Miller v. McCan , 7 Paige Ch. 451 ( 1839 )

The Chancellor.

A general decree dismissing the bill was erroneous, even if Suydam was a necessary party; for such a decree is an absolute bar to another suit in which all the proper parties are brought before the court. The proper course, where there is a want of necessary parties, is either to order the cause to stand over, to enable the complainant to bring the necessary parties before the court; or the bill should be dismissed without prejudice, so that his right to bring a new suit, making all proper persons parties thereto, will not be barred by the decree. (Van Epps v. Van Deusen, 4 Paige’s Rep. 64. Thompson v. Clay and others, 3 Monro’s Rep. 362.) In the present case, however, I do not see any benefit either party could have from making Suydam a defendant in the suit. The complainant does not state a case entitling himself to any decree against him. He only seeks to restrain the plaintiff in the suit at law from enforcing the payment of the note against himself as surety of Suydam. If he does not prove the allegations in the bill, to entitle him to that relief, his bill must be dismissed of course; and he would not in that case be entitled to any decree in this suit against Suydam. On the contrary, if he succeeds in obtaining a decree discharging him from his liability as surety, he cannot, in that event, claim any decree against Suydam, even if Suydam is made a party.

If the equitable defence to the note which is set up here, was a defence in which the principal and surety were both interested, as in the case of Bailey v. Inglee, (2 Paige’s Rep. 278,) this defendant might properly insist that Suydam should be made a party, for his benefit; so that he. might not be obliged to litigate the same question over' again with Suydam, the principal debtor in this court, after he should have succeeded in defeating the suit of the present complainant. But as this was a question in which Suydam stood perfectly indifferent between the parties, he being liable any event to pay the judgment and costs which might recovered in the suit on the note, it was wholly immaterial to the holder of the note whether Suydam was or was made a co-defendant with him in this suit. And whether he was or was not a defendant here, the right of the complainant to examine him as a witness in this suit, against McCan, the present defendant, would be the same. For a defendant in this court is not interested in favor of the complainant, or if his interest in the question in controversy is equally balanced, the fact that he is a party to the suit no objection to his being examined as a witness against co-defendant. The extent of the decree to which the complainant is entitled is a perpetual injunction against the collection of this note of the surety personally; but without prejudice to the deféndant’s right to continue the suit at law, and to enfdrce the collection of the judgment, which may be recovered therein, against the property of the principal debtor. And if the preliminary injunction was granted in such a form as to prevent McCan from proceeding to judgment against Miller and Suydam jointly, and from taking out an execution against them to be levied on the property of Suydam only, it was not warranted by the case made by the complainant’s bill. That, however, would not justify the court in dismissing the bill for want of parties, at the hearing upon pleadings and proofs, instead of making such a decree in favor of the complainant as his bill and proof warranted. I am satisfied, therefore, that there was no reason for dismissing this bill altogether, on the ground that the-principal debtor, who was unquestionably liable, in equity as well as at law, for the payment of the debt, was not made a party to the suit.

It is said by the counsel for the appellant, that an application had been made to the vice-chancellor to suppress the deposition of Suydam on the ground of interest, and that such application was refused; and that the decision thereon was not appealed from. If such was the fact, it explains why nothing is said in the opinion of the vice-chancellor, on the final hearing, as to the interest of the witness. I am satisfied, however, if it were necessary to decide that question at this time, that he was a perfectly competent witness, even without a release; as his interest between the parties was equally balanced. If the complainant succeeded in this suit, the witness was left to pay the debt and costs upon the note, to McCan alone. On the contrary, if the complainant failed in this suit and the money was collected of him, on the execution at law, the principal debtor would be obliged to refund the same sum to him as his surety; but would not be liable for the costs in this court.

The question then arises, whether upon the facts averred and proved, the complainant was entitled to relief in this court; for it is evident he had no defence which it was possible for him to have made at law without the aid of this court. It is distinctly averred in the bill, and proved by the witness, that the fact of the making of the agreements with the principal debtor, to extend the time of payment, was known only to McCan and Suydam, who were the parties to the same. As the former was the plaintiff, and the latter a defendant in the suit at law, neither of them could be examined in that suit as a witness, in favor of the surety, to sustain his defence there; and without such testimony it was impossible to prevent a recovery against the surety as well as the principal debtor. Since the decision of the court for the correction of errors, in the case of Rathbone v. Warren, (10 John. Rep. 597,) it can no longer be questioned that such an agreement as took place here, between the creditor and his principal debtor, without the knowledge and consent of the surety, is a discharge of the surety; even if there is no proof that he has sustained damage by the extension of the credit to the principal debtor. Here, however, it is averred and proved, that the principal failed and became insolvent during the time of the extension agreed on. It is therefore a case of much stronger equity in favor of this complainant than the ordinary cases in which it has been held that the surety was discharged by such an agreement with the principal debtor. If the facts averred and proved in this case had been admitted by the defendant, in his answer to a bill for discovery and relief, there could not be any doubt as to the right of this court to go on and make the proper decree for relief here, instead of sending the party back to make his defence in the suit at law ; even if it were not too late after a judgment had been recovered against him in that suit. For where this court has properly obtained jurisdiction of a cause, for the purpose of a discovery of facts which could not be proved in the suit at law, it may retain the cause in this court, and give the necessary relief here; although, the facts are admitted by the defendant’s answer, so that his answer might be read as evidence in the suit at law. In this case, however, the complainant can obtain no relief whatever in the suit at law, as the only witness by whom the facts could be sustained cannot be examined in that suit; neither can his testimony taken in this cause be used as evidence there. One of the earliest grounds of jurisdiction of the court of chancery was to relieve parties against the injustice which was occasionally produced by the strict application of some of the technical rules of the common law. And the jurisdiction of this court to compel a discovery, in aid of a prosecution or defence at law, is founded upon the fact that, by the strict rules of the common law, a party to the record in the suit at law cannot be compelled by his adversary to prove facts which rest in his own knowledge only, and without which proof palpable injustice would be done to such adversary. Upon the same principle this court, in the recent case of Norton v. Woods, (5 Paige’s Rep. 249,) sustained a bill for relief, on the ground that it appeared from the bill that a valid defence existed to the suit at law, but of which the defendant could not avail himself there, because the only witness who knew the facts upon which that defence rested, and who was not interested in the matter in controversy, had been made a party to the suit; so that he was technieally excluded from being a witness, in that suit, by the strict rules of the common law. I do not see how that case can be distinguished in principle from the present. Although the witness in that case was made a plaintiff in the suit at law, instead of being a defendant, yet, in neither case had the witness any interest in the question actually in controversy between the other parties so as to prevent his being a witness for either party here.

For these reasons, I think the complainant made out a case for equitable relief against the payment of this note. The vice-chancellor, therefore, instead of dismissing the bill, should have enjoined all proceedings against the complainant, upon the judgment which had been perfected since the commencement of this suit; but with liberty to the defendant to take out his execution and enforce the payment of the debt and costs against Suydam, or his property. The decree appealed from must be reversed, and the proper decree be entered; and the respondent must be charged with the costs, including the costs of this appeal.