Bulkeley v. House

21 L.R.A. 247, 26 A. 352, 62 Conn. 459, 1893 Conn. LEXIS 3

• Court: Supreme Court of Connecticut
• Decided: February 4, 1893
• Status: Published

Opinions

J. M. Hall, J.

From the finding in this case it appears that in 1871 John K. Williams and a son of the defendant were partners in business in the city of.Hartford. They desired to increase their capital $6,000. The defendant advanced $3,000 for his son. Williams, in order to raise his share, procured the plaintiff Bulkeley, and D. A. Rood, to execute with him a joint and several note for $3,000, payable to the Society for Savings of Hartford. Williams then took the note to the Society for Savings for the purpose of obtaining the money on it. The Savings Society objected to loaning the money, on the ground that the principals of the note were all engaged in. active business, and insisted that some person of means who had retired from active business should sign the note as surety for Williams, Bulkeley and Rood. Williams then left the note with the savings bank, and the next day applied to the defendant, and told him that he (Williams), Bulkeley and Rood had made a joint and several note for $3,000, which was at the Society for Savings, and that the money could not be obtained on the note without a satisfactory surety to the principals, and requested the defendant to go to the savings bank, examine the note, and sign it as surety for the principals. This information by Williams was the first knowledge the defendant had, that such a note had been contemplated or executed.

On the same or the following day, pursuant to Williams’s request, the defendant went to the savings bank, examined the note, and, being further requested by the savings bank to sign as a surety for Williams, the plaintiff and Rood, and believing the statement of the note itself to be true and that Williams, Bulkeley and Rood were joint and several makers and principals thereof, signed the note as surety for the apparent principals. He affixed his signature several lines below their signatures, and prefixed to his name the word “ Surety.” The note as formally signed was as follows :—

“ $3000— Hartford, Feby. 21st, 1871;

“ On demand for value received we jointly and severally promise to pay to the Society for Savings, at the office of said Society in Hartford, three thousand dollars, with interest semi-annually. Jqhh K. Williams.

William H. Bulkeley.

D. A. Rood.

Surety, Wm. W. House.’’

Williams obtained and used the money in his business, became bankrupt, and obtained a discharge in bankruptcy. The sum of $400 was realized from his bankrupt estate on the note, and the balance was paid- in equal shares by the plaintiff and Rood on a judgment obtained against them and the defendant by the bank. The plaintiff brings this action to compel contribution from the defendant.

Upon the trial of the action in the court below the plaintiff offered parol evidence to prove that, although his name appeared on the note as a principal,- yet he had an understanding with Williams, the first signer of the note, that he should be a surety for him. To the introduction of this evidence the defendant objected, on the ground that it did not appear that the defendant had any knowledge that either of the signers of the note had signed it, or agreed to sign it, in any other capacity than that indicated by the note itself at the time he (the defendant) signed it. The court sustained this objection and rejected the testimony, but offered to admit the same if the plaintiff- could show that the defendant had knowledge when he signed the note that either the plaintiff or Rood had in fact signed the note as surety for Williams, or that there was any agreement or understanding between the defendant and either the plaintiff or Rood that they or either of them were to- sign the note, as surety for Williams.

The record shows that the plaintiff attempted to prove such knowledge, agreement or understanding on the part of the defendant, but failed, and the court expressly finds “that from all the evidence in the case the defendant had no knowledge that the plaintiff and Rood, or either of them, had signed the note in any other capacity than as joint and several makers with Williams.”

The action of the court in rejecting'the evidence offered by the plaintiff, and in rendering -judgment for the defendant upon the facts found, are the errors assigned in the reasons-for-appeal.

In considering the questions involved it should be borne in mind that this is an action for contribution. Contribution does - not rest upon contract, but on the broad equitable principle that equality is equity. Justice and fair dealing demand that where one or more parties sign the same- obligation and become equally obligated in precisely the same degree thereby, and stand upon the same footing as to their liabilities thereunder, one of the number shall not be compelled to assume the whole burden for his associates, but may compel them to share equally with him any loss that may occur as the result of their joint liability. In actions for contribution therefore, the principle seems now to be well established, that parol evidence is admissible to show the true relations existing between the several parties bound by a written obligation. Under this rule some of the apparent principals may be shown to be sureties, and all apparent sureties may be shown to be principals.1

Thus in Robison v. Lyle, 10 Barb., 512, the court held that, “ as between the makers of a promissory note and' the holders, all are alike liable; all are principals; but as between-themselves, their rights depend upon other questions, which are the proper subject of -parol evidence. On the trial of an action, therefore, between the signers of such a note,-it is right to receive • extrinsic proof to show-which of the parties signed the note as principal and which as sureties.” See' also, to the same effect—Brandt on Suretyship, § 226; 2 Randolph’s Commercial Paper, § 908; Apgar's Administrators v. Hiler, 4 Zabr., 815; Fernald v. Dawley, 26 Maine, 470, 474; Mansfield v. Edwards, 136 Mass., 15; Thompson v. Taylor, 12 R. Isl., 109; Adams v. Flanagan, 36 Verm.; 400; Barry v. Ransom, 2 Kern., 462.

Such evidence is not offered to contradict or vary the contract contained in the writing, but simply to show the actual relations subsisting between'the joint makers of the note and the real nature of the contract between them. Such facts are not a part of the contract and do not affect its terms, but are wholly collateral to it.

To support his claim for contribution therefore, the plaintiff clearly had the right to show his true relations to the note, and this, without regard to the knowledge of the defendant, and in rejecting this evidence the court below erred. We are satisfied however, from the other facts.found by that court, that the exclusion of this evidence did the plaintiff no harm. For, in order to hold the defendant liable for contribution, it was incumbent on the plaintiff to prove not only that he was a surety for Williams as he claimed, but also the further fact that the defendant was a. oo-surety with him for Williams. This latter proposition the finding of the court below distinctly negatives.

If the plaintiff was unable to prove that the defendant had agreed to become a surety for Williams only, upon what theory of justice or morals can the plaintiff demand that the defendant share with him a liability which he never assumed ?

It is an unyielding principle of equity that the action of contribution shall never be used to enforce an unjust and inequitable demand. Brandt on Suretyship, § 208, and cases cited.

But the plaintiff claims that the defendant, by his act of signing the note as he did, legally bound • himself for the same obligation and to the same extent and degree that he was obligated, and that it is of no consequence, as affecting the defendant’s liability in this action, whether he knew that the plaintiff was a surety for Williams or not. We are aware that it is laid down in the books that the right of contribution is not affected by the fact that the surety seeking contribution, or from whom it is sought, had no knowledge that the other had assumed the obligation of a surety for the same thing. This is undoubtedly good law. But can it be seriously contended that the facts in this case show that the defendant’s contract and undertaking was the same as that of the plaintiff, even if it be assumed that the plaintiff’s claim as to his being a surety only for Williams is correct ?

Let us see what the record discloses. That the defendant in this action had no knowledge of the execution of the note in question until informed by Williams is expressly found. That he was informed and believed the note to be the joint and several note of Williams, Bulkeley and Rood, as it appeared to be on its face, is-also found. Under such circumstances and with such information and belief he was asked by the bank to sign the note as surety for Williams, the plaintiff and Rood, the apparent joint and several makers of the note, and did so, prefixing the word “ surety” to his signature.

That the defendant never agreed to become a surety for Williams alone appears conclusively from the facts found by the court below. The three other parties had signed the note and assumed the whole liability incurred by that act, without his knowledge and without any expectation on their part that he was to share their responsibility. Although he went to the bank at Williams’s request, yet his undertaking was with the bank alone and not with Williams or the plaintiff. He did not assume the same degree of obligation that the plaintiff had assumed. The fallacy of the plaintiff's claim is in the assumption that the defendant had agreed to become a surety for the debt of Williams only. He was careful not to do this. In other words, he intended to become, and did in fact become, a surety for a surety, an undertaking by no means rare or infrequent in commercial dealings. As such a surety he is not liable to contribution. “ A supplemental surety for all the prior parties, including the pz’incipal as well as sureties, has entered into a still different engagement. His liability is to the holder in case of the default of all those parties. Like a guarantor he is not liable to contribute to the other sureties, because his engageznent extends to their responsibility as well as to that of the maker. As between himself and the other sureties-there is no mutuality, and if he is subjected his only remedy is indemnity. A co-surety undertakes with another to be; responsible for the debt or duty of a third person. Their obligation though several is not collateral, but is for the same thing.” Monson v. Drakeley, 40 Conn., 559.

The plaintiff claims,, as matter of law, that because the defendant signed as'-'a surety he thereby became surety for the actual principal and ¡cannot, be permitted either to contradict this, or to show for whom he-actually did become surety. . This claim cannot be sustained without: ¡establishing a rule liable to work great injustice. . The - contract of. suretyship is construed strictly* both at.law and in equity, and the liabilities of the surety.-cannot be. extended by implication beyond -the precise terms and scope of his engagement. United States v. Price, 9 How., 91; Lockwood v. Jones, 7 Conn., 435.

As against:the-, demand for. contribution the defendant manifestly has the same right to show his relation to the makers of the note that the plaintiff has. Both: -principle and. precedent sanction this right. Exercising, this privilege, the¡ defendant has conclusively proved that he.signed the note with the express .understanding and agreement with the payee and holder that he was to be a . surety for all whose signatures preceded his .own, and thereupon the'court below held, properly as we think, that as to him- and for the purposes of obtaining contribution from him- the plaintiff is to be treated-as a.principal, as he appears to be on the mote itself.

But it is suggested that the, plaintiff had not ¡asked or procured the defendant or contracted with him to become his surety and had no. knowledge that, he was to sign as a surety for him and the other signers of the note, and that therefore if the defendant did so, he voluntarily assumed all the responsibilities that-the plaintiff had'assumed -as surety for Williams alone. -Is this position tenable.?- Can the--right of -the. defendant.tomgree with the payee of the note to become a surety for- all the other signers of the note and with out their knowledge or consent be questioned? We know of no principle of law that prevents a person from obligating himself to pay the debt or to become responsible for the obligation of another if he so desires. If he suffers loss thereby he may be without legal redress, but his right to make such an agreement must be conceded. The defendant in this case was evidently not willing to become a surety for Williams alone but was ready to become a surety for all. So long as he did not thereby change the obligations, increase the liabilities or interfere with the rights of the other signers, we are unable to see how by agreeing with the payee to become a surety for the fulfillment of their obligations, he in any manner became obligated to share with them or either of them the burdens of a contract which existed prior to and independent of his undertaking.

But the plaintiff says that if the defendant had been obliged to pay this note, he could not have compelled contribution from the plaintiff unless he is held to be a co-surety with him for Williams. This is doubtless true, and forcibly illustrates the justice and equity of the defendant’s position. He is not claiming but resisting contribution. The fact that he could not compel the plaintiff to contribute does not give the plaintiff the right to compel contribution from him. The law covering the exact position of the parties in this case is well stated as follows :—“If the sureties are not bound for the same thing or do not occupy towards each other the same relative positions, then oue of these results may follow.—1st. The surety paying the debt may have no right to contribution.—2d. A surety first in point of time may have no remedy against one who is subsequent. —3d. Or a subsequent surety may have no remedy against the first.” Bispham’s Principles of Equity, 308.

An application of this doctrine in a case closely analogous to this is found in Harris v. Warner, 13 Wend., 402. In giving the opinion of the court, Nelson, J., said:—“ Here the defendant is resisting a claim against him founded upon the position that he is a co-surety with the plaintiff and bound to contribute. Now upon the principles of the above case (Warner v. Price, 3 Wend., 397,) the plaintiff must show positively or by legal intendment that the defendant has placed himself in that relation to him. The defendant had aright to qualify his contract as he pleased consistently with the rules of law. He refused to sign as co-surety with the other sureties and did sign as surety for the. whole, in which there is certainly nothing unlawful. They had the benefit of his-name and it did the other sureties no harm. I admit that, had the money been collected from the defendant, he could not have recovered from the.other sureties or principals, unless he could have shown what was required in Warner v. Price and what we now require as to him here, a contract to stand in the relation charged. He is not a co-surety as between himself and the other sureties so as to enable them or either of them to obtain contribution.”

In Paul v. Berry, 78 Ill., 158, the court held “ that as between the makers there arises no presumption from the note or the judgment that the first signer or any other number less than the whole is or are to be treated as principal or principals and the others as co-sureties, but it rests in evidence to be introduced aliunde the note and judgment, to determine what relation they sustain towards each other; that the burden is upon the plaintiff to prove that he is surety not only as between himself and another whom he claims to be principal, but also as between himself and another he claims to be a co-surety.”

The right of the defendant to sign this note as he did without thereby rendering himself liable to contribution at the suit of the plaintiff, is supported by many authorities. On account of the practical importance of this question which we have not had occasion to pass upon directly before, we will refer briefly to a few of the leading cases on this subject.

In Craythorne v. Swinburne, 14 Vesey, 160, an early and oft-quoted, case, it appeared, as in this case, that the undertaking of the last surety was without the knowledge or privity of the former sureties and that the money on their contract could not be obtained without the additional signature of a surety. Yet the court held that there was no duty of contribution among the two classes of sureties.

Again in Sayles v. Sims, 73 N. York, 552, a case ah most identical with this, it appeared that a joint and several promissory note executed by B and the plaintiff, was indorsed by the defendant and then negotiated. Subsequently, at the request of the maker and without knowledge that the plaintiff was surety for B, the defendant signed the note as maker, adding to his signature the word “ Surety.” The plaintiff paid the note and brought this action for contribution, claiming that the parties were in fact có-sureties for B. The court held that it appeared both by the circumstances and by the words of the contract that the defendant intended to limit his liability to that of surety for both the other makers, and that the action for contribution could not be maintained. In giving the opinion of the court Church, C. J., held that the word “ surety,” when thus added to a signature, should be construed the same as if the words “ Surety for the above names” had been employed.

In Oldham v. Broom, 28 Ohio St. 53, the court says:— “Where there is no understanding with prior parties, and nothing in the form of the contract to prevent, and no fraud on the rights of the first signer, we think it is clear that another who afterwards signs as an accommodation party may stipulate as to the terms of his liability.”

In Sherman v. Black, 49 Verm., 198, the defendant signed a note with L, who appeared on the face of it to be a principal but was in fact a surety for the defendant. In order to get the note discounted A took it to the plaintiff and asked him “ if he would sign it with him and the defendant,” and the plaintiff signed it, adding to his signature the word “ surety,” supposing from the manner in which he was asked to sign it and from its appearance that he was signing as a surety for both A and the defendant, and regarding them as principals. In an action for contribution the court held that the plaintiff was surety for and not co-surety with the defendant. The court, in giving the opinion, cited the following language of Redfield, C. J., in Keith v. Goodwin 31 Verm, 268:—“When there is anything in the form of the contract or the nature of the transaction to show that the subsequent -sureties did not expect to be holden as co-sureties for all the former signers, they are entitled to full indemnity from each of the others or all jointly.”

In Robertson v. Deatherage, 82 Ill., 511, the court held “ that where a party signs a note as security for one who is himself only a surety for the principal maker, he is not liable in a suit for contribution by the one for whom he signed as security. * * * He did not directly or indirectly agree with the others that he would become a co-surety, nor did he do anything from which it could be reasonably inferred that he so intended.” See also Keith v. Goodwin, 31 Verm., 276; Adams v. Flanagan, 36 id., 400; Bowser v. Rendell, 31 Ind., 134; Bobbitt v. Schryer, 70 id., 517; Melms v. Werdehoff, 14 Wis., 21; Williams v. Glenn, 92 N. Car., 253; McMahon v. Geiger, 73 Mo., 149. We might multiply citations in the same line, but we think we have cited enough to show clearly the law controlling this case and to abundantly justify the judgment of the court below in holding that the defendant is not liable for contribution in this action.

Perhaps before closing we should notice the claim made in the plaintiff’s brief as to the effect of the judgment obtained by the bank against all the signers of the note, including the defendant. It is urged that the defendant is by that judgment concluded from showing in this action the actual relation he sustained to the defendant as a signer of the note in question. We do not so understand the legal effect of that judgment. A judgment against co-defendants creates no liability between them if none before existed. “Parties to a judgment are not bound by it, in a subsequent controversy between each other, unless they were adversary parties in the original action. If A recovers judgment against B and O upon a contract, which judgment is paid by B, the liability of 0 to B in a subsequent action for contribution is still an open question, because as to it no issue was made or tried in the former suit. As between the sev eral defendants therein a joint, judgment establishes nothing but their joint liability to the plaintiff. Which of the defendants should pay the entire debt, or what proportion each should pay in-case each is-partly liable, is still unadjudicated.” Freeman on Judgments, § 23.

There is no error in the judgment appealed from.

In this opinion Fenn and Robinson, Js., concurred.