Warren v. Branch

15 W. Va. 21, 1879 W. Va. LEXIS 14
CourtWest Virginia Supreme Court
DecidedApril 26, 1879
StatusPublished
Cited by17 cases

This text of 15 W. Va. 21 (Warren v. Branch) is published on Counsel Stack Legal Research, covering West Virginia Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Warren v. Branch, 15 W. Va. 21, 1879 W. Va. LEXIS 14 (W. Va. 1879).

Opinion

Green, PRESIDENT,

delivered the opinion of the Court:

The question presented by the record in this case is : What misrepresentations or failures to disclose facts and circumstances by a creditor will release a security from [27]*27liis obligation to pay a debt ? When with the knowledge and assent of the creditor, there is a misrepresentation' with regard to a material fact, which, had it been known, might reasonably have prevented the security from entering into his contract of suretyship, such contract will not be binding on the surety, though such misrepresentation was not made with a fraudulent purpose. As for instance, if a loan of £2,600 be made with the understanding that an old debt of £900 is to be paid out of it, and security is given for the £2,600 under the false impression on the mind of the security that this £900 has already been paid, produced by reading a mortgage to him in which it is recited that this old debt of £900 had been paid, the contract of the security will thereby be rendered invalid. The fact that the £900 had not been paid as stated, but was to be paid out of the loan, might, if known, have reasonably prevented the security from signing the note; and this misstatement renders the contract void as to him. See Stone v. Compton, 5 Bing. N. C. 142, 35 E. C. L. 57.

So in Willis v. Willis, 17 Sim. 218, Arthur Willis in consideration of a conveyance to his principal of certain property free from all except certain specified in-cumbrances became his surety. It turned out that the property was subject to another incumbrance not specified, which the grantor had at the time forgotten; and this incumbrance was unknown to the surety. This misrepresentation it was held rendered the contract’ invalid as to the security.

In Cooper v. Joel, 1 DeG., F. & J. 240, (62 Eng. Ch. R. 240,) a surety gave a written guarantee for the payment of several judgments, the creditors consenting, as they supposed that they had a right to do, to postpone the sale of the debtor’s property. They had no right to give such consent without the concurrence of a third party; and the sale was made. It was held that the surety was not bound by this guarantee.

Sometimes the law has been laid down much stronger.

[28]*28Thus in Rawlton v. Matthews, 10 Cl. & Fin. 934, Hicks, who had been the agent of the firm of Matthews & Leonard, upon the dissolution of the firm was again appointed their agent on giving his brother and E. Rawlton as security for the faithful performance of his duty. He having mis-approparited funds which came into his hands, his surety, E. Rawlton, asked to have his suretyship held void, alleging that Matthews & Leonard had fraudulently suppressed the fact that, when formerly their agent, he had been guilty of gross irregularities and owed a balance to them on this former agency and was untrustworthy to their knowledge. An issue was directed to be tried, “whether E. Rawlton was induced to subscribe the bond by undue concealment or deception on the part of Matthews & Leonard.” The judge on the trial charged the jury : “That under this issue the concealment must be first of things known to Matthews & Leonard, or which they had strong and grave grounds to suspect ; secondly, that the concealment being undue must be wilful and intentional, with a view to the advantage they were thereby to receive.” Upon appeal the House of Lords held this charge to be erroneous. In delivering his opinion Lord Campbell says: “If the defendants had facts within their knowledge, which it was material the surety should be acquainted with, and which the defendants did not disclose, in my opinion the concealment of those facts, the undue concealment of those facts, discharges the security; and whether they concealed those facts from one motive or another I apprehend is wholly immaterial.” And again : “The liability of a surety must depend upon the situation in which he is placed, upon the knowledge which is communicated to him of the facts of the case, and not upon what was passing in the mind of the other party, or.the motive of the other party.” Lord Cottenham however bases his opinion in this case on much narrower grounds. He says: “It has not been contended, and it is impossible to contend after what Lord Eldon lays down in the case of Smith v. [29]*29The Bank of Scotland, 1 Dow 272, 292 et seq.; S. C. 7 Shaw 244, 248, that a case may not existin which a mere non-communication would invalidate a bond of surety-ship.” And again: “The learned judge in this case lays it down disrinctly, that the concealment, to be undue, must be wilful and intentional with a view to the advantage they were thereby to receive. In my opinion there may be a case of improper concealment or non-communication of facts which ought to be communicated, which would affect the situation of parties, even if it were not wilful and intentional and with a view to the advantage the parties were to receive.”

The previous authorities, it seems to me, do not sustain the broad position of Lord Campbell. It is true that in the case of Pidcock v. Bishop, 3 B. & C. 605 (10 E. C. L. 197), it was decided, that when “it was agreed between the vendors and vendees of goods that the latter should pay ten shillings per ton beyond the market-price, which sum was to be applied in liquidation of an old debt due one of the vendors, and the payinent of the goods was guaranteed by a third person, but the bargain between the parties was not communicated to the surety, that this was a fraud on the surety, and rendered the guarantee void.” In this case, though the vendee had some time before this purchase become a bankrupt, and the ten shillings per ton was to be applied to the payment of an old debt due one of the vendors before his bankruptcy, this conduct of the vendors amounted, as the opinions of the judges show, to a fraud on the security. The controlling motive of one of the vendors was to secure the payment of a debt which he could not otherwise collect; and if the facts had been made known to the security it was highly probable he would have declined to give the guarantee. His object in going the security was to aid his friend in procuring goods to engage in business anew, and not to pay his old debts, from the payment of which he had been discharged as a bankrupt.

[30]*30In Middleton v. Lord Onslow, 1 P. Wms., most of the 'creditors of a party signed a deed of composition, agreeing to take seven shillings and six pence on the pound on their debts and discharge the debtor, the deed providing that it should be void unless executed by all the creditors. Some of them took bonds secretly for the payment of the balance of their debts át a future day. The court ordered these bonds to be surrendered, the court holding that the underhand dealings of these creditors was a fraud. This action of the court was evidently based on the ground that there was in these dealings a fraudulent purpose on the part of these creditors.

Other eases might be referred to; but there is, I think,' no case which sustains the position taken by Lord Campbell in Rawlton v. Matthews, 10 Cl. & Fin. 934, that the intent of the creditor in not communicating the facts to the surety is in all cases wholly immaterial. The cases do establish, it is true, that the creditor must, in dealing with the surety, adhere to entire good faith; but they by no means sustain the extreme position of Lord Campbell.

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Cite This Page — Counsel Stack

Bluebook (online)
15 W. Va. 21, 1879 W. Va. LEXIS 14, Counsel Stack Legal Research, https://law.counselstack.com/opinion/warren-v-branch-wva-1879.