Humphreys v. Third Nat. Bank of Cincinnati, Ohio

• Decision Date: 08 July 1896
• Docket Number: 358.
• Citation: 75 F. 852
• Parties: HUMPHREYS v. THIRD NAT. BANK OF CINCINNATI, OHIO.
• Court: U.S. Court of Appeals — Sixth Circuit

75 F. 852

HUMPHREYS v. THIRD NAT. BANK OF CINCINNATI, OHIO.

No. 358.

United States Court of Appeals, Sixth Circuit.

July 8, 1896

This was an action at law by the Third National Bank of Cincinnati, Ohio, to recover the amount due on 14 promissory notes, aggregating about $24,000, from A. E. Humphreys, a member of the firm of Ira A. Humphreys & Son, who were indorsers on said notes. The notes were made by the Boyd Manufacturing Company, a corporation, to C. W. and S. G. Boyd as payees, and indorsed by them to Ira A. Humphreys & Son and by the latter firm indorsed to the Third National Bank. The notes were made in the latter months of 1886 and the early months of 1887, and by their terms were payable during the months of March, April, May, and June of 1887. They were not paid at maturity, and the liability of the indorsers was fixed by demand, notice, and protest. The maker and indorsers of the note became insolvent before the maturity of all the notes, and Ira A. Humphreys & Son, being desirous of making a settlement with the Third National Bank, entered into an agreement, the important provisions of which were as follows:

'The said the Third National Bank of Cincinnati, Ohio, agrees to fully release and discharge the said Ira A. Humphreys & Son as indorsers upon the several notes hereinbefore described upon the payment by said Ira A. Humphreys & Son of twenty-five per cent. of the indebtedness represented by said notes. The said sum so agreed to be paid by the said Ira A Humphreys & Son to be evidenced by two promissory notes equal in amount, and payable as follows: One in sixty days after the date hereof, and one in twelve months after date hereof with interest at the rate of six per cent. until paid. The said Ira A. Humphreys and A. E. Humphreys, doing business as Ira A. Humphreys & Son, in consideration of the release and discharge as aforesaid, hereby promise and agree to execute and deliver said notes to said bank within thirty days from the date hereof, and to cause the payment of the same to be secured by the execution and delivery of a trust deed by Eleanor A. Humphreys and Ira A. Humphreys, her husband conveying to the Third National Bank of Cincinnati a lot of ground in the town of Sissonville, Kanawha county, West Virginia, containing about seven acres of land, with the improvements thereon; also a tract of woodland situate in said county of Kanawha, known at the 'Huffman tract,' and containing about three hundred acres; both free and clear of incumbrance; said deed to be drawn and executed in conformity to the laws of the state of West Virginia authorizing and empowering the Third National Bank to sell and convey the same upon the failure to pay said notes, or either of them, at maturity. It is further agreed by and between said parties that the Third National Bank shall hold and retain the original notes hereinbefore first described, and upon the failure of the said Ira A. Humphreys & Son to fully pay the two notes representing twenty-five per cent. of said original indebtedness at the maturity of the same, the amount that may be paid thereon by said Ira A. Humphreys & Son, or by the sale of the real estate described in said trust deed, shall be applied as a credit upon the original indebtedness of the said Ira A. Humphreys & Son as indorsers upon the notes first herein described, anything herein to the contrary notwithstanding, and the said bank shall have the right to enforce the full payment of the balance due thereon against said Ira A. Humphreys & Son.'

Two notes were given as provided, and neither was paid at maturity. Payments were made on these notes, however, from time to time from 1887 until May, 1889. Releases were made by the bank under the trust deed to enable parts of the real estate to be sold, and the proceeds were credited on the two compromise notes. Requests were made by Humphreys from time to time for an extension of time on the two compromise notes, and, while a formal contract to extend the time was always refused, leniency was shown by the bank. In one or two of the letters, the bank threatened to bring suit upon the compromise notes. Promises were made by A. E. Humphreys to make partial payments from time to time, but were not always kept. The correspondence is set out in full in the record. The last payments made were the proceeds of sale of two towboats, now said to be the property of the mother A. E. Humphreys, though that did not appear at the time to the bank. The proceeds of the boats amounted to $1,495, and this was credited April 26, 1889, and May 27, 1889. The total credits upon the two notes aggregated about $4,000, leaving a balance due of $2,000, with interest. For 17 months thereafter, no payments were made, and A. E. Humphreys, having abandoned his business in West Virginia, left the state, and became a resident of Minnesota. On the 15th day of November, 1888, the Third National Bank had brought suit in the common pleas court of Brown county, Ohio, against the maker of the original notes, the Boyd Manufacturing Company, and the first indorsers, C. W. Boyd and S. G. Boyd. The petition in that case admitted certain credits in favor of the defendant because of dividends paid out of the insolvent estate of the maker. The answer filed by the Boyd Manufacturing Company pleaded that additional credits should be allowed on the ground that Ira A. Humphreys & Son, as indorsers, had paid to the plaintiff the sum of $6,000. There was no reply, and judgment was entered by the Brown county common pleas court for $18,691.38.

On the 27th of October, 1890, the bank brought suit upon the original notes against the maker and all the indorsers in a state court of West Virginia, and service was obtained on both members of the firm of Ira A. Humphreys & Son. Subsequently the bank brought this suit on the 29th of January,1892, in the superior court in Cincinnati, and obtained service only on A. E. Humphreys, the defendant below, and the plaintiff in error. The cause was removed to the court below on the ground of local prejudice, and the diverse citizenship of the parties. The defenses made in the answer and the amendments to the answer by the defendant below were voluminous, and somewhat confusing. It will serve no good purpose to rehearse them. It suffices to say that the main defense was based on the ground of settlement, and the claim that the bank, by receiving payment on the compromise notes after their maturity, and by urging the defendant to make further payments thereon, and by leading the defendant to suppose that it did not intend to have recourse to the original notes, waived its right under the contract to hold the defendant liable on the original notes, elected to pursue its remedy on the compromise notes alone, and by inducing a change of position on the part of the defendant on the faith that this was the intention of the bank, estopped itself thereafter to rely upon the original notes as against the defendant. A further defense was based on the Brown county suit, it being claimed that the plaintiff had allowed therein a credit to the maker and principal debtor of $6,000, thus electing to treat the delivery of the two notes in compromise as a payment of the sum for which they were given. It was further contended that this release of the principal enured to the benefit of the surety or indorser, and that the judgment was binding as res judicata upon the parties to this suit, because they were privies to the parties to the Brown county suit, and therefore that the judgment in this case on the notes could not exceed that which was taken against the principal debtor in Brown county. It was also made to appear in the defenses that in August, 1892, some eight months after this suit was brought in the superior court of Cincinnati, A. E. Humphreys went to the Third National Bank, and tendered to its proper officers the balance due on the two compromise notes, with interest, and that this tender was refused. The money was not paid into court, and the tender was not kept good by an offer to pay in the answer. Pending the hearing, the bank, through its counsel, tendered to the defendant the two compromise notes, and also a release of the trust deed or mortgage of all the land which had been conveyed under the terms of the original agreement of compromise, less that which had been released previously to permit private sales. This tender was excepted to, but allowed to go in evidence. The case, by written stipulation of the parties waiving a jury, was submitted to the court.

The court made the following findings in favor of the plaintiff: 'This cause, having been duly heard, a jury being waived, was submitted to the court upon the pleadings and the evidence of the October term, A. D. 1894, of this court, and the court, having since said time had the same under consideration, now finds that the defendant, A. E. Humphreys, is indebted to the plaintiff on the several promissory notes set forth and described in the petition, after allowing all proper credits, the sum of twenty-six thousand and ninety-nine and 33/100 dollars ($26,099.33). To all of which defendant, A. E.

Humphreys then and there excepts. ' The defendant then made a motion to set aside the finding and for a new trial for the following reasons: First. Error of the court in assessing the amount of recovery. Second. That the finding and decision are not sustained by sufficient evidence. Third. That the finding and decision are contrary to law. Fourth. That the finding and decision are contrary to law and the evidence. Fifth. The finding and decision were for the plaintiff, when the ought to have been for the defendant, A. E. Humphreys, to which finding and decision said defendant then and there excepted. Sixth. Newly-discovered evidence...