SAMUEL McDOWELL vs. THE PRESIDENT, DIRECTORS and COMPANY OF THE BANK OF WILMINGTON AND BRANDYWINE, 1 Harr. 369

Judge Black delivered the opinion of the court. Black, Justice: On the 6th of October, 1817, Thomas McDowell made his promissory note for @500, payable in sixty days to the order of his brother, Samuel McDowell, which the latter indorsed, and which was discounted by the Bank of Wilmington and Brandywine: It was duly protested at maturity for non payment, and a suit instituted on it by the bank against the indorser, in the supreme court, to March T. 1818, in which there was a judgment by confession on April 7, 1819, for @541 16. A scire facias issued on this judgment to Nov.

T. 1829, to which the matters hereinafter stated in relation to the deposites made in the bank by Thomas McDowell, and the agreement between him and the bank, made in June, 1827, were (inter alla) specially pleaded. To this plea the plff. in the action demurred, and judgment was rendered on the demurrer for the demurrants, on November 6th, 1830, on the ground that the original judgment could not in a court of law be held to be discharged by paroi or matters in pais, but only by a release or actual payment; that if such defence could be proved, it could only avail or be entertained in a court of equity.

Both drawer and indorser took the benefit of the insolvent acts between 1817 and 1827. In August, 1819, Thomas McDowell opened an account in the Bank of Wilmington and Brandywine, and his deposites between that date and June, 1822, exceeded @4000; from June, 1822, to June, 1827, they were above @9000; after June, 1827, they were something over @200. The monies deposited were drawn out, from time to time, by Thomas McDowell, on his cheeks. In the account of Thomas McDowell, as it stands in the ledger of the bank, the letters <CJ. P.” are added to his name, from August, 1819, to June, 1822.

In none of the accounts subsequent to this date are these letters added, but the accounts stand in the name of “Thomas McDowell. The bank insist that this account kept with them by-Thomas McDowell was kept in his official character as a justice of the peace, (he holding that office) and was a special account in that character, and not a general account embracing his own money, and that it continued in that character during the entire period up to 1831, notwithstanding the letters “J. P.” were not appended to the depositor’s name in the ledger after June 1822.

Two bank books, such as are furnished by the bank to those who keep accounts with them, containing entries, made by the officers of the bank, of monies deposited and checks drawn, from October, 1820, to August, 1831, are produced in evidence, which are thus commenced: “Dr. the Bank of Wilmington and Brandywine in account with Thomas McDowell, Cr.” In neither of these books are the letters “J. P.” added to the name of Thomas McDowell. The checks drawn during the period of the account were signed Thomas McDowell, without any addition.

In the scratcher of the bank, in which the original .entries of deposites are made, some, and perhaps most of the deposites made in the year 1819 are entered to the credit of “Thomas McDowell, J. P.” but there are none so entered after 1819. After the year 1821 a number of notarial fees are credited Thomas McDowell in his bank account as deposited. The balances in favor of Thomas McDowell on inspecting the books appear at times to have been considerable; on some occasions $400, and on one upwards of $500.

His fees for protesting, prior to June, 1827, amounted to $495 99, and since that time to $378 49, of which last sum $241 01 have been applied to his note, under the arrangement hereafter mentioned, and $137 48 deposited and carried to his credit in his account with the bank before referred to. In June, 1827, at the instance of the bank, an arrangement was made between them and Thomas McDowell, by which it was agreed that the latter should receive of his notarial fee for each note protested by him for the bank, sixty-two and a half cents in cash, and that the residue of each fee should be applied to his note.

The arrangement to this extent is admitted by the answer. The fees of protest under this agreement amounted as before stated to $378 49, it having been acted on by the parties for several years. The bank by its answer denies that this arrangement was to continue until the amount due on the protested note was paid, or that it was not to require of Thomas McDowell payment in any other manner while he continued to perform his part of the agreement.

On the other hand, Thomas McDowell, who has been examined as a witness in this cause, swears “that the arrangement was to continue until the debt was paid, and that it was expressly understood at the time of making it, that recourse was not to be had against the indorser.” In February, 1829, the complainant was owner of thirty-six shares in the Bank of Wilmington and Brandywine, which he contracted through his brother to sell to Robert Porter at ten dollars per share.

The bank refused to permit the stock to be transferred, on the ground that he was indebted to the bank on the aforesaid judgment, and that by a by-law of the corporation no stockholder who is indebted to the bank is at liberty to transfer any part of his stock while his debt remains unpaid. To recover damages for the injury sustained by this refusal, the complainant instituted an action in the superior court against the bank, of which a trial was had.

The bank relied on the aforesaid judgment and by-law as a defence to this action, which the complainant attempted to meet by proof of the arrangement of June, 1827, and the deposites made by Thomas McDowell in the bank, but was overruled by the court, on the ground that the judgment being a debt of record, its discharge in a court of law could only be shown by a release or actual payment, and that the judgment being a legal demand, could not in that court be successfully resisted on equitable grounds, however strong; that such defences could avail in equity alone.

After the expression of this opinion by the court, who also recognized the validity and legality of the by-law, the plff. submitted to a nonsuit. The value of each share of stock in the Bank of Wilmington and Brandywine was by act of the Legislature in February, 1829, fixed at seven dollars. The shares were to be filled up to thirty dollars, stockholders to have the preference; but if they declined, a further stock was to be created to the amount necessary to fill up the original capital.

The complainant declined filling up his shares, on the ground, as he alledges, of the power claimed by the bank over his stock. The value, in August, 1833, of the full shares was §40 50, or §10 50 above par, and of the old shares not filled up, §10 50, or §3 50 above par. The complainant cannot now fill up his shares, as the time allowed the old stockholders to do this has passed.

The bill prays that the judgment against Samuel McDowell may be decreed to be entered satisfied and a perpetual injunction awarded, and that he may be compensated for the damage he has sustained by the refusal to permit the transfer of the bank stock. On hearing, the chancellor dismissed the bill. An indorser is a conditional debtor up to the period at which he becomes fixed by a due demand and nolice; from that time he becomes a principal debtor, to whom alone the holder may resort.

In a suit at law upon the note he may successfully defend himself by showing that his rights have been fettered, abridged, or suspended. If, however, judgment be obtained against him, this can only be discharged or gotten rid of at loto by showing the debt to be paid or released, the original character of the liability being merged in the judgment, a court of law cannot recognize him in the character of a surety. That court is estopped by the judgment, and cannot look beyond it.

But this rule does not prevail in a court of equity, which will look beyond the judgment and inquire into the origin and nature of the transaction and the condition and character of the parties, and if the original condition and character was that of surety, extend to him the benefit of those equitable principles which the character of a surety properly may demand.

In the court of chancery, therefore, and in this court, on an appeal from the court of chancery, an indorser will be viewed as a surety and entitled to such relief as a surety may on principles of equity claim, notwithstanding a judgment may be obtained against him.

The complainant claims to be relieved from this judgment, first, on the ground that the bank, since the judgment was obtained, have had in their possession and under their control funds of the drawer to an amount more than sufficient to have discharged this judgment, which they had the power and which it was their duty to have appropriated to the judgment, but which they have paid to the drawer, "and that by so doing the claim of the bank is as against Samuel McDowell equitably discharged.

The bank alledges that the account with the bank by Thomas McDowell was not a general account, but a special one with him as justice of the peace, comprising only the deposit of monies received by him in that character, and not his individual funds. The only proof produced by the defts. to sustain this position is, that during the year 1819 most if not all the deposits appear from the scratcher or original hook of deposit to be placed to the credit of “Thomas McDowell, J. P.” and that in the ledger of the bank, from August, 1819, to June, 1822, his account has the heading of “Thomas McDowell, J.

P.” On the other hand, in none of the accounts in the ledger since June, 1822, are the letters “J. P.” added, but they stand merely in the name of Thomas McDowell. The bank books furnished by the bank to Thomas McDowell as a depositor, in which the officers of the bank state the account and make the entries, and which should contain the specific special character of the account, if it was understood by the parties to be a special and not a general one, contains no designation of this kind.

In each book it stands as a general account—“Dr., the Bank of Wilmington and Brandywine, in account with Thomas McDowell, Cr.” Nothing is added to show that it was with him as a justice of the peace, or in any other character than that of the ordinary general account kept by a depositer with the bank. It also appears from the checks drawn by Thomas McDowell, that they are signed merely Thomas McDowell, without any addition thereto of J. P. or of any thing else.

It also appears that the notarial fees due him by the bank -were deposited to his credit in these accounts; these certainly, as the bank well knew, did not belong to an account of justice of the peace. In addition to all this, Thomas McDowell, in his deposition, swears that he had no separate account as justice of the peace, but that any moneys received by him in his official capacity and deposited in the bank were deposited and credited to him as his 'own personal funds.

That the bank could not have received it as a special account, but a general one, is very strongly to be inferred from their payment of the checks drawn by Thomas McDowell, without any addition to show it was drawn on a special fund. In our judgment it can only be considered as a general account of Thomas McDowell with the bank, such as is usually kept by depositers with a bank. It was under the entire control of Thomas McDowell, individually. His creditors might have attached any money due on it.

The bank had the right to appropriate to the note indorsed by the complainant, or any other debt due to it from Thomas McDowell, so much of his money remaining in bank to his credit on this bank account as might be sufficient for this purpose; and as they have neglected to make this appropriation to the note, the important question arises, whether, in relation to the complainant, it was not the duty of the bank to have done so, and whether by neglecting this duty and paying over to Thomas McDowell the money in their hands belonging to him, the complainant is notin equity held discharged from all claim by virtue of the aforesaid judgment.

On what principle of justice or equity can a creditor whose debt is due and the payment of which may be enforced, and who has on a running account money in his hands belonging to the debtor, the means of payment entirely under his own control and at his disposition; who refuses or neglects to make the appropriation or set-off, and voluntarily hands over to the debtor the money which he might have retained; upon what principle of justice can such a creditor in a court of equity claim to hold the surety bound, after the debt had been in point of fact paid, if the creditor had elected to say so or to so consider it.

The creditor could have set off the debt and charged it in the account, and having the power was it not his duty to do so in justice to the surety. If Thomas McDowell had sued the Bank for any balance of the account, he would have been compelled to have allowed this note as a set off. Suppose, in such a suit, the Bank had chosen not to have pleaded this note as a discount, and the entire balance of account thus allowed by them to be recovered—would not the judgment against Samuel McDowell have been in a court of equity held as satisfied by such a course of conduct?

Deciding as we must do on equitable principles, we consider that the right of set off or appropriation of these moneys in Bank to the note of Thomas McDowell, became a duty towards the complainant, in order to protect him from loss, and as the deposites amounted, in the course of the years of which an account is given, to several thousand dollars, and the balances at times as high as $400 and $500, and the means of payment at the will of the creditor, we consider that the Bank cannot, under these circumstances, be allowed to enforce against Samuel McDowell the judgment obtained against him.

The decision of the master of the rolls in the cause of Law vs. The East India Co.; 4 Vezey 330, (if an authority were wanting for so obvious a principle of justice) fully sustains the conclusion to which the court have come. In that case the agents of the company had paid into the hands of the administrator of the principal debtor a large sum of money supposing that sum of money really to be due from the company.

In relation to the sum thus paid the master of the rolls says “nothing is more clear than as between them (the company) and the surety, they could never demand that sum.” The complainant claims relief from this judgment, secondly, on the ground of the arrangement between the Bank and Thomas McDowell, in June, 1837, by which, as he alleges, time was given to the principal to pay the note and the. rights of the surety impaired. Thomas McDowell swears that the arrangement as to protesting was to continue till his debt was paid.

If such was the arrangement then the period of payment was postponed and the rights of Samuel McDowell were so far impaired as that he would no longer be held responsible in equity on this judgment, for the consideration of personal services which Thomas McDowell was to render, and which the Bank could not compel, was a sufficient consideration for the time granted.

It is true Thomas McDowell is the only witness as to this arrangement, but there are concurring and corroborating circumstances, which, were it necessary, would perhaps lead the court to say would countervail the positive denial of the fact in the answer, even if it had been under oath. From the view we have taken of this case it does not become necessary for us to decide, whether the oath of one witness will not avail over the denial of an answer of a corporation under seal.

The reason of the rule that has obtained is, that you have oath against oath, and that in such case further proof or corroborating circumstances are called for, or the answer will neutralize the oath of a single witness. This reason does not exist in the case of a corporation and we confess we entertain strong doubts -whether the testimony of one witness should be annulled by an answer -wanting the sanction of an oath.

We are of opinion on a consideration of the whole case, that the decree of the chancellor is erroneous and should be reversed, and that the defts. be perpetually enjoined from proceeding on the aforesaid judgment against the complainant. We decline ordering an issue as asked, although we don’t doubt the power of the court to do so in a case like the present, if we thought it necessary, as we have enough before us to attain what is equitable between the parties.

By refusing to permit the transfer, the defts. have deprived the complainant of interest on $360 the price at which the stock was sold, from February, 1829. This is all that in equity he is entitled to. He had sold the stock and the right of filling it up would on the transfer have gone to the assignee and would not have belonged to him. In this respect he is not damnified. The shares of stock, according to the proof, is now worth more than ten dollars. We decree him interest on $360, from the tenth of February, 1829, to the tenth of January, 1834, $109 80, the date of the last dividend.

The dividends between these periods to be retained by the Bank and all subsequent dividends to belong to complainant. The defts. to pay costs. The following decree was entered on the record: “And now to wit, this ninth day of June, A.

D. 1834, this cause having come on to be heard before the court of Errors and Appeals at the present term thereof, and the causes of appeal, pleadings, proofs and exhibits having been read and heard by the court, and the matters of appeal being debated by counsel; it is ordered, adjudged and decreed by the court that the decree of the chancellor, bearing date the 24th day of February, A. D. 1834, dismissing the bill of complaint of Samuel McDowell the complainant in the court of Chancery be reversed.

And it is further ordered and adjudged by the court, that the president, directors and company of the Bank of Wilmington and Brandywine the respondents in this appeal be perpetually enjoined and forever restrained from any further proceedings at law against the said Samuel McDowell on the judgment rendered against him on the seventh day of April, A. D. 1819, at their suit in the late Supreme Court of the state of Delaware, held at Newcastle for Newcastle county, of the March term, A.

D. 1819, for the sum of five hundred and forty-one dollars and sixteen cents, numbered on the docket of said court No. 119, of the March term, A. D. 1819, and now remaining of record in the Superior Court of the said county of Newcastle. And it appearing to this court that the sale of the thirty-six shares of the stock of the Bank of Wilmington and Brandywine standing in his name on the books of the said Bank made by the said Samuel McDowell to Robert Porter, in the month of January, A.

D. 1829, for the sum of three hundred and. sixty dollars, was without sufficient cause and inequitably hindered and prevented by the said respondents and that the dividends on the said stock do not amount to as great a sum as the interest upon the said purchase money, it is further ordered and decreed that the said respondents pay to the said Samuel McDowell the sum of one hundred and eight dollars in lieu of the dividends declared on the said thirty-six shares of stock between the month of January, A. D. 1829, and the month of February, A.

D. 1834, and that the said dividends declared on the said thirty-six shares of stock between those periods be retained by the said respondents for the use and benefit of the said Bank of Wilmington and Brandywine, leaving to the said Samuel McDowell his legal and equitable rights as to the sale and transfer of the said thirty-six shares of stock, and of demanding and receiving any dividends that have been or may be declared thereon since the month of January, A.

D. 1834; and it is further ordered and adjudged by1 this court that the said respondents pay the said sum hereby decreed to be paid, and also the costs of this suit in the court of Chancery, and the costs on this appeal in ninety days from the date of this decree, or that a writ of sequestration issue.” J. A. Bayard, for appellant. Wales and Rogers, for respondents.