McCarty v. Roots

THIS case was brought up by writ of error from the Circuit Court of the United States for the district of Indiana.

It was a suit brought by Roots, Coe, & Aydelotte, citizens of Ohio, against Enoch McCarty, a citizen of Indiana.

It was upon a bill of exchange drawn by Tyner & Childers, upon Richard Tyner, of New York, in favor of Enoch McCarty, for $4,500. Tyner accepted the bill, and McCarty endorsed it to George Holland, who endorsed it to Ezekiel Tyner, who endorsed it to Roots, Coe, & Aydelotte. It was alleged that Holland took it up when past due at the Richmond Bank, and that Holland delivered the bill to the plaintiffs as collateral security for a pre-existing debt of Richard Tyner.

The nature of the pleas is set forth in the opinion of the court, and the following reference to them will be sufficient:Defendant filed eight pleas.

1. The general issue, withdrawn by defendant after the judgment of the court upon the demurrers.

2. Plaintiffs filed replication; issue joined; defendant withdraws plea.

3. Plaintiffs demurred to this plea; joinder in demurrer; demurrer sustained.

4. Plaintiffs filed replication; issue joined; defendant withdraws plea.

5. Plaintiffs demurred to this plea; joinder in demurrer; demurrer sustained.

6. Plaintiffs demurred; joinder in demurrer; demurrer overruled; plaintiffs obtained leave to withdraw their demurrer and reply; replication filed; defendant demurred to it; joinder in demurrer; defendant's demurrer to replication over-ruled.

7. Plaintiffs demurred; joinder in demurrer; demurrer sustained; defendant obtained leave to withdraw his joinder in demurrer, and to amend plea; amended plea filed; plaintiffs demurred to it; joinder in demurrer; demurrer sustained.

8. Plaintiffs demurred; joinder in demurrer; demurrer sustained.

Upon these rulings of the court, the case was brought up here, and was submitted on printed argument by Mr. O. H. Smith for the plaintiffs in error, and argued by Mr. Gillet for the defendants.

Mr. Smith's points were the following:

1. That as the bill was received by the appellees after it was due, and dishonored, they took it with notice that it was subject to all prior equities between the parties. (Byles on Bills, 129, 130, and numerous authorities, tit. Transfer.)

2. That this case rests upon the same legal defence that could be set up in a suit between the endorsers of the bill as to their equities, if the action had been brought by one of them, after paying the bill, against the defendants. (The same authorities as above.)

3. That co-sureties are liable to contribution as between themselves, after the payment of the bill. (Byles on Bills, 199; Kemp v. Finder, 12 M. and W., 421; and authorities cited to fourth position.)

4. That if one co-surety takes up the bill, he cannot maintain an action upon it against a co-surety, but may use it as evidence of the amount paid, in an action of assumpsit for money laid out and expended, in which he may recover in contribution the equitable pro rata proportion of the money he has actually paid, from his co-surety. (Done v. Whalley, 17 L. J., 225; Exch. 2 Exch., Rep. 198, S.C..; Gale v. Wash, 5 T. R., 239; Rogers v. Stephens, 2 T. R., 713; Orr v. Maginnis, 7 East., 359.)

5. That although the endorsers are prima facie liable to each other, in the order in which their names stand upon the bill, yet it lies in averment in the pleadings that they are co-sureties, and parol proof is admissible, as between them, to show the true state of their liability. The same principle applies in suits brought by an endorsee of the bill against a remote endorser, when the bill was taken after it was due and dishonored. (14 Vesey, 170; Byles on Bills, 192, and notes, Ed. 1853; 9 Met., 511; 7 Cush., 404; 4 N. H., 221; 5 Denio, 307; 9 Ala., 949; 28 Maine, 280; 34 ib., 549; 5 How., 278; 21 Pick., 195; 2 Selden, N. Y., 33; 2 Ired., 597; 18 Ohio R., 441.)

6. That if the principal places funds or property in the hands of one co-surety, sufficient to pay the bill in trust for that purpose, and such co-surety takes up the bill from the holder, he cannot sue his co-surety on the bill, nor for contribution, until he has exhausted the assets in his hands of the principal. (8 Pick., 155; 16 Ala., 455; 21 ib., 779; Adams's Equity, Ed. 1855.)

7. That time given by the holder to one co-surety for the payment of the bill, to the prejudice of another co-surety, upon a contract binding upon the holder, without the assent of the other co-surety, discharges such other co-surety from liability upon the bill. (9 Conn., 261; 2 Wheaton, 253; 2 Story, 416; 21 Wendell, 108; 2 McLean, 111; 10 N. H., 359; 18 Conn., 361; 3 McLean, 74.) It is admitted that these authorities speak of principal and surety, but we maintain that the principles decided apply to the holder and a co-surety, the case before this court.

8. That after a bill is taken up from the holder by a co-surety, it is no longer available in the hands of such co-surety, or his endorsee, who takes it with notice, after due and dishonored, so as to enable such co-surety taking up the bill, or such endorsee, to maintain an action on the bill against any other cosurety. (7 N. H., 202; 2 Ired., 417; 24 Maine, 336.)

9. That a plea can only be demurred to specially for duplicity, in which case the demurrer must point out the duplicity specially; and if the plaintiff, instead of demurring, replies to the plea, his replication must answer so much of the plea as it assumes to answer; and if it assumes to answer the whole plea, and only answers a part, it is bad on demurrer. (1 Chitty Plead., 228, 229; ibid, 668, Ed. 1855; 2 Johns., 433; 20 Pick., 356; 10 East., 79; 1 Saunders, 100, note 1, title Qualities of Replication; 1 Chitty Plead., 643; and authorities, Ed. 1855.)

10. It is no ground of even special demurrer, that a plea contains surplusage; the doctrine of utile, per in utile non vitiatur, (1 Chitty Plead., 547,) applies.

Mr. Gillet's point were the following:

1. The legal liability of the drawer, acceptor, and endorsers, of a bill, is determined by the act of drawing, accepting, endorsing, demand, and notice.

If these things have occurred in the ordinary mode of such matters, the legal liability is fixed, and can only be avoided by showing some fraud or illegality in the creation of the bill, or some positive act of discharge.

2. Contracts in writing, binding between the parties to them, cannot be charged by parol understandings or agreements made at the time of making such contracts. (Thompson v. Ketchum, 8 Johns. R., 192; Robishat v. Folse, 11 Louisiana; Barthet v. Esterbene, 5 La. Annual, 315; Brochemore v. Davenport, 14 Texas R., 602; Bank of the United States v. Dunn, 6 Pet., 56; Brown v. Wiley, 20 How., 442.)3. If the endorsers had an agreement, valid between themselves, as to sharing equally the loss occasioned by their endorsements, such agreement only affected themselves, and did not run with the bills so as to affect their legal liabilities, as to the holders of the bills in question.

If there had been such an agreement as the defendant wishes to have inferred, which he does not aver, and it had been binding among themselves, and Holland, or any one of the parties to it, had refused to carry it into effect, the defendant could not take advantage of it in the mode now attempted, but must enforce it by action against the refusing party.

There is no intimation in the plea that Holland agreed to take up the bill, and discharge it, and look either to the trust fund or to the other endorsers for contribution. Nor is it pretended that the plaintiffs knew of such an agreement. If defendant shall pay the whole bill, then he can look to the parties to that agreement to refund their proportions.

But if the agreement assumed to have been made runs with the note, then the defendant would still be responsible for his share as one of the endorsers. In that event, the plaintiffs must recover the one-fourth thereof, upon the defendant's own theory, though it is clearly an incorrect one.

But the defendant has not set out an agreement, either with or without consideration, by which Holland relinquished and changed his rights, as subsequent endorser, to call upon the defendant as a prior endorser for the full amount of his liability.

On the face of the contract, (the bill, non-payment, and notice,) defendant was liable for the whole amount thereof. He can enforce this contract, unless it has been discharged by payment, or by a new valid agreement changing the original liability. To make such an agreement, it must be in writing, and be upon a lawful and sufficient consideration. No such agreement is even hinted at in the pleadings, much less averred, so as to be issuable. It follows, that there was no change of the original contract or liability, and consequently the defendant is liable, and the plaintiffs are entitled to recover.

It is therefore clear that the eighth plea is bad, and the demurrer to it must be sustained.

Mr Justice McLEAN delivered the opinion of the court.