Opinion
03-04-1852
CRALLE & als. v. MEEM & als.
Stanard and Bouldin, for the appellants. Robinson, for the creditors. Patton, for Friend and his children. Bouldin, for the appellants, on the last point considered by Mr. Patton.
(Absent Cabell, P. and Daniel, J.[a1])
1. D being the endorser of C on several notes discounted at bank, and it being expected that he will endorse other notes for C, the latter executes a bond binding his heirs to D, with a condition that he will, when required by the bank or D, pay off all such notes, and thus indemnify and save D harmless. C dies whilst D is his endorser on several notes, which by an arrangement with the bank, D takes up by the discount of his own note: and subsequently the administrator of C pays up the whole amount of the notes, principal and interest, out of the personal estate. HELD: That this bond was a valid security to D, binding the heirs of C; and that the notes, to the extent of the penalty, having been paid out of the personal assets, the simple contract creditors of C are entitled to have the assets marshalled, and to be substituted to the extent of the penalty of the bond, to the rights of D upon the real estate, in the hands of the heirs of C.
2. Upon a bill by simple contract creditors to marshal assets, it is competent for the Court in its discretion, to decree a sale of the real estate in the hands of the heirs, some of whom are infants, for the payment of the debts: But it is premature to decree a sale before adjudicating the claims of the creditors, and so ascertaining the amount of indebtedness chargeable upon the lands of the decedent.
3. Though such a decree for a sale of land has been prematurely made, yet if the sale is made and confirmed, the Court will not set the sale aside on the petition of the purchasers, if upon the hearing it appears that the sale is beneficial to the infants.
4. The application of the purchasers, in such a case, to have the sale set aside, should be by petition in the cause. And if they proceed by bill to enjoin the collection of the purchase money, and have the sale set aside, the bill should be treated as a petition in the cause, and be brought to a hearing with it.
5. The Court having made the decree for a sale of the real estate, on the petition of the adult heirs, and with the assent of the creditors, it is erroneous to proceed to sequestrate the rents of the other real estate in the hands of the heirs for the payment of the debts, before deciding upon the claim of the purchasers to have the sale set aside.
This was a suit in the Circuit court of Lynchburg, by John G. Meem and others, simple contract creditors of John J. Cabell deceased, against his administrator and heirs, to marshal the assets, and have payment of their debts out of the real estate of the deceased. The bills after setting out the debts of the plaintiffs, and the qualification of Thomas R. Friend as the administrator of John J. Cabell, stated that he had disposed of all the personal estate, and had exhausted it in payment of debts, many of which bound the heirs of his intestate; and that he had rendered no account of his transactions. That among the claims which should be regarded as binding the real estate, and which had been discharged by the administrator out of the personal assets, were sundry negotiable notes made by John J. Cabell in his life time, and endorsed by Henry Davis. That to secure himself from loss Davis had taken from Cabell a bond binding his heirs in the penalty of 10,000 dollars, with condition to pay off and discharge these notes, when required by Davis or by the bank at which they were made payable, so as to save harmless and indemnify Davis from loss or damage on his endorsements. That after the death of Cabell these notes were protested for non-payment, and subsequently discharged by the administrator out of the personal assets, to an amount exceeding the penalty of the bond.
The prayer of the bills is for a settlement of the accounts of the administrator, and that the assets may be marshalled so as to subject the real estate descended to the heirs to the payment of the outstanding simple contract debts; and for general relief.
The administrator, widow and heirs answered the bill, and called for proof of the complainants' debts. They admitted that John J. Cabell was largely indebted at the Bank of Virginia and the Farmers Bank at Lynchburg, by notes endorsed by Henry Davis, and that Davis held the bond referred to in the bill; but they denied that the condition of that bond had been broken; the notes on which Davis was endorser having been paid by the administrator, so that Davis had sustained no loss or damage by his endorsements.
They admitted that Cabell died seised of a large real estate which was then held by his widow and heirs; and they asked that if it should be held that it was liable for the payment of the debts of the complainants, the defendants might be allowed to select such parts of the estate as they may desire to be disposed of, so that the satisfaction of the plaintiffs may be attended with as little injury to them as practicable.
In October 1837 a commissioner was directed to settle the accounts of the administrator, designating the grade and dignity of debts paid by him, and also to state an account of the real estate of which John J. Cabell died seised, the annual value thereof, and in whose possession it was at the time of the decree; and also an account of the debts due to the respective plaintiffs.
The report of the commissioner was made, and was recommitted for the purpose of correcting some errors in the calculation of interest on the complainants' debts, and was again returned to the June term 1839. At this term of the Court Richard K. Cralle, who had married one of the daughters of John J. Cabell, then deceased leaving children, the widow of John J. Cabell and S.W. Ward a daughter, the two first in their own right and as guardians of some of the infant heirs, filed a petition in the cause, in which, after referring to the debts of the complainants, they say, they have no reason to doubt that their debts are really due; and that they at all times anticipated that a resort to John J. Cabell's real estate for their payment, would become necessary, and they had therefore in their answers prayed that when a decree should be made subjecting the real estate, they might be permitted to designate the portion thereof to be so subjected, and the manner and mode of doing it.
They stated that a division of the real estate, (except a tract of land in Bedford owned jointly by Cabell and Leftwich,) had been made among the heirs at law and widow, under an order of the Hustings court of Lynchburg, but had not been confirmed, owing to the pendency of this suit; but that since the division, the several heirs had held and enjoyed their respective portions thereof. That there was a tract of land lying on the Kanawha river containing one thousand acres, which was divided into equal portions of two hundred and fifty acres, to each one of the heirs of John J. Cabell, each part being regarded as of equal value. That this land though deemed very valuable, was not productive in rents or profits to the heirs, and could be sold without affecting the division of the balance of the estate among them. That the other property divided, yielded a large rent, which they were compelled to apply to purposes of present support. That the debts to be paid were of such magnitude that if the Court should sequester these rents and annual profits for the payment of the debts, that the petitioners would be wholly deprived of their resources for living for an indefinite period, and thereby be subjected to serious inconvenience. They pray that the Court will decree a sale of the Kanawha land upon such a credit as will ensure the greatest possible price, and that the proceeds may be applied to the payment of the debts of the complainants. They think such a sale would be beneficial to all concerned; and will be entirely agreeable to Thomas R. Friend, who was then absent, and who had married a daughter of John J. Cabell, then deceased leaving three children, all of whom were infants. This petition was accompanied by an affidavit of Richard K. Cralle verifying the facts therein stated.
The infant defendants to the bills were made parties defendants to this petition, and an answer was filed for them by a guardian ad litem.
Upon the filing of the petition and the answer, the cause came on to be heard, when the Court pronounced its opinion, declaring that when the parol contract creditor is decreed to have satisfaction out of the real assets of his deceased debtor's estate, he is but substituted to the right of some creditor whose debt bound such real assets: that these rights by substitution cannot be greater than the originals for which they are substituted; and that in either case the land ought not to be sold if the debt can otherwise be paid in a reasonable time: and it appearing to the Court from the report of the commissioner, that the rents arising from the real estate would, in all probability, be sufficient to discharge the respective demands of the several simple contract creditors aforesaid in a reasonable time, the Court accordingly was about to proceed to sequester the rents of the real estate, with a view of applying the same to the payment of said debts; but the defendants, the heirs at law and distributees of the said John J. Cabell deceased, thereupon presented to the Court their petition, with the answer of the infant heirs, by their guardian ad litem thereto, praying, for certain reasons therein set forth, a sale of a portion of the lands whereof the said John J. Cabell died seised and possessed, in satisfaction of said debts, in lieu of the payment of the same out of the rents. And the Court, on consideration of said petition and of the answer thereto, together with an exhibit (the report of the commissioners for the division of the estate among the heirs,) and the affidavit of Richard K. Cralle, filed therewith, is of opinion from the facts therein disclosed, that it would be most conducive to the interest of said heirs and distributees, some of whom are infants, to proceed to sell the real estate designated in said petition, rather than to sequester the rents, since by the latter proceeding, said heirs and distributees would be deprived of their property, and consequently of their chief means of support, until said debts should be paid, which in all probability could not be effected for some three or four years. And not at that time deciding upon any other matter, the Court with the assent of the plaintiffs, decreed that Richard K. Cralle and Samuel Hannah, either of whom might act, should proceed to sell at public auction upon the premises, the said Kanawha land, on a credit of one, two, three and four years, in equal payments, taking from the purchasers bonds with good personal security for the purchase money, and retaining the lien as a further security; subject to be resold if default should be made in the payment of the bonds as they fell due; and report their or his proceedings to the Court. And liberty was reserved to the infant defendants to shew cause against the decree at any time within six months after they should respectively attain the age of twenty-one years.
At the May term of the Court for 1840 Richard K. Cralle returned his report of the sale of the Kanawha land, by which it appeared that he had sold one undivided moiety of the Kanawha land for 18,000 dollars, to Joseph Friend and Thomas R. Friend. One of these purchasers, Thomas R. Friend, was the owner of one fourth of this tract of land by purchase from Mrs. Ward one of the daughters of John J. Cabell, and he held another fourth in right of his deceased wife, who was another daughter of said Cabell; and by agreement with the commissioner before the sale of the undivided moiety, they were to take the one moiety at the price the other should bring. At the same term of the Court this report was confirmed; and the report of the commissioner upon the accounts was recommitted with the exceptions thereto, to a special commissioner, who was directed to call in all the outstanding creditors of John J. Cabell.
In October 1841, on motion of the plaintiffs, and by consent of the counsel of all the parties, Cralle and Hannah, or either of them, were directed to collect the outstanding bonds given for the Kanawha lands, then due and in arrear, and the other bonds as they should fall due, and after paying all the costs of the suit, to deposit the residue in one of the Savings banks in Lynchburg. In June 1842 the report of the special commissioner was recommitted with the exceptions thereto, to one of the commissioners of the Court. And again on the motion of the plaintiffs the Court directed Cralle and Hannah forthwith to proceed to collect the bonds then due for the purchase money of the Kanawha land, and to pay the money arising therefrom into one of the banks at Lynchburg to the credit of this cause.
In May 1844 commissioner Davis returned his report, to which there were various exceptions by the administrators and heirs of Cabell. Some of these exceptions were to particular debts reported as due from John J. Cabell; and to all of them for the mode in which the commissioner charged interest upon them. The only exceptions however which it is necessary to notice, refer first to the notes secured by the bond mentioned in the bill as having been executed by John J. Cabell to his endorser Henry Davis for his security. This bond bears date the 15th of August 1821, and is in the penalty of 10,000 dollars. The condition is set out at length in the opinion of the Court. The facts connected with this exception were, that at the time of the death of John J. Cabell, which occurred between the 6th and the 20th of August 1834, Henry Davis was his endorser on three notes which had been discounted at the Bank of Virginia at Lynchburg for 2500 dollars 5000 dollars, and 3000 dollars; and on one which had been discounted at the Farmers Bank for 3000 dollars. On the 20th of August 1834 the directors of the Bank of Virginia made an entry upon their minutes, that " on the application of Henry Davis he is permitted to assume the payment of John J. Cabell's note endorsed by him for 2500 dollars, and due at this day; he the said Davis giving his note for the same amount at sixty days, endorsed by Peter Dudley, and further securing the payment of the same by the deposit of the notes aforesaid of the said Cabell, (protested,) and an indemnifying bond executed to him by the said Cabell in the penalty of ten thousand dollars." Subsequently the same arrangement was made as to the other two notes discounted at that bank. It does not certainly appear what arrangement was made by Davis with the Farmers Bank; but he took up the note at that bank by a discount of his own with Peter Dudley as endorser, leaving Cabell's note with the bank as collateral security.
The arrangement with the Bank of Virginia was executed; the note of Cabell being taken up after it was protested by the proceeds of the note of Davis endorsed by Dudley; and the notes of Cabell and his bond were deposited with the bank as collateral security: the endorsement of Dudley being considered as merely nominal, and only intended to put the note in form. And it was the understanding between the bank and Davis that he could not be coerced to pay his notes until Cabell's means were exhausted. The discount on Davis's notes were paid by him from time to time as they were renewed, until they were paid off by Thomas R. Friend, the administrator of Cabell, out of the personal assets of the estate. Friend paid on the first note 784 dollars 20 cents on the 24th December 1834; and he paid on the second note 500 dollars on the 19th of November of the same year. On the 13th of February 1835 Friend deposited in the Bank of Virginia bonds amounting to 14,391 dollars, proceeds of the personal estate of his intestate, for the purposes following: the proceeds of such as should be first paid, were to be applied to the extinguishment of a note of 3000 dollars, which Dr. Cabell owed the Farmers Bank at Lynchburg, endorsed by Henry Davis, and assumed by him at Cabell's death, with all discounts and charges on the same. The proceeds of such as should be next collected were to be applied to the extinguishment of the three notes which Cabell owed to the Bank of Virginia at Lynchburg, endorsed by Henry Davis, and by him assumed as they severally fell due after Cabell's death, with all discounts and charges thereon. And if anything should remain after satisfying these claims with all discounts and charges, it was to be applied to the payment of a debt of 379 dollars 9 cents due from Cabell to Davis. These bonds were collected and the debts for which Davis was bound as endorser, with all discounts and charges thereon, were paid in December 1835 and January 1836. Previous thereto, viz., in November 1834, judgments were recovered by Davis, suing for the benefit of the banks, against the administrator of Cabell upon the notes which had been protested as they fell due after Cabell's death.
It appears that the only payments made by Davis as endorser for Cabell, except by the discount of his note, were the discounts upon the first making and the renewal of his notes; and these advances had been repaid at the times and in the manner hereinbefore stated.
Another exception referred to a note of 5000 dollars, made by John J. Cabell and endorsed by Richard E. Putney. On the 9th of March 1834, Cabell and Putney entered into a covenant binding their heirs each to pay to the other the sum of 10,000 dollars, or so much as would secure him for his endorsement for the other. This covenant is set out in the opinion of the Court. At the time of Cabell's death Putney was his endorser on a note for 5000 dollars, dated the 6th of August 1834; but it does not clearly appear from the evidence that this was for the same debt for which Putney was Cabell's endorser at the date of the covenant. The Bank of Virginia at Charleston sued Putney upon his endorsement, and in October 1834 he confessed a judgment: And thereupon the bank agreed to suspend execution of this judgment for two years from that time, upon his executing his bond with David Ruffner as his surety, with condition for the payment of the judgment, interest and costs at the end of the two years. This bond was executed; and the debt was afterwards paid by the administrator of Cabell out of the personal estate.
Pending the proceedings in this cause Joseph Friend and Thomas R. Friend in September 1842 filed their bill in the same Court for an injunction to restrain the collection of the purchase money of the Kanawha land. After referring to the suit of the creditors of John J. Cabell against his administrator and heirs, and the proceedings therein up to the time of filing their bill, they state that the accounts ordered, except the administration account, had not been taken, and especially that the order directing the account of the debts due the complainants had not been completed, but was then in progress of execution; nor as they believed, had any account been taken of the real estate or its annual rents.
They referred to the petition filed by Richard K. Cralle and others and the proceedings therein, and the sale of the land made by Cralle to themselves, and the confirmation of that sale by the Court.
They further represent that at the time of their purchase they made no enquiry into the title to the land, or the authority under which it was offered for sale. That since the sale they have come to the knowledge of facts which they are advised renders their title worthless and unavailing, at the election of the infant heirs of John J. Cabell, when they shall attain full age. That the sale was made for the payment of simple contract debts, which had not as yet been proved and established so as to authorize a sale of the real estate. That the admission of the justice of the debts by the petitioning heirs did not give any additional validity to the sale; as among them Mrs. Sally W. Ward was the only adult heir, and she had previously sold her interest in the land to the complainant Thomas R. Friend. That the other petitioners were infants of very tender years, who could not, as the complainants were advised, be bound by their express assent, and much less by the merely negative admissions of their guardians or next friends.
They further represent that from the best information they had been able to obtain, the debts to which John J. Cabell's estate may be subjected cannot exceed five or six thousand dollars; and that the real estate would in ordinary times yield an annual rent of 7000 dollars, which would, if applied under the directions of the Court, in a short time discharge all the debts which bound the land. And they further represent that a tract of land lying in Bedford county, belonging in the greater part to the estate of John J. Cabell, had since his death been sold by commissioners under a decree of the County court of Bedford, for a large sum of money, which had been applied or was in a course of application to the payment of the debts binding the heirs of Cabell. That notwithstanding all this Richard K. Cralle acting under an order of the Court, had instituted actions at law upon the bonds of the complainants against them and their sureties, in the Circuit court of Kanawha county, where the same were then pending.
And making the heirs of John J. Cabell and the complainants in the creditor's suit, defendants, they ask that the decree of the 7th of June 1839, for the sale of the Kanawha land and all proceedings had under it, may be set aside, rescinded and annulled; that their bonds for the purchase money may be delivered up to be cancelled; that Cralle as commissioner of the Court may be enjoined from proceeding to collect the amount of said bonds; and for general relief. The injunction was awarded.
Richard K. Cralle, Mrs. Ward and Henry Ann Cabell the youngest daughter of John J. Cabell, and who had then attained the age of twenty-one years, answered the bill. They insisted upon the necessity of the sale of the land, and that it was advantageous to the infant heirs, and should be enforced. A number of the creditors also answered, insisting upon the validity of the sale, and that it should be enforced; and testimony was taken on both sides to sustain their pretensions.
On the 21st of November 1846, the case of the creditors of John J. Cabell against his administrator and heirs was brought on to be heard, upon the papers formerly read and the report of the commissioner Davis, with the exceptions thereto, when the Court being of opinion that the simple contract creditors of John J. Cabell, upon the principle of marshalling assets, have the right to occupy the shoes of Henry Davis and Richard E. Putney, who held two securities, each binding as well the personal assets as also the heirs, which were paid off and satisfied by the defendant Thomas R. Friend administrator of John J. Cabell, out of the personal assets of his intestate's estate: And being further of opinion, that the creditors should not longer be hindered and delayed by the sale of the Kanawha land, made upon the petition of the heirs of John J. Cabell, for their own easement, under the decree of the 7th of November 1839, though it appears on the face of said decree that it was made with the assent of the plaintiffs after the Court had pronounced its opinion, and was in the act of sequestering the rents and profits of the said John J. Cabell's real estate, which had descended upon them; which rents and profits before this time would probably have paid off and satisfied all the debts: And this is the more equitable, because the validity of that sale, and the title to the land sold under it, being questioned by one or more injunctions in this Court between the alleged purchasers of the lands and Cabell's heirs, (the record of which injunctions is filed among the papers in this cause,) and they having made no movement in it, the Court will leave this family matter to be settled among themselves, and will now restore the creditors to the position they occupied at the date of the decision in June 1839. Wherefore the Court doth adjudge and decree that the rents and profits of all the lands and tenements of which the said John J. Cabell died seised and possessed, save the Kanawha and Bedford lands, which have been sold by the procurement of the adult heirs, be sequestered to create a fund as well for the payment of the simple contract creditors in the proceedings mentioned, to the extent that they may be entitled by marshalling the assets, as for the payment of the bond debts proper.
The decree then proceeded to appoint a receiver with power by distress or otherwise, to collect all the rents then due or to become due upon the real estate remaining unsold as aforesaid, and to rent out the property from year to year, and collect the rents; and after paying all the taxes, costs, charges and necessary repairs, to deposit the residue in one of the Savings Banks in Lynchburg to the credit of the cause.
The decree further ordered that one of the commissioners of the Court should take an account of the moneys arising from the sales of the Bedford lands aforesaid, shewing what had become of the same; and that he should examine and report upon the exceptions taken to the administrator's account; and make any changes in the report of commissioner Davis warranted by the proofs in the cause; and also that he should take a further account of the simple contract creditors. From this decree the heirs of John J. Cabell, except the children of Mrs. Friend, applied to this Court for an appeal, which was allowed.
Stanard and Bouldin, for the appellants.
One of the questions in the cause, and the principal one, is that arising upon the effort to charge the real estate, upon the principle of marshalling assets, with the amount of the bond executed by Dr. Cabell to Davis, and upon the covenant between Cabell and Putney.
First. Did the bond from Cabell to Davis constitute a claim upon the real estate of Cabell in the hands of his heirs, of which under the circumstances of this case, the simple contract creditors may avail themselves? By the act of 1831, Sup. Rev. Code, p. 220, the notes endorsed by Davis ranked with specialties in the administration of the assets of Dr. Cabell's estate, and the notes with all costs and charges were paid by Cabell's administrator out of these assets. The question then is, has the bond been forfeited so as to enable Davis or any one else, to maintain an action upon it: And if it has been so forfeited, what is the extent of the damages which can be recovered in such an action? And the further question is, whether by means of this bond the simple contract creditors can claim on the real estate of Cabell; Davis himself never having been subjected to loss?
Let us try this question of forfeiture as if in a Court of law; and let us enquire whether there has been a forfeiture of the bond which would have given Davis a right of action upon it.
Before a forfeiture can be established two facts must be made out. First. That Cabell or his administrator was requested to pay the notes on which Davis was bound as Cabell's endorser. And, second. That being requested they failed to pay, so that Davis suffered loss.
To sustain an action at law on the bond, it would have been necessary to aver and prove a special request. The Court will observe the language of the bond; and will observe that the request may be made by Davis or his representative, but it is to be made to Cabell alone. But passing by this, it is clear the request should have been made to the administrator of Cabell, as it should have been made to himself in his lifetime. Now where a request is required to do a collateral act, especially to create a forfeiture, it must be a special request. Otherwise if a note for fifty dollars had not been paid, Cabell or his administrator might have been sued. This then is a case in which a precedent request is necessary and must be averred. Birks v. Trippet, 1 Wms. Saunds. 36; Hill v. Wade, Cro. Jac. 523; Bowdell v. Parsons, 10 East's R. 359; Carter v. Ring, 3 Camp. R. 459.
If the demand was necessary, was it made? It may be said the note was protested: But this was no demand. The protest is sufficient to charge an endorser on a note; but to forfeit a bond the demand must be personal. 5 Viner's Abr. 207, P. B.
It may be said that Davis was compelled to renew the notes, and pay the discounts upon the renewals; and that this was a forfeiture of the bond. But the condition of the bond is to pay the notes when thereto required. Davis did not require the payment of the notes by the administrator: And if he chose to have the notes renewed and to pay discounts upon them, without giving notice to the administrator, and requiring him to pay them, that was his own act for which he can blame no one but himself.
It will be said, however, that suits were brought upon the notes. It seems that some time after the arrangement was made with the bank by Davis, there was a judgment by confession by the administrator, in a suit brought in the name of Davis for the benefit of the bank. But whenever an actual request is necessary a suit is not sufficient. In some cases where the condition of the bond is to pay money, a suit has been held sufficient; but where a collateral act is to be done an actual request is necessary. If the bank had sued Davis on the notes, it might have been a question whether that created a forfeiture of the bond. But before notice to the administrator, the bank agreed with Davis that they would not sue him until their remedies against Cabell's estate was exhausted: And as a part of the consideration for that agreement Davis deposited with the bank Cabell's bond. Davis therefore, had no right of action against Cabell's administrator until all the notes were paid. What could he have averred and proved? What damage could he have laid? Could he aver he had been sued? No. Could he aver that he was liable to be sued? No. Could he say he had sustained damage? No. Would it not have been a complete defence even after the judgments on the notes, that the administrator was prepared to pay, and had paid, the whole amount of these debts?
There was then but one state of facts under which Davis was entitled to sue upon the bond of Dr. Cabell: And that was that the bank had been unable to make the money out of Cabell's estate upon the notes. If the bank had failed to make the money by proceedings against the administrator upon the notes, and had required Davis to pay, and he had paid it, then he might have required the bank to return to him the bond, that he might hold Cabell's heirs liable to him. But until he had paid off the whole amount to the bank, he was not entitled to the bond. Then in the state of things as they really existed, Davis could not sue upon the bond. The bank could not have sued upon it; because it was not given to them or for their indemnity. And yet although no person had a right to sue upon the bond, and no steps were ever taken to forfeit it, this is now attempted by these simple contract creditors, through the agency of a Court of equity. But in the case of Webster v. Bannister, Doug. R. 393, it was held that even if an actual forfeiture has occurred the parties may waive it; and it cannot be enforced by third persons; and that especially by the aid of a Court of equity.
If as we contend, a demand was necessary to entitle Davis to the benefit of the bond, the question arises when should that request be made. The suits on the notes were brought after they had all fallen due. It is true generally that a suit is a demand; but here the demand is a condition precedent which must be complied with strictly modo et forma. Davis or the bank might claim upon the notes or the bond, but if he intended to claim upon the bond, then he must comply with the condition.
But if the suits upon the notes is a demand so as to enable Davis to sue on the bond, this right of action gave only the right to recover for the amount of actual damages sustained. This is not a bond for money, but with a collateral condition; a bond of indemnity. This condition is to pay the notes so as to indemnify and save Davis harmless: And if the notes with all the costs and damages actually incurred by him are paid before a suit is brought upon the bond, no action can be sustained upon it. To shew that this is a bond of indemnity, I refer to Pond v. Warner, 2 Verm. R. 532; Douglass v. Clarke, 14 John. R. 177; St. Albans v. Curtis, 1 D. Chip. R. 164: And the condition being for the benefit of the obligor shall be construed favourably. 2 Lomax Dig. 113. Let us suppose that Davis had brought a suit on the bond after the suits against the administrator upon the notes, what damage could he have averred that he had sustained? Will it be said he was damnified by being fixed for his liability as endorser? The bond does not protect him from that damnification. And moreover his giving his own note was voluntary on his part without notice to the administrator. And so too was his payment of discounts upon the notes.
Again, Davis could not have sued before December 1835; that being the time when the suits were brought against the administrator; and in December 1834 the administrator had deposited five hundred dollars in the bank; and he deposited much more in January and February 1835; indeed more than enough to pay all the discounts. Davis never paid Cabell's note. The bank never surrendered that or intended to do it. The giving his own note did not pay it, because one security will not extinguish another of the same grade. Manhood v. Crick, Cro. Eliz. 716; Norwood v. Grype, Id. 727. This is the state of things if Davis had sued upon the bond. But he did not sue upon it, and has not claimed the benefit of the forfeiture. And if he could and did not, how can third persons insist upon enforcing it in equity.
If a Court of equity could take jurisdiction to enforce the forfeiture of the bond, it could not be acted on without pleadings and a jury. Cabell's heirs had a right to the verdict of a jury and judgment of a Court on the question whether the condition of the bond was forfeited; and also on the extent of the damages. If the suits on the notes was a demand the judgments may have been confessed upon the express condition that the suits should not be so considered. Upon a plea stating the facts it would have been a good defence at law; and will a Court of equity undertake to decide the question upon an exception to a commissioner's report. If the Court will take jurisdiction of this question, all it could do would be to direct an issue of quantum damnificatus, or an issue as to the forfeiture of the bond.
Again. These plaintiffs come here upon the ground of marshalling assets. But in this case they cannot come to marshal assets without violating the principle, that a Court of equity will never actively aid in enforcing a penalty or forfeiture. 2 Story's Equ. Jur. § 1319, p. 551. But if this penalty had been actually incurred, might not the heirs have come into equity to be relieved from it, by paying the notes and the damages sustained by Davis.
As to the covenant with Putney, that only applies to the notes in being at the time of its execution, without any provision as to their renewal. And these plaintiffs seek to charge Cabell's heirs on account of a note for 5000 dollars, endorsed by Putney, dated the 6th of August 1834, after the date of the covenant. This particular note was certainly not in existence when the covenant was executed; and there is neither a provision in the covenant for the renewal of the notes, nor proof that this note was a renewal of any note in existence at the time the covenant was executed. It might have been renewed twice at sixty days. Hurlstone on Bonds, p. 94, 9 Law Libr.; Union Bank v. Ridgely, 1 Har. & Gill 324.
The Court below clearly erred in making a decree for the sequestration of the rents, after having decreed a sale of a part of the lands, not only at the request of the heirs but with the concurrence of the plaintiffs: and after too that sale had been made and confirmed; and orders had been made on the motion of the plaintiffs, directing the commissioner to proceed to collect the purchase money. The Court in its decree says, it was about to make a decree to sequestrate the rents, when the heirs applied to have a sale of a part of the lands. If the Court was about to make such a decree it was about to do what it had no right to do. For the Court will not sequestrate the rents where a sale of a part of the land will pay the debts. And in this case the sequestration was certainly improper until the Court had decided whether that sale should stand.
Robinson, for the creditors.
It is very clear that the heirs had not intended to raise the first and second questions discussed by the counsel, in 1839, when they filed their petition for the sale of the land.
At the death of Dr. Cabell, Davis was his endorser on four notes; and it is beyond all question, that if Cabell's administrator failed to pay these notes, and Davis paid them, that Davis would have a remedy against Cabell's heirs upon his bond. We say both facts are shewn to have occurred.
First. Cabell's administrator failed to pay the notes and they were regularly protested. But it is argued that a special request is necessary to give Davis a right of action on the bond; and that none was made. I need not go beyond 2 Lomax Dig. 113, to shew that any words evincing an intention to make the request is sufficient. The condition of the bond is that payment should be made when required by the bank or Davis. And we say he was required to pay exactly in the mode contemplated by the parties. Of course they contemplated that the demand of payment was to be made in the mode applicable to such a case. Here there was a demand of payment, protest and notice, which was the usual and regular mode of making the demand in such a case. All this doctrine, therefore, about a special request, is beside the case. We have an action and a judgment; and the latter is an adjudication of the fact that the administrator of Cabell had been required to pay and had not paid the notes on which Davis was Cabell's endorser.
It is said Davis was not sued. The object of the bond was to prevent his being sued. But Davis paid the notes; and from that moment he had a right of action on the bond. Counsel asks what Davis could have averred in an action on the bond. He could have averred that the administrator had not paid off the notes when required, and that they had been paid by himself: And he could have proved his case as easily as he could plead it. The protest would have shewed both demand and refusal to pay; and the production of the notes by Davis would have proved his payment of them: And the true measure of damages would have been the whole amount of the notes not paid by the administrator, and paid by Davis. Upon the proof of these facts the recovery would have been certain. Could it have been prevented by shewing that Davis had paid the amount of the notes by the proceeds of his own notes. Of what consequence is that. It is every day's mode of payment by an endorser called on suddenly to take up a note. Nor can it make any difference that the bank was informed when it discounted Davis's note that the proceeds would be applied to pay Cabell's note; or that they were informed that they should have the security of Cabell's notes and the bond. It is said that Davis at no time had possession of Cabell's notes. They belonged to him, and he only transferred them back to the bank as collateral security. And then it is asked how Davis could maintain an action on the notes when he was not entitled to them. The best answer is that he did maintain an action against the administrator on the notes; and the judgment decided that he had the right of action upon them. And if he had a right of action on the notes he had a right of action on the bond: because he could not have a right of action on the notes unless upon demand and neglect to pay, and payment by Davis: And these would entitle him to sue on the bond. The right to sue upon the bond is so clear that I presume no question would have been made of Davis's right to sue if he had found it necessary to sue the heirs; but the administrator paid him, and therefore rendered a suit by him unnecessary.
It is said that when the administrator paid the notes he was entitled to them and the bond. That is true. But that is the case always; every administrator is entitled to a bond when he pays it. But that cannot impair the right of the simple contract creditors to come into equity to marshal the assets: And we have but the common case of the bond creditor having two funds and the simple contract creditor having but one; and the first taking that which was subject to satisfy the last, the last is entitled to go against the other fund.
The next question is as to the effect of the covenant with Putney. Putney was on a note of Cabell's which was protested, and Putney was sued; and then gave security for the payment of the amount. It is in proof that the debt evidenced by the note on which Putney was endorser had been contracted some time before that note was made; and construing the covenant according to the intention of the parties, the Court will construe it to include the renewed notes. It is true that it does not positively appear that the debt was in existence when the covenant was executed, but the Court will not require strict proof when the question was not made in the Court below. If, however, the Court has any difficulty as to the fact, it will direct that when the case goes back there may be an enquiry upon this point. In truth all that the Court below has done is to decide that the simple contract creditors have the right to stand in the shoes of Davis and Putney to the extent they have been paid out of the personal assets.
It is said that by agreement the obligee may waive the forfeiture. But here he has taken pains to exclude the conclusion that he had waived it. So it is said that the plaintiffs have no right to come into equity to enforce a forfeiture. A Court of equity will enforce the forfeiture of a mortgage; and this is like that case. So in the case of a bond binding the heirs a Court of equity will enforce a payment out of the real estate: And now by the late statute the only remedy on a bond against the heirs is in equity. It is said further that the doctrine of marshalling assets is the creature of equity; and that equity will not do injustice. But I would enquire what injustice there can be in compelling these parties to pay the debts of their ancestor out of his large estate.
It will be seen that the Court below was about to sequestrate the rents of the real estate in the hands of the heirs when they asked for a sale of a part of it, and selected the part that they preferred to have sold. After the sale the purchasers filed their bill objecting to the sale, on the ground that there were infant heirs, whose lands were improperly sold, and for other irregularities. The injunction was an irregular proceeding, and the purchasers should have proceeded by petition in the cause. The creditors had gotten nothing, though the decree for the sale was made in 1839. What then were they to do? The debts bind the whole estate; and if there is any difficulty in subjecting one part of it they may resort to another part. The heirs are no worse off if they are allowed to have the benefit of the sale. It would have been improper to set aside the sale because the heirs may wish to enforce it. And the Court only says this sale was made at your instance, and you may enforce it; but creditors are not to be delayed in the recovery of their debts.
Patton, for Friend and his children.
Mr. Robinson says the heirs had no intention to raise the question arising on the bonds of Cabell to Davis, and on his covenant with Putney when they filed their petition in the cause. But their answer filed before the petition, expressly denies the liability of the real estate under this bond: And this is the great question of controversy. There are infant parties too, and therefore there could be no waiver or admission of the liability of their estate under this bond and covenant. As to Putney's covenant, no bill claims to subject the real estate on account of this covenant; and it is only brought into the cause by the commissioner's report.
The argument of the counsel for the creditors is, that the bond became forfeited whenever there was a failure to pay when demand of payment of the notes was made at the banks. But this argument is in utter disregard of the terms, objects and stipulations of the bond. The stipulation is to pay when required, so as to indemnify and save harmless Henry Davis from loss or damage. If the demand at the bank for payment of the note was all that was necessary, why was Henry Davis to make a demand of Dr. Cabell. The demand at the bank was certainly usual; but the demand provided for in the bond was to create a new and original obligation. This will be manifest by a single enquiry, Was the bond forfeited by a demand at the bank, or by a demand by either Davis or the bank on Dr. Cabell? No demand was necessary to fix Dr. Cabell's liability on the note; that is only necessary as to endorsers. Suppose the note had been demanded and protested, and even sued upon, not only against Dr. Cabell's estate but Davis, and judgment had been rendered against Davis, would this bond be forfeited? Certainly not. It cannot be forfeited until Davis has sustained actual damage by payment.
The necessity of a demand in this case is a rule of law, and is founded in reason and justice. The bond was not necessary as a security in the lifetime of Dr. Cabell: He was bound to pay his notes and all his property was liable. The bond was only necessary after his death, to provide for the contingency of his dying without leaving personal assets sufficient to pay his debts: And he gave the bond in which he binds his whole estate to guard his surety from loss, provided the surety gave him notice. The bond was not given to bind Cabell to pay the note at maturity, but to guard his surety from loss.
As the law then was, the heirs of Cabell were not bound to pay the notes on which Davis was endorser; and they had a right to have the notice and demand before they should become bound. Their interest is entitled to the same protection and security as if they held by an independent title; and they are therefore entitled to have the protection provided for them by the bond.
The counsel for the creditors says it has been adjudged that the demand made by the suit was all that was necessary. But the question is not whether there had been a demand made upon the note; for no such demand was necessary: Dr. Cabell was bound without a demand. It is the bond which provides for and requires a demand in order to raise the obligation therein provided for, and it is that demand, for the proof of which we ask, and the proof of which is wanting.
It is further contended that Davis has paid these notes, and that he is therefore entitled to hold Dr. Cabell's estate bound on the bond. The actions were brought on the notes as subsisting liabilities against Dr. Cabell's administrator, and judgments were rendered upon them. As to all the parties to these suits, therefore, that was an adjudication that the notes had not been paid: And this is what is made out by the proof. Indeed every thing that was done was to hold Dr. Cabell's estate liable, and give them time to pay the debt. The counsel refers to the note of Davis endorsed by Dudley, and discounted at the bank, as a payment of Dr. Cabell's notes by Davis. But we are looking not to the form but the substance of things; and all the proofs shew that the notes of Dr. Cabell were not paid or intended to be paid by that arrangement. We insist that nothing but actual payment can operate as a forfeiture of a bond which stipulates to protect the party from all loss and damage from the endorsement; and when there is a forfeiture it extends only to the amount of the damage sustained. If then we shew that there has been no actual payment of the notes, and only payment of one or two discounts upon his own note, we shew at the same time that this is the extent of his loss and damage.
Formerly on the forfeiture of a bond, the penalty was all payable; and the obligor could only be relieved by a resort to a Court of equity, which would relieve him on its own principles. Now this is changed, and by our statute the plaintiff in an action on a bond for the non-performance of covenants or agreements, is only entitled to a verdict and judgment for such damages as he may prove he has sustained. 1 Rev. Code of 1819, p. 509, § 82. This is the doctrine now, and no other sum can be recovered than what will indemnify the plaintiff for his actual loss. Sedgwick on Measure of Damages, p. 415, 416. In this case Davis's loss is what he has actually paid. Even where a surety has been taken into custody, yet he can only recover to the extent of the injury he has sustained, and not to the amount of the debt unless he has paid it. Rodman v. Hedden, 10 Wend. R. 498. In that case it was said that if the surety give a negotiable note in satisfaction of the debt so as to discharge the principal, he may recover the amount of the debt. But to authorize him to do this he must discharge the principal, and his note must be taken as payment. But the giving a negotiable note as a collateral security will not entitle him to sue for the amount of the debt for which he was surety.
There is a distinction taken in the books between cases where there is a condition to pay at all events, and a condition to indemnify and save harmless. Our case falls within the latter class: And in such a case there is no forfeiture until damage is sustained. If any other authority is wanted in the case, the Court is referred to Hopewell v. Cumberland Bank, 10 Leigh 206; and May v. Boisseau, 12 Leigh 512. But the cases of the first class are not conformable to principle. Sedgwick on Measure of Damages, p. 311. Indeed the doctrine that a surety may sue whilst the principal remains bound cannot be carried out in this first class of cases without great enormity. The bond is to the surety, and according to these cases the surety may sue upon it directly there is a failure to pay. The creditor may sue on the obligation or note executed to him. And thus the principal debtor may be compelled to pay twice. But on a covenant to indemnify and save harmless, the damages must be proved to have been sustained. Sedgwick, p. 312.
We submit then that actual loss must be proved; and that the recovery by the surety can only be to the extent of that loss. And to entitle the surety to recover he must prove payment. What then is payment? In Sedgwick on the Measure of Damages, p. 317 and onwards, it will be seen that neither bond nor note nor judgment nor security on land will amount to a payment. It is said that a negotiable note is an exception; but there is no ground for this distinction either in law or common sense. Though a bond or note or conveyance of real estate is not damage, yet if taken in satisfaction of the debt it is payment or damage; and will authorize the surety to sue. So a negotiable note if taken as a discharge or extinguishment of the principal's liability, will authorize the surety to sue; and only when so taken. And this must be so. There can be no remedy on an indemnifying bond until the first is discharged. They cannot both exist at once; and it is only the extinguishment of the one which brings the other into existence. And this is the result of the authorities as stated by Sedgwick, p. 319. The reason given for holding the giving a negotiable note a payment is that it is treated as money. But that is not the true reason. The true reason is that the debt for which it is given has been thereby discharged; and it matters not in what way or by what means the debt is discharged, that is a payment.
To constitute a negotiable note a payment it is essential that it shall be given and accepted in full payment of the debt. Sedgwick on Measure of Damages, p. 326. If this be so there is an end of the question in this case. Here there was no satisfaction of Cabell's notes; but it was agreed by both Davis and the bank that the notes were not to be discharged; and by the act of the bank and Davis actions were brought against the administrator of Cabell upon these notes as subsisting securities; and judgments were recovered and the money paid upon these judgments by the administrator.
The counsel for the creditors seems to admit that upon the record as it now stands, the heirs cannot be subjected upon the covenant with Putney. In truth no additional proof can subject them. Not a cent was paid by Putney upon the note on which he was endorser. The covenant is to indemnify against loss; and all the surety did was to give a bond with security to pay the debt in two years. The debt was in fact paid by the administrator of Cabell.
It certainly is a matter too plain for argument that after the Court has sold property to more than is needed to pay all the debts of the estate, and the proceeds are under the control of the Court, then to sequestrate the rents and profits of all that remains in the hands of the heirs, is erroneous. Besides there was a tract of land sold in Bedford county; and in the decree sequestrating the estate a direction is given to enquire as to the proceeds of this land. And whilst there are these two tracts of land sold, and before a dollar has been ascertained to bind the heirs, this sequestration was ordered.
It has been suggested that the Court may put the injunction suit out of the way. But that is an independent suit, and is not in this Court; therefore this Court cannot judicially know whether the injunction is proper or improper; or what disposition should be made of it. It is said the application to suspend the collection of the purchase money should have been by petition in the cause. The reason for that is not perceived. Suits were brought on the bonds for the purchase money of the land, the sale having been confirmed; and the only mode of protecting themselves left to the purchasers was by injunction. That suit not having been acted on by the Court below, and not being here, this Court cannot act on it, and cannot know whether the injunction was proper or improper.
Bouldin, for the appellants, on the last point considered by Mr. Patton.
There having been a sale of the land reported and confirmed in this cause, and there being no objection to it by the heirs, but the sale being proved to be favourable to them; and a copy of the injunction cause being filed, it was competent for the Court to direct the collection of the purchase money of the land sold. The injunction cause being ready the Court below should have acted on both causes at once, and should have dissolved the injunction and directed the payment of the money. And this Court will direct the Court below to dispose of the injunction case before any steps are taken against the heirs. And the plaintiffs in the injunction being heirs in part, and parties in this suit, their bill will be considered as a petition, and may be treated as a proceeding in the cause.
OPINION
BALDWIN, J.
The bond with collateral condition executed by Dr. Cabell to Davis may be treated as a covenant, and its purpose seems mainly to have been to provide a security which, in the event that has happened of Cabell's death, would subject his real as well as personal assets. The covenant was of comparatively little value in the lifetime of Cabell, inasmuch as legal proceedings against his person and property could not be materially affected by the dignity of the demand, and would be substantially the same whether it were evidenced by specialty or by simple contract. But the security afforded by a specialty binding his heirs might become all important upon the occurrence of his death. It appears that Davis had incurred responsibilities to a large amount as his endorser in bank, and that renewals of the notes, and other future liabilities of the like kind, were contemplated. The death of Cabell without having discharged these debts, would, without a specialty binding his heirs, leave Davis exposed to the hazard of loss by the inadequacy of the decedent's personal estate, though the owner of real property of great value.
The condition of the obligation is as follows: " Whereas the above named Henry Davis hath endorsed sundry notes which have been discounted for the accommodation of the said John J. Cabell, at the office of discount and deposit of the Bank of Virginia in Lynchburg, and it is in contemplation to renew said notes, from time to time, according to the custom of said bank; now therefore in case the said John J. Cabell shall, whenever thereto required by said bank, or by said Henry Davis, or his legal representative, well and truly pay and discharge all such notes as now are or hereafter may be endorsed for his accommodation by said Henry Davis, whether the said endorsement be made for the renewal of the notes already endorsed, or for obtaining from said office of discount and deposit, or elsewhere, further loans for the accommodation of the said John J. Cabell, on either notes, bills or otherwise, so as fully to indemnify and save harmless the said Henry Davis and his legal representatives, from all loss or damage on account of the said endorsements, then the above obligation to be void, else to remain in full force and virtue."
This was not a covenant of mere indemnity, but a covenant to pay the notes & c. whenever required by the bank or by Davis. It was not in the alternative either to pay the notes, or to indemnify and save harmless, but a direct and positive engagement to pay, and by that means indemnify and save harmless: and thus in effect it was a stipulation that by payment of the debts Davis should be relieved from all responsibility as surety therefor. Nor was any formal demand or notice from the bank or from Davis necessary to give effect to the covenant. It is not pretended that the bank was bound by any contract with Cabell to extend to him credit beyond the period stipulated in the notes, nor that Davis was so bound to continue his endorser. By the uniform usage and custom of banks, and the universal understanding of those who deal with them, notes negotiable and payable there must be paid at maturity, or within the three days of grace thereafter. And the failure to obtain such extension of credit, or the disapproval of the person offered as endorser, would be the most decisive requisition of payment that could be made by the bank. And so the withholding by Davis of a renewed endorsement would be equally a requisition on his part that the notes should be paid by Cabell.
It is clear therefore that the covenant would have been broken by the failure of Cabell in his lifetime to pay the notes at maturity, and that Davis could in that event have maintained an action at law against him upon his obligation. The only difficulty, if any, in such an action would have been in regard to the extent of the recovery. It being incompetent for the legal forum to enforce a specific execution of the contract, a question might have arisen as to the quantum of damages, if the notes had not been paid by Davis, or had been paid by Cabell, before verdict. That is a subject which we need not consider, there having been no breach of the covenant in the lifetime of Cabell (the notes not having reached maturity until after his death,) and it serving to throw no light upon the present suit in equity.
The covenant of Cabell to pay the notes not only devolved at his death upon his personal representative, but also descended upon his heirs at law, and the latter became as much bound to pay them out of the real assets as the former to pay them out of the personal assets. And the death of Cabell, and the arrival of the notes at maturity without payment thereof out of his estate, constituted by inevitable necessity a breach of the covenant, as well on the part of his heirs as on the part of his administrator. It will be seen from the condition of the bond that it was not in the contemplation of the parties to renew the notes after the death of Cabell; there was no authority on the part of his administrator or his heirs to renew them in their representative character; and in point of fact they were not renewed. On the contrary they were taken up at maturity by Davis the endorser, which he could not have failed to do but at the expense of his credit and the harassment of a suit.
It appears that by an arrangement with the banks Davis obtained the means of relieving himself from his liabilities to them as Cabell's endorser. This was accomplished by his giving his own notes with a nominal endorser, and pledging as collateral securities the notes of Cabell and his obligation aforesaid. Davis's notes were discounted by the banks, and the proceeds applied to the credit of Cabell's notes, and the banks consented to indulge Davis upon his notes so discounted until the collateral securities were exhausted. This transaction was perfectly fair and legitimate, and conformable to the rule of equity by which a creditor is entitled to avail himself of any counter bonds or other securities given by the principal debtor to those bound with him as sureties; and the principle is not varied by his consenting to take the surety as his principal debtor, with a transfer of such securities so previously acquired. We need not consider whether this adjustment was equivalent to a payment to the banks of Cabell's notes by Davis the endorser; for the result as it affects the merits of this suit is the same either way. The full amount of the notes was afterwards paid by Cabell's administrator out of the personal assets of the estate, and whether in reimbursement of Davis, or in satisfaction of the banks, who stood in his place and held his securities is wholly immaterial.
The merits of the case, however, do not depend upon the enquiry, when or by whom the notes of Cabell have been actually paid, or whether they have been paid at all; but upon the force and obligation of the covenant and the condition of the assets. The counter bond of Cabell by which he bound himself and his heirs to pay off his notes in bank, to the exoneration of Davis his endorser, placed the latter in the position of a specialty creditor, entitled to performance of the obligation from the heirs as well as the administrator. He had two funds for the satisfaction of his demand, the real assets in the hands of the heirs, and the personal assets in the hands of the administrator: the simple contract creditors had but one, the personal assets only. The well established and familiar rules of equity, derived from considerations of natural justice, required a resort by the specialty creditor to that fund to which the simple contract creditors could not look, or if he should exhaust the personal assets, in the whole or in part, that they should be placed in his stead, and relieved out of the real assets to the same extent. And in a suit for marshalling the assets, it matters not whether the debts binding the heirs have been actually paid or remain to be satisfied, or whether they are evidenced by direct obligations or collateral covenants, or whether the former have not yet fallen due, or the latter have not yet been broken. These are all matters of detail in the arrangement, application and distribution of the assets by the equitable forum, and do not in any wise impair the principles belonging to the subject.
The right of the plaintiffs as simple contract creditors to marshal the assets, and obtain satisfaction of their demands out of the realty in the hands of the heirs in relation to the covenant with Putney, stands upon the same footing and is governed by the same principles as in regard to the covenant with Davis. The contract between Cabell and Putney is in the following words: " Memorandum of agreement between R. E. Putney and John J. Cabell, all of the county of Kanawha, Virginia: That whereas the said John J. Cabell is endorser for the said Putney in a large sum at the Bank of Virginia, and being desirous to secure said Cabell as endorser, hereby binds himself, his heirs, & c., to pay to the said Cabell the sum of 10,000 dollars, or so much as the said Putney may be in default to the said bank: and whereas the said Putney is endorser for the said John J. Cabell in a like large sum at the Bank of Virginia at Charleston, Kanawha, and the said Cabell being desirous of securing said Putney in the aforesaid undertaking as endorser, hereby binds himself, his heirs, & c., in the sum of ten thousand dollars, or so much as the said Cabell may be in default to the said bank, to be paid to the said Putney whenever such default shall happen."
The covenant on the part of Cabell with Putney varies from his covenant with Davis only in point of form, except that the former stipulates in the event of Cabell's default with the bank, to make payment thereupon to Putney; and the effect of the two covenants respectively in regard to the real assets of the covenantors, and the consequent equities of the simple contract creditors, is essentially the same. The only difficulty in relation to the covenant with Putney is from the absence of direct evidence to prove that Cabell's note for 5000 dollars, subsequently made, endorsed and discounted, falls within its provision. The presumption, however, is that said note was not made for a new consideration originating after the covenant, but for the renewal of a note of that amount made by Cabell, with Putney as endorser, and discounted at the bank prior to the covenant. It is a matter, however, which can in all probability be reduced to a certainty one way or the other upon a reference to a commissioner, and such an enquiry ought to have been directed by the Court below.
In proceeding to give relief to the plaintiffs as simple contract creditors entitled to marshal the assets, the Court below had competent authority to decree, at the proper time, a sale of the real estate in the hands of the heirs, so far as requisite for that purpose: But it was premature to do so before adjudicating their several demands, and so ascertaining the amount of indebtedness chargeable upon the lands of the decedent. It is true that the sale which the Court directed of land in Kanawha was upon the petition of the adult heirs and by consent of the plaintiffs; but no such consent could be given on the part of the infant heirs, and their rights and interests were under the protection of the Court. A sale however was had under the decree, which was reported to and confirmed by the Court, and an order made for the collection of the proceeds; and although it was competent for the Court, these proceedings being interlocutory, to set them aside in the further progress of the cause, upon its appearing that they were prejudicial to the interests of the infants, yet, on the other hand, if appearing to be beneficial to them, there could be no good reason for disturbing them in behalf of any other party. But a bill was filed in the same Court by the purchasers at the sale, praying an injunction (which was granted) to judgments recovered on the bonds given by them for the purchase money, and seeking to set aside the decree for sale, and the proceedings under it, on the ground that the same being irregular and unwarranted as against the infant heirs, and subject to future impeachment by them, they the purchasers were exposed to the hazard of great loss, if compelled to pay up the purchase money.
To this bill of the purchasers the numerous creditors, the heirs of Cabell as well adults as infants, and other persons, were made defendants. Some of the defendants answered, and evidence was taken pro and con upon the question, whether the land was sold at a price prejudicial or advantageous to the heirs, and that case is still pending and undetermined. The proceeding was, however, irregular and improper as a separate suit, and the bill ought to have been treated by the Court as a mere adjunct of the original cause, and in the nature of a petition, and to have been brought to hearing therewith. And if so treated, it would have presented to the consideration of the Court the enquiry whether the sale made under its decree was advantageous or injurious to the infant heirs.
Instead of taking this course, the original suit was again brought to a separate hearing, and the Court without adjudicating any of the demands of the creditors, or making any disposition of the proceeds of sale of the Kanawha land, but leaving the injunction which had been granted to the purchasers in full force, and the land itself in their possession, and the objections which had been made to the sale thereof unadjudicated, rendered another interlocutory decree, by which the whole rents and profits of all the other real estate of the decedent were sequestered.
And the Court is of opinion that there is no error in so much of the decree of the Circuit court as declares the principles upon which the assets real and personal of the intestate ought to be marshalled, but that it is erroneous in not directing the injunction bill of the purchasers of the Kanawha land and the proceedings thereupon to be heard together with and as a part of the proceedings of this suit, and in not adjudicating the question whether the sale of the Kanawha land ought to be established or set aside, and in not adjudicating and marshalling the respective claims of the creditors, and in all other respects wherein it conflicts with the principles above declared. It is therefore adjudged, ordered and decreed, that so much of the decree of the Circuit court as is above declared to be erroneous be reversed and annulled, and that the residue thereof be affirmed with costs to the appellants. And the cause is remanded to the Circuit court to be proceeded in conformably to the principles of this opinion and decree, and upon such further proofs as may be adduced by the parties.
[a1] Judge Daniel had been counsel in the cause in the Circuit court.