Cox v. Hagan

100 S.E. 666, 125 Va. 656, 1919 Va. LEXIS 56

• Court: Supreme Court of Virginia
• Decided: September 17, 1919
• Status: Published

Opinion

Sims, J.,

after making the foregoing statement, delivered’ the following opinion of the court:

The material question? raised by the assignments of error will be disposed of in their order as stated below.

[1, 2] 1. Was there error in the action of the court below in sustaining the general objection of the plaintiff to special plea No. 1 set forth in the statement preceding this •opinion ?

This question must be answered in the negative.

The plea is, in substance, that although the signatures of the plaintiffs in érror appear on the note in said suit as comakers, they were not in fact principal obligors, but sureties only for certain co-makers of the note, the latter being in truth the principal obligors. The plea, however, does not allege that the plaintiff had any notice of such suretyship relation of the parties before he indorsed the note. Now, while as between themselves, parol evidence is admissible to show the actual relations to one another of apparent joint-makers of a note, as that the relationship of surety in truth exists as to one or more o'f them (8 Cyc. [K], pp. 262-3; 8 C. J., sec. 106, p. 70), yet such evidence is admissible only against parties having knowledge of such' relationship .at the time of the entering into the contract by them. (Idem., p. 264.) “If a person sign a note as maker, but is, in fact, a surety, and there is nothing on the face of the note to show his true relation, he will be treated and considered as a principal, with respect to all who have no notice of the suretyship.” 3 R. C. L., sec. 354, p. 1138. See also 8 C. J., sec. 105, p. 69-70.

[3] The plaintiff was the last indorser on the note, other than the payees and indorsees thereof named therein, and paid and took up the note upon default as set forth in the statement preceding this opinion. “* * * an in-dorser of a note who, upon the default of the maker, satisfies the demands of the indorsee, and takes up the note, becomes the lawful holder and may enforce the terms of the contract against all prior indorsers * * * as well as against the maker * * 3 R. C. L., sec. 337, p. 1121. It is, therefore, immaterial, so far as the plaintiff’s right of action was concerned, whether the plaintiffs in error were makers or indorsers of or sureties on the note. As to the plaintiff they were all principal obligors, unless indeed there had been an agreement between themselves and the plaintiff that their obligation should be otherwise, which the plea, as aforesaid, does not allege. Hence, the plea under consideration interposed no valid defense to the action, and for that reason there was no error in the action of the court below in refusing to allow it to be filed.

[4] 2. Was there error in the action of the court below in sustaining the general objection of the plaintiff to special plea No. 2 set forth in the statement preceding this opinion?

This question must be answered in the negative for several reasons.-

(a) The plea is not verified by affidavit as required by the statute under which it was filed. See section 3299 of the Code. Watkins v. Hopkins, 13 Gratt. (54 Va.) 743.

(b) The plea does not allege “the amount to which he” (the defendant) “is entitled by reason of the matters contained in the plea,” as is required by such statute. Tyson v. Williamson, 96 Va. 636, 32 S. E. 42; Richmond Ice Co. v. Crystal Ice Co., 99 Va. 239, 37 S. E. 851.

[5] (c) The plea is bad because it violates the rule against the allegation of mere conclusions of law and does not allege the facts from which those conclusions are sought to be drawn with sufficient detail and certainty to apprise the opposite party of the nature of the defense and to enable the court upon the facts admitted or found to decide whether the matter relied on constituted a valid claim to the relief sought. Burtners v. Keran, 24 Gratt. (65 Va.) 42; Watkins v. Hopkins, supra, 13 Gratt. (54 Va.) 743.

[6] 3. Was there error in the action of the court below in sustaining the general objection of the plaintiff to spe- • ciai plea No. 3 sét forth in the statement preceding this ' opinion?

If the plea here under consideration means to allege that the plaintiff was entitled to recover only such costs of collection as he in fact paid and was legally bound to pay his own attorney, that defense could have been as Well made under a plea of the general issue as by special plea. There was, therefore, in such case no error in the action of the court in refusing to allow such special plea to be filed.

[7] If the plea means to allege that the plaintiff was entitled to recover only such costs of collection or attorney’s fee as he paid and was legally bound to pay to the payee or indorsees of the note who held it at the time the plaintiff paid the note, this position is not sustained by the provisions of the note aforesaid on the subject. Such provisions constitute the terms of the contract on that subject which the plaintiff as lawful holder of the note after its payment by him had the right to enforce against the makers and all prior indorsers of the note. The note expressly provides that: “The makers and indorsers of this note * * * agree to pay costs of collection or ten per cent attorney’s fee in case payment shall not be made at maturity.” Therefore, although the plaintiff may not have paid the payees or indorsees of the note any costs of collection or attorney’s fee, yet if by reason of the default of the makers of or other prior parties to the obligation, the plaintiff after the payment of it by him, aforesaid, had to place the note in the hands of an attorney for collection, as he alleges in the notice for judgment was done, he was entitled to recover judgment against the makers of and prior parties to the obligation for such an amount of expense incurred by him of costs of collection or attorney’s fee as the contract when properly construed provides for. For this reason also the court below was right in refusing to allow the plea under consideration to be filed.

4. Was there error in the action of the court below in sustaining the general objection of the plaintiff to special plea No. 4 set forth in the statement preceding this opinion?

[8-10] This plea is, in substance, the same as special plea No. 1, above mentioned, except that it alleges that the plaintiff knew of the suretyship alleged at the time the note was executed, and that the plaintiffs in error were in truth merely indorsers of the note. While there is much conflict among the authorities on the subject, the prevailing rule seems to be that as between the parties liable upon a note having knowledge of their true relations one to another, parol evidence is admissible to show such true relationship regardless of where the signatures appear on the note, whether as maker or indorsers, and regardless of the order of sequence of the indorsements. (8 Cyc. [K], pp. 262-8; 3 R. C. L., sec. 338, p. 1123). And by statute with us (subsection 68 of section 2841-a of the negotiable instrument law), it is provided as follows: “As respects one another, indorsers are liable prima facie- in the order in which they indorse; but evidence is admissible to show that as between or among themselves they have agreed otherwise.” The plea under consideration would, therefore, have been a good plea if it had contained the further allegation that the plaintiff in the court below and the plaintiffs in error had agreed at the time of their execution or indorsement of the note that they should be jointly liable as sureties for the true makers and principal obligors, or allegations to that effect. 'The plea, however, contains no such allegation, and it is fatally defective because of the lack of such allegation. The plea does allege that the “plaintiff knew at the time that these defendants were only * * * jointly liable with "him,” and that “the plaintiff is only entitled to recover the pro rata amount due by these defendants as indorsers, because each indorser assumes the same liability as every other;” but this is a mere conclusion of law, and an erroneous one. The long and universally established rule at common law is that “* * * the liability of indorsers, in the absence of special agreement, is successive and not joint” (3 R. C. L., sec. 349, p. 1135). This rule has become a part of our statute law, as aforesaid (subsection 68 of section 2841-a of the Cbde). It appears from the note in suit, as aforesaid, that the plaintiff is the last in-dorser thereof, except the payees named in the note. There is no allegation in the plea under consideration that the plaintiff endorsed the note prior to the signing of it by the plaintiffs in error. Hence, taking the allegation of the plea to be true that the plaintiffs in error were mere in-dorsers of the note, still on the face of the record they were prior endorsers to the plaintiff. And in the absence of any allegation in the plea of an actual agreement between the parties that their liability should be otherwise, the' prima facie order of liability aforesaid, now fixed by statute with us, negatives the conclusion of the pléa and renders it bad.

[11] 5. Was there error in the action of the court below in entering the judgment against the plaintiffs in error by a nunc pro tunc order?

This question must be answered in the affirmative.

As laid down by the authorities on the subject which are relied on by the plaintiff in the court below: “There are two classes of cases in which it has been held proper to enter judgments and decrees nunc pro tunc. The first class embraces those cases in which the suitors have done all in their power to place the cause in a condition to be decided by the court, but. in which, owing to the delay of the court, no final judgment has been entered. The second class embraces those cases in which judgments, though pronounced by the court, have, from accident or mistake of the officers of the court, never been entered on the records of the court.” Note in 4 Am. St. Rep., at pp. 828-830. See, to same effect, Freeman on Judgments (4th ed.), sec. 57.

[12] The order in the instant case must be sustained, if at all, as having been entered in the first class of cases above mentioned. In such class of cases the court uses the papers and proceedings and evidence in the case, as the same existed at the time to which the order or decree is proposd to relate back, as the basis of its action, and acts on such record at the subsequent time'when the motion for the nunc pro tunc order or decree is made. The court enters “now for then” such order or decree as it finds from such record the party moving for the nunc pro tune order was “then” entitled to.

[13,14] It will be at once perceived that such practice, if generally pursued, would greatly tend to destroy that confidence which is, and of right ought to be, reposed in the verity of judgments. Accordingly, the authorities hold that “the power to affect their operation or change their import by judgment or orders nunc pro tunc should be exercised with caution and circumspection” (15 R. C. L., sec. 63, p. 622), and we find it laid down by tlie very authorities relied on by the plaintiff, that “nó case could be ranked among the first class in which the delay to render or enter judgment' was imputable to any negligence or even misapprehension of the parties” (Freeman on Judgments, sec: 57); and that the practice of- entering such judgments in the first class of cases was confined “chiefly, if not exclusively, to those cases where, after trial and submission of a case, one of the parties died * * *.” That “as the suitor, who brought his action on to trial and caused it to be heard and submitted, had manifestly been guilty of no laehes, the court protected him from any prejudice he might suffer by the death of his adversary after such submission, and instead of permitting the' action to abate, directed the judgment to be given effect, of necessity, as far back as the day of submission" (Idem., sec. 57). In the-note in 4 Am. St. Rep., supra,., at p. 830, it is also said, it is true, that while the cases in which mine pro tunc judgments are ordered without any judgment actually rendered by the c-ourt nearly always arise from the death of one of the parties, yet “they are not always restricted to that cause." But the only other character of cases cited in which such a judgment has been entered is that of Springfield v. Worcester, 2 Cush. (Mass.) 52, where “while judgment was suspended to permit a hearing of reserved questions of law, the statute upon which the action was brought was repealed without a saving clause. * * * Under these circumstances the court ordered a judgment to be entered as of a day prior to the date of the repeal of the statute.” But the better rule seems to be that in such case the court had no jurisdiction to enter such a nunc pro tunc order. 15 R. C. L., sec. 63, p. 622. And as to the need of nunc pro tunc .judgments or decrees to protect suitors from prejudice they might otherwise suffer by the death of adversaries, that was met at common law by the fiction of making judgments bear date as of the first day of the term, if the case was so matured on docket that judgment might have been entered on that day, upon the theory that the entire term of court is in contemplation of law but one day. 15 R. C. L., sec. 57, pp. 617-618. This fiction of the law has been long regulated by statute with us. Sec. 3567 of the Code; 2 Barton’s Chy. Pr., p. 917-918, 928; Burks’ Pl. & Pr., p. 607. Prior to the amendment of section 3567, aforesaid, by Acts of 1897-8, p. 507 (subject to certain statutory provisions concerning the docketing thereof in order to affect purchasers for valuable consideration without notice) the lien of a judgment entered in court in a cause on docket and so matured that judgment might have been rendered on the first day of the term, although entered after the commencement of the term, related back to the first day of the term. But since such amendment, such statute has provided that: “The lien of a judgment shall in no case relate back to a day or other time prior to that on or at which the judgment was rendered.” See 2 Pollard’s Code 1904, section 3567, and note, and authorities there cited. In view of the history of the subject and of the last-mentioned statutory provision, we are of opinion that, whatever may be true of other jurisdictions, with us the courts no longer possess the power to enter nunc pro tunc judgments in cases falling within the first class, but only possess such power in cases falling within the second class, above mentioned. That is to say, we are of opinion that with us “the office of a judgment nunc pro tunc is to record some act of the court done at a former time which was not then carried into the record and the power of the court to make such entries is restricted to placing upon the record evidence of judicial action which has been actually taken. It may be used to make the record speak the truth, but not to'make it speak what it did not speak, but ought to have spoken. If the court has not rendered a judgment that it might or should have rendered * * * it has no power to remedy these errors or omissions by ordering the entry nunc pro tunc of a proper judgment. * * * In all cases” (in this State, certainly since said statute of the Acts of 1897-8 was enacted) “the exercise of the power to enter judgments nunc pro tunc presupposed the actual rendition of a judgment, and a mere right to a judgment will not furnish the basis for such an entry. 15 R. C. L., sec. 64, pp. 622-3.

The judgment under review was, therefore, erroneous, and must be reversed.

[15] This being the only error we find in the record, it might be cured by entry of the same judgment by us to take effect as of the date on which it was in fact entered by the court below. But in view of the fact that the plaintiffs in error claim to have several substantial defenses attempted to be set up by the special pleas aforesaid and of the fact that the defects in such pleas are formal, we feel that the plaintiffs in error should have an opportunity to amend such pleas and thus properly present such defenses to the plaintiff’s demand, should they be so advised. We shall, therefore, grant a new trial of the case.

Having reached the above conclusion, it becomes necessary for us to refer to .certain questions in connection with the attorney’s fee provision in the note in suit, which are raised in the brief for the plaintiff (the defendant in error), and also to pass upon the proper construction which should be given to the provisions in the note in suit on the subject of the costs of collection and the attorney’s fee therein mentioned about which question is also raised in the brief for plaintiff, since both subjects are likely to give rise to the same questions on a new trial.

[16] 6. The first questions next above referred to are whether the defense, that the amount claimed by a plaintiff as attorney’s fee under the obligation sued on and provided for therein is unreasonable in amount or unconscionable, can be made by special plea under section 3299 of the Code? And if so, how the issue made by the plea should be tried, whether by the court without or with a jury?

Section 3299, aforesaid, so far as material, provides as follows:

“In any action on a contract, the defendant may file a plea alleging any such failure in the consideration of the contract or fraud in its procurement, or any such breach, of any warranty to him of the title or the soundness of personal property, for the price or value thereof he entered into the contract, or any other matter as would entitle bim either to recover damages at law from the plaintiff * * * or to relief in equity, in whole or in part, against the obligation of the contract; * :i: * and * * * alleging the amount to which he is entitled by reason of the matters contained in the plea. Every such plea shall be verified by' affidavit.”

We are of opinion that the defense in question can be made by such plea, although there is no necessity therefor. Where the contract in suit is not under seal and the defendant seeks no recovery of any excess over the plaintiff’s demand, the defense can be set up under the general issue of non-assumpsit, if the action be one in assumpsit (Burks’ Pl. & Pr., sec. 739, pp. 448-452), and the issue made by a general denial of the facts alleged in the notice in the case in judgment is not less comprehensive.

[17-19] The connection of the language of the statute is such that the words “or any other matter” do not refer to matters of the same kind previously mentioned in the statute except in one particular, namely, in the particular that they must contain the feature of being “matters directly connected with and injuries growing out of the contract sued on.” American Mang. Co. v. Va. Mang. Co., 91 Va. 272, at pp. 281-2, 21 S. E. 466, at p. 467. As plainly set forth in the statute itself they are “any other matter as would entitle him” (the defendant) “to recover damages at law from the plaintiff * * * or to relief in equity, in whole or in part, against the obligation of the contract.”(Italics supplied.) That the matters allowed to be pleaded under such statute must be such as would entitle the defendant to the recovery or relief mentioned against the obligation of the contract sued on is, plainly, the only restrictive meaning which is imposed by the ejusdem generis rule, when that rule is properly applied to the words “any other matter.” Such rule, as said by this court in Commonwealth v. Werth, 116 Va., at p. 607, 82 S. E., at p. 695, Ann. Cas. 1916 D, 1263, “is only a rule of construction and intended to throw light on a statute of otherwise doubtful import and has no application where the language of the statute plainly manifests a contrary purpose. In such case the obvious intention of the legislature must be given effect rather than defeated by the misapplication of the rule.” The language of the statute under consideration, beginning with the words “or any other matter,”- etc., was not in the statute when the preceding portion of it was first enacted. Such language was added by act of March, 1873, (Acts 1872-3, p. 196), so that the purpose of the statute could be fully accomplished. That purpose plainly is to allow all matters in controversy between the plaintiff and defendant arising out of the same cause of action — i. e., all matters of recoupment — to be disposed of in one action at law, so as to avoid the necessity of a separate suit having to be brought by the defendant, whether at law or in equity, to determine any such matter. American Mang. Co. v. Va. Mang. Co., supra (91 Va. 272, at p. 282, 21 S. E. 466) ; 1 Barton’s Law Pr., p. 514, et seq.; 4 Minor’s Inst., 706, et seq.

[20] If defense by way of special plea under section 3299 of the Code be adopted, the plea should allege the amount to the extent of which the defendant claims the attorney’s fee in question is unreasonable or unconscionable, and should also allege the facts on which such claim is based with sufficient detail and certainty to apprise the plaintiff of the nature of the defense and to enable the court on the facts being found or admitted to decide whether the matter relied on constitutes a valid claim to the relief sought. And the plea should be verified by affidavit.

• As to the procedure upon the plea: The procedure should be the same as upon a plea under such statute of any other matter pleadable thereunder. If the issue upon the plea is such that the facts pleaded are admitted, the sufficiency of the defense, including the determination of what amount should be recovered as an attorney’s fee, is for the determination of the judge. If the issue upon the plea is one of fact, that issue must be tried by jury, subject to such proper instruction as may be given by the judge, including instruction as to what amount may be recovered as an attorney’s fee under such a state of facts as may be found by the jury to exist, unless all matters of fact as well as of law are submitted for decision to the judge under the statute in such case made and provided or by consent of parties, in which latter case the determination of the amount recoverable as a reasonable attorney’s fee, as well as of the facts in the case, .is for the judge.

[21] In other words, in every case the facts being admitted or found, the determination of what may be recovered as'an attorney’s fee under a provision in the obligation in suit creating the obligation of payment of such a fee, is for the judge of the trial court in an action at law, and, of course, is also for such judge where the question arises in a suit in equity.

[22] Further, the judge, upon the issue being made as to what amount is recoverable under the attorney’s fee provision, aforesaid, should allow only such an amount as may be reasonable, considering the-services of the attorney actually performed in and about the collection of the debt in view of the customary charges of the profession in the locality for such services, not exceeding the maximum amount stipulated in the obligation. And where the services of an attorney are not in fact employed by the holder of the obligation, and the latter party seeks such recovery, no recovery should be allowed of any attorney’s fee. Bank v. Wood, 125 Tenn. 6, 140 S. W. 31; 2 Va. Law Reg. (N. S.) 321; Triplett v. Bank, 121 Va. 189, 92 S. E. 897; Colley v. Summers, etc., Co., 119 Va. 439, 89 S. E. 906, Ann. Cas. 1917-D, 375.

The question remaining for our consideration as likely to arise upon a new trial of the case, is as follows:

[23, 24] 7. What is the proper construction of the obligation in the note in suit on the subject of the attorney’s fee?

The obligation of the note is in the following form: “The makers and indorsers of this note hereby * *. * agree to pay costs of collection or ten per cent attorney’s fee in case payment shall not be made at maturity.” (Italics supplied.)

. “Costs of collection” refers not to costs of suit, which are recoverable by law, but to the “attorney’s fee” for services in making or attempting to make collection. 3 R. C. L., sec. 83, pp. 895-6. The proper construction of the provision in the note under consideration, therefore, is.that the makers and indorsers of the note agreed to pay the lawful holder thereof such reasonable attorney’s fee as such holder may actually incur for services of attorney in making collection thereof, not exceeding the ten per cent maximum stipulated, payment of the note not having been made by the former in accordance with their obligation. Such an agreement is the same in substance as if it had been to pay such reasonable attorney’s fee for collection actually incurred by the lawful holder of the note, up to but not exceeding 10 per cent of the amount of the debt due to the holder of the note, principal and interest, in case of nonpayment of the note, as aforesaid, at maturity. The rule in this State is, in effect, that such a contract is valid and enforceable to the extent of a reasonable attorney’s fee, incurred as aforesaid, not exceeding the percentage named in the note. Colley v. Summers, etc., Co., supra, 119 Va. 439, 89 S. E. 906, Ann. Cas. 1917 D, 375; Triplett v. Bank, supra, 121 Va. 189, 92 S. E. 897.

Because of the error of the court below in entering the judgment under review nunc pro tunc, the same will be set aside and annulled, with leave to the plaintiffs in error to amend their pleadings or to plead anew, and a new trial may be had by the plaintiffs in error, if they are so advised, not in conflict with the views expressed in this opinion.

Reversed and, remanded.