Bank of Gettysburg v. Thompson

The opinion of the court was delivered by

Black, J.

In the year 1838, one Clarkson made a note for $20,000, payable to Stevens, Thompson, and Smith, who indorsed it to the Bank of Gettysburg. The note was several times afterwards renewed, and payments made on it from time to time, until in 1851, it was reduced to $7,500. At that time the maker of the note assigned to the bank, as collateral security, a note for $500 on David Little, and other, paper, valued altogether at nearly $4,500. The note against Little was lost by the negligence of the bank, and the other collaterals were handed back to Clarkson. "When the note for $7,500 became due, namely on the 9th of October, 1841, a payment was made on it which reduced it to $5,435. This was renewed at successive periods of thirty days each, until the 8th of March, 1842, when, as the witnesses for the defendants swear, it was all paid off, and a new discount obtained on a new note indorsed by the same persons for $1,540. This note was again renewed from time to time, until the' 27th of October, 1844,-when it was protested and lay over until the 25th of October, 1845.

Then a new note was given for the amount of principal, and another for interest and costs. After several renewals and protests, the present note was given on the 15th of May, 1849, for $2,014 94, the amount of principal, interest, and costs on both the notes last mentioned. This suit was brought against the indorsers in 1852. The defence they set up is, that the bank, in 1841, had in its hands collaterals sufficient to pay nearly $5,000 of the debt, but suffered a portion of them to be lost for want of diligence, and gave the rest up to the principal debtor, in prejudice of the indorsers’ rights.

Nothing can be better settled than the rule of law which declares that if a creditor has in his hands the means of satisfaction, and chooses not to retain it, but suffers it to pass into the hands of the principal debtor, the surety shall be.released pro tanto, unless he has consented to the conduct of the creditor. *118The jury were also properly instructed, that if the note now in suit was not a continuation of the one existing when the col-laterals were given up, the defence was not available, whatever it might have been under other circumstances. Thus far, the defendants had nothing to complain of. But there was no evidence how or wherefore the collaterals came to be given up. The fact was proved, but nothing more. One of the indorsers was president of the bank. At. the next renewal of the note afterwards, it was reduced by a payment of nearly $2,000 and a few months later another payment of $4,000 was made.

It is not at all improbable that Clarkson raised the money out of the collaterals, and that they were given to him for that purpose. If so, the indorsers owe the reduction of their liability from $7,500 to $1,500 to the matter which they now allege as a reason for releasing them from the balance. From the time of the first renewal, after giving up of .the collaterals until the making of the present note, there passed a period of eight years; and there were so many intermediate renewals that I have not thought it necessary to count them. After such a lapse of time, accompanied by such circumstances, upon which party does the burden of proof lie to show the nature of the transaction ?

When a person renews his indorsement of an accommodation note, if it be not the making of a new debt, it is certainly a very distinct acknowledgment of an old one. From each successive indorsement, a perfectly natural presumption arises that the indorsers knew the sums, for which the notes were respectively given, to be due. Shall these admissions, repeated probably thirty or forty times, be counted for nothing, and the bank be called to prove'that a previous transaction was not a fraud on the indorser’s rights ? It may be, that the collaterals were given up without the consent o'f the indorsers — that the proceeds of them were not collected'’ and applied by the principal debtor to their relief, and that they made all their subsequent indorsements in ignorance of the truth; but, if the case was so, we think it lay upon the defendants to make it out. All men of sound mind are supposed to understand their own business, and to know what they are doing, especially when they are making a promise to pay money. The best man, indeed, may make a mistake, or become the dupe of an impostor. But we cannot presume that there was either fraud or mistake in a matter like this, without some proof.

There is another difficulty about the case of the defendants. They admit their legal liability, but appeal to the equitable jurisdiction of the court for relief, on the ground of their own mistake and the fraud of their adversary. But equity never gives relief to a party who has slept upon his right for a period *119so long that his claim would have been barred in a court of law. A chancellor acts upon presumptions which are in strict analogy to the statute of limitations. The transactions relied upon here occurred in 1841. Immediately after its occurrence, the defendants admitted impliedly that it was no defence; and they continued to repeat the admission, at short intervals, for eight years. Of course, I do not say that the equitable matter of every defence in an action of assumpsit must be dated within six years before suit brought or before plea pleaded.

But where the defendant has constantly acted, for the full period of six years, in a manner inconsistent with his defence, he cannot set it up any more than he can set up a counter claim, barred by the statute. A party who alleged a constructive release to be established by facts which are capable of a different explanation, must take his stand when the matter is fresh. He cannot be permitted to lie by and renew his promises continually for eight years, until the creditor has lost his evidence, and then turn upon him with a defence previously-kept out of sight.

These principles embrace the ground covered by the note against Little, as well as the collaterals which were delivered to Clarkson. None of the transactions of 1841 can now be used to resist the plaintiff’s claim without violating the rules of law and equity.

Judgment reversed, and venire de novo awarded.