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U.S. Supreme Court

Etting v. Bank of the United States, 24 U.S. 11 Wheat. 59 59 (1826)

Etting v. Bank of the United States

24 U.S. (11 Wheat.) 59




Although a judge may refuse to declare the law to the jury on a hypothetical question not warranted by the testimony in the cause, yet if he proceeds to state the law and states it erroneously, his opinion may be revised in the court above, and if it can have had any influence on the jury, its verdict will be set aside.

Although it is the province of the court to construe written instruments, yet where the effect of such instruments depends not merely on the construction and meaning of the instrument, but upon collateral facts in pais and extrinsic circumstances, the inferences of fact to be drawn from them are to be left to the jury.

Where the Court is equally divided in opinion upon a writ of error, the judgment of the court below is to be affirmed.

Quaere what concealment or suppression of material facts in a contract where both parties have not equal access to the means of information will avoid the contract?

This was an action of assumpsit brought in the court below by the defendants in error against the plaintiff in error, Etting, as the endorser of the promissory note of James W. McCullough, under the following circumstances:

In the year 1819, the president of the Branch Bank, established at Baltimore, his partner in trade, McCullough, the cashier of the branch, and Williams, one of the directors of the parent

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bank, had contracted a debt to the bank to the amount of $3,497,700. The directors at Philadelphia, in consequence of some information which they had received respecting it, passed a resolution, on 19 February, 1819, calculated to draw forth a complete statement of the case, with all its circumstances. This resolution brought the papers it required, and also brought the president and cashier to Philadelphia, who attended for the purpose of making verbal explanations. These were received, and the case was referred, on 16 March, to a committee, whose report was made on the 30th of the said month. It appeared by this report, that the securities offered for the debt consisted of 20,848 shares of the stock of the bank, of 26,550 shares previously pledged for very large sums in London, Liverpool, New York, and Boston, the amount of which was not stated, and the personal liability of the debtors themselves. The report stated, "As the result of many conferences, and a good deal of deliberation," an offer on the part of the debtors to give additional security for $900,000, payable in five years by annual installments. A part of the proposed arrangement was that the shares previously pledged in London, and elsewhere should be liberated from the claim of the bank and that the separate liability of each for $300,000 should be received instead of the joint liability of all for $900,000. This offer, with some modifications, was accepted by the bank. A part of the security offered by McCullough were

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sixteen merchants of Baltimore, who were to become bound for $12,500 each. The committee recommended the acceptance of these terms, and also recommended that the sufficiency of the security offered by Williams, and McCullough, including the sixteen sureties proposed by McCullough, should be referred to the members of the board residing in Baltimore. This course was adopted by the bank, and the committee of members residing in Baltimore reported on the whole subject. Of the sixteen names proposed for their consideration, three were withdrawn and three were objected to. Among those who were accepted was Etting, the plaintiff in error. The negotiations, investigations, and arrangements for the completion of the business were some time in progress. Propositions were made for changes of the securities, and, on 10 May the president of the bank addressed a letter to the committee in Baltimore urging it to bring it to an immediate close. On 14 May, the committee at Baltimore reported the documents which had been executed in pursuance of previous arrangements made with the debtors, a report of which was made by the committee at Philadelphia on the 17th of the same month, and on the 18th McCullough was removed from the office of cashier, which he had held from the first establishment of the bank. It was admitted that he was a young man worth nothing, who had a family and whose salary as cashier was $4,000.

Page 24 U. S. 62

When the note endorsed by Etting, the plaintiff in error, fell due, he refused to pay it, on which it was protested for nonpayment and this suit was brought by the bank. At the trial in the court below, the whole matter was given in evidence, and the court was moved to instruct the jury on the law which would arise on the facts of the case and the inferences which the jury might draw from those facts. The counsel for the plaintiffs moved the court to instruct the jury that if it should be of opinion from the evidence that the defendant Etting, without any communication with the plaintiffs but on the application of McCullough only, agreed to become his endorser under the arrangement made between him and the plaintiffs, although it should be satisfied from the evidence offered by the defendant that the said McCullough deceived the said Etting; that it was known to the bank before or pending the negotiation that the debt from McCullough, or the greater part thereof, had grown out of his unauthorized and fraudulent appropriation of their funds to his own use, which knowledge the bank did not promulgate, though it contemplated his removal as soon as the securities should be given in conformity with the arrangement which had been made; that the defendant endorsed the note in ignorance of any fraud on the bank or of any abuse of his office of cashier or of any probability of his removal from the said office; that had the defendant known these circumstances, he would not have endorsed the said note; and that the bank forebore

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to promulgate either the information it possessed or its intention to remove the said McCullough, under the impression that the disclosure would increase the difficulty of the said McCullough in procuring security, if not render it impossible for him to procure it; yet if it should also be of opinion that the defendant, without making any inquires of the plaintiffs on the subject of such information and intention or holding any communication with them on the subject of his intended endorsement, did, of his own accord, on the application of the said McCullough and for the purpose of giving effect to the said arrangement, endorse the said note on which this action is brought, that there was nothing in the evidence so given by the defendant to affect the plaintiff's right of recovery in this action. That in order to vitiate the said note and endorsement in law and to bar the plaintiff's right of recovery thereon on the ground of a fraudulent misrepresentation or fraudulent concealment of circumstances known to them and unknown to the defendant, it was incumbent on the defendant to show that he applied to the plaintiffs for information or held some communication with them for the purpose of receiving such information, and that on such application or communication the plaintiffs either misrepresented or concealed such circumstances, and that in the absence of such proof there was nothing in the facts so given in evidence by the defendant to affect the right of recovery in the action.

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The court gave the instruction as asked, to which an exception was taken.

The counsel for the defendant then moved the court for instructions that if the jury should draw from the evidence certain inferences which were stated, the plaintiffs were not entitled to recover. These inferences were that the bank was fully informed in March, 1819, of the fraudulent conduct of McCullough, the extent of his misapplication of their funds, and of his insolvency; that on receiving this information, it became satisfied of his unfitness to continue in office, and determined to remove him. That, however, it continued him in office until 18 May, carefully concealing the circumstances and its determination for the purpose of obtaining security of the debt due to them from the said McCullough, one of which so contemplated securities was the note in question. That the defendant was, to the knowledge of the plaintiffs, ignorant of McCullough's breach of duty and of the determination to remove him, and endorsed the note by reason of that ignorance.

The court refused to give this instruction unless the jury should be further of opinion that the defendant was led into this state of ignorance in consequence of inquiries made by him of the plaintiffs or of some previous communication between them and him.

On the further application of the counsel for the defendant praying the court to instruct the jury that on the statement and evidence contained

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in the bills of exceptions, if the jury believed the same, the plaintiffs were not entitled to recover; the court refused to give the instruction asked, and directed the jury that on the evidence aforesaid, the plaintiffs were entitled to recover.

Judgment was rendered for the plaintiffs in the court below, and the cause was brought by a writ of error to this Court.

Page 24 U. S. 73

MR. CHIEF JUSTICE MARSHALL delivered the opinion of the Court.

If this case depended on the deservedly high character of the individuals who were engaged on the part of the bank in the transactions in which the suit originated, if elevation above the possibility of suspicion that they could have meditated anything believed by themselves to be legally or morally wrong could decide it, this cause would not have required the great efforts which have been bestowed upon it. The names which appear on this record can never be connected with actual fraud; nor would any difficulty be found in protecting them from the imputation were it possible that it could be made. But judicial inquiries are into the rights of the parties,

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and although high and honorable character has and ought to have great influence in weighing testimony in which that character is in any manner involved, yet when the inferences from that testimony are drawn by others and a court is required to pronounce the law arising upon them, character is excluded from the view of the judge and legal principles alone can be acknowledged as his guide.

At the trial, several points of law were raised by both parties on which opinions were given to which exceptions were taken, and the correctness of those opinions constitutes the single inquiry in this Court. [Here the learned CHIEF JUSTICE stated the case as it is stated above.]

As preliminary to the inquiry whether the law arising on the facts and on the inferences assumed in the bills of exceptions contained in the record was correctly stated by the court, a point has been made at the bar which must be disposed of. It has been contended that a court is not bound to answer abstract or hypothetical questions of law not growing out of the testimony in the cause which may be propounded at the bar, and to apply this principle it has been also contended that the testimony contained in the record and referred to in the bills of exceptions contains nothing from which the jury could possibly draw those inferences of fact upon which the court was asked to declare the law. That the points made in the bill of exceptions constitute a distinct and totally different case from that made by the evidence.

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That a judge cannot be required to declare the law on hypothetical questions which do not belong to the cause on trial has been frequently asserted in this Court, and is, we believe, incontrovertible. The court may at any time refuse to give an opinion on such a point, and if the party propounding the question is dissatisfied with it, he may except to the refusal, which exception will avail him if he shows that the question was warranted by the testimony and that the opinion he asked ought to have been given. But if the judge proceeds to state the law and states it erroneously, his opinion ought to be revised, and if it can have had any influence on the jury, its verdict ought to be set aside.

It cannot, however, we think, be correctly affirmed with respect to the case now under consideration that the points stated in the bills of exception have no relation to the testimony to which those bills refer. That testimony consists of various communications and reports made to the bank of its own transactions and of the admissions of parties. It has been said that this testimony is all in writing, and is to be construed by the court, and from this proposition is deduced the corollary that the jury was not at liberty to draw inferences from it.

Were the fact as alleged and were it true that the testimony is all in writing, the consequence drawn from it cannot be admitted. Conceding it to be the province of the court to construe any particular paper which was offered in

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evidence, the report of 30 March, for example, and to declare the meaning of every sentence and of the whole instrument, yet this report contains a great variety of extrinsic circumstances, suggests measures of deep interest, was followed by numerous successive acts which took place in the country and which do not derive all their influence on the cause from the construction of the particular papers in which they are communicated, but in a considerable degree from their connection with each other, from the motives in which they originate, and from the effects they were calculated to produce and did produce on others. These subjects are peculiarly proper for the consideration of a jury. If the testimony be examined, it will, we think, appear that the counsel for the plaintiffs has not asked the court to give its opinion on any inferences of fact which it was not at least possible for the jury to draw from the evidence. The knowledge of the bank is not questioned. The ignorance of Etting might be inferred from the absence of all testimony proving his knowledge that any fraud had been practiced by McCullough. The original resolution of the bank to remove McCullough might be inferred from its knowledge of his unfitness for the office and from the fact that it did remove him the instant the securities were obtained which they expected from him. The same facts might justify the inference respecting the motives which induced the bank to retain him in office until those securities were procured.

We are far from saying that these inferences were

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all of them such as the jury ought to have drawn. It is not difficult to perceive that the bank might have acted on motives equally unexceptionable in morals and in law. The jury might very well have believed that the bank thought the 26,550 shares of stock were not worth more than the sums for which they were pledged, or at any rate were not a safe security, and might therefore think it advisable to relinquish that pledge if other security could be substituted in its place. Others might estimate that stock more highly than they did, and might estimate it rightly. Friends therefore, acting on their own judgment of the value of this stock, might be found willing to endorse the paper of Mr. McCullough on receiving it as a pledge. The motive, too, for retaining Mr. McCullough in office might be to induce him to do the bank all the justice in his power, not to induce others to endorse his notes. The whole subject was before the jury, and it might have drawn from the testimony either these inferences or those which are stated in the bills of exceptions. The counsel for the plaintiffs, believing the law to be in their favor even upon that view of the testimony which is taken in the exceptions and fearing that the jury, should it take that view, might find for the defendant, chose to refer the law to the court. Whether his fears respecting the jury were well or ill founded, this cause must now be decided on the correctness of the opinion given by the circuit court.

In the very elaborate arguments which have

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been made at the bar, several cases have been cited which have been attentively considered. No attempt will be made to analyze them or to decide on their application to the case before us, because the judges are divided respecting it. Consequently the principles of law which have been argued cannot be settled, but the judgment is affirmed, the Court being divided in opinion upon it.

Judgment affirmed.

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