VAN
VLiEET
fl.
SLEDGE.
743
VAN VLEET SLEDGE
et ale v.
SLEDGE
et al.
etal.
fl. VAN, VLEET.
(O£rcuit OO'Ull'tt W. D. Tenne8see. . August 9, 1. NEGOTIABLE INSTRUMENTS-INDORSEMENT-EVIDENCE. The testimony of a witness all to statements of the indorsers of a note in regard to tbe agreement under which the indorsement was made is inadmissible as hearsay. B. all CONTRACT-EvIDENCE; Parol evidence is inadiIiissible to vary or explaiu an unconditlonallndorsement of notes, but is competent for the purpose of reforming the contract of indorsement. S. .SAJ,[...ENTRY ON Booxs 011' ACOOUNT. An entl] on the books of the indo"rsers, charging the notes to the indorsees, and reciting, ,All said notes transferred to them in' part ,payment of their account, and indorsed by us, waiving n is not ambiguous, and the person who made tbe entry cannot construe it, or testify as to what was meant by the word "payment. .. " SAM»-REF.ORMATION 01' CONTRAdTS. A written'contract will not be reformed unless a materlalmistake is shown by proofs .that are fUll, clear, and decisive, free from doubt and uncertainty, and such as to entirely satisfy the conscience of the court. ' 5. SAME-LACllES. Notes :were indorsed and transferred in payment of an indebtedness, and at the same time an entry was made by the indorsers' book-keeper intbeir books to the ef· feet that tbe indorsement was unconditional. Afterwards the indorsers went into voluntary liquidation, with. complainants' testator as liquidating partner, and he had charge of the books until his death, four years after which, aUd nine years after the indorsement! complainants sought to reform the contract of indorsement by making it conditlOnal. Held, that they were estopped on the ground of laches. 6. SAlIrn,,-RElIORJUTION OF TIlE Boox-ENTRY. The entry in the indorsers' hoo:lts, claimed by complainants to have,been a written memorandum 'of a verbal in regard to the indorsement. could not be refonned to show that the indorsement,was oondi'tional, where, it was, without mistake, made to appear on the notes as unconditiol).al j since the effect woald be to put in writing a verbal understanding, to vary the written contract. '1. SAME- PAROL EVIDENCE TO' VARY WRITTEN CONTRAOT-RULE 011 FEDERAL CoURTS. The federal court is not bound by the decisions of the state courtof the state over wbich it bas, jur,isdiction, allowing a parol agreement to limit the effect of a written contract, tiutwill follow the contrary rule, as established in the federal courts. 8,' INTEREST-RECOVERY OF USURIOUS INTEREST PAID. Usurious interest alleged to have been received from a firm by one of the part,. ners cannot be recovered from 4is representative by the representatives of the other partners, where it is neither alleged nor shown tbat the lattel' did not receive like interest. II. SAME-LACHES. , A demand for fluch interest will be repelled on the ground of lacbes, where it is made 10 years after the a1fairs of the partnership have been amicably settled, and the accounts of the several partners, as between themselves"sljotisfactorily adjusted 10. INTEREST-STATEMENT OF ACCOUNT-CONVENTIONAL INTEREST. . ,Where a statement of account is furnished by the debtor, charging himself witb , interest at the conventional rate, he thereby con,trQllts to pay that rate, and cannot, after paying the, amount, recover the interest on the ground that it was greater than the legal rate. ' . 11. SAME-USURY. The statute, of Mississippi, making the legal rate of inter,est 6 per cent., and providing that" contracts may be made in writing" for tbe payment of 10 per cent., only prevents the recovery of more than 6 pel' cent, unless the'contract is in and does not give the right to recover back more than 6 per cel).t. VOluntarily paid under a verbal agreement. 12. PRACTICE IN FEDERAL OounTs-LACHES. The .1ed$'8l courts sitting in equity will decline relief :where complaillant has been of laches, though his claim may not be barred. by the lItatute of limitations of the state. '
744 18. bTBREST-EvASION 011
FEDERAl,
voL ;45.
LAw; It is not an evasion of the interest laws' to have the purchase-money notes for laud executed in the' sta.tewhere the 'land ill situated, in order to gain a higher rate of iutt'restthan is allowed by the law of the state in which the contracting parties reside. The extent of the liability of the unconditional indorser of a note is the face value the note, not the consideration received by him.
14.
NEGOTIABLE IN8TRUI\IENTS--Lu.BILITy OF INDORSER.
In Equity. 'complainants, as executrices of A. N. McKay, surviving partner of 'the firm of Sledge, McKay & Co., filed their bill in 1889 against William M. Sledge, as executor of W. M. Sledge, deceased, N. R. Sledge, W. n; Sledge, ahd O. n.Bledge, executors of N. R. Sledge, deceased, as surviving partners of the fir IIl of N. R. Sledge & Sons. The bill 'alleges that A. N. McKay, deceased, was the liquidating partner of Sledge, :McKay .& Co., which firm went into voluntary liquidation, and 'that all the debts of said firm had not been paid, and the prayer was for a receiver to settle up the affairs of the partnership, and that its creditors ;should come in and prove their claims. The bill also alleges that in and after 1873 N. R. Sledge & Sons exacted usurious interest on the balance it had to its credit with the firm of Sledge, McKay & Co.; that prior to Janua.ry 29, 1880,N. R. Sledge & Sons had a large balance with Sledge, McKay & Co.; that the latter firm on that date was the holder of three prol'l).issory notes; thatN. R. Sledge, acting for his firm, proposed to Sledge, McKay & Co. that he would take the notes in part payment of the balance due if Sledge, McKay & Co. would guaranty their payment in the event the title the land on which they were secured, which was theq in litigation, should fail; that the notes were thereupon indorsed ahd delivered in pursuance of the agreement; that the title to the land proved good, and that N. R. Sledge & Sons foreclosed their lien on, the same, ,and that defendants threatened to bring suit against complainants for the deficit. The bill prayed, among other things, that complainants might be allowed to prove by parol that the indorsement on the notes referred to was conditional; as alleged, and that they might be allowed to set off against any claim of N. R. ,Sledge & Sons the usurious interest alleged in the bill to have been exacted by them. The indorsement on ,the notes was as follows: "Pay to the order of N. R. Sledge & Sons, wltiving protest and notice. SLEDGE, McKAY' & Co." Defendants answereil the bill, denying the exaction of usurious interest, as alleged, or that the notes taken by N. R. Sledge & Sons from Sledge, McKay Co. were indorsed conditionally, or that there was any parol agreement in reference to such indorsement. They alleged that the entire transaction was expressed in the written indorsement, and that it was intended to have its legal effect.' ,The ,notes were indorsed in 1878. Defendants also filed a cross-bill, asking that complainants be charged with two-thirds of the balance due on the notes, after deducting the amount received from the sale of the land on which they were a lien. Complainants by an amended bill sought to charge defendants, as executors of N. R. Sledge, with usuriousiJitere.st, iUleged to have been received by him from the
VAN VLEET'll. SL&DGE.
745
firm of Sledge, McKay & Co., of which he was a member, as well as of the firm of N. R. Sledge & Co. Tayktr & CarroU, T. H. Jackson, and Metcalf & Walker, for Van Vleet et ale Beard & Olapp and O. F. Vance, for Sledge et aZ.
JACKSON, J. The conclusions reached by the court on the questions presented in these causes, after a careful examination of the pleadings and proof, which it is not deemed necessary to set out and review i'n detail, are the following, viz.: 1. The exceptions of cross-complainants to the answer of witness A. N; McCollum ,toithe fourteenth and fifteenth direct interrogatories andtothe answer of witness W. M. Sledge to direct interrogatory 7, so far as thet undertake to give the conversations or statements of A. N. McKay and W, M.Sledge, Sr., as to the contract or agreement under which Rogers notes were indorsed by Sledge,McKay & Co. to N. R. Sledge&: Sons, should be and are sustained, because-said answers were only hearsay testimony, and incompetent. To the extent indicated, said answers are excluded as evidenee. The excepti6nsof Said complainants to the competency of the answers of witness J. W. Fulmer to the seventh, ninth, tenth, and thirteenth direct interrogatories are sustained so far as they attempt or undertake to vary cir explain the written contract bodied in the indorsement made by Sledge, McKay & Co. upon theROg.. ets notes, transferred to N. R. Sledge & Sons. Parol evidence being iIicompetent to vary or explain said contract, said answers should be ex'" eluded for, that purpose. But, so far as said answers have any bearing upon the question of reforming the contract of the parties sought to be effected by the amended bill, the statements of the witness are tent, and are to stand as evidence upon that question. The eXceptions of cross-complainant to the competency of said witness answers to the twenty-third and twenty-fourth direct interrogatories are sustained. The ,entry made by said witneSs upon the books of Sledge, McKay & Co., charging N. R. Sledge & Sons with the Rogel'S notes; with the accompanying memorandum, that "all said notes transferred to them in part payment of their account, and indorsed by us, waiving protest," was not ambiguous. Witness was not at liberty to construe it, nor was it competent for him to explain what was meant by the word " payment," or to give his understanding that, when a creditor accepted a note of a third party in absolute payment, he has no right to look to the indorSer of such note. These answers are incompetent, and should be excluded. 2. The amended bill to reform the contract between Sledge, McKay & Co. and N. R. Sledge & Sons, under which the Rogers notes were transferred by the former to the latter, cannot be sUfltained, because the evidence is insufficient to warrant such relief, and because complainants and McKay, the surviving partner of Sledge, McKay & Co., to whose rights they have succeeded, have unreasonably delayed their application to refohn. said contract, and should now 'be repelled on the ground of
.746 "lachj'ls," proof waa eveJl tbnn'it, i$ that the in· dorsement of the notes, and the entry upon the hooks of Sledge, McKay & ,Co.., djd;,J:jlo,t embody or expresa the real contraGt and agreement of the parties. The casual conversations which E. A. Spottswood and W. M. Sledge detail as N. R. Sledge are entitled to but little consideration as evidence on which to reform a writteJl cotl.rapt;but, sOjJfar: as they have any they are fully by. R. Slel1ge.and N.Norfleet,-... the evidence tends to show that A. N. McKay in his life-time, and shortly ,before his death,rec;rdcK,ay & Co. upon: their indorsement of the IWgers ,notes, firm, was liable; to the surviving partners of N. & 13onfl;onsaid N. R. Sledgevasgiyen by S,pottswood and W. M. Sledge, being fully offset t1l6 of Norfleet, tAe case for the of the depends upon t1W, of is ins.llfficient for that purpose. ,Equitywill.refqrl1): that they shall con.. form, to. thep!,"ecise, to matElrial mig.. take is show,nbyprqofs tlla.t .l!-re iuTh, and deci,sive; free from doubt uncertainty. and stl{}h as to sati/5fy: conscience of t,he (JOurt. F.Wmer'i! testiJ;uony fall& far sbQtt of this;standard. After stll.tthe Rogers in part the large deht.which"Sledge, M:ciKay.. & Co.;owed to N. R. Sledge & Sons, .he is a,l3ked if tllere .was anY; understanding as to the liability :M;cKay & OR·, came. ullder by virtueo,f .their indorl;!ement of said .notes,to which: .' . ,. for which were given was hl.1itigation4tthe in case Sl,epge, McKay & Co. failed to gain the litigatioll' and in tbateYent, they w:ere liableoQ, tbeir indorsement, but otherwise were not liable." ",', '. ' . :.
, N.rMcE;aY both stated the "proposition" to hiOltogether, and authorized. him. to make the entry and complete the transact,ion; thaMhey dirl;3cted him to enter upon the books of Sledge, McKay i&CO. the entire transaction and agreement, which, howe:ver, he pidnot do; that it ,was not customary to enter conthe books in, 'Olaking journal entries further than to state the object oft1)e,entry;anq po object in IMv:ingout the special agree.ment ,j,p. ,the entry,. hemEtde of the tr,anflaction. Now, by 4Dswer to the, twenty-fourth direct interrogatories, it will be seen that his understanding at the time was that, KS taken inabsoillte payment, N.· R. Sledge & Sons could lOOK ,pnly to the !Makers thereof, and not to the; indorsers. Ent¢aining that Sledge, McleaY&; ,Co. incurred no liability. of said nQtl;Js,inasJ;lilJlClha,sthey were ac. ceptedbY R. Sled,glil .&.8on8 in partpayIQen.ti debt; and, as something;!pay guarantying the title to was of secwity i
VAN' VLEET
SLEOO]t.
747
ment:ofthe notes,:it is Ihorethhrl likely-that Fulmer has confused the latter wi th' his idea. orrtmdel'st!llnding that their' indorsement of the notes imposed.no liability ,ipon Sledge, McKay &; Co., because the notes were taken by N. R. Sledge:'& Sons in absolute: payment of part of their debt. Having this idea as to,theeffect of the indorsement, it was quite natural for Fulmer to suppose, from: something that may have been said about the title to the land, that the liability of Sledge, McKay & Co. was limited to a guaranty of that title. According t6 Fulmer's understandingat the time ,()fthe transaetion, and of the effect of the entry made by :him on the books of Sledge; McKaJ & the latter's indorsement of the notes imposed no liability upon them, and yet he now says that the parties agreed anq direct,ed him to make an entry to the effect that said indorseulent should impose a' liability, npon the indorsers only in the event: the tiUe failed. Thil;IDust have struck him as something ra-markable,if it occurred in tha:t,way; but, instead of making the entry : of'4nysuch agreement, he neglected to do so, for the reason that it was not 'customary. Nine yearea/ter the transaction,an4 after failure to make the entry as directed, It is now proposed, by and upon his indistinct and general recollection of what was said,-whefher before or after the indorsement was actually made does not appear,-to correct his entry. His testimony ,fails to satisfy the <Iotirtthat this should be done. The action of the intlorsers informally waiving protest and notice is iI}consistent with the theory now advanced, or with Fulmer's understanding that Sledge, McKay & Co., by and under their indorsement, were to incur no liabillt)" for the failure of Rogers to pay the notes, but only became liable to make good the title to the land. !fthe latter was their sole undertaking, why waive protest and notice of the non-payment of thenotes? Business'lhen of experience would harclly so act. Bu't if the prooftOf the alleged agreement to qualily and limit the legaleffootof Sledge,McKay & Co.'s indorsement upon the not(:8, so as to make their liability thereon dependent Upon the iilllu1'6 of the title to the land, w'as even clearer ,ttnd more satistactorythan it is,still the complainants should be denied the relief sOl:lght by their amended bill, of haVing the contract reformed,'nnder the circumstlinces of this cal:le, on the'gl'Ollntlof "laches;" Theil'amended bill. seekhrga reformation of the coritraot, was filpd more than nine years after the transaction. No satisfactory explanation is j;!;ive-n for the delay. Complainants' testator r A. N.McKay, was the liquidating partner of Sledge, McKay & Co. He ha:dthehooksof the fil'minhis possession up to the date of his death, in< Decernber, 1885, and, ifhe·didnotactually inspect the entry of the transaction upon th0Se books as made 'inJ'auuary, 1880, he could have done so. It is not shown that he did notinspect and know of theentty' as it was actually made by Fulmer. It must be presumed that he did . know'of it, and there is ,no evidence thllthe ever complained of its incorrectness. ' His clerk, McCollum, who; alter his death, became the agent' of}:1is e8tatefor the complainants, was inj(nmed of the alleged :M. Sledgei agreernent>'at or about the time it was' made. 80' was the executor of W. M. Sledge, Sr. If A. N. McKay had Burvivedan6'
FEDERAL REPOR'rER,
vol. 45.
filed the amended bill to reform· said contract as late as February 20, 1889, and after the death of the other parties to the transaction, he would clearly have been repelled on the ground ·of "laches." With all the facts easily accessible to them, the complainants, as his personal representatives, stand in no better position. The well-settled rule of the supreme court is that parties seeking such relief must be diligent in the assertion of their rights. In Badger v. Badger, 2 Wall. 95, the rule laid down and repeatedly reaffirmed is that the party who appeals to the conscience of the chancellor in support of a claim, where there has been prosecuting it, or long acquiescence in the assertion of adverse rights-, "Should set forth in tbis bill specifically what were tbeimpediments to an earlier prosecution of bis claim, how be came to be so long ignorant of his rights, and tile means used by the respondent to fraudulently keep bim in ig. nqraIl.ce, and how and when he first ca,ml;l to a knowledge of the matters allegl;ld in bill; otherwise, tbe may j nstly refuse to consider his case; 011hl/3 'own showing, witbout inqniring whether there is a demurrer or formal plea of the statute of limitation contained in the answer." The principles laid down in other cases fully sustain the objection of laches in; this case. See Marsh v. Whitmore, 21 Wall. 184; Haywood v. Bank,99,U.S.618; Godden v. Kimmel)" 99 U. S. 201; Landsdalev. Smith, 106 q. S; 391, 1 Sup. Ct. Rep. 350;· and Richards v. MackaU, 124 U. S. 18S, 8:&JlP. Ct. Rep. 437. But, aside from the objections of laches, and theil)sufficiency of the evidence to justify the relief sought, there is another difficulty in this branch of the case. Th!3 complainants do not allege their original or amllnded bill that there was any mistake in, the indorsement which Elledge, McKay & Co. placed upon the Rogers notes, or that said indorsement was not in conformity with the intention of the parties. The claim is that, while there was no mistake in the itself, as made, there was a contemporaneous collateral agreement explanatory thereof, and limiting its operation and, legal effect toa QOntingent liability of the indorsers, depending, not upon pf the maker:s to pay the notes at maturity, but upon the the failure Qf title to the land on which the notes were a lien, which agreement was intended to be reduced to writing, but which Fulmer, the omitted or neglected to enter upon the books of Sledge, M<:Kay4z;Co., as he was directed to do. The object of the amended bill is to have the entry which Fulmer actually made of the transaction on. the bqpks of Sledge, McKay & Co., in January, 1880, so reformed the alleged collateral explanatory agreement, to the end as .to that entry be used to control the legal effect of the in. d9rSemelltupon the notes. and limit and confine its operation to a mere guaranty on the part of the indorsers of title to the Red Fork tract of land, fOl'which Rogers executed the notes which were transferred. Such an reform an entry made in. the books of the indorsers, in order to make it.1imit and qualify this contract of indorsement upon merciaJ paper, is a novel proceeding. It is an ingenious effort to provide evidence by which to explain lI-nd vary the contract of indorse-
'VAN'VLl!:ET t1. SLEDGE.
749
inent. In substance and effeCt it is an application to the court to com· pel the parties to put an alleged collateral verbal understanding in writing, so that it may be used as evidence in explaining and qualifying their formal written contract. The entry on the books of Sledge, Me. Kay & Co., as it stands, is only evidence of the transaction. Suppose it should be reformed,as desired, its effect and operation would still be merely written evideneeOf the transaction. In my examination of this question, I have found no authority for entertaining a bill merely to provide written evidence, or to put evidence in such legal shape as will enable So party to use it in controlling So written contract. In the indorsement made by Sledge, McKay & Co., no mistake is alleged or shown.' This, court oannot aid complainants in providing written evidence 'by which to explain that indorsement. If the agent of the indorsars neglected to make such an explanatory written entry of the transaction as complainants'now seek to have made by reforming the entry in the books of Sledge, McKay & Co:, the latter must bear the consequence such neglect. ,No reformation of the contract of indorsemant made by Sledge, McKay & Co. can be had under the amended bill, ari.d thatreUefisaccordingly denied complainants. . 3. The next position of the amended bill, that, as the indorsemenf of the notes was made in Tennessee, where a parol contract limiting the liabUity of an indorser of paper is valid between the imtnediate partIeS, and may be Shown by parol evidence, this court should ree. ognize lind· enforce such law of Teimessee as part· of the contract of indorsement, is equally untenable. It is well settled that the federal courts are not bound by state decisions upon questions of general commercial law. Swift v. Tyson, 16 Pet. 1; Oates v. Banle, 100 U. S. 239; Railroad Co. v. NafJional Bank, 102 U. S.31; and Liverpool Steam Co. v.PheniX Ins. Co., 129 U. S. 443; 9 Sup. Ct. Rep. 469. It is equally well settled in the ili1deral courts that parol evidence of an oral agreement, alleged to have been made at the time of the drawing, making, or indorsing of a bill or note,C8nnot be permitted to vary, qualify, or contradict theternis ofthewritten contract. spechtv. Howard, 16 Wall. 564; Forsythe v. Kimball, 91 U. 8.,291; White v. Bank, 102 U. S. 658-661; and Martin v. Cole. 104 U. S. 31. 4; The recovery sought by the atnended bill against the estate of N. R. Sledge, and for $3,701.21 of alleged usurious interest received by said Sledge from the firm of Sledge, McKay & Co., cannot be sustained, beGause· it is neither stated in the pleadings nor shown in the evidence that. the other members of Sll'dge, McKay & C()" including complain. ants' testator, A.N. McKay, were not paid, or'did not receive equal amount of usurious interest from saidfirrn, because the demand is stale, and, ifnoiiactuaUy barred by the statute of limitations ()f both'Tennessee and Mississippi, should be now repelled on the ground of laches. The firm of Sledge, McKay & Co. was dissolved by .voluntary liquidation in 1878. Its'llitfairs were amicably settled, ahd'the aceouutsofthe sev· eral wemberswith the firmllnd as between themselves were adjusted to their m,utual' satisfaction. To open ,their settlements now; under a bill
FEDEBA;L,
j
'voL 45.
lQ yea.r6. s,(terothe 11l$t:inatallmellt:of usurious interest was allowed and to overha.ul his settled intenest accounts with to not warra.nted by sound principle or ..'yeKnight v.' Taylor, 1 How,,,168, the supremecQurtsay: f' Thialdn matters ·of"liccouIit, whenthay llre not barred by :the act of IimitaUonsi COIlJ:'tsof equjty to interpose after a considtlrablelaplIe of time, Of,pl,l)Jlic policy, anll from the difficulty of doing entire Justice origi,naUransactions h,ave become and the ." . , '' eVidence may be lost. " ". to, ,r; ': ; '. .. , ,. , , , :; , :,! '. ,
r,
. ',
C<mscience, good. faith. and diligencC'l to call intoracti!{lil exercise the pqweJ"Ofa cou1t of chancery in slH::hcases. This court ",illnot,at this day, even if N. R. was not ,Q.Y tpC'l sixaud Eleven yea,rs' staiutef!',(If limitation, after, tb,e'pa,rtners have, acquiesced in the firmlspaying interest in, of 6 per cent. to one, or, all its members, open up the aeof;said firm witpa.view ofascertnining how much usurious ineach has received. Thi#! claim of the amended bill is accordingJyd,t1nied. 5. Complainants cannot requjr,e the ,firm of N. R. Sledge ,& Sons, or the. surviving meQl!;ler thereof, torefu:1lcl the interest in of 6 per &Co.,amountingj as alleged, to $7 for (1) by the law of Mississippi, wh.ere :N..·. R.; Sl.ed.ge&. SQn did land. its members resided, and )I.¢K;a.y& Co. was payable, a conof in. excess ;of .G.>per. cent. was allowed. The rate of in the absence .of any conprovides: "But contracts may be made vention! or agreement" in\wr,iting for the of a as ten per cent. 11;1 Sledge, McKay & Co. per. and in August, 187,2, interest at the rate of 10 .per to. have charged on side up to in a of interest in favor of N. R. Sledge '&. EiGlP's" o:f ;$:1,320.66, which, was entereo up to their credit, and tpey were. 1;?y & Co. with a written statement of the account between the firms, showing such rate of interest, and the ,dne N. R. Sons,. such balance 'Of interest in their favor.; ,Thisstatet.L8.j::c!>,u,nt by Sledge, McKa,y & .Co. , the debtors, rt:,q.qered ill :w,ritingJo .creditor, a.nd IlhtJwing upon its face the interthelatterllt, ,ra.te of 1.Q !per cent., was .equivalent to,Of t in s,§, in' wrIting: for: the payment of .p'qfi,..rateof inter6/!lt' ,;When a; creditor renders an al}, his whiPAthe ,l,attetassenta. to as c0rrect,ei ther expressly fmm, to objeettheneto within a it ,becQmlMj I:U.ta,ted aceoull;t j , whioh the debtor can ordinarily or nlietl\ke when SlbUghttobe held for the,. balanceshowD;. ,4Q.·rlWGQUnt "a; contract. The party the, is as promising to pay that b.alance, not tbe into it. Hence inquiry on
751
lhto t.hoSe items is not fraud or mistake is shown." 'Such being the settled' rule, when 'the creditor rendets the accOunt, whleh is received by the debtor without it manifestly applies with greater forcewlieri thedebtorsfates the account. In the latter case it is a df his contract liability to pay shown, items of indebtedness therein , whether made up of princip'lil or :Hhas,'in sucll 'case all the force and effect of a promissory note, embodying the rate of interest specified t¥erein; and meets thereguirement cOntract may be niade in writing: for the payment ofauch rate of irlterest. , 'The statute of Camarnia provides'that, "when:there is no in writing fix'iriga differentrateiM interest; interest shall be 'allowed at the'rate of ten annl.1mj"',and,'further,thati ,'''parlies may agree'in writing :for,the payment or any ratEiaf interest whatever, on money:due dueol'l-anyoontract." In Pratalo7l!Jo ''V. Larco, or to 3J8, held accounts stated 'between the 'parties, as in'the present caet6,showihg the rate of interest charged' at Hper cent. pet montH;: ctll:1MitUted an agreement iIhvl'iting, whichi 1'ully-complied with the requiI'eme:nf of' tha'sta1!ute;That case'is directly' in point here, for there is i in California and ;M:lsSissippistatutes; An exceptils 't&t1lerale oNnterest-whi.'ch' maybe ment in writing," under the California statute, is the: Slime in legJl:1effect as a: -was C6. to' :N.R. iSledge&SoIis'on monthly from 'September: 1"1875, to balanees 'aria 'accounts 1, September},; 1876; to'Septeinber 1, 1877. From September 1,1877, t6 September 1, ,1818 ,the rate of interest was reduced to 8 petooti't. But theal:lcount' was regularly by Co. to' No- R.';Sledge&.Sons,·showingthe balancesaild the rate of interesta:lloWied, \:;0 that aU,tne interestallowed alid agreed to be paid by debtor firIDin excess: of 6:per cent. up to September ,1, 1878,' was. covered by the written' contraets' and agreements of filedge,McKay &Oo;w' pliy·· the same; within the provision of, t).1e :1t1ississi ppistatute, and was not thereforeus'lll'ious. , From September 1, 1878; to date of final settletIHint'of the balance due N.R. Sledge & Sons only 6 per cent. }nterest was charged and collected by the latter, and of course 110 quesfiollcan arise as to that period. But aside froD,lthe fact that the stated accounts bring the rate of interest "rerieived within the Mississippi statute, there' is another view of the qUestiOIi!which is defeat complainants' right to have the interest'in excess of 6 per cent.: reftlllded. Under the Mississippi stat11 te no M9re than 6 per cent. ,can 'berecoverpd by action, unless the ,con· tract for the payment of a greater rate is in writing; The does not prohibitor make iIlegalthe paying or receiving of a greater rate of interestthal:16 per cenLunless the contract is in writing. UndeI' such -circumstances, when iuteiest is in' jE',ccess' of 6 per cent., it cannot be recovered' back if 'payment wa& Thillwassoreached in the'Well-considered caseofllJarvinJ v.Mbndell, 125 Mass. 562, which
752
nDEBAL REPORTER,
of Massachusetts, almost identical with that of turned upon the Mississippi. The court that, while the conventional .rate could not be ·enforced unless the contract was .in writing, still without a written contract it was lawful to pay and receive a greater rate. than 6 per cent., and .that when voluntarily paid it could not be. recovered back. To the same effect is thecllSe of Maryev. 5 Fed. Rep. 483. If the foregoing positions were not fatal to .the claim to have N. R. Sledge & Sons refund the of alleged usurious interest, this court would on the ground of long acquiescence, delay,and laches, to opeQ.;,the acco,unts said firIPS reaching back to August, 1872, an4 them,so,asto eliminate usurious interest charged and received on.. both sides. Nor would this court, in the consideration of that question, feel itself bound by the exceptions contained in the Tennessee statutes of limitations ,as to the non-residents of the state. In action at law the federal courts,. sitting a state, recognize and give effect to the statute of limitations. Section 84, judiciary act of 1789. Amy v. Dubuque, 98 U·. S. 470j Bank v. J.QW8rY, 93 U. S. 72·. But there is It defense peculiar to courts of equity founded on lapse of time and the staleness of the claim. In, such case the equity side o,fthe federal courts will .often refuse to interfere, even though the statute of limitations has not barred the claim. It should, I think, decline to actor afford relief in a like the present. 6. Tl).e proof establishes that the Rogers notes were executed with reference to the laws of Arkansas,and that the rate of interest stipulated therein to be paid after ,the maturity was lawful. The situation of the parties,the dating of notes at Red Fork, A,rk., and the presumption of the .law that they intended to make a legal transaction, satisfies the court that the contract as to rate of interest had reference to the law 'of Arkansas. McCollum states the matter too strongly when he says it was intended to. evade the law of Tennessee. It was certainly intended to obtain the Arkansas, rather than the Tennesl;lee, rate of interest. That intention was no violation or evasion ',of the law of Tennessee. Cromwell v. Sac Co., 96 U. S. 51; Kellogg v. M'I11er, 13 Fed. Rep. 198, (which is directly in pointj) BrlYlJJn v. Freeland, 34.Miss. 214. 7. The liability of Sledge, McKay & Co., as indorsers, to N. R. Sledge & Sons is for the full amount of the three unpaid Rogers notes, after crediting the same with the proceeds of land, amounting to $8,250, as of date November 19, 1886. This question has given the court the most difficulty in reaching a satisfactory conclusion. The extent of an indorser's liability to his immediate indorsee is, by the Tennessee decision, limited to the consideration reCeived by the indorser, with 6 per c!,!nt. interest, both in respect to real transactions, as well as to accommodation paper. May v. Campbell, 7 Humph. 450. In Nichols v. FearBOn, 7 Pet. 103, the question as to whether an indorsee could recover from his immediate indorser more than the consideration paid the latter was reserved. It does not appear to have been since directly passed upon by the supreme court. In Tilden v. Blair, 21 Wall. 241, and Railroad Goa. v· Schutte, 103 U. S. 145, there are expressions by the court
VAN VLEET 1'. SI,EDGE.
753
tending to show that the rule is that the indorsee may require the indorser to pay what the maker undertook to pay. In Bank v. Johnson, 104 U. S. 271, Mr. Justice MATTHEWS, speaking for the court, seems to limit the against the indorser to the amount advanced to the latter, and interest thereon. He certainly states that as the rule in New York. Whether it was intended.to. adopt it as the rule of the supreme colirt does not clearly appear. IUs laid dow,n in 2 Parsons on Bills & Notes, (page 428,) that the indorsee may recover in the against· .his indorser the full amount of the note, . ca.seQfreal transaction paper. See, also, 1 Daniel, Inst. §§ 757, 767. There is great diversity of ruling in the state .court on the point. After consideration of the question, the conclusion of this court is that the bette'r reasonlUideonnder principle are found· in the rUle which makes the indorser liablElforthe faC(¥ of the note, where no usury is invalved in the contract of indorsement,.as in the present case. The-legal undertaking of the indorser is that he will pay the note if the maker faile to .do so at maturity,upon proper demand of such failure given, when not waiyed. Whe;n he passestllEl tit1(l to the paper to an il)dQrsee· for value with this undertaking, the· Bqlluder view seems to indorser render!! him.self lia.ble for the face of the note or bitl. 130 ruled in this case, andthj:l firm of Sledge, McKay dr;Po. willbeclla.rged in favor of. N. & Sons, or the ,with the. full amount of the three unpaid RQgers·. note$, after credjtmg said· notes with the proceeds of the land as of date November 19, 1886, and at the rate of insale, specified, 8 per cent., till paid. .It follows that crossare entitled to a decree ,on their crol;ls-bill against the estate of N. McKay and W. M. Sledge ·for two-thirds of the .balance due and. llnpaid on said Rogers notes, ascertained on the basis stated, and adeoree will be accordingly so entered, with an allowance of costs to said .cresB-complainants in both the original and cross-suits. The complainants are denied any relief under their original or amended bill against the executor {)f N. R. Sledge, deceased, except to charge them, as such flxecutors, with one-third of the Rogers notes, or one-third of the due thereon. They are entitled to no relief as agains.t· the Sledge & Sons, or the surviving member thereof. Comfirm plainants' amended bill will be dismissed, with costs. Their original bill may be retained, if they so elect, to proceed thereunder to settle up a.ny liabilities and business of McKay & Co. If retained for that purpose, a reference will be directed to the master to ascertain alld report any unpaid debts and undistributed assets of said reference need not include the liability to cross-complainfirm .. , ants on.the Rogers notes, which is fixed, and the amount thereof easily ascertainable by simple computation. Complainants will be taxed with the costs in the cause already and hereafter to accrue. · Let decrees be entered . v.45F.no.11-48
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I. DDD8f-It:\I:I10nMAlfION-EQt1lllY.-.JURiSDlOTIONo' .:, . " ljlquity ll.. I' lI11ft to lIet a deed fP,ven in pursuance thet:eof \jee.use Qf mutual mistake, or frauddntb,ep'artof the grantor , in'lncluding therein land ltolwhieh behad,no,title, though there may be a,eoncur, "rjWt "1"veJ!lantsin deed. l4DpiOND,J., dissenting. t. BoN», lrO,B'TITLE-PABOL :mVIDENCE TO VABT.' , , , : , ' ' .' ." , 'l'eatitnofty to ahow'that tbe cdntraet 'expreilsedia a:tit,le.;boli.d waaaltered .; .. ' ,.,.; \ ' , -L;' ",1,,; II i,
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No lormer opini9n WfI,f!' filea., T. J{., .Riddick,) !for,pJ.s.batiffs· ·"11,,,!Jj· MQoromaft" fordefenda.nta., r" "', review· of'the original the com: adm'irlisffator of Ji.' iJ'. the fehdaii't GollSett,in: JllIitlarY,1884, to reform a 'cor\\'eyanee !made by said COssettr!'W·tbe, heirs :of. 8tLid PUllill:ttl aft::the' timEl'df'lmd Bliid rreettietiiim't,:becaUBH'ljaidcbnvEiyanoe 'inc1uiled; c'ertaio';lands which warb lleithersold 'by 'the veiidor norpitrchased 'by the intestate Of the moneys 'lnjproperly paid him .by saidadtfiinistra:tor'and These matte'.tsofrelieh.re sought upon: .of fral1diti\lnt concell:lmentahd of ieriaiJ!;thctllbysaidCossett in 'procutihgisllid settlement, 'and in his wrong:. fUlly'amikrl.(}\'ringly inclUding inhis''tlleed to the'heil's'ofPuHiiamcertain pardeis) 'compariitively worthless-; whichi'their intestate had not purcpased','aJid obtaining payment fei-:tbesame; lind !tiponihe fUl'thel' alleglttlon·tjNriutual ttiistak{ljboth '6f 'fact and'of'law','in'respect to said lana improperly'ineluded, itisaid' alleged overpayments' made to 'said CosseU:by reason 'of 'said fraudulent concealment and rnisrepresenfutibrl in 'procunng said settlement'and inlhe execution byreasonofthe mistliIieof material facts, are be recovered, .. Cossett objection by-way 6fdetmirrer frame, of the bill and to the relief sought, but answiered, the same, putting in isstie the charges on which' the equity of the bill Proofw8.s: taken on 'both sides t1pon the issues thepleildirl/ts, lind upon of'the cause in June, 1889, suit, nofupon its merits; <aiflrtltted: by had It 'complete at law upon of seisin and warranty contained in 'the Ideed from' Cdssett to'l'b:e heirs of Pulliam, and that the case as presented by the biU: did' 'not'pr6Vetly come within the equitable jurisdiction of this court. Leave was'gTanted c&m'plaihants to present an application for rehearing, which the presiding judge requested , JActtSbl,q';'Jf.'It is not deemed;necassary'tO go of i ttie'-'ple8:dirigs and·evidence in thiS case. andihIie'ilded' bills" is Ito, lIetasidEI '&:.f
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