Moreland & Willis v. State Bank, 1 Ill. 263, 1 Breese 263 (1828)

Dec. 1828 · Illinois Supreme Court

1 Ill. 263, 1 Breese 263

Moreland and Willis, Appellants, v. The State Bank of Illinois, Appellee.

APPEAL FROM GALLATIN.

The 22d section of the act establishing the state bank, is merely directory to the board of directors, and an omission by them to comply with it does not release the securities to a note executed to the bank for an accommodation. ⁽¹⁾

Rules of decision are the same in a court of equity as in a court of law.

(1) The present statute is nearly the same as that cited in the opinion of the court. Purple’s statutes, 1083, sec. 1. Scates’ Comp., 835. And under this statute the court holds that “ To sustain a plea under the statute, it must appear on the face of the note that the party signed it as security.” McAllister v. Ely, 18 Ill., 249. Payne v. Webster, 19 Ill., 103.

This statute applies only to such obligations as are transferable by indorsement, so as to vest the legal interest in the assignee. Taylor v. Beck, 13 Ill., 384.

The rule is well settled that mere passiveness or delay in proceeding against the principal, except when required by statute to sue, will not discharge a surety. The People v. White et al., 11 Ill., 341. Pearl et al. v. Wellmans, id., 352. Taylor v. Beck, 13 Ill., 376.

If a creditor, by a valid and binding agreement, without the assent of the surety, give further time for payment to the principal, the surety is discharged both at law and in equity; and it makes no difference, whether the surety be actually damnified or not. Davis et al. v. The People, 1 Gilm., 410. Waters v. Simpson, 2 Gilm., 574. Warner v. Crane, 20 Ill., 148.

A promise to delay for an uncertain period, will not discharge a surety. The time of extension must be definitely fixed. Gardner et al. v. Watson, 13 Ill., 352. Waters v. Simpson, 2 Gilm., 574.

Opinion of the Court by

Justice Lockwood.

This action was originally commenced before a justice of the peace, and judgment rendered in favor of plaintiff below, against defendants below, as securities to a note given to said plaintiff. The defendants appealed to the circuit court of Gallatin county, where the following facts were agreed to by the parties : “ That the note was discounted upon the application of one Garner Moreland, and the accommodation was made to him upon his check, that neither the directors of the bank, nor any agent for them, ever gave the said Hazle Moreland and John Willis, any notice of the failure to renew said note, or of its non-payment, until the commencement of this suit, and that at the time the note fell due, and for twelve months after, the said Garner Moreland resided in this county, and was in solvent circumstances, and that he afterwards, before the commencement of this suit, left the state, and took with him all his property, and that these facts are all the evidence in the case.” The circuit court affirmed the judgment of the justice of the peace, and the case is brought into this court by appeal. It is, among other things, urged, that the securities became released, because the president and directors did not cause the note to be protested; and secondly, because they did not use diligence against the principal in the note. By the 22d section of the bank law,^* “it shall be the duty of the board of directors of the said principal bank or branch, to have the note (if a note) protested; if said loan be secured by mortgage, to have the mortgage foreclosed, and to proceed to the collection of said debt, without delay.” Does the mere omission of the board of directors to have the note protested and sued, operate as a release to the securities?

It is a general rule of the common law, that mere delay to sue, does not release the security. And it is a controverted point, whether a refusal to comply with the request of the security to bring suit would release him.

But, by ‘“an act providing for the relief of securities in a summary way in certain cases,” passed 24th March, 1819,^† it is provided, that a security may, by notice in writing to the creditor, require him to put the note, &c., in suit, and in default to comply with such request, the creditor shall thereby forfeit his right of action against such security. In this case no such request has been made.

It may, however, well be doubted, whether the legislature did not intend to take away from securities, the right to give this written notice to bring suit, for by the 12th section of the bank law,^‡ the security is to “ sign such note as principal,” and consequently, liable to be considered as such. It is, however, unnecessary to decide what effect a notice to bring suit would have, as no such notice has been given.

In putting a construction upon the 22d section of the bank act, it is the duty of the court to ascertain the intention of the legislature, by carefully examining the context, and give such a construction to each of the provisions of the act as will harmonize with other parts of the act, if it can be done without violating any of the acknowledged rules of construing statutes. Acting upon this principle, the court are of opinion that the 22d section of the bank law is to be considered as merely directory to the board of directors, and their neglect forms no ground of defense to the debtor, or his securities. The directors were not acting in their own right, and any omission of duty on their part ought not to work an injury to the state, as it was in the power of the securities, by paying the note, to commence suit and thus secure themselves. The court are confirmed in this construction, by a recent decision of the supreme court of the United States.

By the post-office law,^* “If any postmaster shall neglect or refuse to render his accounts and pay over to the postmaster-general the balance by him due, at the end of every three months, it shall be the duty of the postmaster-general to cause a suit to be commenced against the person or persons so neglecting or refusing; and if the postmaster-general shall not cause such suit to be commenced within six months from the end of every such three months, the balances due from every such delinquent shall be charged to, and be recoverable from, the postmaster-general.” . It is observable, that the requirement of the act of Congress to commence suit against postmasters, is as "strong as in the case of the board of directors under the bank act, and in addition, the, postmaster-general is to be charged with all sums due from postmasters, if he neglects performing his duty. Yet the supreme court of the United States have decided, in an action on the postmaster’s bond, that his securities were not discharged by the neglect of the postmaster-general, and that the remedy given against the postmaster-general was intended for the benefit of the government, and consequently, was cximulative in its character.

We have not seen this decision, but such we understand to be its import. It was argued, on the part of the defendants below, that by commencing suit before a justice of the peace, the circuit court was authorized to decide this case, in the same manner that a court of equity would have done. The rule, however, is the same in courts of law and equity, and whatever would exonerate the security in one court, would also in the other. The facts being ascertained, the rule must be the same in this court as in a court of chancery. People v. Jansen, 7 Johns., 337. It is laid down in Jansen’s case, “ that mere delay in calling on the principal, will not discharge the surety, is a sound and salutary rule, both at law and in equity.” This case of The People v. Jansen, is relied on by defendants below, as an authority in point, to show that the laches of the board of directors, operates as a good defense to this suit. If that case, since the decision in the supreme . court of the United States, on postmasters’ bonds, should be considered as correctly decided, still, we think that there is a wide difference between that case and this. The securities in that case were bound for the faithful performance of the duties of an officer. Here, the defendants bound themselves absolutely, to pay the note when it became due.

Gatewood, for appellants.

Eddy, for appellee.

They are to pay unconditionally. The risk of the insolvency of the principal is assumed by the sureties, and it was their business to see that the principal paid the note when it became due. Jansen’s case is not, therefore, analogous; and it was also decided under its peculiar circumstances, which have no application in this case. The objection that was made in the argument, that the bank, by its cashier, can not take an appeal, is not well founded, for both appeals were taken by the defendants below, and if the appeal had been taken on behalf of the bank, by the cashier, or prosecuting attorney, the court do not perceive that it would be liable to objection. The judgment must be affirmed with costs. ^(a)

Judgment affirmed.

* Laws of 1821, p. 39.

† Laws of 1819, p. 243.

‡ Laws of 1821, p. 86.

* Gordon’s Digest, p. 63.

(a) The omission of the proper officer to recall a delinquent paymaster, in pursuance of the fourth section of the act of congress, of April 24th, 1816, does not discharge the surety. United States v. Van Zandt, 11 Wheat., 184.

The neglect of the postmaster to sue for balances due by postmasters, within the time prescribed by law, although he is thereby personally chargeable with such balance, is not a discharge of such postmasters or their sureties, from liability on their official bonds. Locke v. P. M. General, 3 Mason, 446.

The provisions of the law are merely directory to the P. M. Gen. and form no condition in the contract with the postmasrers or their sureties. Id.

Mere laches, unaccompanied with fraud, forms no discharge of the contract of securityship between individuals. 9 Wheat., 720.

In general, laches is not imputable to the government. Id.

A surety in a bond is not discharged by a mere delay to demand p'ayment after it becomes due, unaccompanied by fraud, or an express agreement with the principal to allow the delay. 1 Gallison, 32.

He is exonerated by any agreement, without his consent, between the creditor and principal, which varies essentially the terms of the contract, 1 Paine, 305. See 3 Stark. Ev., 1390 and cases there referred to in note.