Case ID: cow_1/html/0387-01.html
Source: Caselaw Access Project
Author: {"author": "Woodworth, J. \n      Sutherland, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Havens against Huntington.
    Where J. & eljdorsed * promissory note for the commodationt" ?ud its be-ed^fodTnd ‘ j00^*i“p,then delivered the “one/with the original en-thereon, held, tbat might maintain an action in his °0^“ Vendor-see-bl^quaily^of a note 18 not destroyed by advancing the ¡dnVt up^ta~ Unless this VfeenX’V*”10 . Yet wbe e> in such a case, its negotiation may work a wrong to any one of the
    previous parties, such a payment will be holden to extinguish the note, and prevent its negotiability, and this for the purposes of justice :
    As if a subsequent endorsee may thereby be rendered liable.
    And so of the like cases.
    It is no objection to an action, by the endorsee against the maker, that the note thus taken up was originally given to the payee, and endorsed by him for the accommodation of the maker ;
    For, by paying it as endorser, he becomes possessed of the note, as a purchaser ; is capable of suing upon the note itself; is not confined to an action tor money paid ; and might make himself liable, as endorser, upon it.
    And the defendant may avail himself of any defence which he might have had against the payee, had the action been in his own name.
    A note, though over-due, and dishonoured, may still, be negotiated, subject t.o all the equities between the original parties.
    Assumpsit, to recover the amount of two promissoiy notes hereinafter recited. The declaration contained two counts upon the notes themselves, that is to say; one count upon each of the notes against the defendant, as maker, in favour of the plaintiff, as endorsee of Jenkins & Havens, the payees, in the usual form. It also contained the common money counts, and a count upon an insimul computassent. The defendant pleaded the general issue, with notice of set off. An order for a bill of particulars having been obtained, the plaintiff, in pursuance thereof, stated the particulars of his demand, arising under the third and fourth counts of his declaration, viz. the money counts, and count upon the . 7 J . r insimul computassent, in the words following ; “ The particulars of the plaintiff’s demand, contained in the third and fourth counts of his declaration in this cause, are the several sums of money specified in the two several promissory notes, mentioned and described in the two first counts of the said declaration. And the plaintiff reserves to himself the right, if necessary, of offering the two promissory notes aforesaid, or either of them, in evidence, on the trial of this cause, or otherwise, in support of his demand, contained in the third and fourth counts of his declaration, aforesaid, and each of them.’
    
      The cause was tried before his honour, the late Mr. Just*ce Yates, at the New-York sittings, on the 21th November, 1821. On the trial, the two notes declared on were proved an<^ rca(^ evidence to the jury, the first being as follows :
    “ Ds. 2000. Sixty days after date, I promise to pay “ Messrs. Jenkins <£- Havens, or order, two thousand dollars, “ value rec’d. New- York, July 1 si, 1814,
    (Signed) “ Ben HuntingtonN
    
    (Endorsed) “ Jenkins fy TlavensN The second note was as follows:
    “ New-York, 22th July, 1814.
    “ Sixty days after date, I promise to pay Messrs. Jenkins “ Havens, or order, two thousand dollars, value rec’d.
    “ Ds. 2000.” (Signed) “ Ben Huntington.”
    (Endorsed) “ Jenkins HavcnsN
    
    
      William Whitlock, the witness, who proved the notes, being cross-examined, testified that, at the time the notes were given, he was a cleric of the firm of Jenkins & Havens, which consisted of the plaintiff and Frederick Jenkins : that the endorsement of the notes is in the hand writing of the plaintiff: that the notes were endorsed by Jenkins & Havens, for the accommodation of the defendant, Huntington, the maker, who got them discounted at the bank, for his own use; and that Jenkins c(- Havens afterwards, (when thp notes had fallen due, and "were dishonoured by the maker) as endorsers, paid the amount of the notes to the bank, and took them up.
    Upon this evidence, the defendant’s counsel moved for a non-suit, upon the ground that Jenkins & Havens, the endorsers, by paying the amount of the notes to the bank, and taking them up, acquired such title to the notes, as only enabled them to bring an action in their joint names ; and that they could not, by a subsequent transfer, or delivery of the notes to the plaintiff, enable him to bring the action in his individual name, nor give them in evidence in this action; and that no action could be sustained in the name of the plaintiff, solely, the notes, in consequence of the payment, having ceased to be negotiable- The plaintiff’s counsel, on the contrary, insisted, that the notes, being endorsed in blank, and paid, and taken up by the endorsers, they might, by delivery or transfer of the notes to the plaintiff, enable him fo bring an action thereon, as against the maker, in his own name 5 and that an action upon a note, endorsed in blank, may be maintained in the name of any person, subject to any -equities existing between the original parties; and that the evidence, prima fade, was sufficient to support the action, either on the special counts, or the money counts. His honour the Judge, however, ruled that, although Jenkins & Havens, the endorsers, by paying and taking up the notes, might have brought an action in their joint names, yet that they could not, by a subsequent transfer or delivery of the notes to the plaintiff, enable him to bring an action in his individual name : that the action could only be brought in the joint names of Jenkins & Havens ; and that the evidence was not competent to sustain this action : that he would direct the plaintiff to be nonsuited, with leave to move the Court to set the nonsuit aside. The plaintiff’s counsel then offered to prove further, that the partnership of Jenkins Sz Havens had been since dissolved, and that this firm was indebted to the plaintiff, as one of the partners, to an amount equal to the amount of the notes, so that he was entitled to the whole benefit thereof; but his honour thought the testimony immaterial, and therefore rejected it, and the plaintiff was, thereupon, by his honour’s direction, nonsuited, with leave to move the Court to set aside the nonsuit. A motion to set aside the nonsuit, and for a new trial, was now made accordingly.
    
      W. Slosson, for the plaintiff, insisted,
    1. That Jenkins & Havens, the indorsers, by taking up the notes, which they were legally liable to do, acquired a clear right of action, upon the notes, as payees ; the payment of a note, by an indorser, being a legal purchase of the security, and not an extinguishment of the note.
    2. That the notes, being available in their hands, and being indorsed by them in blank, they could, by transfer or delivery, enable the plaintiff to maintain an action, subject to the equities existing at the time of the transfer. 
    
    
      3. That an action may be maintained, on a note Iran'sferrable, by delivery, in the name of any person.
    
    4. That the evidence was also competent, under the money counts.
    5. That his honour, the Judge, was mistaken in the law, as ruled by him; and that the nonsuit ought to he set aside~ and a new trial granted.
    The objection, at the trial was, that, as Jenkins & IJavcnshad paid and taken up the notes, their negotiability had ceased; and the two cases of Blake v. Sewall, and Boylston v. Greene, were produced at the Circuit, upon the author~ ity of which the Judge allowed the objection, and. ordered the nonsuit. The error of those cases consists in laying down the rule too broadly, and supposing that the negotiability of a note absolutely ceases, on its being paid. The rule is a qualified one, like that which relates- to.paper which is dishonoured, or over-due. In the latter case, it still continues negotiable, but all equities, between the. original parties, remain. After paying and taking up the note, the payees were fully remitted to their original rights, and held, in their first capacity as payces; and whether the maker pay it to them or to their assignee, must be immaterial to him. An indorsement in blank, authorises the holder to fill it up to himself. The cases to this point are cited by Kent, J. in Conroy v. Warren ; and that authority decides, that where there are no suspicious circumstances, the Court will never, in such a case, inquire into the right of the plaintiff to sue. It is enough that he holds the note. Beck v. Robley, up-~. on the authority of which the cases of Blake v. Sewall, and Boylston v. Greene, in JI'Iassaehuselts, were decided, stands upon the principle that some previous party might have been injured by the transfe'r. But Huntington is the maker of these notes, and ought to pay them; and could not Jenkins & Havens, holding them in their original capacity, transfer them to the plaintiff? The case of Callow v. Lawrence, decides.this very point, and gives to Beck v. Robly its proper qualification ; and it is remarkable, that the two cases from Mass. Rep. have, upon a more enlightened view of the subject, in that very state, been overruled, or restricted to th;e 1 -principle, as it is to be found in Callow v. Lawrence. This was done in Guild v. Eager & another, 
      
       The defendant has a full right, in this case, to all the defence which can exist, or could ever have existed. He is, consequently, not injured by the form of the action.
    
      G. Griffin, contra.
    1. The notes on which the action is founded, having been once paid, ceased to be negotiable, and could not, therefore, be transferred to the plaintiff, so as to enable him to sustain an action in his own name.
    2. Jenkins & Havens could not have maintained any action on the notes themselves, as they were accommodation notes, though they might for the money paid ; but the right of action for money paid is not negotiable.
    There are, in reality, substantial reasons why this action should have been brought in the name of Jenkins & Havens, instead of Havens individually. It is conceded, that if the defendant may, by possibility, be injured by this form of proceeding, the action cannot be sustained. Here is a notice of set off. Now suppose our right of set off to be against Jenkins §■ Havens jointly; do they not defeat it by thus, of their own heads, declining to be plaintiffs, and throwing Havens forward as the sole party ? All the cases cited by the gentleman, steer clear of the real point in controversy. These are accommodation notes, endorsed and discounted for the benefit of Huntington ; so that, in truth, the endorsers Were mere sureties for the defendant. Jenkins & Havens paid the money and took back the notes as endorsers. The cause of action was then properly money paid, laid out and expended—a mere chose in action, not assignable. Admit them restored to their original capacity ; what was this •? Not that of payees. They never could have counted upon these notes as such. They never were made and delivered as promissory notes to Jenkins fy Havens. They differ, therefore, altogether from the case of notes given for a debt due to Jenkins & Havens. A payment would there remit them to their original situation as endorsers. Here it merely gives them a new right of action as sureties, which was created by the payment. They have stood all along in the relation of mere sureties.-.
    
    
      But these notes are functus officio, without reference to ^le effect which may be produced upon any of the parties to them. They ate so within the case of Beck v. Robley. That case was decided in the 14 Geo. 3 ; and being beforfe, the revolution, is binding upon this Court, notwithstanding the cases decided there since.
    
      Slosson, in reply.
    
      Jenkins & Havens were hot mere sureties'. They became sureties upon negotiable paper ; and are entitled to all the benefit arising from the form in which the bu siness was done. No authorities have been or can be cited against this doctrine. Being the beneficial owners, they are entitled to treat this páper as-promissory notes, and transfer it accordingly. They became the substituted holders of the notes. Had a third person paid the note, and taken it from the bank, could not an action have been maintained "upon it ? In Callow v. Lawrence, it was holden that one who takes up a note, becomes the purchaser, and may sue upon it as such. In Beck v. Robley, the right of action is denied upon the single ground of injury to Hodgson. Huntington, I repeat, cannot complain. He has every equitable defence by way of set off or otherwise ; and he may avail himself of it equally as if the suit were in the name of the payees.
    
      
      
        Callow v. Lawrence, 3 M & S. 95 Ch.on Bills, Phil. ed. 440.
    
    
      
       Cooper v. Kerr, 3 John. Cas. 264.
    
    
      
       3 Mass. Rep. 556.
    
    
      
       8 id. 465.
    
    
      
       Brown v. Davies, 3 T. R. 80. Taylor v. Mather, id. 83, in note. Johnson v. Bloodgood, 1 John Cas 51, S. C. 2 Caines Cas. Err. 303 Sebring et al. v. Rathbun 1 John Cas. 331. Lansing v. Gaine & Ten Eyck, 2 John Rep. 306. O'Callaghan v. Sawyer, 5 id. 118. Lansing v. Lansing, 8 id. 454. Ch. on Bills, Phil. ed. 168. Id. Story's ed. 105 to 106.
    
    
      
       3 John. Cas. 259, 263, 264.
    
    
      
       1 H. Bl. 39, in note.
    
    
      
      
         17 Mass. Rep. 615.
    
   Woodworth, J.

The question in this case is, whether, after payment to the bank, the notes continued negotiable, and could be transferred to the plaintiff, so as to enable him to sustain an action in his own name ? The objection to the right of recovery is merely to the form of action. It is urged on this principle, that by payment of a bill or note, the contract of the parties to it ceases. It is not necessary to controvert this proposition, in order to decide the present cause. A remedy in this form, on the note itself, is certainly convenient; and if it can be shown that no injury can arise by sustaining it, I should be inclined to uphold it, unless restrained by a uniform current of authority. The case of Beck v. Robley, (1 H. Bl. 89,) is relied on by the defendant’s counsel as in point; but it will be found, on ex-animation, to be clearly distinguishable. The facts were these : Brown drew a bill of exchange upon Robley, payable to Hodgson, or order, which was accepted by Robley, and indorsed by Hodgson. Not being paid when due, Hodgson returned the bill, and Brown took it up, Hodgson’s indorsement still remaining. Brozan afterwards gave the bill to Beclc, as a security for money. The jury found a verdict for the defendant, on the ground that thé acceptor was discharged by Brown’s taking up the bill, and that there Was an end to its negotiability. The Court held the action not maintainable ; not on the ground, that where a bill Comes back unpaid, and is taken up by the drawer, it ceases, in every case, tó be a bill, but that the facts in that case required it so to be considered. This is evident from the expressions of Lord Mansfield, Who observes, “ if it were negotiable, Hodgson would be liable, for which there is no colour.” The consequences that would follow from a different decision, could not be sanctioned. The payment by Brown to Hodgson, wholly exonerated the latter. It was the same thing as striking out his indorsement; and if so, Beck could have no title to the bilk If, notwithstanding the payment to Hodgson, his indorsement passed the interest in the bill to Beck, it follows that he Would be liable as an indorser—a proposition too absurd and unjust to be tolerated. The distinction, in the present case, is manifest. It is true, the indorsers here have taken up the note, as the drawer did in Beck v. Robley : they afterwards passed it, but on their own indorsement solely. -‘The plaintiff derives his right from Jenkins & Havens, Who ought to be liable as indorsers ; for it must be presumed they have received value for the transfer. Supposing Havens had indorsed this note, and Jetókins & Havens had paid hiin and taken it up, but omitted to strike out his name ; the holder could not recover on a Count, stating the indorsement to him to have been made by Havens; because then the principle in Beck v. Robley would apply. The two cases would be alike. Here there are no interests of third persons to be affected, but in the manner prescribed by law. The note continued negotiable in the hands of Jenkins Havens, by their own indorsement. If they passed it, there is no reason why they should not he liable. In Callow v. Lawrence, (3 M. & S. 95,) the case was this : The drawer of a bill, payable to his own order, indorse(l ü to Taylor, who discounted it for him. Taylor indorsed it to Bassett. Upon the bill being dishonoured, the drawer paid the amount to Bassett, who struck out his own and Taylor's indorsement, and returned it to the drawer, who afterwards passed it to the plaintiff. It was held that he might recover against the acceptor. Lord Ellenhorough, in that case, says, “ If the drawer has paid the bill, he may sue the acceptor on that bill, and if, instead of suing the acceptor, he put it into circulation on his own indorsement only, it does not prejudice any of the other parties.” He considered that Bywell, the drawer, became the purchaser of the bill when he passed it and took it up ; that it was not paid animo solvendi, in order to extinguish it, but only to relieve himself from the situation in which he stood upon the bill. All the Judges concurred in the opinion, that the case of Beck v. Rohley was decided on the distinction I have laid down. In Gomez Serra v. Berkley, (1 Wils. 46,) the point in question seems to have been settled. There the payees of a promissory note, payable to them or order, indorsed it to the plaintiff, and afterwards paid the note and took it back, and then passed it a second time to the plaintiff. It was held that the plaintiff might recover against the maker ; for he was still liable to the payees, when they passed the note a second time ,to the plaintiff; and that the plaintiff ought to stand in their place. The next objection is,, that Jenkins <5- Havens could not have maintained an action on the notes themselves, as they were accommodation notes, though they may for the money paid. It will be conceded that Jenkins & Havens could not sustain an action on the notes, before payment at the bank. Previous to that there was no consideration, but becoming liable on the notes as indorsers, and it being their duty to take them up, the money paid operated as a purchase of the security; and from that moment it ceased to be an accommodation note, indorsed by them for the defendant, but a valid note to Jenkins & Havens, founded on good consideration. I am of opinion, that the plaintiff is entitled to judgment.

Sutherland, J.

The only question is, whether the notes oeased to be negotiable in consequence of having been dishonoured by the maker, and paid by the indorsers.

All the doubt that exists upon this point, has grown out of the case of Beck v. Robley, (1 H. Bl. Rep. 89, note.) And all the cases, in which the negotiability of a note, or bill of exchange, circumstanced like these, has been called in question, put themselves upon the authority of that case.

That was the case of a bill of exchange, drawn by one Brown upon Robley, in favour of one Hodgson, accepted by Robley, and endorsed by Hodgson. Not being paid by the acceptor, when due, Brown, the drawer, took it up, Hodgson’s endorsement being still upon it. Brown subsequently passed it to Beck, the plaintiff. It was held, by Lord MansJield, that the drawer, after having paid the bill, could not again put it in circulation ; because, by so doing, Hodgson, the payee and endorser, would be subjected to a suit upon it, which clearly ought not to be.

This case has always been Considered, in England, as standing upon its own particular grounds; and has never been held to decide, that a bill or note is not negotiable after it becomes due, and has been taken up, unless by putting it in circulation again : some party to it might be subjected to a suit, who ought not to pay it.

The case of Callow v. Lawrence, (3 M. & S. 94) is decisive upon this point. There a bill of exchange was drawn by one Pywell, payable to his own order, upon, and accepted by Lawrence, the defendant. Pywell endorsed it to one Taylor, and Taylor to one Bennett, who held it when it became due. Not having been taken up by Lawrence, the acceptor, Pywell, the drawer and first endorser, paid it; and, striking out the subsequent endorsements of ’ Taylor and Bennett, passed it to Callow, the plaintiff.

It was held, by all the Judges, that the fact of the bill having been taken up by the drawer, did not destroy its negotiability : that the test was, whether it could be put in circulation again, without prejudice to any party who ought not to pay it: and that, as the drawer was also the first endorser of the bill, its negotiability could be preserved, without prejudice to the subsequent endorsers, by striking ou£ j-jjgjj. ilameSj and leaving his own upon it. The case of Gomez Serra v. Berkley, (1 Wils. 46) is to the same P°*nk

This question was. very fully discussed in the Superior Court of Massachusetts, in Guild v. Eager et al. (17 Mass. Rep. 615,) and the principle of Callow v. Lawrence was sanctioned and adopted, although two decisions of a contrary character had been made, in that Court, under a misapprehension of the case of Beck v. Robley.

It is clear, then, upon the authority of these cases, that the negotiability of the notes upon which this suit was brought, was not impaired by the fact of their having been paid and taken up by Jenkins <£• Havens. They were the payees and sole endorsers of the notes ; and no party, who was not at all events bound to pay them, could be sued or molested, in consequence of their being again put in circulation.

If, as between Jenkins & Havens and the defendant, there was any fraud in the transfer of these notes, or if he has any ground of defence against them, he can avail himself of it against the plaintiff; for, having taken the notes after they became due, he took them subject to every defence which existed between the original parties at the time of their transfer to him. (Brown V. Davies, 3 T. R. 80. Taylor v. Mather, id. 83, note. Johnson v. Bloodgood, 1 John. Cas. 51. 2 Caines’ Cas. in Err. 303. Sebring v. Rathbun, 1 John. Cas. 331. Lansing v. Gaine & Ten Eyck, 2 John. Rep. 306. O’Callaghan v. Sawyer, 5 John. Rep. 118. Lansing v. Lansing, 8 John. Rep. 454.)

The nonsuit must, therefore, be set aside, and a new trial granted, with costs to abide the event of the suit.

Savage, ph. J. concurred.

Rule accordingly.