Hargroves v. Cooke , 15 Ga. 321 ( 1854 )

By the Court.

Lumpkin, J.

delivering the opinion.

[1.] It is now, undoubtedly, law in England, that under 29 Car. 2 C. 3, S. 4, to charge a party upon a special promise to answer for the debt of another, there must be a written agreement or memorandum thereof, which will not be valid unless it shows a consideration. It is true, that the consideration need not be expressly and formally stated, but it must, at least, appear clear and without ambiguity. James vs. Williams, (5 B. & Ad. 1109.) (27 E. C. L. R. 280.) Cole vs. Dyer, (1 Cr. & J. 461.) (S. C. 1 Tyrwhitt’s R. 304.)

[2.] In the first of these cases, Patterson, J. said—“ The consideration need not be stated in express words, on the face of the instrument; it may be collected or implied, from the instrument itself; but then, it must be collected, not asa matter,, of conjecture, but with certainty”.

And in Hawks against Armstrong, (1 New Cases, 761, 27 E. C. L. R. 565,) the Lord Chief Justice of the Common Pleas, said—“ It is not, however, necessary, that such consideration should appear in express terms ; it would undoubtedly be sufficient, in any case, if the memorandum is so framed that any person of ordinary capacity must infer, from the perusal of it, that such, and no other, was the consideration upon which the undertaking was given. Not that a mere conjecture,, however plausible, that the consideration stated in the declaration, was that intended by the memorandum, would be sufficient to satisfy the Statute ; but there must be a well-grounded inference to be necessarily collected from the terms of the memorandum, that the consideration stated in the declaration was intended by the parties, to be the ground of the promise”.

Now, the argument here is, that the guarantee, in its terms, covers future advances; and that inasmuch as the Courts will not be strict in the construction of such instruments, (per Tindal, C. J. in Newberry vs. Armstrong, (4 Bingham, 201, 19 E. C. L. R. 55,) but they are “ to be taken as strongly against the party giving the guarantee, as the sense of them will admit”. Mason vs. Pritchard (12 East. 227), that it may be inferred that Sampson Butler intended to stipulate, not only for future advances to be made to his brother, but for forbearance to press him on past indebtedness.

[3.] Besides, it is insisted that the advance of future sums is a good consideration to support a promise to guarantee not merely future, but past advances; that the contract cannot be divided, so as to leave one part of the guarantee without consideration ; that the whole constitutes one agreement, and the consideration goes to all.

• As to the latter proposition, there could be no answer to it, if the instrument had expressly guaranteed past and future advances, in consideration of advances to be made. B'Ut, on the contrary, not only is no such agreement expressed, but none such can be collected from the instrument.

‡ The other is much the most reasonable conjecture. The probable inducement operating on the mind of Sampson But- / ler, to give this guarantee, being the support of Nash Buttler, generally, in his business, which might require both indulgence for- the existing debt, as well as future accommodation. For, it would have been -<$_ little advantage to have provided for future advances, if'-Nash Buttler had been sued immediately for the old balance., _Destruction of his commercial credit would have been the inevitable consequence.

■ [4.] If there were, therefore, in the instrument, any thing which would indicate that forbearance on the existing debt, entered into the consideration, we would gladly seize on it to uphold the agreement in toto. But the language of the instrument is too unambiguous to allow this. He simply promises “to pay the debt now due, and all further liabilities for goods purchased, not to exceed $2500 at the termination of the year”.

We are loft entirely to guess, as to the consideration which induced this promise; we cannot sufficiently see what it is. It is not pretended that there is any engagement here to forbear •suing on the past advances. And we are not at liberty to form ■conjectures ; this is too hazardous. The Statute of Frauds is not thus satisfied.

[5.] In Wain vs. Warlters, (5 East. R. 10,) the leading ■case upon this branch of the argument, it might .have been fairly conjectured that the guarantee was given in consideration of forbearance to enforce against the principal, the bill which the plaintiffs held. But the Court pronounced the agreement invalid, for want of showing a consideration.

I am aware that the doctrine of Wain anal, Warlters, was considered and adopted by this Court, in Henderson vs. Johnson, (6 Ga. R. 390.) My examination of the case before me, has excited doubt as to the correctness of our conclusion.— From the repeated adjudications to be met with, in which the construction there put upon the Statute has been recognized, it seems to have been taken for granted, that it had become-the settled rule of the English Courts, at the time of our adopting Statute. But in ex parte Gardom, (15 Ves. 286), Lord Eldon said—“until that case, (Wain vs. Warlters) was-decided sometime ago, I had always taken the law to be clear, that if a man agreed in writing, to pay the debt of another, it was not necessary that the consideration shordd^§ggg^pn the-face of the writing”.

Now, Wain and War Iters was decidedC^liffira Sllenborvi^h,, in 1804. Is it true, that before that time tie been construed according to its popular dpmfication,1' and thate contrary interpretation wras put upon it iAhatfc f time? If-so, then, so far from being bouno^ythe rule thergtdaid down, it is both our privilege and duty, to aclner#6S!^ffelaw as it stood before that time. And this is a point I desire for myself, to have discussed, upon authority.- It is important to explore, thoroughly, the precedents from the date of the Statute to the commencement of our Revolution. It never has been done in this Court. And as the investigation would lead to no-practical result, in the case under consideration, I forbear to-undertake the labor myself.

The doctrine of Wain and Warlters, has always been esteemed of doubtful policy and propriety. And I have no hesitation in saying, that it nullifies nine out of ten of all the bona' fide securities given and received in good faith,- without conferring any corresponding benefit.

" Lord Sllenborough pronounced the Statute of Frauds, “ one of the wisest laws in our Statute Book”. Without taking issue with him, upon this subject, except so far as. to notice that our last Legislature seems to have thought otherwise, for they have gone far to annihilate it; I would remark, that the reason upon which Lord Sllenborough made the decision in Wain and Warlters, is founded in an incorrect supposition. He supposed the Act to. have been drawn by Sir Matthew Sale, and in view of his known accuracy, he concluded that the strict legal import of the wTord agreement must have been intended and that itincluded, therefore, both promise and consideration. Whereas, the history of the Statute, as appears from Ash vs. Abdy, (3 Swanston’s R. 664,) and other sources, seems to be this : It was originally drawn by Lord Sale, and introduced into the House of Lords by Lord Nottingham, but in a different form from the first draft; and it was subsequently “ altered and patched up by the Judges and civilians, until it was moulded into its present shape”. Thus it may be inferred, pretty satisfactorily, that the word agreement was either inserted through oversight, or was intended to be used in its ordinary and popular sense.

The States were, at first, pretty equally divided upon tho question. But owing to local legislation, and a change of Judicial opinion, which South Carolina, and other States have undergone, it is now pretty generally held, that tho consideration need not be stated.

To the opinion of the Court, as to the appropriation of the payments, both parties excepted. Cooke’s counsel contended, that tho payments should be first applied to the extinguishment of tho intermediate items of indebtedness, contracted between the giving of the first and second guarantees, and which were covered by neither. On the other hand, the attorney of the .estate of S. Butler, insisted that they should go to those items in the account, for which Sampson Buttler Avas security.

• It will be remembered, that the dealings between Nash Butler and Cooke, commenced in January, 1848, and continued doAvn to July, 1850. The first guarantee AAras given in December, 1847, and covers only tho first item in the account, of $>787 76, dated 7th of January, 1848. Further purchases Avero made throughout that and tho succeeding years, •and tho second guarantee was given on the 4th of January, 1850, and the dealings terminated in July of that year.

The Court held, and perhaps properly, in reference to the exact condition ©f this account, that the payments should he applied to the oldest items in the account, first.

[6.] Mr. Story, in his treaties on the Law of Contracts, (pages 752-’3,) thus statos tho rule, as to the appropriation of payments on accounts: “ The party who pays the money, has the right to apply it as he sees fit; if there be' several debts due from him, he can designate that one to which it shall be applied. If the party making the payment do not, at the Same time, make any specific appropriation thereof, then the party to whom the payment is made, may apply it as he pleases.

[7.] If neither party makes any specific application of the payments to the discharge of any particular debt, the presumption is, that the first items of a running account, or that the debts which are first in point of time, are to be thereby discharged. In all cases, if the parties, themselves, have omitted to make any specific appropriation of payments, the law will appropriate them according to the justice and equity of the case, for the benefit of both parties”.

This text, which is an epitome of the authorities, justifies the opinion of the Court, under the facts and circumstances of this case.

[8.] That Cooke, the creditor, might have applied the payments made by N. Butler, to the items in the account which was not protected, and continued to hold S. Butler, the guarantor, bound for the balance, the law is clear—a guarantor or surety merely, as such, having no equity to compel or change an application of payments made by the creditor.— See note to Mayor &c. of Alexandria vs. Patten and others, (1 Hare & Wallace’s American Leading Cases, 123.)

But here, the creditor, Mr. Cooke, applied the payments to' the account, generally, and consequently, could not claim the benefits of this principle, however well established. -And the point presented for the judgment of the Circuit Court, and for the opinion of this Court, is not what the creditor might have done, under the law, but what he did do. That he possesses large powers in the application of payments, will abundantly appear from the note in Hare Wallace. He may waive them, however, and in the present case he has seen fit to do so.

[9.] Lastly, was the Court right in holding that the guarantee of S. Butler, ranked with “ bonds and other obligations”, under the Act of 1792, for the disiribution of an insolvent’s estate ?

Tho attention of the profession has been repeatedly directed to the proper construction of this Statute. The omission to provide for the payment of notes and other liquidated demands, by name, has been attributed to oversight; and by a strained interpretation, as it has been usually supposed, all this class of claims havo been arranged under the term, “ other obligations ” in the Act, and thus placed on a level with bonds.

[10.] The suggestion may seem almost presumptuous, at this late day. Wo live,, however, to learn, and we think, that a recurrence to elementary principles, and to the early legislation upon this subject, will serve to explain the true intent of tho Act, and to vindicate its authors, against tho charge of using language, the legal import of which they did not themselves clearly comprehend. “Next bonds and other obligations”— say the objectors, this is mere tautology. Tho word obligation, ex vi termini, imports a sealed instrument, that is, means a bond. In its most technical signification, this is true. In Comyn’s Digest, obligation is defined to be a deed, whereby aman binds himself, under a penalty, to do a thing. But, in its more popular sense, the term obligation signifies the instrument or writing, by which the contract is witnessed. And the Assembly may well bo supposed to havo used tho word in its ordinary sensp. And it is in this view of it that our Courts have held, that all written contracts aro obligations, in contemplation of the Statute. And they have been ranked with bonds, in the distribution of the assets of an insolvent’s estate.

Upon strictly legal principles, then, it is plain that the framers of the Act of 1792, employed apt and proper phraseology, in regulating the order in which the debts of an estate should be paid; and that, in using the words “bonds and other obligations”, they havo been guilty of no vain repetition. (1 Burrill’s Law Dictionary, 764. Bouvier’s Dictionary Title “ Obligation”.)

[11.] But by tho 57th section of tho Judiciary Act of 1789, (• Watkins' Digest, 404,) it is declared, that all judgments, bonds, bills, promissory notes, or other writings, ivith or iviihout seal, whore the debt or demand is liquidated, and signed with the hand of the debtor, such writing shall constitute á specialty for such debt”.

Here, then, by express enactment, promissory notes and all other written evidences of debt, “ with or. without seal”, are constituted specialties, for such debt, provided they bo liquidated.,

Then, by the 88th section of the Judiciary Act of 1792, passed, not only in the same year, but on the same day with the Act directing the order in which the debts of a decedent shall be paid, to-wit: the 18th day of December, 1792, (Watkins, 488,) “all promissory notes and other liquidated demands”, are declared to be of equal dignity. The same dause is found in the Act of 1799, but that Act being seven years junior, in point of time, 'to the Act of 1792, regulating the dignity of debts, has been treated as having little or no application to it. But when it is discovered that this is a re-enactment, only, of the same provision in the Judiciary Act of 1792, which was passed simultaneously with the Distribution Act, it must be seen that it has an important bearing upon the proper exposition of that Act.

When the Legislature, in 1792, omitted to mention notes and other liquidated demands, and speak only of “ bonds and other obligations”, they used language which was not only warranted by its popular sense, but which was technically accurate and correct, according to the Act of 1789. For by that Act, all such demands are declared to be specialties, for the purposes of such debt. And then, by the Judiciary Act of 1792, as - well as that of 1799, they arc declared to be of equal dignity with bonds. That this equality extends to the order of their payment, there can bo no question; that it stops there, is by no means certain.

So much by way of explanation or verbal criticism.

Now, then, in view of all this legislation, what is the true intent and meaning of the Act undey consideration ? It is no more nor less than this: that all bonds and, liquidated demands are next to judgments, &c. to be first paid; all others are open accounts, and consequently, are last to be paid.

[12.] When is a debt said to be liquidated—a distinction so prominently preserved throughout the whole of our legislation ? I answer, whenever the amount due is agreed upon by the parties, or fixed by operation of law. A debt may be in writing, ■and not liquidated, or vice versa, it may bo liquidated, though not in writing. Open accounts are raised by one party only. The merchant, the mechanic, and all others with whom we deal, may charge what they please. It is an ex parte affair. The .account is open till agreed to by the other party. It may be scaled, by showing that the goods or work is overcharged. A shop-keeper may produce a written order for every item in his customer’s bill. Still, this does not liquidate it. On the other hand, there may be no written proof; still, if the debtor has acknowledged the justice of the account, it is no longer the act ■ of one party, but the agreement of both—it is liquidated. The case of Lawson and Nisbet, so often cited, sufficiently illustrates what is meant by liquidation, by operation of law. It is' the collection of money by an agent, the payment of a debt by a security, and such like cases, where the liability is for a fixed and precise sum, or nothing at all.

[13.] Is, then, a written guarantee to pay the future indebtedness of another, on open account, liquidated ? True, it is in writing, and but for our Statutes, would constitute, in common parlance, an obligationj and consequently, would take rank with the preferred class. But under our law, a writing, merely, does not suffice. It must be liquidated. Erom the very nature of the case, this guarantee cannot be. The amount of indebtedness, as between Nash Butler and Cooke, is not liquidated. It is open for future adjustment. How can it be claimed, then, that the guarantee of Sampson Butler, to see this open account debt, whatever it might be, short of $2500, paid, is liquidated ?

[14.] A'bond debt, whether liquidated or not, must be paid, because the Statute says so. It may be for unliquidated damages, as for the breach of a covenant to make titles to land. Still, if it be a bond debt, it must be discharged.

[15.] But as it respects all other demands, the inquiry is, not whether they are in writing, but whether they be liquidated? Eor I repeat, that although in writing, still, if they be' not liquidated, they are not in the nature of specialties, and must be postponed. And although not in writing, still, if they be liquidated, they must be satisfied before open accounts; if not, because they are pro hae vice specialties, they are not open accounts, which stand “solitary and alone”, at the bottom of the descending grade. Rightly or otherwise, in my humble opinion, most wrongfully, as are all distinctions in debts—they occupy “ a lower deep” than any other species of indebtedness.

[16.] I would not thoughtlessly aggravate the bibliomania or extravagant desire of multiplying books abroad in the land; still, if there be any member of the bar who feels burdened to discharge the duty which Sir Edward OoJce says every man owes to his profession, to bring forth something of this sort, “ according to his power, place and capacity”, I would suggest that a small volume, containing all the old Constitutions, Judiciary Acts and other general Statutes, State and Colonial, which were of force in Georgia, prior to 1799, and which are not to be found in any of the existing Digests, except Watkins, which is nearly out of print—and some of these Statutes, as for instance the Judiciary Act of 1796, which was only partially repealed by that of 1797', is not even in Watkins; such a compilation, I am persuaded, would be an acceptable contribution to our libraries. And especially should the author not for:.get to begin, by inserting am authentic copy of the Colonial 'Charter.