Case ID: dc_8/html/0112-01.html
Source: Caselaw Access Project
Author: {"author": "\n      Cartter, Ch. J.,", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

LEACH ET AL. vs. LEWIS.
    At Law.
    No. 8616.
    L. accepted a bill of exchange for the accommodation of T. H. & C., with the understanding that they would raise money on it with which to pay their indebtedness to plaintiff. They also agreed to take care of the acceptance, and plaintiffs were so informed, but, failing to raise money on it, transferred it to plaintiff in payment of such indebtedness, and also in consideration of further advances and forbearance.
    Held—
    I. That this was not a misappropriation of the acceptance.
    II. That such transfer was for value, and in the usual course of business.
    III. That plaintiffs were entitled to recover against such accommodation acceptor.
    STATEMENT OP CASE.
    Suit brought on the following bill of exchange by the indorsees and holders against the acceptor:
    “$500.00.] New York, 18th Nov., 1870.
    Sixty days after date, pay to the order of ourselves five hundred dollars, value received, and charge the same to account of
    TILDEN, HALL & CO.
    To J. C. Lewis, Esq.,
    No.-, Washington, D. G.”
    “Accepted; payable at the Ocean National Bank, New York.
    J. C. LEWIS.”
    The case was referred, by consent of counsel, to Walter S. Cox, esq., who made an award in favor of the plaintiffs, to which defendant took exceptions, and the motion for judgment on the award together with the exceptions were certified to the general term, to be heard in the first instance. From the testimony reported by the referee the following facts may be deduced. A letter was addressed by a member of the firm of Tilden, Hall & Co., who are the drawers of the bill and whose place of business is in the city of New York, to J. O. Lewis, of the city of Washington, and who is the acceptor •and the defendant in this action. The letter is as follows:
    “ New York, November 5,1870.
    Dear Sir : We want to raise some money for a few days, which we can do if you will be kind enough to accept a draft on you, making it payable in New York. We owe our glass' factor, and can raise enough money on this draft, which we n eed to deposit as security. This accommodation is only needed for a few days, until we can make our collections, when we will take it up and return to you. I know this is asking a great favor of you, and if it was not so certain that our col lections would be made in time for us to protect it, I would not ask it.
    Yours,
    J. T. H. HALL,
    
      For Tilden, Hall & Co.”
    
    
      "J. C. Lewis.”
    With this letter they forwarded the draft to Washington, which was accepted by Lewis solely for their accommodation, upon an agreement that it was to be deposited as security with a friend of said drawers, who was to loan them money thereon to enable them to pay their indebtedness then due the plaintiffs. Tilden, Hall & Co. were at that time indebted to the plaintiffs in about $100. They tried to raise the money by discounting or depositing the bill of exchange, but the parties upon whom they relied disappointed them, and they then proposed to the plaintiffs to receive it as security for the amount then due, and also in consideration that they would make additional advances of goods to said Tilden, Hall & Co., to make up the balance of the draft. The plaintiffs, after taking time to consider the proposition, took the bill, made the advances, and extended time of payment.
    The defendant also claims that he has shown by the testimony, the plaintiffs knew at the time they received the acceptance that it had been accepted by defendant without consideration, and that Tilden, Hall & Co. had agreed to take care of it, and that the plaintiffs promised said Tilden, Hall & Co. to look to them and not to the defendant for payment.
    Upon this state of facts the defendant contended that the acceptance was accommodation-paper; that plaintiffs knew it to be so when they received it, and that it was passed to them as security for an antecedent debt, out of the usual course of business, and that therefore they stood in no better position than the drawers.
    
      Lloyd & Fraser for plaintiffs :
    It is no defense to this action that the acceptance was passed to plaintiffs as collateral security for existing and future indebtedness. The pre-existing debt, the act of forbearance, and the delivery of additional goods to the drawers constitute, or either of these facts constitute, a- sufficient consideration, but more especially do they constitute a sufficient consideration taken together. The plaintiffs, therefore, acquired the acceptance in good faith, for value, in the usual course of business, and free from equities existing between the original parties. Pond et al. vs. Lockwood et al., 8 Ala., 669; Payne vs. Bensley, 8 Cal., 260; Robinson vs. Smith et al., 14 Cal., 94; Bostwick vs. Dodge, 1 Doug. (Mich.,) 413; Carlisle vs. Wishart, 11 Ohio, 172; 1 Zabriskie, 665; Swift vs. Tyson, 16 Pet., 1; Goodman vs. Simmonds, 20 How., 343; Valette vs. Mason et al., 1 Ind., 89.
    
      H. T. Wiswall for defendant:
    The defendant ploved that this acceptance was delivered by him to the drawer solely upon the faith of the drawer’s promise to use the draft only as security for a loan, and take up and return to defendant. He also proved that the plaintiff knew the whole history of the bill; that at the time of transfer the drawer reminded plaintiff that this was only accommodation-paper given to drawer qpon his agreement with defendant to use only as security for a loan, and take up and return to defendant, and plaintiff then made an express agreement with drawer that he would look only to the drawer for payment and would not present it at bank, would keep it in his safe, and would not call on defendant for payment. Daggett vs. Whiting, 35 Conn., 366.
   Cartter, Ch. J.,

at the conclusion of the argument, announced the decision to the following effect:

We are of opinion that judgment should be entered on the award. It is clear from the testimony that Lewis accepted the draft for the accommodation of Tilden, Hall & Co., and for the special purpose of enabling them to raise money to pay their indebtedness to the plaintiffs. It is also evident that they tried to negotiate the draft, but the parties they relied on could not let them have the money, and then they induced the plaintiff's to receive it for the four hundred dollars they owed them, and for the further consideration of advances up to its full amount. This can scarcely be called a misappropriation of the acceptance. It was given for the express purpose of enabling Tilden, Hall Co. to procure the means of paying their existing indebtedness to these plaintiff's. It was in fact applied to that purpose by being transferred directly to them instead of to somebody else. The precise object for which it was given was thus fairly accomplished. The court can see no ground of defense in this.

It is (inite likely that the drawers agreed to take up the acceptance at maturity, and that the plaintiffs were informed of this agreement when they received the transfer. But this is only in accordance with the usual understanding between parties to accommodation-paper, for when a person indorses for another without consideration, it is upon the express or implied agreement that the person accommodated will save him harmless, but this cannot affect his liability when the paper has been applied to the purpose for which it was made, and the fact that the drawers have failed to meet their engagements in this respect cannot release the defendant under the circumstances of a case like this. It is argued that plaintiffs agreed to look to the drawers, but we think this fact is not established by the evidence.

Besides, it clearly appears from the testimony that the plaintiff's agreed to furnish additional goods iu consideration of the transfer. It was therefore a negotiation for value and in the usual course of business.

We are of opinion that there should be judgment on the award.