Woolley v. Louisville Banking Co.

• Decision Date: 10 January 1884
• Parties: Woolley v. Louisville Banking Company. Johnston v. Louisville Banking Company. Theirman v. Louisville Banking Company.
• Court: Kentucky Court of Appeals

81 Ky. 527

5 Ky.L.Rptr. 562

Woolley v. Louisville Banking Company.

Johnston v. Louisville Banking Company.

Theirman v. Louisville Banking Company.

Court of Appeals of Kentucky.

January 10, 1884

1. Where the plaintiff fails to set forth a cause of action, it is no obstacle to his bringing another action alleging a state of facts which will authorize a recovery; but after a demurrer has been sustained to the petition, and the petition dismissed, he will not be permitted to bring another action setting forth the same facts when the judgment dismissing the first petition is pleaded in bar.

2. Mrs Johnston's consent that certain of her stocks should be pledged for the payment of a certain debt of her husband did not give appellee a lien thereon for all the debts due by him. The lien is restricted to the particular debt for which it was pledged.

3. It is well settled that a creditor is bound to hold for the surety all securities he may receive from the principal to secure the debt for which the surety is bound.

4. Where the creditor represents to the surety that he holds collaterals, as an inducement to the surety to become bound when in fact he holds none, the surety will be released from the debt, The creditor must suffer for the misrepresentation and not the surety.

5. The release of one surety operates in this case to the release of all.

APPEAL FROM LOUISVILLE CHANCERY COURT.

BEATTIE & WINCHESTER FOR APPELLANT, R. W. WOOLLEY.

A bill of exchange endorsed by the payee to th e acceptor after acceptance extinguishes the bill as regards the drawer. (Long v. Bank of Cynthiana, 1 Litt., 290; 4 Ark. 546; 2 Barn & Cress, 483; 7 Wait's Acs. and Defs., 36; Smith Cont., 92; 1 Wm. S. Sander, 211; Smith & Fah, 15 B. Mon., 445; Emmons v. Overton, 18 Ib., 650; 50 N.Y. 158; 25 L. I., sec. 4, chap. 244; Daniel Neg. Insts., sec. 480; 36 Eng. Law and Eq., 562; 6 Ala. 852; 40 Pa. St., 186; Story on Bills, sec. 223; Robinson v. Offutt, 7 Mon., 551; Ray v. King, 3 B. Mon., 510; Brant on Suretyship, secs. 348, 373, 79.)

A creditor who induces a person to continue as surety for a debtor, by assuring the person that the creditor holds collaterals to secure the debt, has no claim against the surety if the representation is untrue, although innocently made, (Lead. Cas. Eq., part 1, 979-983; 4 Vesey, 824; 17 Simons, 218; 8 Piek, 121, 131, 124; Morse on Banks, 42-43, 507, 575; Tyler on Usury and Pawns, 595-576; 5 Wait's Acs. and Defs., 175; Story on Bailments, 292,)

A married woman, resident of Kentucky, can not give a power of attorney to pledge her separate estate as a collateral to secure the payment of her husband's debt. (Civil Code, secs. 93, 109; Story on Eq. Pl., 456, 793; 3 Vesey, 255; Metford on Eq. Pl., 216; Jenks v. Irvin, MS. opin., Lou. Chy. Ct. and Ct. Appeals.)

BIJUR & DAVIE FOR THEIRMAN.

It has been clearly shown by the brief of Messrs. Beattie & Winchester, whose authorities we adopt, that R. W. Woolley was, by the misrepresentation of appellee, released from the debt. As Woolley was the prior endorser, to whom Theirman had the right to look for indemnity, the discharge of Woolley is the discharge of Theirman's notes. (Rees v. Barrington, two leading cases.)

The sureties had the right to expect the bank to use all proper care to protect the collaterals from loss.

Sureties are released by any act or default of the creditor which results in loss of remedies or securities which would revert to the surety in payment of the debt. (Two leading cases Equity, 306, note to Aldrich v. Cooper; 44 N.Y. 453.)

MUIR & HEYMAN FOR MRS. JOHNSTON.

Appellee is estopped from denying that the stocks are the property of appellant. The bank stock was issued by appellee to appellant as fully paid-up stock, and appellee treated them as her property.

The attempted pledge of these stocks to appellee by Jas. C. Johnston, husband of appellant, was void.

By reason of her coverture appellant had no power to consent to the pledge or to makc it.

Being a resident femme covert, she had no legal capacity to execute a power of attorney, and as her endorsements were obtained for that purpose only, they are void.

As these certificates were issued to the wife at the instance of the husband, he became her trustee, the stocks became her separate estate, and the trustee afterwards violated the trust. (Gen. Stats., sec. 36, chap. 24; Campbell v. Galbraith, 12 Bush, 461; Marriman v. Marriman, 4 Met., 90; Thomas v. Harkness, 13 Bush, 27; Gen. Stats., 532.)

The judgment upon appellant's demurrer to the original and amended petitions was a bar to any claim of appellee as against her to the stocks in controversy. They were held to be insufficient, the petition dismissed, and no appeal has ever been prosecuted from that judgment. It settled all controversy in her favor. (Story on Eq. Pl., sec. 486; Ib., 793; 3 Vesey, 255; Met. on Eq. Pl., 216.)

BARNETT, NOBLE & BARNETT, AND W. LINDSAY AND P. D. BUSH, FOR APPELLEE.

Woolley's defense is that he, as drawer, has been released by the reissue of the bill to plaintiff. He does not deny, but admits he drew that bill. He does not plead want of notice of protest, or of due presentation for payment. In substance, he says the endorsement by Johnston and McDonald to Johnston satisfied the bill, and extinguishes it as to him.

This is not a bill passing from hand to hand for value, nor does it ever reach the hand of a prior endorser. It was an accommodation bill. (Smith v. Lockridge, 8 Bush, 427; 20 How., 343; Bradford v. Ross, 3 Bibb, 239; Woolfolk v. Bank of America, 10 Bush, 574; Welby v. Smith, 1 Met., 316; Spencer v. Biggs, 2 Met., 125; Alexander v. Springfield Bank, Ib., 835; May v. Quinby, 3 Bush, 102; Taylor v. Hay, 2 J. J. Mar., 461; 1 Stewart, 154; 3 Wheat, 172; 13 Conn. 412.)

As to Woolley's defense that he was induced to sign one of the bills by the fraudulent representations of Theodore Harris, that he held the stock of J. C. Johnston sufficient to protect it, we say that Harris never made such representations. If such representations were made and were false, they constitute no fraud. (Campbell v. Williams, 14 B. Mon., 517; Ball v. Lively, 3 Dana, 370.)

If any such agreement was made, no breach has been averred by Woolley. (2 Cranch, 578; 31 Devan, 284; 46 Penn. St., 94.)

As to Mrs. Johnston's defense, she never had any right, title or interest in and to the stock.

Her husband had disposed of his interest in the stock before he gave it to his wife.

If she had any interest, she, by her endorsement of the certificate, consented to and aided her husband in transferring that interest to appellee. In no case can she be adjudged the owner of the stock, except subject to the pledge to appellee. (Payne v. Powell, 2 Bush, 252; Hudson v. Buckner, 4 Dana, 251; 48 N. M., 585; Schuler's Domestic Rel., chap. 5, p. 3; 2 Adol & Ellis, 30; 10 Cushing, 291.)

Mrs. Johnston's plea in bar of appellee's right to recover can not be maintained.

It is not a bar, because it is not a judgment on the merits.

If it had been a judgment on the merits, she, by her cross petition against appellee, waived the right to plead said judgment in bar.

The supposed bar was not well pleaded by appellant to any portion of the counter claim of appellee. (Burch v. Funk, 2 Met., 544; Kendrick v. Talbot, 1 Mar., 321; Thomas v. Hele, 5 B. Mon., 594; Timberlake v. City of Newport, MS. opin., 1880; 91 U. S.Ct. Ct. Rep., 526; Burdet v. Burdet, 2 A. K. Mar., 144; Warner v. Bledsoe, 4 Dana, 73; Herman on Estoppel, secs. 86, 95; Introduction to Bigelow on Estoppel, 48.)

OPINION

PRYOR JUDGE:

The Louisville Banking Company (appellee) instituted an action in equity against R. W. Woolley, Jas. C. Johnston, and Johnston and McDonald, on a bill of exchange for $1,200, due and payable in ninety days from the 15th of September, 1877. The bill was drawn by Woolley and accepted by Jas. C. Johnston, and then endorsed by Johnston and McDonald to Jas. C. Johnston. The object of the bill was to enable Jas. C. Johnston to raise money, or rather to renew certain paper to the banking company upon which Woolley was then liable as surety or endorser of Johnston. A personal judgment was sought against Woolley, and the aid of the chancellor invoked for the purpose of subjecting to the payment of the debt certain certificates of stock that had been pledged by Jas. C. Johnston as collateral security for the payment of a note or bill for which he alone was liable, the plaintiff (the bank) alleging that by the terms of its charter it had a lien upon these collateral securities for the payment of any debt the pledger might be owing the bank, and that after satisfying the debt for which it was specially pledged, the balance should be applied to the other indebtedness of Johnston to the bank. The bank held another note on Johnston, with Woolley and Theirman as endorsers, and sought to obtain judgment against these endorsers by an action at law. That action was transferred without objection, on the motion of the defendants, and consolidated with the equity action.

Jas C. Johnston, who was primarily liable as between the parties to the paper, was the trustee of his wife, Julia Johnston, and the certificates of stock were issued in his name, and were pledged by the husband to secure the payment of the twelve hundred dollar note for which he was liable, and upon which there was no surety or endorser. The name of Mrs. Johnston was written on the back of each certificate, and the certificates attached to this note, and pledged by the husband to secure that note only. Mrs. Johnston, the wife, was made a defendant to the action in equity, and the chancellor was asked to sell this collateral paper first to satisfy the twelve hundred dollar note, upon...