on New York, which it converts into exchange worth a premium. But it continues to receive of other parties this class of paper, though constantly depreciating. There is no legal necessity that it should do this. It only does so with a view to its own advantage. When, however, it proves to be a loss instead of a profit, the bank says to the man whose money it had used profitably months before, 'I claim to impose this loss on you. I insist on the right to pay the debt I owe you, not in the specific bank bills I received from you, nor in those of the same value which I received from you; but in bills of that general class, although, while I have been using the money, they have depreciated forty per cent.'

If we are correct in these views, it would seem that the relation of principal and agent was changed the moment the money received was placed in the general fund of the bank, and the plaintiff credited on its book with the amount.

Does the notice of the Marine Bank to its customers, taken in connection with the other facts of the case, change the relative rights of the parties as thus stated? The obvious intent of the circular is to convey to correspondents the fact of the great depreciation in value of the Illinois currency; and to request them, if they are not willing to have their notes paid in such currency, to withdraw their collections. This was just and fair between the parties, and was what the collecting bank had a right to require. We think that it justified that bank in receiving the Illinois currency, in all cases where the notice had reached their correspondents and no contrary orders had been received. If the Marine Bank had thus received depreciated money, and kept it without using it until called for, or had sent it by express to plaintiff, it would have been relieved from further liability. In other words, as long as the defendant retained strictly the character of agent, and acted within the principle laid down in the circular, it was protected. But, as we have already shown, the defendant changed that relation by using the money as its own, and became the debtor of the plaintiff for the sum collected.

The counsel for plaintiff in error raises the point, that the action was trespass on the case for wrongfully receiving the depreciated paper, and that the circular is a sufficient defence to such a count. This is undoubtedly true, both as to the nature of the action and as to the effect of the notice, and if it had been in any manner made a point in the court below, we do not see how we could avoid reversing the judgment. But nothing of the kind was done. All the testimony was received without objection. No instruction was asked of the court by either party as to the effect of the testimony in sustaining plaintiff's case, or as to the effect of the notice in making good defendant's receipt of depreciated paper. On the contrary, the only instruction prayed by defendant's counsel recognizes the right to recover something with interest, and only raises the question of the measure of damages. #fn-s-s On that subject we think the instruction asked was erroneous, and properly refused. It is too late now to object for the first time to the particular form of the action.

JUDGMENT AFFIRMED WITH COSTS.


text: Talk:Marine Bank v. Fulton Bank/Opinion of the Court


text: The Venice (69 U.S. 258)

title: The Venice (69 U.S. 258)


text: Talk:The Venice (69 U.S. 258)

title: Talk:The Venice (69 U.S. 258)