Mann v. Bradshaw's Adm'r , 136 Va. 351 ( 1923 )

Sims, J.,

after making the foregoing statement, delivered the following opinion of the court:

There are both assignments and cross-assignments of error. The questions thereby presented for decision will be disposed of in their order as stated below.

1. Do the evidence and the law sustain the holding of the decree under review to the effect that the appellant and the decedent were joint indorsers of the notes in suit held by the two banks and paid to them by appellant?

The question must be answered in the negative.

Section 68 of the negotiable instruments statute, (Code, section 5630) provides as follows:

“Order in which indorsers are liable.-—As respects one another, indorsers are liable prima facie in the order in which they indorse; but evidence is admissible to show that as between or among themselves they have agreed otherwise. Joint payees or joint indorsers who indorse are deemed to indorse jointly and severally.”

The appellant and the decedent were not payees of the notes in suit, and, so far as appears from the notes themselves and from the fact that the notes were indorsed by both of them in blank before delivery, and that they signed for the accommodation of the payee (all of which appears without conflict from the testimony of the cashiers of the banks), they were irregular indorsers (not joint indorsers), and the decedent was liable to appellant, by the express terms of section 64 of the negotiable instruments statute (Code, section 5626), as well as by virtue of the aforesaid provisions of section 68 of the same statute, for the whole amount. which the appellant, by snch indorsement, was obligated to pay and did pay because of such obligation. See also 1 Daniel on Neg. Inst. (6th ed., compiled after the negotiable instruments statute was enacted in Virginia), section 703 (8).

In the authority last cited this is said: “When several persons indorse a bill or negotiable note in succession, the legal effect is to subject them as to each other in the order they indorse. The indorsement imports a several and successive, and not a joint, obligation, whether the indorsements be made for accommodation or for value received, unless there be an agreement aliunde different from that evidenced by the indorsements. Where the successive indorsements are for accommodation of other parties, the indorsers for accommodation may make an agreement to be jointly and equally bound, but whoever asserts such an agreement must prove it. In cases, therefore, in which no such agreement is proved, the indorsers are not bound to contribution amongst themselves, but each and all are liable to those who succeed them.” (Italics supplied.)

It is plain, therefore, that by the notes in suit, in evidence and by the testimony in chief of the two cashiers, the appellant, prima facie, made complete and sufficient proof of so much of his claims as was evidenced by such notes. It appeared from such proof that, because of the order of indorsement, appellant and the decedent were not joint indorsers of those notes, but that their liability thereon was several; and that the decedent, being the prior indorser, was liable to appellant for the whole amount of appellant’s claims which was evidenced by such notes, they having been paid by appellant upon the default of the decedent in making such payment in accordance with the aforesaid obligation resting upon him as prior indorser.

In sneh case, the appellant, by paying and taking up such notes, became the lawful holder thereof, with the right to enforce the terms of the contract contained in the notes “against all prior indorsers.” Cox v. Hagan, 125 Va. 656, at p. 668, 100 S. E. 666, and 3 R. C. L., see. 337, p. 1121, there eited and the cases therein cited.

2. But it is argued in behalf of appellees that by the evidence brought out by the cross-examination of appellant and of the two cashiers, the prima facie case made by the testimony in chief for appellant is overturned, because such evidence discloses the existence at one time (1907 to 1909) of such relations between the appellant, the decedent and the maker of the notes in question that, under the authorities on the subject, it will be inferred that the appellant and the decedent were joint obligors and joint indorsers of the notes executed and indorsed by them during that period of time; and because such evidence discloses also that the notes in question, although given and indorsed at a later time, (1913 and 1914) were given by the maker and indorsed by appellant and the decedent in renewal of the series of notes which were alike given and indorsed (1909 to 1913 and 1914) in renewal of those given and indorsed in the first mentioned period of time; from which, it is contended, that, under such authorities, it will also be inferred that the appellant and the decedent were joint indorsers of the notes in question; and the following authorities are cited in support of such contention, namely: Weeks v. Parson (1900), 176 Mass. 570, 58 N. E. 157; Trego v. Cunningham’s Estate, 267 Ill. 367, 108 N. E. 350; Plumley v. First National Bank, 76 W. Va. 635, 87 S. E. 94; Hagerthy v. Phillips, 83 Me. 336, 22 Atl. 223; McDonald v. Whitfield, L. R. 8 App. Cas. 733; George v. Bacon, 138 App. Div. 208, 123 N. Y. Supp. 103; Haddock B. & Co. v. Haddock, 192 N. Y. 513, 85 N. E. 682, 19 L. R. A. (N. S.) 136; Reed v. Union Trust Co. (1917), 26 Pa. Dist. R. 833; Strasburger v. Myer & Co., 167 App. Div. 198, 152 N. Y. Supp. 757; Lee v. Boykin (1920), 114 S. C. 480, 103 S. E. 777, 11 A. L. R. 1328.

But, while unquestionably parol evidence is admissible on the subject, certainly under the negotiable instrument statute (see 1 Daniel on Neg. Inst. [6th ed.], sec. 703 (8), p. 785; Haddock, Blanchard & Co. v. Haddock, 192 N. Y. 499, 85 N. E. 682, 19 L. R. A. [N. S.] 136; Alphin v. Lowman, 115 Va. 441, 79 S. E. 1029, Ann. Cas. 1915 A, 863), an examination of the authorities cited and relied on, as aforesaid, discloses that while they hold that the agreement, allowed by the statute (Code, section 5630) to vary the prima facie rule therein provided, need not be an express agreement—that such agreement may be inferred; still they all require that the agreement inferred must be an agreement in fact, and none of them go any further than the holding that where the evidence discloses that the indorsers of the negotiable paper of a corporation have a like common interest, and none have any peculiar interest, in the purpose for which the paper is negotiated (as where the indorsers are all stockholders or directors of the corporation, or all have other like common interest, and none have any peculiar interest in the matter), and they all indorse the paper without evidencing that there was any thought or designed action on the part of any of them as to the order in which they place their names on the paper, such circumstances will warrant, although they do not compel, the inference of fact that they have agreed among themselves to participate together in the liability; which means, in substance, that they have agreed among themselves to be jointly bound, and hence may be regarded as joint indorsers on the notes indorsed while such relations existed. See also on this subject 1 Daniel on Neg. Inst., sec. 703a; In re McCord, (D. C.) 174 Fed. 72; McCarty v. Roots, 21 How. 432, 457, 16 L. Ed. 162; McDonald v. Magruder, 3 Pet. 470, 7 L. Ed. 744. But none of such authorities holds that the same is true of indorsers on subsequent notes delivered by the indorsers as renewals, where there is any evidence that there was thought or designed action on the part of the indorsers with respect to the order in which they placed their names on the renewal paper. And if it were conceded" that the evidence brought out on the aforesaid cross-examinations discloses such relations as existing between the parties during the period 1907 to 1909 that the inference is warranted that the notes indorsed by appellant and the decedent during that period were indorsed by them as joint indorsers, the same evidence, after excluding altogether any consideration of the testimony of the appellant on the subject (namely the notes themselves and the testimony of the two cashiers), discloses that during the priod of 1909 to 1913 and 1914, the notes indorsed by appellant and the decedent, including the final notes in suit, were all indorsed in one and the same order, namely, first by the decedent and next and last by appellant, as contra-distinguished from the lack of any fixed order of indorsement or execution of the paper prior to such period, which satisfies us that, as to such notes, there was thought and designed action on the part of such indorsers, as to the order in which they placed their names on the paper. Hence, such notes plainly do not fall within the influence of the aforesaid authorities cited and relied upon for appellees; so that the prima facie case made by appellant, as aforesaid, remains unaffected by the evidence brought out on the cross-examinations aforesaid.

In Adams v. De Frehn, 27 Pa. Sup. Ct. 184, cited and relied on for appellees, the instrument was made payable to the order of the indorsers, hence they were joint indorsers, as appeared from the instrument itself. The case, therefore, has no application to the subject next above considered.

3. It is urged in argument for appellees that appellant having been once bound as joint indorser, or obligor, on the original notes aforesaid, given during the period 1907 to 1909, he was not released therefrom by the renewal notes subsequently given.

It is elementary that the original notes were extinguished as obligations when the renewal notes were given by the maker and also by the indorsers, and were accepted by the payee as such, and not merely as collateral. Adams v. De Frehn, 27 Pa. Sup. Ct. 184. In the instant case the maker of the notes does not appear from the evidence to have been insolvent when the .series of renewal notes began, in 1909, with the uniform order of indorsement aforesaid, so that the doctrine has no application which is announced in Trego v. Cunningham’s Estate, 267 Ill. 367, 108 N. E. 350, and relied on for appellee, namely, the holding therein that, where the maker corporation is insolvent at the time a renewal note is given, the right of the solvent indorsers of the renewal note to require contribution from the estate of a joint indorser with them of the original note, who refused to go upon the renewal note, will not, in equity, be precluded.

4. It is also urged in behalf of the appellees that no consideration moved from the appellant to the decedent to sustain the change in the order of the indorsement which began in 1909 and was thereafter continued.

It is sufficient to say as to this that the statute (Code, .section 5630), which is but the enactment of the common law rule on the subject, requires, in such ease, no consideration to support the effect given by the statute to the order of indorsement as actually made, other than the fact that there is no agreement as between the indorsers themselves that they will be jointly bound. The principles on which this doctrine rests are set forth in 1 Daniel on Neg. Inst. (6th ed.), section 703 (8), as follows:

“This doctrine rests upon very clear and satisfactory principles. Each indorser places his name upon the instrument, whether for accommodation or otherwise,, knowing that he renders himself conditionally liable to every subsequent and successive indorsee * * for the whole amount he may be obligated to pay. With such knowledge of his liabilities * * he assumes his. relation to the instrument- with others who assume a different relation, accompanied by increased or diminished risk of loss. And contribution does not arise between such successive indorsers for the accommodation of another party by operation of law, but only where established by special agreement.”

5. It is further argued in behalf of appellees that, the testimony of the appellant, to the effect that he-told the decedent personally, at the time the changed order of indorsements began, that he (appellant) would not in future indorse the notes unless the decedent made-himself first liable, and the subsequent action of the decedent in uniformly placing his name first in indorsing the notes, does not establish the fact that the decedent actually agreed to be first liable; and the following testimony of the cashier, Agnew, on. cross-examination, is relied on for appellees as showing that the decedent did not consider that he was so liable, namely:.

“In the fall of 1913, before the notes were paid, J. L. Bradshaw stated before several gentlemen who were. present, that he was willing to pay one-half of the notes then due by the J. L. Bradshaw Cooperage Company to the Bank of Crewe, upon which Wm. H. Mann and J. L. Bradshaw were indorsers, if Wm. H. Mann would pay the other half. Wm. H. Mann said he would not admit that he was indebted to the Bank of Crewe as joint indorser on any of said notes, claiming that he had underwritten Mr. Bradshaw’s indorsement. That is all I recall.”

If it were conceded that the position just stated as taken for appellees is correct, that would be immaterial. As we have seen, there was no burden upon appellant to prove an actual agreement on the part of the decedent to become first liable. The order Of the indorsements of the notes in question resulted in imposing that liability upon the decedent, because of the provisions of the statute (Code, section 5630), in the absence of affirmative evidence that the appellant and decedent between themselves “agreed otherwise.” The burden was upon the appellees to prove such an agreement, certainly to the extent, at least, of producing evidence from which the inference that such an agreement existed should be drawn, in order to relieve the estate of the decedent from the prima facie liability imposed, under the circumstances, by the statute. This, as we have seen, they failed to do, for even if it be conceded that the decedent did not actually agree that he would be first liable, it being manifest from the evidence that appellant never in fact agreed that the decedent should not be first liable, such liability arose by operation of law, as aforesaid, from the aforesaid order of indorsement of the notes in question.

6. Such being our views, it is unnecessary for us to deal with much of the evidence, not mentioned in detail, which bears on a further position taken for appellees, namely, that if the testimony of appellant just-referred to were held to be sufficient to establish by inference the fact that the decedent actually agreed to be-first liable, such testimony is uncorroborated; and that, therefore, under the statute on such subject (Code, section 6209), the decedent being incapable of testifying at the time of appellant’s testimony, no decree could be rendered in favor of appellant founded on such testimony.

As we have seen, in view of the other evidence in the-cause, a decree in favor of appellant, upon his claim to be repaid the amount owing to him because of his payment of the notes in suit, would not be founded on the testimony of appellant just mentioned, for the reason that proof on his part of an actual agreement on the part of the decedent to be first liable for the payment of such notes was in no way essential to the right of such recovery by appellant.

7. Should the plea of the statute of limitations (Code, section 5810), of three years, have been sustained by the court below as against appellant’s claim founded upon his payment as indorser of the notes in suit?

The question must be answered in the negative.

As we have seen, the right of action of the appellant with respect to such claim was not founded upon any implied promise or contract of the decedent growing out of the relations of the appellant and decedent as joint indorsers of the notes in question. Such right of action arose by virtue of the statute (Code, section 5630); first accrued in February, 1915, upon the payment of such notes by appellant as last indorser thereon; was against the decedent in his lifetime and upon his death against his estate, founded upon the notes themselves and the prior indorsements of the decedent thereon; and by the terms of the statute of limitations (Code, section 5810), the period of limitation upon the right of action was five years (and not three) next after the right of action first accrued. The running of the statute was suspended by the entry of the order of reference for the account of debts, August 24, 1918, under which the appellant’s claim now under consideration was proved before the commissioner, before the five years had run; so that the bar of the statute had no application thereto.

The following eases are cited and relied on for appellees to sustain the position that the right of action of the .appellant upon the portion of his claim now under consideration was founded on an implied promise only, growing out of the equitable relations of himself and the decedent as cosureties, namely: Tate v. Winfree, 99 Va. 256, 37 S. E. 956; Rosenbaum v. Goodman, 78 Va. 126; Stovall v. Bank, 78 Va. 194; Stout v. Vauce, 1 Rob. (40 Va.) 179. These were all cases of joint obligations of the sureties, and have, therefore, no application to the ■question under consideration.

8. Should the plea of the' aforesaid statute of limitations, of three years, have been sustained by the court below, as against the claims of appellant founded upon his payments of the joint bond and joint note on which he and the decedent were obligated, in excess of the one-half thereof for which appellant was liable?

Where the obligation of sureties.is joint, and one ■pays in excess of his share of the liability, as between himself and his cosurety or cosureties, it is well settled that the right of action of such surety against a co-surety or cosureties, for repayment of such excess payment, is based solely on the implied promise growing out of the equitable relations which the sureties, as jointly bound, bear to each other, and not upon the written contract by which they became sureties. Tate v. Winfree, 99 Va. 255, 37 S. E. 956; Faires v. Cockerell,, 88 Tex. 428, 31 S. W. 190, 639, 28 L. R. A. 528.

In the instant ease, all of the payments made by appellant of the joint note and bond, upon which he and the decedent were jointly bound as sureties, were made-more than three years prior to the order of reference-aforesaid, except a single payment, that of $327.33, paid by appellant on August 6, 1918, being the last payment in satisfaction of the joint bond aforesaid, executed by appellant and decedent. The plea of the statute of limitations, therefore, should have been sustained by the court below as to all of that portion of the claim of appellant which was founded upon his payments of the joint bond and joint note in question, except to the-extent of $327.33 with interest thereon from August 6, 1918.

The only question remaining for our decision is the following:

9. Did the court below err in making the allowance of fees to counsel for the administrator contained in the decree under review?

In view of the provisions .of the statute on the subject (Code, section 3430), the question must be answered in the affirmative.

This statute is as follows:

“No court shall make any decree or order for allowance of any fee or compensation to counsel to be paid out of money or property under the control of the court, unless the claim therefor be stated in the bill, petition, or other proceeding, of which the parties interested shall, have due notice, or unless such parties be notified in. writing that application will be made to the court for-such decree or order.”

The counsel for the administrator is undoubtedly entitled to an allowance out of the fund in the hands of the administrator of reasonable fees for all services rendered the administrator in giving legal advice, drafting .and filing the answer of the administrator in this cause, and other pleadings by the administrator setting up the ■statute of limitations, also in representing the administrator in settling his accounts before the commissioner, in attending the taking of the depositions, in keeping in touch with all proceedings in the suit so as to protect the interests of the administrator should occasion therefor arise; and also for such legal services as were rendered the administrator or the estate by such attorney as counsel and attorney for the administrator, outside of the proceedings in the suit.

As the estate was plainly insolvent, even if the whole of the claims of appellant had been disallowed, the actual controversy in the suit was in truth wholly between creditors; the attorney for the administrator was also counsel for creditors whose debts aggregated something over a third of the total indebtedness reported by the commissioner, so that the active defense made by such attorney could not and did not benefit the beneficiaries of the estate, other than his creditor clients and the other creditors, and they were all, or practically all, represented by counsel of their own selection. As held in Stuart v. Hoffman, 108 Va. 307, 61 S. E. 757: “Generally the power of a court to require one party to contribute to the fees of counsel of another party must be confined to cases where the plaintiff, suing in behalf of himself and others of the same class, discovers, creates or preserves a fund which enures to the eommon benefit of all. The power is very capable of abuse, and hence should be cautiously exercised. It will not be exercised where, * * every party in interest was represented by counsel of their own choosing.” We think the principle there involved is applicable to the instant case. Since the fund is insufficient to pay the debts in full, any allowance of counsel fees of the administrator out of the fund is, in result, a contribution from the creditors to the fees of counsel for-the administrator, another party and one who had no interest in the controversy in the suit. Of course, such, result could not affect the right of the administrator to have the benefit of the services of counsel in all matters-in which it was his duty to act for and protect the estate,, or the authority of the court to allow reasonable fees-therefor—such as those indicated by what we have-said above—but we do not think that any fee should be-allowed the attorney for the administrator for actively-contesting the allowance by the commissioner of the-appellant’s claims, beyond the filing of the pleadings-aforesaid. It was his duty to do what he did in making-such active contest as attorney for his creditor clients. Moreover, as appears from the statement preceding this-opinion, the opposite parties interested were given no notice whatsoever of the application for the allowance-of counsel fees prior to the decree, other than as contained in the draft of the decree as proposed to be asked for, sent to counsel for appellant through the mail, and that draft contained no claim for any allowance of counsel fees for services rendered outside of this suit.. Therefore, the notice required by the statute on.the subject was not given as to application for allowance of fees-for the services last mentioned. Further: There is no evidence in the record before us to show that services-were rendered by counsel for the administrator outside of this suit. The ease will, therefore, have to- be remanded to the trial court for further proceedings, by reference to one of its commissioners, or otherwise, as it may deem best, for the ascertainment and allowance of reasonable attorney’s fees to the attorney for the administrator. Lake's Adm'r v. Pattie, 116 Va. 130, 81 S. E. 78.

We do not mean, however, by anything we have said that we are of opinion that the total amount of the aforesaid allowance of fees is excessive. For the reasons mentioned we cannot adjudicate that question. We have, therefore, stated for what services fees should be allowed counsel for the administrator, and we leave it to. the court below to decide upon the amount to be allowed as reasonable compensation for such services as it may find were rendered by such counsel.

The decree under review will, therefore, be reversed in so far as it allows the attorney’s fee aforesaid and fixes the.amount of the claims of appellant; the decree of this court will be entered, allowing the appellant, as the party substantially prevailing, to recover his costs in this court and in the court below, to be paid by the administrator out of the funds in his hands, and fixing the whole amount of the appellant’s debts against the decedent’s estate at $13,562.03, with interest on $12,597 plus $327.33 (the portions thereof which are principal), aggregating $12,924.33, from January 1, 1919, being the full amount upon which appellant is entitled to prorate with the other creditors in the distribution of the decedent’s estate in the hands of the administrator for distribution amongst the creditors; and the cause will be remanded with the direction that the court below proceed, by reference to one of its commissioners, or otherwise, as it may deem best, to ascertain and allow the attorney for the administrator reasonable fees for the professional services rendered by him as counsel and attorney for the administrator, to which he is entitled as indicated by what we have said above on the subject, and for such other proceedings in the court below as may be proper, not inconsistent with this opinion.

Reversed and remanded for further proceedings.