Southall v. Farish
| Decision Date | 20 September 1888 |
| Citation | 85 Va. 403,7 S.E. 534 |
| Parties | Southall et al. v. Farish. |
| Court | Virginia Supreme Court |
Where, on the insolvency of a bank, a surety pays judgments due it on notes on which he is indorser, by setting off deposits in the bank, under an agreement by the principal to repay the amount, he is entitled to receive the face value of the notes so paid, though the bank paid a dividend of only 60 per cent.; especially where he had made a contract with a third person, under which he could have transferred his whole deposit at its par value.
The fact that the bank refused to transfer the surety's deposit to the one to whom he had contracted to sell it, before the judgments were paid out of it, which payment was made by charging them against the deposit, does not make the subse quent agreement of the principal debtor to repay the amount at its par value, with out consideration, as he was under an implied agreement to reimburse the surety.
Whether or not, under the national banking laws, deposits which the surety-transferred constituted a valid set-off in the hands of the transferee against its indebtedness to the bank, is immaterial in determining the value of the deposits to the surety, as he had a right to sell them for whatever the transferee was willing to pay.
Where a surety has paid a large part of a judgment held by an insolvent bank against him and his principal by means of checks drawn on his deposits in the bank, the principal, on compromising the balance, may have the judgment assigned to the surety for the amount of 50 cents on the dollar on the sum paid by him, though the bank pays a much smaller dividend.
As the surety could have disposed of his deposit at its par value, notwithstanding the insolvency of the bank, the contract of the principal to repay, with interest at 6 per cent., the full amount of the deposit set off against the debt, which bore 12 per cent, interest, is not usurious.
The fact that the principal was not informed that the surety had been required by the bank to pay the judgments out of his deposit cannot be set up as rendering void for fraud the contract to repay in full the amount of the deposit used in paying the judgments, where the fraud is not particularly charged in the bill.1
Appeal from circuit court.
Southall & Blakey, for appellants. Geo. Perkins, for appellee.
Lewis, P. 1. The first question in the case is whether the appellee, A. J. Farish, is entitled, as against the trustees of Thomas L. Farish, to the par value of the deposits in the Charlottesville National Bank, used by him in discharging two judgments in favor of the bank, aggregating $343.45 of principal, recovered on two negotiable notes executed by Thomas L. Farish, with A. J. Farish as indorser, or whether he is entitled to what the trustees claim to be "the real value" of the deposits. If the former view is the correct one, then the appellee was rightly allowed, by the decree complained of, the sum of $879.39, as of the 1st of October, 1887; whereas, if the latter view is correct, he is entitled only to $482.62, as of that date..The trustees, the appellants here, contend that the latter view ought to have been adopted by the circuit court, because the sum claimed by A. J. Farish, and allowed by the decree, is greater than the value of what was actually paid by him, or more than he is entitled to recover. The rule is certainly too well settled to be controverted, nor is it disputed, that the contract between the principal and the surety is for indemnity only; and therefore, if the surety discharges an obligation for a less sum than its full amount, he can only claim against the principal the sum so paid. Bloxo v. Maynard, 2 Leigh, 29; Kendrick v. Forney, 22 Grat. 748. But the question is: what, as between the parties, is to be considered the amount paid by the surety in the present case? The bank suspended, and went into the hands of a receiver, in October, 1875; and the dividends subsequently paid to its depositors amounted to only a little over 60 per cent, of their claims; and if this could be taken as the proper basis upon which to ascertain the value of the deposits with which the judgments were discharged, or, in other words, the amount actually paid by the surety, a reversal of the decree would necessarily follow. But the facts of the case show that this is not the equitable or proper basis of calculation.
It appears that, immediately after the suspension of the bank, there was an agreement between Thomas L. and A. J. Farish, whereby the latter undertook to discharge the judgments, which were bearing 12 percent, interest, and the former to repay the amount, with interest at 6 per cent., and in pursuance of this agreement the judgments were discharged. It also appearsthat the debt, as now claimed by the appellee, was afterwards recognized by Thomas L. Farish; and in the trust deed of August 10, 1885, appointing the appellants trustees, the debt is referred to as "the debt originally due the Charlottesville National Bank by two notes aggregating about $300, on which A. J. Farish was indorser, and which he discharged by setting off against the same an amount due him by the Charlottesville National Bank, at the time of its failure, in October, 1875." The deed, it is true, further recites that "how much will be due the said A. J. Farish'upon settlement on account thereof is not known." Bat we do not perceive any inconsistency—certainly, none that is material—between this recital and the deposition of the witness by which the agreement above mentioned was proved; for the witness docs not undertake to give the exact amount of the debt, but simply says A. J. Farish agreed to take up the two notes upon which the judgments were obtained, and that Thomas L. Farish agreed to repay the amount, with (5 percent, interest. It is quite probable the notes were not at hand when the deed was prepared, and that their exact amount, principal and interest, was not known to, or remembered by, the parties at the time, and hence the guarded recital in the deed. This is rendered still more probable by the fact that the deed refers to a number of other debts due by the grantor, without giving, even approximately, the amount of any one of them, or describing them in any other than the most general terms; so that the failure to give the exact amount of the debt in question is a circumstance of no special significance.
To determine, then, the amount paid by the appellee, and.therefore the sum he is entitled to recover for his reimbursement or indemnity, the question must be determined, what, as between the parties, were the deposits worth when the judgments were discharged? The appellants contend that they were worth just what the broken bank would pay, and that their value was then certain, though not ascertained; since that is sufficiently certain which can be made certain. In other words, they claim that their value is to be ascertained upon the basis of the dividends subsequently paid by the bank to its depositors. But this, as already said, is not the proper basis of calculation. Their value to the parties at the time was much greater. It appears that, when the bank suspended, the deposits of the appellee therein amounted to several hundred dollars in excess of the judgments, and that on the night of the day of its suspension the appellee contracted with the Charlottesville Milling & Manufacturing Company to transfer to it for flour the whole of his deposit in the bank. The appellee, who was examined as a witness, testifies that the next morning he went to the bank to ascertain the amount of his deposit, and while there informed the president of the bank that he had sold his deposit. The latter, however, he says, objected to his transferring the whole amount; saying he would require the judgments above mentioned to be paid out of it, which was done by charging against the deposit the amount of the judgments. The balance he then transferred for flour, amounting to upwards of 100 barrels, which he got at a slight advance over the regular price; the deposits being taken by the company at their par value. The company, it seems, was indebted to the bank, and used the certificates of deposit transferred to it by the appellee in its settlement with the bank. The appellee further testifies that he afterwards sold the flour for 50 cents...
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