Supreme Court of United States.
Absent ... . Washington, justice.
*77 DEXTER, for the Plaintiff in Error.
*81 C. LEE, contra.
All the judges being present.
*89 MARSHALL, ch. justice, delivered the following opinion.
This is a suit in Chancery instituted for the purpose of obtaining from the Defendants, payment of certain bills of exchange drawn by Jonathan Russell, an agent of Robert Murray & Co. and indorsed by Nathaniel Russell; which bills were protested for non-payment, and have since been taken up by the indorser. The Plaintiff contends that the house of Clark & Nightingale had rendered itself responsible for these bills by two letters addressed to him, one of the 20th and the other of the 21st of January, 1796, on the faith of which his indorsements, as he says, were made.
The letters are in these words (See the preceding statement of the case.)
The bill alleges that these letters bind Clark and Nightingale to pay to Nathaniel Russel any sum for which he might credit Robert Murray & Co. either because,
1st. They do, in law, amount to a guaranty or that,
2d. They were written with a fraudulent intent to be understood as a guaranty or that,
3d. They contain a misrepresentation of the solidity and character of the house of Robert Murray & Co.
Soon after the protest of these bills for non-payment, Robert Murray & Co. failed and became bankrupts. *90 Previous to their Bankruptcy they assigned a great proportion of their effects, including the cargoes for the purchase of which these bills were drawn, to John J. Clark and John B. Murray in trust for Clark and Nightingale, and for sundry other creditors and purposes mentioned in several trust deeds which are recited in the bill, and which appear in the record. The Plaintiff claims to be paid his debt out of this fund.
The answer of John J. Clark was filed, and a certain William Russell, a partner of the house of Joseph and William Russell, who gave a letter of credit and guaranty to the drawer of the bills indorsed by the Plaintiff, Nathaniel Russell, was made a party Defendant. Against Joseph and William Russell a judgment had been obtained by Nathaniel Russell for the amount of the bills indorsed by him, but they had become insolvent, and no part of this judgment had been discharged.
Many depositions having been taken and sundry exhibits filed, a decree of dismission, without argument, and pro forma was rendered in the Circuit Court for the District of Rhode Island, and the cause comes into this court by appeal from that decree.
It is contended by the Defendants, that the letters which have been recited create no liability on the part of Clark and Nightingale, but are to be considered merely as letters of introduction. Whatever may be the construction of the letters, they insist that the Plaintiff, if intitled to recover, has complete remedy at law, and that a Court of Chancery can take no jurisdiction of the cause.
It is believed to be unquestionable that a suit in Chancery could not be sustained on these letters against Clark and Nightingale, unless some additional circumstance rendered an application to this court necessary.
The Plaintiff contends that such application is necessary, because there are a great variety of facts belonging to the transaction which could not be introduced into a court of law, or which would not avail him in that court, but which are proper for the consideration of a court of equity.
*91 Because some of these facts rest within the knowledge of the Defendants and
Because he cannot, at law, subject the trust fund to his claim.
So far as respects the question whether these letters constitute a contract of guaranty, there can be no doubt but that the construction in a court of law or a court of equity must be precisely the same, and that any explanatory fact which could be admitted in the one court, would be received in the other.
On the question of fraud the remedy at law is also complete, and no case is recollected where a court of equity has afforded relief for an injury sustained by the fraud of a person who is no party to a contract induced by that fraud.
It is true that if certain facts, essential to the merits of a claim purely legal, be exclusively within the knowledge of the party against whom that claim is asserted, he may be required, in a Court of Chancery, to disclose those facts, and the court, being thus rightly in possession of the cause, will proceed to determine the whole matter in controversy. But this rule cannot be abused by being employed as a mere pretext for bringing causes, proper for a court of law, into a court of equity. If the answer of the Defendant discloses nothing, and the Plaintiff supports his claim by evidence in his own possession unaided by the confessions of the Defendant, the established rules, limiting the jurisdiction of courts, require that he should be dismissed from the Court of Chancery, and permitted to assert his rights in a court of law.
It is also true, that if a claim is to be satisfied out of a fund, which is accessible only by the aid of a Court of Chancery, application may be made, in the first instance, to that court, which will not require that the claim should be first established in a court of law.
In the case under consideration, the answer confesses nothing. So far from furnishing any evidence in support of the Plaintiff's claim, it denies, in the most full and explicit terms, the whole equity of the bill.
*92 This ground of jurisdiction, therefore, is totally withdrawn from the case.
It remains to inquire whether the Plaintiff can be let in to claim on any part of the trust fund: and this depends principally on his claim being within any one of the trusts declared.
The first trust deed, which was executed by Robert Murray & Co. on the 23d day of March, 1798, is declared to be in trust to apply the monies arising from the trust property "in payment and satisfaction of the debts and balances which shall appear to be found to be due and owing from the said parties of the first part (Robert Murray & Co.) to them the said John J. Clark and John B. Murray (the trustees) and to such other of the creditors" of the said Robert Murray & Co. as they should, by any instrument of writing, within twelve months, appoint.
It may be doubted whether this declaration of trust would be applicable to a collateral undertaking not, at the time, carried into judgment.
In the second deed, one of the trusts declared is, to repay Clark and Nightingale for any sums they may pay or be liable to pay under a suit at the time depending against them. That suit was dismissed.
Without deciding whether Russell could avail himself of this trust, having failed in the particular action then depending, the court will proceed to inquire how far Clark and Nightingale were liable to the Plaintiff for the debt due to him from Robert Murray & Co.
The law will subject a man, having no interest in the transaction, to pay the debt of another, only when his undertaking manifests a clear intention to bind himself for that debt. Words of doubtful import ought not, it is conceived, to receive that construction. It is the duty of the individual, who contracts with one man on the credit of another, not to trust to ambiguous phrases and strained constructions, but to require an explicit and plain declaration of the obligation he is about to assume. In their letter of the 20th, Clark and Nightingale indicate *93 no intention to take any responsibility on themselves, but say that Mr. Russell may be assured Robert Murray & Co. will comply fully with their engagements. In their letter of the 21st they speak of the letter of the preceding day as a letter of recommendation, and add "we have now to request that you will endeavor to render them every assistance in your power."
How far ought this request to have influenced the Plaintiff? Ought he to have considered it as a request that he would advance credit or funds for Robert Murray & Co. on the responsibility of Clark and Nightingale, or simply as a strong manifestation of the friendship of Clark and Nightingale for Murray & Co., and of their solicitude that N. Russell should aid their operations as far as his own view of his interests would induce him to embark in the commercial transactions of a house of high character, possessing the particular good wishes of Clark and Nightingale?
It is certain that merchants are in the habit of recommending correspondents to each other without meaning to become sureties for the person recommended; and that, generally speaking, such acts are deemed advantageous to the person to whom the party is introduced, as well as to him who obtains the recommendation.
These letters are strong, but they contain no intimation of any intention of Clark and Nightingale to become answerable for Robert Murray & Co., and they are not destitute of expressions alluding to that reciprocity of benefit which results from the intercourse of merchants with each other. "The friendship," say they, in their letter of the 20th, "we have for these gentlemen, induces us to wish you will render them every service in your power, at the same time we flatter ourselves this correspondence will prove a mutual benefit."
Mr. Russell appears to have contemplated the transaction as one from which a fair advantage was to be derived. He received a commission on his indorsements.
The court cannot consider these letters as constituting a contract by which Clark and Nightingale undertook *94 to render themselves liable for the engagements of Robert Murray & Co. to Nathaniel Russell. Had it been such a contract, it would certainly have been the duty of the Plaintiff to have given immediate notice to the Defendants of the extent of his engagements.
It remains to inquire whether these letters contain such a misrepresentation of the circumstances and character of the house of Robert Murray & Co as to render them accountable to the Plaintiff for the injury he has sustained by trusting that company.
The question, how far merchants are responsible for the character they give each other, is one of much delicacy, and of great importance to the commercial world.
That a fraudulent recommendation (and a recommendation, known at the time, to be untrue, would be deemed fraudulent) would subject the person giving it to damages sustained by the person trusting to it, seems now to be generally admitted. The case of Pasley v. Freeman, reported in 3 Durnford and East, recognizes and establishes this principle. Indeed, if an act, in itself immoral, in its consequences injurious to another, performed for the purpose of effecting that injury, be not cognizable and punishable by our laws, our system of jurisprudence is more defective than has hitherto been supposed.
But this does not appear to the Court to be the case described. It is proved incontestibly that when the letters, on which this suit depends, were written, Robert Murray and Co. were in high credit, and were carrying on business to a great extent, which was generally deemed profitable. The bill charges particular knowledge in Clark and Nightingale that this apparent prosperity was not real. But this, as well as every other allegation of fraud, is explicitly denied by the answer; and the answer, being responsive to the bill, is evidence. Had the Plaintiff been able to exhibit proofs which would have rendered this fact doubtful, it might have been proper to have directed an issue for the purpose of trying it: but he has exhibited no such proofs.
In writing the letters, then, recited in the bill, Clark *95 and Nightingale stand acquitted of the imputation of fraud.
But it is contended by the Plaintiff, that the representation they made of the circumstances of Robert Murray and Co. was, at the time untrue; and that this misrepresentation, whether made ignorantly or knowingly, was equally injurious to Nathaniel Russell, and equally charges them with the loss he has sustained by trusting to their assurances.
The fact, that Robert Murray and Co. were not, in January, 1796, in solvent circumstances, is not clearly made out: but the cause does not rest entirely on this fact. The principle, that a mistake in such a fact as the real internal solidity of a mercantile house, whose external appearance is unsuspicious, shall subject the person, representing their solidity to another, to the loss sustained by that other in trusting to this representation, is not admitted.
Merchants know the circumstances under which recommendations of this description must be given. They know that when one commercial man speaks of another in extensive business, he must be presumed to speak from that knowledge only which is given by reputation. He is not supposed to have inspected all the books and transactions of his friend, with the critical eye which is employed in a case of bankruptcy. He must, therefore, be supposed to speak of the credit, not of the actual known funds of the person he recommends; of his apparent, not of his real solidity. In such a case it is certainly incautious and indiscreet to use terms which imply absolute and positive knowledge. It may, perhaps, be admitted that, in such a case, fraud may be presumed on slighter evidence than would be required in a case where a letter was written with more circumspection. Yet, even in such a case, where the communication is honestly made, and the party making it has no interest in the transaction, he has never been declared to be responsible for its actual verity. The reason of the rule is, that merchants generally possess, and are therefore presumed, in their correspondence, to speak from that knowledge only of the circumstances of other merchants, which may be acquired by observing *96 their course of business, their punctuality and their general credit.
This principle appears to have been fully considered in the case of Haycraft v. Creasey, reported in 2 East, in which case all the authorities were reviewed. It does not appear that a single decision has been ever made, asserting the liability of the writer of such a letter. The case of Haycraft v. Creasey denies his liability; and that case appears to this Court to have been decided in conformity with all previous adjudications.
It is therefore the opinion of the Court, that Clark & Nightingale, having believed, and had reason to believe, so far as is shown by the evidence in this cause, that the representation they made to the Plaintiff, of the character and circumstances of Robert Murray and Co. was true, are not liable to the Plaintiff, in consequence of that representation, for the credit he gave to that company.
A claim is also set up to the funds in the hands of Clark and Nightingale, founded on the circumstance that they consist, in part, of the rice purchased with the bills indorsed by the Plaintiff. But as no specific lien is alleged to have existed, and as the particular fraud, alleged to have been committed to acquire those funds, is not proved, this claim is unsustainable.
The Plaintiff, then, cannot be considered as a trust creditor in consequence of any claim, he can assert against Clark and Nightingale.
The second deed which is dated on the 24th day of March, 1798, is also in trust "to pay to Joseph and William Russell, the amount that shall be recovered and paid from them to Nathaniel Russell," &c. "upon account of a letter of credit," &c. "and for which the said Nathaniel Russell hath recovered a judgment against the said Joseph and William Russell."
No part of this judgment has ever been paid, and Joseph and William Russell are insolvent. The state of things, then, has perhaps not yet occurred in which Joseph and William Russell could demand the execution *97 of the trust: and the Court, though with some hesitation, feels constrained to decide that, under the terms of this trust, Nathaniel Russell claiming through Joseph and William Russell, cannot demand its execution directly to himself.
It also appears that, in September, 1796, Robert Murray and Co. assigned to Loomis and Tillinghast, certain personalties in trust. This assignment was surrendered to Clark and Nightingale in consideration of notes to a large amount, in which Loomis and Tillinghast were bound for Robert Murray and Co. It appears that Clark and Nightingale are otherwise secured with respect to these notes: at least, there is reason to believe that they are secure.
Clark and Nightingale, having taken this assignment with notice of the trust, take it clothed with the trust. They are trustees for the same uses and to the same extent with Loomis and Tillinghast.
A paper appears in the cause, which purports to be the assignment to Loomis and Tillinghast. The assignment is in trust, first, to repay themselves any sums which they may pay on account of certain undertakings made by them for Robert Murray and Co. and, secondly, in trust "to pay to Joseph and William Russell all such monies as they shall be liable to pay, as guaranty as aforesaid, to Nathaniel Russell upon bills," &c. reciting the bills for which this suit is instituted.
It is settled in this Court, that the person for whose benefit a trust is created, who is to be the ultimate receiver of money, may sustain a suit in equity, to have it paid directly to himself.
This trust being to pay Joseph & William Russell, a sum they are liable to pay to Nathaniel Russell, and being created in such terms, that the money is certainly payable to them, the purposes of equity will be best effected by decreeing it, in a case like the present, to be paid directly to Nathaniel Russell. Indeed, a Court ought not to decree a payment to Joseph & William Russell, without security, that the debt to Nathaniel Russell should be satisfied.
*98 But it is not shown, by any legal evidence, that this paper is the assignment which was made in trust to Loomis & Tillinghast, and transferred by them to Clark & Nightingale. Its verity is not admitted by the Defendants, nor proved by the Plaintiff.
Nor are the circumstances under which the transfer was made, nor the present circumstances of the trust, sufficiently before the Court, to enable it to decide with certainty, whether the prior trust to Loomis & Tillinghast is satisfied, or otherwise so secured, that the trust fund may now be applied to the debt of Joseph & William Russell.
Could these defects be supplied, the Court would still be unable to decree in favor of the Plaintiff, for want of proper parties.
The incapacity imposed on the Circuit Courts to proceed against any person residing within the United States, but not within the District, for which the Court may be holden, would certainly justify them in dispensing with parties merely formal. Perhaps in cases where the real merits of the cause may be determined without essentially affecting the interest of absent persons, it may be the duty of the Court to decree, as between the parties before them. But in this case, the assignees of Robert Murray, & Co. are so essential to the merits of the question, and may be so much affected by the decree, that the Court cannot proceed to a final decision of the cause till they are parties. They may contest the validity of all the deeds under which, both parties claim, and assert in themselves, for the benefit of the creditors generally, a right to the whole fund. Certainly this Court ought not, on light grounds, and without due precaution, to change the hands in which this fund is placed, until any claim of the assignees to it may be decided.
Should this difficulty be obviated by suspending the effect of the decree, till the validity of the trust deeds should be decided, or by directing security to be given, another presents itself, which cannot be removed. The assignees have a right to contest the claim of Nathaniel Russell, and may, either deny its original validity, or *99 show that it has been paid. They are, then, essential parties, and the Court ought not to decree in favor of the Plaintiff, without them. It is possible, that they may consent to make themselves parties in this cause, and, as a Court may, instead of dismissing a bill brought to a hearing without proper parties, give leave to make new parties, the Court will, in this case, set aside the decree of the Circuit Court, dismissing this bill, and remand the cause to the Circuit Court, with leave to make new parties.
