Jungk v. Holbrook

49 P. 305, 15 Utah 198, 1897 Utah LEXIS 33

• Court: Utah Supreme Court
• Decided: June 16, 1897
• Docket: No. 774.
• Status: Published

Opinion

Minee, J.

(after stating the facts):

This ease was twice before .the territorial court prior to this appeal. The cases are reported in 9 Utah 49, and 12 Utah 209. Upon each occasion the record discloses Pac. 292. Upon each occasion the record discloses a somewhat dissimilar state of facts. The case now presents a somewhat different state of facts from those presented on the last appeal, so far as appears from the opinion rendered. The first question arises upon the charge of the court as given, and the refusal of the court to charge as requested. In some respects the testimony bearing upon the question involved is somewhat indefinite and unsatisfactory. The jury were the judges of its Aveight and conclusiveness, and found ’ against the plaintiffs. There are sufficient facts and circumstances disclosed in the record from which the jury could infer or find that Jungk, Fabian, and Scott were partners for the purpose of purchasing sheep, and that Jungk and Fabian knew at the time, or were chargeable with notice, that Scott was a partner with Cropper and Eeed, or at least interested with them in the contracts for the purchase and sale of sheep to them; that Cropper, Eeed, and Scott were partners in the purchase and sale of sheep to Jungk and Fabian; that Cropper and Eeed knew, or were chargeable with notice, that Scott' was a partner or interested in the contract for the purchase of sheep with Jungk and Fabian; that defendants Holbrook and Huggins were wholly ignorant of the double relation existing between Scott and the two firms at the time they signed the guaranty contract and the notes given in pursuance of it, and ■ would - not have executed the contract or indorsed the notes had the true state of facts been made known to them by either firm; that the concealment of these facts and circumstances immediately affected the liability of the sureties; that Cropper and Eeed and Jungk and Fabian fraudulently withheld .from the sureties the true state of facts existing between them and Scott when the indorsements were made; that each of these firms knew that Scott was their partner in the transactions with the other firm, and that the sureties were making the indorsement in ignorance of the relation; that Jungk and Fabian sent Scott, as their agent and representative, to obtain the signatures of Holbrook and Duggins to the contract; that Scott was their partner at the time; that Jungk and Fabian knew, or were chargeable with notice, that Cropper, Reed, and Scott owned sheep together at Oasis, and had them there when Fabian was present; that Reed and Cropper and Jungk and Fabian, knowing the facts, induced the sureties to sign the notes, and fraudulently withheld from .them the double relation of Scott, as affecting their interest and liability.

If, in obtaining the signatures of these defendants to the contract of suretyship, or as indorsers of the notes made in continuation of their supposed liability, there was any fraudulent concealment on the part of Cropper and Reed and Jungk and Fabian, or either of said firms, of any fact or circumstance within their knowledge, or concerning which they were reasonably chargeable with notice, which materially affected and increased the liability and responsibility of Holbrook and Duggins as sureties or indorsers in those transactions in which they were sureties,, and operated to their prejudice, then the sureties should be discharged. “It has been held that the mere non-communication by the creditor to the surety of material facts within the knowledge of the creditor which the surety should know, although not willful or intentional on the part of the creditor, or with a view to advantage to himself, will discharge the surety.” The fraud upon the sureties consists in the situation in which they were placed by the conduct of the other parties, and not on what was passing in their minds, not expressed, but concealed. Upon this subject, Brandt on Surety-ship (section 420) says: “It has been held that 'one who becomes surety for another must ordinarily be presumed to do so upon the belief that the transaction between the principal parties is one occurring in the usual course of business of that description, subjecting him only to the ordinary risks attending it; and the party to whom he becomes a surety must be presumed to know that such will be his understanding, and that he will act upon it unless he is informed that there are extraordinary circumstances affecting the risk. To receive a surety known to be acting upon the belief that there are no unusual circumstances by which his risks will be materially increased, well knowing that there are such circumstances, and having an opportunity to make them known, and withholding them, must be regarded as a legal fraud, by which the surety will be relieved from his contract.' ” It is also held that, in order to discharge the surety, the undisclosed information should relate to business which is the subject of suretyship. Story says: “The contract of surety imports entire good faith and confidence between the parties in regal'd to the whole transaction. Any concealment of material facts, or any express or implied misrepresentation of such facts, or any undue advantage taken of the surety by the creditor, either by surprise or by withholding proper information, will undoubtedly furnish a sufficient ground to invalidate the contract. Upon the same ground, the creditor is, in all subsequent transactions with the debtor, bound to equal good faith to the surety.” Story Eq. Jur. § 324; Bank v. Cooper, 36 Me. 179; Brandt Sur. §§ 419-421; Comstock v. Gage, 91 Ill. 328; Bank v. Stevens, 39 Me. 532; Jungk v. Reed, 9 Utah 49; Peck v. Durrett, 9 Dana 486; Pidcock v. Bishop, 1 Law Lib. 87; Doughty v. Savage, 28 Conn. 146; Hamilton v. Mathews, 10 Clark & F. 934; Warren v. Branch, 15 W. Va. 21.

It is said that that “test as to whether the disclosure should be voluntarily made is whether there is a contract between the debtor and creditor to the effect that his position shall be a different one from that which tbe surety might expect.” Hamilton v. Watson, 12 Clark & F. 109.

These sureties did not know that Scott was a partner of each firm on the contract concerning which they were sureties, and did not indorse with the knowledge that they were becoming liable for the acts of Scott in the manipulation of the business of the several firms. They signed as sureties for Cropper and Reed, relying upon their integrity, and not as sureties for Cropper, Reed, and Scott. When they signed, they were not informed that a member of both firms had laid plans with each, by which the sureties should be robbed, and Cropper and Reed ruined, for the benefit of one member of the several firms. Nor did the sureties know that Cropper and Reed and Jungk and Fabian were either passive or active agents in such resulting’ dishonesty. Neither did the sureties know that Jungk and Fabian knew that Scott was interested with Cropper and Reed in the sale of sheep, nor that Cropper and Reed knew that Scott was interested with Jungk and Fabian in the purchase of sheep. If a material fact connected with the contract of suretyship, and directly affecting the sureties’ liability, which might influence the sureties in entering into the contract, is concealed from the sureties, or, if knowing the fact, such information is purposely concealed from the sureties, in the interest of the creditor, such concealment, though no inquiry is made by the sureties, amounts to a fraud upon the sureties, and would discharge them from liability. Under all the facts and circumstances shown for the consideration of the jury, they have found the facts against the appellants. We find no> reversible error in the instructions of the court, nor is there any error in refusing to give the instructions asked by the plaintiffs.

Prior to tbe trial, plaintiffs moved tbe district court for Utab county for an order transferring said cause for trial to Salt Lake county. Tbe motion was based upon an affidavit showing that plaintiffs owned tbe notes, and bad resided in Salt Lake county since they were given, and that they were payable at Salt Lake. Tbe motion was overruled, and an exception taken. Tbe motion is based on section 7 of article 24, and section 5 of article . 8, of the constitution. Plaintiffs resided in Salt Lake City when they commenced this action in tbe First district court in Utab county, January 10, 1891. This case had been tried in that county three times prior to tbe last trial, which occurred October 9, 1896. Tbe defendants resided in Provo, Utab county. Section 5 of article 8 of tbe constitution provides, among other things, that all civil and criminal business arising in any county must be tried in such county, unless a change of venue be taken, in such cases as may be provided by law. Section 7 of article 24 of tbe constitution provides, among other things, that all actions and cases pending in tbe district and supreme courts of tbe territory at tbe time tbe state is admitted into tbe Union shall, except as otherwise provided, be transferred to tbe supreme court and district courts of tbe state. Section 2 of article 24 of tbe constitution provides that all laws of tbe territory now in force, and not repugnant to the constitution, shall remain in force until they expire of their own limitation, or are altered or repealed by tbe legislature. Section 5 of article 8 of tbe constitution is only prospective in its operatioAs, and therefore does not apply to actions which were commenced and pending in tbe territorial district courts when the constitution went into effect. A constitutional provision should not be construed with a retrospective operation, unless that is tbe unmistakable inten tion of tbe words used. Black, Const. Law, p. 70; End. Interp. St. § 506; Watt v. Wright, 66 Cal. 202; Gurnee v. Superior Court, 58 Cal. 88; People v. County Com’rs of Grand Co., 6 Colo. 204; Lehigh Iron Co. v. Lower Macungie Tp., 81 Pa. St. 484.

Section 2 of article 24 of the constitution continues in force, under the state, such territorial laws as were not repugnant to it, and thereby malíes them state laws. This court so held in Whipple v. Henderson, 13 Utah 374; Pleasant Val. Coal Co. v. Board of Com’rs, 15 Utah 97. Among the laws of the territory then in force with reference to the place of trial were sections 3193 to 3201, Comp. Laws Utah 1888, which were amended (Sess. Laws 1896, p. 90) by making these sections conform to the new condition of things under the constitution. The territorial act was substantially re-enacted after striking out the words “judicial district,” and substituting the word “county.” The act was approved and took effect February 17, 1896, before this motion was made. This act provides where cases shall be commenced and tried, and when and where they may be removed for trial. Section 3196 provides that “in all other cases the action must be tried in the county in which the defendants, or some of them, reside at the commencement of +he action.” When this action was commenced, the plaintiffs resided in Salt Lake, and the defendants in Utah, county. The First district formerly comprised-Utah and several other counties. Under the new constitution, Utah county is made distinct by itself. The action was brought in pursuance of law in the proper county under the statute as it then existed. This statute was continued in force until changed by the act of 1896. We are of the opinion that the district court of Utah county properly assumed jurisdiction in this case. We find no reversible error in the proceedings. The judgment of the district court is affirmed, with costs.

Zane, C. J., concurs. Hart, District Judge, concurs in the result.