Stickney v. Mohler, Graff & Co.

19 Md. 490, 1863 Md. LEXIS 13

• Court: Court of Appeals of Maryland
• Decided: February 17, 1863
• Status: Published

Opinion

Gqldsboroitgh, J.,

delivered the opinion of this Court:

Henry D. Lawrence, of the city of Baltimore, being desirous of obtaining certain loans from the Chesapeake' Bank, the bank agreed to loan him the sum of fifteen thousand dollars, by discounting for him, from time tn time, promissory notes or bills of exchange drawn by himself, or by others and endorsed by him, to an amount not exceeding at any one time the amount aforesaid. Such: discounts to bo granted at any and all times within two years from the date of the agreement.

To secure the payment of these loans, Lawrence, on the 13th day of May 1855, executed to the bank a mortgage, conveying all the property mentioned therein. The mortgage contains the assent of Lawrence to the passing of a decree by the Superior Court of Baltimore city, or the Circuit Court for Baltimore city, for the sale of the mortgaged property at any time after default shall have been made in payment of the debt secured by the mortgage, or any part thereof, in accordance with the provisions of the Act of 1833, ch. 181.

The bank filed its petition in the Circuit Court, on the 21st day of January 1856, alleging -the facts heretofore stated, and which are set out in the mortgage. That in pursuance of the terms of the mortgage, and upon the faith of the security thereof, the bank discounted, for the use and accommodation of Lawrence, a promissory note made by Moliler, Graff & Co., for 01,560.15, drawn to the order of Lawrence, and endorsed by him, and gave him the net proceeds thereof. That this note, when it matured, was not paid by the makers; that it was regularly protested, and that Lawrence also failed to pay it. Thereafter, the bank filed a supplemental petition, in which it is stated that Mohlcr, Graff & Co. had paid the note re-referred to in the original petition, and b}r an order of Court they had leave to withdraw the note. The bank thereupon filed with their petition three several notes of Lawrence’s, due and owing, amounting to the sum of •08,500, with an affidavit that no part thereof had been paid.'

Upon the original and supplemental petitions of the bank, the Circuit Court passed a decree for the sale of the mortgaged premises, and appointed George H. Williams trustee to soil the property, who sold the same for the amount specified in his report.

The trustee’s report was finally ratified and confirmed, and the cause referred to the auditor to state an account. The auditor, after deducting the expenses of suit and trustee’s commissions, appropriated the fund to the payment of the three notes filed by the bank, and the interest thereon, principal and interest amounting to $8,536.66, which left a balance of $3,513.42 subject to the further order of the Court.

This last named sum is claimed on the one hand by the appellants, Stickney & Co., as second mortgagees, under a mortgage from Lawrence, and on the other hand by Mohler, Graff & Co., as alleged sureties of Lawrence, claiming by subrogation under the mortgage of Lawrence to the Chesapeake Bank,

At the final hearing, the Circuit Court allowed to Mohler, Graff &■ Co. the amount of the note for $1,560.75, and also that for $1,000.75. From this part of the decree the appellants appealed. The Court disallowed the claim of Mohler, Graff & Co. for the note of $825, and from this part of the decree they appealed.

In reviewing the action of the Circuit Court upon these conflicting claims, we deem it proper to examine and decide upon the relation which existed between Henry D. Lawrence and Mohler, Graff & Co., at the time when the last named parties gave to Lawrence their several promissory notes, and which, being endorsed by him, he had discounted in the Chesapeake Bank, and obtained the proceeds thereof.

The proposition insisted On by the appellees, that these were accommodation notes, would meet the approbation of this Court if they were shown to have been executed without equivalent or consideration ; for, in that case, the relation of principal and surety would arise, and the appellees, by their payment of them to the Chesapeake Bank, as the endorsee of Lawrence, would acquire a clear right to be subrogated to that extent to the security of the mortgage from Lawrence to the bank.

But we find, by reference to the supplemental bill filed by the appellees, they admit that as to the note for “$1,560.75, and the note for $1,000.75, they received from Lawrence his notes of even date for the same sums, and payable at the same times respectively” as the notes they loaned to Lawrence.

It is admitted by the parties, that these last mentioned notes were both discounted by the Fells Point Savings Institution, for the appellees, and Lawrence failing to pay them, they were taken up and paid by the apjmllees.

As to the note for $825, alleged to have been loaned by the appellees to Lawrence, and which, with the others, he procured to be discounted in the Chesapeake Bank, it is, in our opinion, conclusively shown by the evidence that Lawrence obtained this note from Mohler, Graff & Co. for value, and that it was a strictly business transaction.

The remaining question for us to determine, as to the other two notes alleged to be loaned by Mohler, Graff & Co..to Lawrence, is, were they accommodations, creating the relation of principal and surety? We cannot so regard them, in view of all the circumstances of this case. We think that the transaction brings it within that class of cases where there is mutual accommodation with specific ex- ■ change; that the appellees exchanged their notes for Lawrence’s notes, and each party was bound to pay his or their own notes, and, in paying them, is not considered as surety for the other. See Byles on Bills, Am. Ed. 1856, pages 364, 365 and 366.

Recurring to the acts of Mohler, Graff & Co., and Lawrence, as confirmatory of the view above expressed,, we find that upon tlie failure of Lawrence to pay his notes discounted in the Fells Point Savings Institution, and after they were paid by the appellees, they so far regarded these notes as their property that they embraced them in their suit against Lawrence, these notes constituting more than one-third of the causes of action on which the judgment was rendered; and that they issued an execution on their judgment, and realized $2,072.77, more than one-third of which was applicable to these notes. And if they failed to receive a full equivalent for their notes given to Lawrence, it was another instance of the vicissitudes of mercantile life, and the loss must be borne by them.

If the appellees were gratified in their application to he regarded as sureties of Lawrence, and subrogated to the rights of the bank under Lawrence’s mortgage, they would be reimbursed not only in full for the three notes discounted in the Chesapeake Bank, but they will also have received the amount of the note of Mason & Son, and nearly f 700 on the two notes of Lawrence, included in their judgment, amounting in the aggregate to upwards of $1,500, for which Lawrence received no equivalent whatever.

Entertaining these views of this case, we are of opinion that the Circuit Court properly disallowed the appellees’ claim for the note of $825, hut erred in allowing the two notes, one for $1,560.75, and the other for $1,000.75; and that the appellants, Stickney and Eeed, are entitled, by virtue of their mortgage, (it embracing the same property as tlie one given to the bank,) to be allowed tlie amount of their mortgage claim, and that the balance arising under the trustee’s sale, and now subject to the further order of the Circuit Court, or so mucb thereof as may be necessary therefor, should be applied to the payment of tlie appellants’ claim.

The decree of the Circuit Court, so far as the same is involved in this appeal, must be reversed, with costs to the appellants, and the canse remanded, that an account may be stated in conformity with the views entertained and expressed by this Court.

(Decided February 17th, 1863.)

Decree reversed, tvith costs to the a/ppellants, and Cause remanded for further proceedings.