Wales v. President of the Bank of Michigan

1 Harr. Ch. 308

• Court: Michigan Court of Chancery
• Decided: July 1, 1841
• Status: Published

Opinion

The Chancellor

The grounds taken in support of the demurrer are these:

First. That Mr. Hastings, then President of the bank was acting as the agent of Wales, and not in behalf of the bank.

The question now presented is, upon demurrer, by which the allegations in the bill for the purpose of this decision must be taken to be true.

The allegation is, that the notes which were held as collateral security “were placed by the complainant in the bank with the said President thereof, to be by the said President, Directors and company used, held, collected and applied as before mentioned ; that is, for the purpose of paying the noto of Whitaker, of which Wales was indorser.

It further appears that one of the notes of about $600, so deposited, has been collected, and that the proceeds have not been applied to the payment of the note indorsed by Wales.

That the other note has been given up by the then President of the bank, upon the undertaking of another individual to pay to the bank the amount of Whitaker’s note, upon which Wales was endorser.

Under these allegations uncontradicted, it would seem that these securities have been treated throughout as a part of the security, on which the bank relied for the payment of this note, and that it comes fairly within the scope of the powers of the officers of the bank ; it was one of the most ordinary transactions, to wit, taking security for a debt.

The fact that one of the notes has been collected and the proceeds not applied as was agreed, and that the bank is still proceeding to collect the entire judgment must be fatal to a general demurrer, unless it can be sustained on other grounds.

Second. The .other ground in support of the demurrer is, that this complainant comes too late. That he should have made his defence at law.

The rulo on this subject is very rigid, and should be adhered to. But this seems to me to come within the excepted cases.

The rule laid down in Lansing vs. Eddy, 1 Johns Ch. 51, is stated Chancellor Kent to be, that this court will not relieve against a judgment at law on the ground of its being contrary to equity, unless the defendant below was ignorant of the fact in question, pending the suit, or it could not have been received as a defence. This relief is often also refused where the party has been guilty of negligence.

The allegation here is, that the complainant confidently relied and expected the defendant wotild collect and apply the proceeds of these notes to the payment of the note of Whitaker, on which he was endorser, and did not know or suspect he had any legal defence until after the judgment was rendered, when he for the first time learned that one of the notes had been collected, but the proceeds had not been applied; and that the other had been transferred upon the understanding of a third person to pay this identical note, upon which the judgment is rendered against him as endorser.

The circumstances were well calculated to lull the complainant into security. But for these transactions of the defendants, there was no defence to the note; of these he knew nothing until after the judgment was rendered, the complainant, relying, as he says, that the money would be collected upon the collateral notes to pay off this liability.

The demurrer must be overruled with leave to answer,

Demurrer overruled.