Hatton's Adm'rs v. Jordan , 29 Ala. 266 ( 1856 )

WALKER, J.

In support of the demurrer it is contended, that the agreement to pay Jordan, in consideration of his consent to the making of the deed, and to the preference of Hatton over himself and the creditors to whom he was bound, would, in the end, enure to the benefit of Lowe ; and that the contract, therefore, covertly reserves a benefit to an insolvent assignor. From this argument the conclusion is deduced, that the agreement was unlawful, because its purpose was to accomplish by indirection that which could not be accomplished directly,-as settled by repeated decisions of this court. — Wiley, Banks & Co. v. Knight, 21 Ala. 336 ; West, Oliver & Co. v. Snodgrass, 11 Ala. 549 ; Grimshaw & Brown v. Walker, 12 Ala. 101 ; Gazzam v. Pointz, 4 Ala. 318 ; Montgomery’s Ex’rs v. Kirksey, 26 Ala. 112. This ai’gument is bottomed on the assumption, that in a suit by Jordan, for reimbursement of money paid by him as the surety or endorser of Lowe, the latter might claim a credit equal in amount to the sum paid Jordan on this contract. If the contract of Hatton had been to pay money on the debts of Lowe'on which Jordan was bound, or to pay money to Jordan with which to discharge those debts, for a consideration moving from Lowe, it would follow that Lowe would be the real ultimate beneficiary from the recovery against the defendant, because the surety can recover from his principal only what he has actually paid.— Burge on Suretyship, 358, 359. But such is not the case here. It is an independent contract, for the payment of money to Jordan, upon his consent to the preference in the deed of the promisor to himself. The promise is to Jordan alone, and the consideration moves from him alone. It is a contract in which Lowe does not participate, and from which he' could neither gain nor lose anything. For these reasons, Lowe could not be entitled to the benefit of any money which Jordan might receive under the contract.

The case of Kissam v. Edmonston, 1 Iredell’s Equity R. 190, cited by the counsel for appellants, is not analogous to this. In that case, the debtor extorted from his creditor, as the. terms upon which a security should be provided, that the creditor should divide his debt into two equal parts ; for one of which parts the debtor should execute his note to a third person, for the benefit of his wife and children, and for the other should give his note to the creditor ; and should make a deed of trust on his property as a security for the two notes. The-note and security for the debtor’s wife and children were held to be fraudulent. That case is distinguishable from this. In that case, the debtor was the contracting party, and secured an appropriation of half the debt, with a security for its payment, to his wife and children ; which was deemed, in effect, a provision for himself. In this, the debtor is not the contracting party ; no diminution of the extent of his liability to his creditor is stipulated for ; neither himself, nor any selected object of his bounty, is provided for ; and, after expressing his own desire to prefer a partichlar surety, he submits that preference, which he had at that time an undoubted right under the laws of this State to make, to the control of him whom he desired to prefer ; and the beneficiaries to the deed arrange among themselves by a contract with which he does not appear, from the declaration, to have any connection, a postponement of the surety whom he -had intended to prefer. In such an' arrangement, we cannot detect any reservation of a Jpenefit to Lowe, nor perceive how he is ultimately to receive the benefit of the promise made to Jordan.

It is argued, that the tendency of the contract was to wrong and defraud the creditors to whom Jordan was bound as the surety of Lowe, and also his co-sureties.- If Jordan was .insolvent, or unable to pay the debts upon which he was surety, the effect of the contract would be to injure the creditor ; because, in that event, Jordan would stand in the attitude of diverting, by his. consent, for a consideration personal to himself, from the creditor, a means of payment which he would otherwise have received. It is not necessary, and we therefore do not stop to inquire, what judgment the law would pronounce upon the transaction, if the declaration averred that Jordan was insolvent. If, on the other hand, Jordan was entirely solvent, and able to pay the debts to the amount of $150,000 upon which he was bound, the postponement of those debts in the deed could not injure the creditors; because, if they could not realize their money from the deed, they could make it out of Jordan. Upon the hypothesis of Jordan’s ability to pay the debts, the perils of his suretyship were vastly increased by his consent to the preference of Hatton; but it is not perceived that the creditor could be injured. It is not averred that the creditors could not have, made their money out of Jordan, and we cannot by intendment add that averment.

No question arises, as to whether the tendency of the contract was to wrong Jordan’s co-sureties, or the other endorsers on the paper endorsed by him. The declaration does not disclose that there were any other sureties or endorsers bound with Jordan.

The contract is not a nudum pactum. The preferred creditor is benefited, and the surety who consents to the preference and to the postponement -of the debts for which he is bound, is injured by an increase of his hazard, resulting from-the waiyer of an opportunity to have the debts secured. Heud v. Holdship, 2 Watts, 104 ; S. C. 1 U. S. Digest, 100, § 69,; Story on Contracts, 852, § 431, second edition ; Chftty on Contracts, 31 and 32, and notes, 8 Am. from 4th London edition.

There is no analogy between-this case and the cases of secret agreements for undue advantage to some of the creditors in composition deeds. Such deeds contain an agreement bjr the creditors to release the debtor' from so much of the debt as is hot paid out of the effects assigned. The assent of each creditor is supposed to be influenced by the conduct of the rest, and each to act upon the supposition that there is perfect good faith among them. It is therefore regarded as a fraud for one creditor to stipulate, without the knowledge of the others, for a benefit outside of the composition deed. Here there is no dependency of the acts of the several creditors upon each other, and no secret arrangement is made, with the debtor, and no provision of a benefit to Jordan from him.— Clark v. White, 12 Peters, 199 ; 1 Story’s Eq. Ju. 406, § 378; Story on Contracts, 115, § 184, and note; Knight v. Hunt, 5 Bing. 432, (15 E. C. L. 488.)

No principle of public policy or morality is infringed by an arrangement among the common creditors of an insolvent debtor, about to make'a conveyance to secure them, that he shall prefer the one, and postpone the other. The law applicable to this case- allowed a debtor to discriminate among his creditors, and yet that discrimination might be induced by motives of caprice, favor, or affection. A discrimination pre-arranged among the beneficiaries, and adopted by the debtor, cannot suffer in the contrast with one governed alone by the judgment or feelings of the debtor.

It results from the views above expressed, that in our judgment the declaration was .sufficient.

2. The court properly refused to grant to the defendant oyer of the deed made by' Lowe. The instruments of which the defendant may demand oyer are those of which the plaintiff would have been compelled at common law to make profert. The deed was not the foundation of the suit. The breach of a contract outside of the deed is the gravamen of the action. The deed is mere inducement. For these reasons, the plaintiff would not have been bound at common law to make profert of the deed, and the defendant is not entitled to oyer.— Gould’s Pleading, 444, chap. 8, § 47 ; 1 Chitty on Pleading, 430, 431, 432, 365.

3. It is a sequence from the conclusions above expressed in reference to the demurrer to the declaration, that Lowe was not incompetent to testify for the plaintiff, upon the facts stated in the declaration. But the facts upon which the competency of Lowe depended, as set forth in the bill of exceptions, are not identical with those averred in the declaration. The court had before it, when it passed upon this question, several additional facts; but the only one which it is necessary to notice in this connection, is, that there were other sureties and endorsers bound with Jordan. In determining the effect of this last fact upon Lowe’s competency, it may be conceded (although it is by no means clear), without affecting the result, that th'e co-sureties of Jordan would be entitled, if sued by him for contribution, to diminish his recovery by the amount which he may get in this suit; and that in the event those cos-ureties should sue Lowe, he could restrict their recovery to the amount paid Jordan, as lessened by the defense set up on' account of the money received by him from this suit.— Under the concessions thus made, Lowe would only be advantageously affected by Jordan’s recovery in this suit, in the contingency that Jordan should pay, or has paid, more than his co-sureties, and should sue them for contribution, and they should diminish his recovery by the amount received from this case; and in the farther contingency that they should then sue Lowe for reimbursement. An interest depending upon such contingency is two remote to disqualify the witness. Massey v. Ragan, 6 Ala. 648 ; The State v. Truss, 9 P. 126. It does not appear ■ from the bill of exceptions that the co-sureties of Jordan have paid, or ever will pay, anything upon the liabilities on which they are bound with Jordan. It is therefore unnecessary to consider the question of Lowe’s competency upon the hypothesis of such payment; but we do not perceive how, if such were the case, it could change the result.

There being no error in any of the rulings of the court below, shown in the record, the judgment of the circuit court is affirmed.

This suit was instituted, and the contract upon which it is brought was made, before the adoption of the Code; and the foregoing opinion is therefore made without reference to its provisions.