Subscribe to Cases that cite 24 U. S. 59 RSS feed for this section

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 chanrobles.com-red

Page 24 U. S. 60

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 chanrobles.com-red

Page 24 U. S. 61

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. chanrobles.com-red

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 chanrobles.com-red

Page 24 U. S. 63

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. chanrobles.com-red

Page 24 U. S. 64

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 chanrobles.com-red

Page 24 U. S. 65

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. chanrobles.com-red

Page 24 U. S. 73


ChanRobles Professional Review, Inc.

ChanRobles Professional Review, Inc. : www.chanroblesprofessionalreview.com
ChanRobles On-Line Bar Review

ChanRobles Internet Bar Review : www.chanroblesbar.com
ChanRobles CPA Review Online

ChanRobles CPALE Review Online : www.chanroblescpareviewonline.com
ChanRobles Special Lecture Series

ChanRobles Special Lecture Series - Memory Man : www.chanroblesbar.com/memoryman