Lenox v. Prout

APPEAL from a decree of the circuit court for the district of Columbia. The facts of this case were as follow: William Prout, the plaintiff in the court below, on the 29th of July, 1812, endorsed, without any consideration, a promissory note made by Lewis Deblois, in his favour, for 4,400 dollars payable in thirty days after date. This note was discounted by the defendants, as trustees for the late bank of the United States, for the accommodation and use of the maker, and not being paid, an action was brought against him, and another against the endorser, in the name of the trustees, and judgment rendered therein in the same circuit court, in the term of December, 1813. In the April following, Prout, fearful of Deblois' failure, called on the defendant Davidson, who was agent of the other defendants, and requested him to issue a fieri facias on the judgment against Deblois, promising to show the marshal property on which to levy. On the 16th of April, or thereabouts, Davidson directed an execution of that kind to issue, and Prout, on being apprized thereof, offered to point out to the marshal property of the defendant, and to indemnify him for taking and selling the same. But before any thing farther was done, Davidson countermanded this execution, and on the 2d of May, 1814, or thereabouts, a ca. sa. was issued against Deblois by the clerk through mistake, and without any order of Davidson or the other defendants. This was served on Deblois on the 10th of May, who afterwards took the benefit of the insolvent laws in force within the district of Columbia, the effect of which was to divide all his property among his creditors, whose demands were very considerable. It appears, from the evidence, probable that if the fieri facias had been prosecuted to effect, a great part of the money due on the judgment against Deblois, which had been recovered on the note endorsed by Prout, would have been raised, and the latter, in that case, would have had to pay but a small sum on the one against him. But as matters stood, little or nothing was expected from the estate of Deblois; and, of course, no part of the judgment against Prout could be satisfied in that way, but the whole still remained due and unpaid. The fieri facias appears to have been countermanded the day after it was received by the marshal, of which Prout had notice soon after. On these facts, the circuit court decreed that the appellants should be perpetually enjoined from proceeding at law on the judgment which they had obtained against Prout, and that they should also pay him his costs of suit to be taxed. From this decree, the defendants below appealed to this court. March 6th. Mr. Key, for the appellants, argued, that this being a negotiable instrument, the liability of the plaintiff below, after notice of non-payment by the maker, was no longer conditional, and depending on the default of the maker; so that the holders of the note could proceed against him alone, without taking any steps against the maker. That, therefore, they were not bound to issue the fieri facias against Deblois, on the application of the plaintiff. That having issued it, they had a right to countermand it, provided they did not place the plaintiff in a worse situation than he was in before it was issued. That the ''fi. fa. was not countermanded with any view to injure the plaintiff, but because the agent had ascertained that the trustees of the bank were not bound to issue the fi. fa.'' in the first instance, and that it was neither right nor safe for the bank to give thereby a preference to the plaintiff over other endorsers of Deblois. And that the plaintiff was not placed in a worse situation by countermanding the ''fi. fa.;'' but had it in his power, under the act of assembly of Maryland of 1763, ch. 23. to tender the amount of the note to the agent of the bank, and obtain an assignment of the judgment, by which he might have secured himself, by levying on the property still in the possession of Deblois. Mr. Jones and Mr. Law, for the respondent and plaintiff below, argued, that the plaintiff being a mere gratuitous surety, was entitled to the protection of a court of equity. That even in a court of law, it had been determined, that where the holder of a bill gave an indulgence to the acceptor, after judgment, the endorser was discharged.a That of all forms of suretyship, that by endorsement emphatically entitles the surety to protection. The relative obligations between the holder and endorser require the former in the first instance, to look to the drawer for payment, and to give notice of his default to the endorser. The relief given by courts of equity to sureties on a bond is derived from the common law principles in favour of endorsers. A surety has a right to come into equity, and compel the creditor to proceed against the principal debtor.b If the party for whose benefit a contract is made prevents its execution, the contract is rescinded. The contract between the holder and endorser is, that the former shall seek payment of the maker before he resorts to the endorser. If he disables the maker from paying, the endorser is discharged. If the holder of the bill, or note, gives time to the acceptor or maker, in prejudice of the endorsers, without their concurrence, they will be discharged from all liability, although they may have been previously charged by notice of non-payment.c The doctrine of equity, that a surety is discharged by any indulgence shown to the principal by the creditor in prejudice of the surety, is applicable to every species of suretyship, whether absolute or collateral; and whether the liability of the co-obligors, sureties, or endorsers, has been fixed by judgment or not.d If giving time, staying execution, or taking new security, in consideration of indulgence, releases the surety, how much more ought he to be discharged by the countermand of an execution on which the money might have been levied. The statute of Maryland is only in affirmance of the pre-existing rules of equity. Nor does it apply to this case; the issuing of the fieri facias, at the plaintiff's solicitation, being a waiver of all right to demand a compliance with the act. Mr. Key, in reply, insisted, that a court of equity would not relieve in such a case as this, even if the plaintiff was to be considered as a gratuitous surety. That the cases cited of co-obligors, or sureties, in bonds, were not pertinent. This is a commercial contract. The drawer of the note having made default, and the endorser having had legal notice of non-payment, becomes liable absolutely. His engagement ceases to be collateral and contingent, and he is converted into a principal debtor. The punctuality of commercial dealings, and the preservation of paper credit requires that it should be so. An indulgence given to the maker can no more discharge the endorser, when thus fixed, than an indulgence to him will discharge the maker. The law does not require that the holder should take any active measures of diligence; nor can a single case be found where a court of equity has compelled him to take any such measures. March 9th. Mr. Justice LIVINGSTON delivered the opinion of the court, and, after stating the facts, proceeded as follows: