Deposit Bank v. Peak

62 S.W. 268, 110 Ky. 579, 1901 Ky. LEXIS 111

• Court: Court of Appeals of Kentucky
• Decided: April 19, 1901
• Status: Published

Opinion

Opinion op the court by

JUDGE O’REAR

Reversing.

Appellee was sued, with J. 0. Garriott and E. M. Garriott, upon a promissory note to appellant for $1,132.24, dated August 8, 1892, maturing four months thereafter, with credit indorsed, “Interest paid to Dec. 8, 1893, $90.57.” J. C. Garriott was the principal; the other two, sureties. 'J. C. is a son of E. M. Garriott. E. M. Garriott paid one-half the note after suit, and made no defense. J. C., the principal, is insolvent. Appellee pleaded numerous matters in defense, all of which were disallowed by the court, being held insufficient on demurrer, save three, as follows: (.1) That when appellee signed the note it had been signed by the two Garriotts, and had been accepted by appellant, the bank, and there was therefore no consideration for his signature; (2) that after the maturity of the note the principal, J. C. Garriott, had more than enough money >on deposit with appellant to pay the note, and it failed to apply same on the note, and thereby appellee was discharged; (3) that said principal had placed a lot of notes belonging to him with -appellant for collection, with direcbions to apply the proceeds, when collected, to his debts owing it, including the one sued on, and that this note should be credited by its proper proportion of the amounts collected. Of the other matters attempted to be interposed as defenses by appellant, and disallowed by the circuit court, but two are urged iu argument here for appellee as having been improperly rejected. They are contained in the sixth and -séventh paragraphs of the answer, and are as follows: In paragraph 6 he charges that E. M. Garriott, whose name wTas signed to the note as a surety when he signed it, was not in fact bound on the note, because he had been induced to sign a note of which it was :a renewal by fraudulent misrepresentation of the bank to the effect that the debt was one represented by a note signed by his sons, J. C. and T. E. Garriott, when in fact it was but an overdraft by J. C. Garriott at the appellant bank, of which T. E. Garriott was the cashier. The seventh paragraph contained, in addition to the matter set up in the sixth, the further allegation that appellant sued E. M. Garriott on this note in- the Trimble Circuit Court, and that said E. M. Garriott filed his answer in that suit, pleading the above facts as discharging him from liability on the note sued on, and that thereupon, appellant dismissed its action without prejudice, and that afterwards appellant sued all the parties to the note in Henry county, the appellee being served with summons while there in the official discharge of his duty -as Oommonwealth -attorney in that district, and that -thereafter appellant accepted of E. M. Garriott one-half of said note sued on, and certain persons, who were alleged to be officers of appellant bank, executed to said E. M. Garriott their individual obligation by which they undertook to indemnify him against having any further sum to pay on this, debt. Said paper is in the following words: “Whereas, E. M. Garriott has this day executed to the Deposit Bank of Sulphur his promissory note for seven hundred and twenty-four (§724.63) dollars and sixty-three cents, to pay one-half of a note due to said bank by J. C. Garriott, R. F. Peak, and E. M. Garriott; and, whereas, the bank will not release said E. M. Garriott from the balance of said note: Now, in consideration of the execution of this note to said bank, we bind and obligate ourselves to said E. M. Garriott that, if he is compelled to pay any more of said J. 0. Garriott note, that he will refund and pay to ---the amount that he is required to pay on said note in excess of the amount he has this day paid by the execution of his note for §724.63, which is to be applied on d. G. Garriott, etc., note. Witness our hands this December 8th, 1898. J. T. Adams. Park C. -Smith. T. E. Garriott. G. R. Martin.” It was further alleged that said obligation was the obligation of the plaintiff (appellant), and that by reason of its execution appellant re leased said E. M. Garriott from liability on said note. Other allegations are made, but they are more in the form of argument and legal deduction than a pleading of substantive facts.

On the -trial the evidence for appellee (he, of course, having the burden) in support of the first plea allowed by the court was, in substance, that J. C. Garriott, the principal, being required by the bank to renew the note, procured his father, E. M. Garriott, to sign it with him, telling him that another brother would als'o sign it, but, instead, being in a hurry, he took the note to the bank and delivered it to' the cashier, saying that appellee would sign it, and requesting the cashier to call appellee’s attention to it. Appellee testified that the cashier called him into the bank some time in October or November, and told him that J. C. Garriott had said he would sign that note and presented it to him, and that he did sign it without asking any question, or holding further conversation. This appears to have been some days — at least, some time — after the first names had been signed, but it also appeared that the note bore an earlier date than that of its actual execution, to oorrespond with the date of the maturity of the one for which it was to be in renewal. On the second ground of defense, there was no evidence on appellee’s showing, nor any evidence in fact, that J. C. Garriott ever had on deposit in the bank, after the maturity of the note, a sum as much even as half of the note sued on, or any considerable amount. On the third ground, the only evidence to support it was the testimony of J. 0. Garriott that he had deposited a number of - notes— names, amounts, and dates not recalled, though he gave the names of some of the obligors, and approximated the amounts owing by them — with the bank, as collateral for his indebtedness to the bank; that his recollection was that these notes amounted to from $2,500 to $3,300,— something mure than his indebtedness to the bank. He did not know how much had been collected, nor did he say how much was collectible. On all the evidence, we can not say that there was enough to justify a submission of the case to the jury. The peremptory instruction should have been given, but was overruled. Appellant’s evidence showed conclusively that the note had not been accepted by the bank till signed by appellee, that at no time did J. C. Garriott have any sum of money on deposit in.appellant bank after the maturity of the note approaching as much as half the amount of the note sued on, and that-the notes left as collateral had been collected, so far as collectible, and applied on’ other unsecured debts owing the hank by J. C. (Harriott, upon which they were expressly placed as collateral, and that some few dollars remained, which was placed to his credit on deposit, and that interest on the note was paád by charging it' up to this account. The jury returned a verdict for appellee. In our opinion, there was not sufficient evidence to sustain the verdict, and it is so flagrantly against the weight of the evidence as to appear at first glance to have been given under the influence of prejudice or passion, and should have been set aside.

On the trial appellee was permitted to prove, over appellant’s objection, that appellee was comparatively a poor man, his whole estate subject to execution, being his home in Shelbyville, worth some $2,500 after deducting incumbrances, and perhaps an equity in some, other real property of no great value, all probably acquired since the creation of appellee’s liability, and that E. M. (Harriott was a wealthy man, — that is, was worth, anyhow, from ten to fifteen thousand dollars, — and that the cashier of appellant bank was his son. The only possible theory upon which the foregoing was admitted as relevant was to show that the bank had in fact accepted the note before appellee signed it, and that, therefore, as to appellee, it was without consideration; for it was probably supposed the bank would accept a solvent note without reference to, or wanting for the signature of, an insolvent surety. On the contrary, the effect of the testimony on this line must have had the contrary legal effect; for allowing another to sign after the obligation had become complete might operate to release the surety who had signed, because of the consequent change of the contract between the bank and him, and therefore the evidence would more strongly rebut than support the presumption first supposed. But, to our minds, the most natural effect of this evidence was to lead the attention,of the jury to the consideration of the ethical relation of these parties as among themselves; that is, that it was more just to require the bank, whose cashier was the' brother of the principal, to look to the father of the principal, who was rich and old, and would soon doubtless be distributing his estate among his children, to pay the whole of this debt, rather than to collect, half of it from a justly popular, struggling, poor, and rising young attorney, whose recent preferment marked the esteem in which those trying the case and his other neighbors bore him. The evidence must have been highly prejudicial to appellant, as tending to distract the jury’s attention from the pure legal question involved, to the solution of a sentimental one in its stead.

As from the foregoing it is apparent that the case must be returned to the lower court for a retrial, it is proper to here consider the legal value of the pleas made in paragraphs 6 and- 7 of appellee’s answer, and disallowed by the court. The effect of these pleas is, if allowed, to •permit appellee to plead for his co-surety a defense personal to the latter, and of which he declines, for whatever reason, to avail himself. That appellee could rely on any defense of the principal is without question. Why? Because he has engaged to be answerable only for the legal liability of the principal on the undertaking. Therefore anything that gave the principal legal release is goad as the suretj-’s defense. But is such his liability to his co-surety? The only liabilities to the co-surety, independent of special agreement as between themselves, were not of contract, but are imposed by the law; that is, to divide, in proportion to their original liability, any indemnity received by their suretyship, and any damage necessarily sustained by it; that is, so much of the principal’s debt as they may be required to assume. Daniel Neg. Inst., section 1341. We are of opinion, furthermore, that the matter set up for E. M. Harriott’s defense would not have availed said E. M., because it does mot appear to us that the alleged misrepresentation was of a material fact. That it was the debt of J. C. Harriott which was being secured is oonceded. We can not see that it is material whether that debt was formerly an overdraft or a note. That T. E. Harriott, the cashier, is alleged to have been bound on the original debt as surety, can not be deemed ■a material fact; for it was not alleged that T. E. was to become again bound on the debt if E. M. did not sign the note, or that E. M. executed it in consideration of T. E.’s release, and that J. C. Harriott, the principal, was then insolvent. In other words, the facts pleaded fail to show that either the bank or T. E. Harriott gained anything, or that their alleged position with reference to probable loss on account of "J. C.’s state of solvency was in any wise changed or affected by ithe fact alleged to have been misrepresented to E. M. Harriott. The consideration of E. M. Harriott’s signature was the future forbearance of an overdue draft of his son J. C. Harriott. Whether the form of debt of which this was a renewal had been secured by a personal surety or not does not appear to us to any wise affect the undertaking that E. M. Harriott, the new surety, was assuming. But whether the co-surety, though not legally bound, could by paying the whole debt thereby make the other surety liable to contribute to him one-half, certainly the one about whose liability, as between him and the payee, there was some question may, without legal ground of objection from another surety, pay what would be his own part of the liability, in no wise interfering with or adding to the original liability of his co-surety as contemplated and agreed to by the latter when he signed the paper. And that such surety did so pay can not have prejudiced any right of the surety who had paid nothing. Houch v. Graham, 106 Ind., 195; Bowser v. Rendell, 31 Ind., 128.

So far as the paper executed by Adams and others, and charged to be the act of the bank, is concerned, we are of opinion that it is invalid as a defense to appellee, for at least two reasons: (1) It does pot appear to be the act of the bank, but the act of the parties who signed it, as their individual undertaking; nor is it alleged that the bank had agreed with them, for a consideration, to assume the obligation, or that it authorized them to so obligate it. (2) If it is the act of the bank, and could be so treated, then it appears to be without consideration; for, E. M. Garriott having paid -but one-half of the sum for which he appears legally bound, the. obligee’s agreement, in consideration of such payment, — it being past due, — to release him from the residue, is not of binding force, for there would be no consideration to' support it. From the foregoing it follows that the circuit court did not err in sustaining the demurrers to the paragraphs named, but that it did err in admitting the testimony criticised herein, as well as in not giving the peremptory instruction asked for. The judgment is reversed, and the cause remanded for proceedings consistent herewith.