Farmers' Bank of Virginia v. Groves

THIS was an appeal from the Circuit Court of the United States for the District of Louisiana, sitting as a court of equity.

The facts in the case are set forth in the opinion of the court, to which the reader is referred.

It was argued by Mr. M'Farland, for the appellants, and Mr. Johnson, for the appellee.

The grounds upon which a reversal of the decree was claimed, were the following:

It ought to be remarked, in the first place, that the only contract to which the bank admits itself to have been a party, after the rendition of their judgment against Groves, was a new mortgage given by Collier to Pegram, their agent, about the month of December, 1841, and of that contract there is no copy in the record, and it was not in evidence in the court below. Now, it is in reference to that contract that the bank, while admitting that it was understood at first, that the collateral security was to be surrendered to Collier, yet, he neither paid the notes secured by the new mortgage, nor did he insist on the surrender of the collaterals, but expressly waived the assignment of the judgment and consented that it should stand as additional security for Collier's debt, inasmuch as it turned out that the property was subject to heavy previous incumbrances. Is there any thing in the record in reference to that contract from which this court can infer an intention on the part of the bank to operate a novation unconditionally of the judgment against Groves, which is not even alleged in the bill, and to substitute in its place a new mortgage on the property of Collier, and his promissory notes? Such a security will be regarded by the law of Louisiana, where the contract was entered into, as cumulative, unless the previous debt was released in express terms. It is of the essence of a novation that the first debt be extinguished, and a new one substituted in its place; a novation is never presumed. See Louisiana Code, art. 2181, et seq.; 2 La. Ann., 188; Parker v. Alexander.

It is an ominous circumstance in reference to this new contract or mortgage, that it was not produced in evidence by the party claiming the benefit of its stipulations. If it had contained an absolute release of the judgment against Groves, the sagacious and able counsel of the estate would not have failed to introduce it in support of the allegations in their bill. As it was in their power and was withheld, we have a right to infer that its production would have made against them.

But there is another view of this matter which, it appears, was absolutely insuperable.

Moses Groves was not a party to the new contract in 1841. and he now seeks to avail himself of a stipulation in his favor contained in it. This is what, in the technical language of the civil law, is called a stipulation pour autrui, or a stipulation in favor of a third person. The doctrine is well settled, that third persons may accept such stipulation in their favor, and enforce them either by action or exception. But before such acceptance and its notification to the parties, it may be retracted and desisted from, and the third person has no right to complain. Now in this case, it appears that Collier waived the release of the collateral security previously given, and agreed that the new mortgage should stand as additional security for the debt due to the bank, long before Groves sought to rely upon it as a discharge of the judgment against him.

See Flower v. Lane et al. 6 Mart. (La.), N. S., 152; Pemberton v. Zacharie et al., 5 La., 316; Mayor et al. v. Bailey, 5 Mart. (La.), 322; Marigny v. Remy, 3 Id., N. S., 607.

We come now to examine the contract between Collier and King, on which the complainants rely in their bill as evidence of a discharge or payment of the judgment against Groves. It is remarkable that neither the bank nor Moses Groves was a party to that agreement. Collier did not even assume to act as the agent of the bank, much less is there any proof that he was so, or that his agreement with King was ever known to the bank. The whole purport of that agreement was, that Collier was to be permitted to purchase certain property of King's at sheriff's sale, at a certain price, and if he did so, Collier would grant full acquittance of certain debts, and particularly to Moses Groves, a full acquittance of all demands against said Groves, for and on account of said judgment obtained by the Farmers' Bank of Virginia.

The property which Collier was authorized to purchase on these conditions, is enumerated in the contract, consisting of sundry tracts of land, and a large number of slaves. Now, the only evidence that he purchased any part of the property in pursuance of the agreement, is found in a sheriff's deed, and a simple comparison between the agreement and the sheriff's deed will show that a large part of the property of King never was sold according to that agreement. The condition, therefore, upon which Collier was himself bound to procure a release of the judgment in favor of the bank, has not been complied with, and even between him and King no such obligation has resulted from the sale, much less is there anything in the whole transaction which is binding on the bank. It was as to the bank, res inter alios acta.

There is not the least pretext for saying, that the bank ever ratified and approved this agreement, or that they ever had any knowledge of it.

Mr. Justice NELSON delivered the opinion of the court.