Case ID: va_35/html/0913-01.html
Source: Caselaw Access Project
Author: {"author": "PARKER, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

*Harrison v. Wortham & M'Gruder.
    April. 1837,
    Richmond.
    (Present Tucker, p„ and Cábelo and Parker. J.)
    (Absent Brooke and Brockenbrough, J.)
    Set-Off — Claim to Unliquidated Damages - Case at Bar. —A debtor draws and delivers to his creditor an order on a third person, payable at sight, and directs the amount, when received, to be placed to the credit of his account; the creditor, without the knowledge or assent of the drawer, takes the drawee’s acceptance payable at 60 dais, and before the expiration thereof the acceptor dies insolvent: Held, the drawer’s claim against his creditor on account of the draft is a claim to unliq-uidated and uncertain damages for the failure to collect It, and cannot be allowed as a set-off in a suit brought by the creditor to recover his original demand against the drawer.
    Arbitration and Award -What Set-Off Should Be Rejected by Arbitrator. — A reference to arbitration in a pending suit submits all matters of difference between the parties in that suit: the suit is an action of indebitatus assumpsit, in which the defendant has pleaded non assumpsit and filed notice of set-off; but the ground on which the set-off is claimed merely entitles the defendant to an action for unliquidated damages: Held, as the matter of the set-off would not have availed upon a trial of the issue in court, the arbitrator did right to disallow itfor that reason,
    Wortham & M’Gruder had two suits against Nathaniel Harrison in the superiour court of Henrico. One was an action of debt on a single bill, in which payment was pleaded; the other an action of as-sumpsit, in which the plea was non as-sumpsit. The defendant, according to the act of assembly, filed with his plea a statement of the nature of the payments and set-offs which he desired to prove.
    In this state of pleadings, the two suits were referred to arbitration. The record-stated that the parties, by *their attorneys, mutually submitted all matters of difference between them in these suits to the final determination of Holden Rhodes and Herbert A. Claiborne, gentlemen, and agreed that their award, or the award of such person as they should choose for an umpire thereupon, should be made the judgment of the court; and the same was ordered accordingly.
    The arbitrators reported, that having heard the parties and maturely considered the evidence by them produced, they found the following facts, either admitted by the parties, or proved to their satisfaction, viz. That the defendant, being indebted to the plaintiffs on the 10th February 1828 in the sum of 176'dollars 37 cents, by single bill dated June the 19th 1827 and payable on demand (which forms the subject of the suit first mentioned) and in the further sum of 8S dollars 80 cents with interest from 7th December 1827, for goods furnished to him between the 19th June 1827 and the 10th February 1828, and in the further sum of 65 dollars 90 cents with interest from 1st April 1)327, for goods furnished to Martha W. Harrison on the credit of the defendant (which two last sums form the subject of the other suit), did, on the said 10th February 1828, draw a draft or inland bill of that date, in favour of the plaintiffs, on Jerman Baker then of Richmond city, for 155 dollars, without time of payment mentioned therein, and so payable at sight; which draft the defendant inclosed to the plaintiffs in a letter of the same date, directing the money, when received, to be placed to his credit with them. That the plaintiffs received.the letter and draft in due course of mail, and duly presented the draft to the drawee, who, on the 15th of February 1828, accepted the same in writing, payable at 60 days. That the plaintiffs put the draft into bank for collection, and it was protested for nonpayment on the 18th of April 1828. That late in March 1828 the drawee died insolvent. That on or about the 4th of *April 1828, the plaintiffs’ clerk presented to the defendant, for a settlement by note, a written statement of'their account against him, not mentioning the said draft or single bill, or the particulars of their demand, but merely referring to and stating the amount of a former account, rendered on the 7th of December 1827, in which the said single bill was comprised; and that on the presentation aforesaid the defendant declined giving his note, saying he would be in town again in a short time, and would pay the account. I
    The report of the arbitrators then proceeds as follows: “Whether the defendant examined the account so presented, or whether the amount was mentioned to him, does not appear to us. Nor does it appear to us that any thing was then said, to or by him, of the draft aforesaid, or that he then had received notice or had knowledge of the presentment of the draft, of the terms of acceptance, of its nonpayment, or of its deposit in bank. Sometime after-wards, and after the draft was protested for nonpayment, when applied to for a settlement of the account, the defendant claimed credit for the amount of the draft.
    And upon the facts aforesaid we differ in opinion; one of us, viz. Holden Rhodes, being of opinion that the said defendant should have credit for the amount of the said draft, to be applied in discharge of the said open account at the time of the presentment of the said draft by the plaintiffs to the drawee, viz. February 15, 1828, which would then leave a balance due to the plaintiffs, on the said open account, of 1 dollar 9 cents with interest from the same time; that the suit founded on the said open account should be dismissed at the costs of the plaintiffs, the said balance of 1 dollar 9 cents being applied in reduction of the costs to be adjudged to the defendant therein ; and that the plaintiffs should have judgment for the amount claimed by them in the first mentioned suit, with interest and costs. And the other *of us, viz. Herbert A. Claiborne, being of opinion that it was also in proof that the plaintiffs were in the habit of receiving drafts and other claims from their country customers, for collection, and that their general rule was not to apply such claims, but the money arising thereupon when collected, to the credit of their accounts against such country customers, is therefore, under all the circumstances of the case, led inevitably to the conclusion that the said draft. was never considered by the plaintiffs asa payment; that the defendant himself, at the time it was sent, did not consider the draft as a payment, and never thought of contending for it as such, till after the death of Jerman Baker and the insolvency of his estate had become notorious ; and therefore that the said draft should” be rejected as a payment: that the plaintiffs should have judgment for the principal, interest and costs in the first mentioned, suit;- and in the second suit, for 151 dollars 70 cents,.with interest on 65 dollars 90 cents part thereof from the 1st of April 1827 till paid, and with interest on 85 dollars 80 cents the residue thereof from the 7th of December 1827 till paid, and the costs.
    Wherefore we the arbitrators aforesaid, not being able to agree upon any award between the said parties, choose and appoint Conway Robinson esq. as umpire to determine between the parties aforesaid, in pursuance of the order aforesaid.”
    The award of the umpire was as follows: “Upon the facts reported by the arbitrators, the question is presented whether the defendant is entitled to make a discount against the demand of the plaintiffs, of the bill on Jerman Baker, mentioned in the report of the said arbitrators. If he is so entitled, it is because his discount is in the nature of a payment, or is the proper subject of a set-off.
    I think it is very clear that the bill was not offered nor received in payment (pro tanto) of a previously existing *'debt; but the money, when received, was to be placed to the credit of the defendant. The money was never received ; and it cannot be regarded as a payment on the part of the defendant.
    The other and more difficult enquiry is whether the defendant has any claim against the plaintiffs, arising out of the bill, which can be made the subject of a set-off in these suits; and the answer to this enquiry depends upon several questions, which will now be considered in their proper order.
    1. Did the plaintiffs ever make themselves liable on account of the bill? I think they did. Although they did not receive it in payment, yet they took it to be collected in the usual method of business, and that method ought to have been pursued. It was not pursued. The bill, according to its legal effect, was a bill payable at sight; and the plaintiffs, instead of getting it accepted according to its tenor, took an acceptance payable at 60 days. They were not bound to receive such an acceptance, but might have treated the bill as dishon-oured, and given notice to the drawer. Yet if they did receive it, it became their duty to give immediate notice to the draw'er, of the nature of the acceptance offered. By giving such notice they might have discharged themselves from ail liability ; for they would thereby have put it in the power of the drawer to recover from the drawee the debt in the hands of the latter. By failing to give notice, they leave the drawer under an impression that the bill has been paid according to its tenor, and prevent him from using any measures to obtain the money due from his debtor.
    2. After the plaintiffs had been guilty of laches in respect of the bill, and thereby' made themselves liable on that account, was the claim of the defendant against them waived by the subsequent promise which he made? Before it can be held that the promise amounted to a waiver of claim on account of the laches of the plaintiffs, *1 think it should be established that, at the time of making the promise, the laches was known to the defendant. That knowledge, I think, cannot be presumed in this case. It does not appear that the defendant examined the account, or that the amount was mentioned to him. In the absence of any information to the contrary, derived from the plaintiffs or from an inspection of the account, it was reasonable for the defendant to suppose that the plaintiffs had done their duty in relation to the bill; and if that had been done, he had a right to conclude that the money was paid according to the terms of the bill, and was placed to his credit with the plaintiffs. Under such circumstances, the promise of the defendant must be regarded as a promise to pay the account upon a supposition that he was allowed therein the amount of the bill. This view of the case is not repelled by the fact that if the bill had been credited, there was but a small balance due on the open account. It can hardly be supposed that the defendant knew precisely how much he owed the plaintiffs; and independent of this, the promise extended to the single bill, which was embraced in the account. But while the view which I have taken is not affected by the actual condition of the accounts, its correctness is strongly enforced by what transpired afterwards. After the bill had been protested, the defendant claimed a credit for the amount of it. Why then did he claim the credit, if he had waived it on the 4th April 1828? Was it because Baker had in the meantime become insolvent? Certainly not; for Baker had died insolvent in March 1828. It is not susceptible of that explanation, but it is susceptible of a different one. When he promised to pay the account, he did not know that the bill had not been credited. When he claimed the credit, the fact had been ascertained to be otherwise.
    3. The plaintiffs being liable for their conduct in relation to the bill, is that liability necessarily the amount *of the bill? and if not, what is the extent of it? I do not think the liability, when ascertained to exist, must of necessity be the amount of the bill. The relation in this case seems to me to be that of principal and agent. The plaintiffs undertook the collection of a bill in the usual course of business, and {raving done so, they were bound to exert such a portion of activity and care as might reasonably satisfy the trust reposed in them. They have failed in this, and I consider have made themselves liable for the actual damage sustained by the defendant by reason of that failure. That damage may in point of fact be the amount of the bill, or it may be less.
    4. Is the actual damage sustained by the defendant such damage as the defendant has a right to set off in these suits? I know of no better rule as to the damages which may be the subject of set-off than this, that they must be liquidated, and (where they do not grow out of a specialty) such as indebitatus assumpsit will lie for. In this case, it seems to me, the damages could not be recovered in an action of as-sumpsit fdr the payment of money; but the action would be one setting forth the implied undertaking to use due care in the collection of the bill; charging a breach of that undertaking, and a consequent loss to the plaintiff, and claiming damages for that loss. These damages must be regarded as unliquidaied and uncertain. The case of Winchester v. Hackley, 2 Cranch 342, seems to me completely analogous, and to leave scarcely a doubt upon the subject.
    Entertaining the opinion that the damages which the defendant has sustained by the misconduct of the plaintiffs in relation to the bill cannot be set off in these suits, it is altogether useless to determine on the amount of those damages. Although I should be of opinion that the amount of the damages is the amount of the bill, yet I could not allow the damages without, in my opinion, exceeding the powers given me by the submission. *Those powers are, to determine the matters in controversy between the parties in these suits: and the matter in controversj' touching- the bill is whether the bill or any part of it can be allowed as a set-off in these suits, or either of them.
    Upon all the facts reported by the arbitrators, I Conway Robinson am of opinion, and do therefore award and determine, that the plaintiffs, in their action of debt against the defendant, recover against the said defendant the sum of 176 dollars 37 cents, with interest from the 19th of June 1827 till payment, and their costs about their said suit expended; and that the said plaintiffs, in their action on the case against the defendant, recover against the said defendant the sum of 151 dollars 70 cents, with interest on 65 dollars 90 cents part thereof from the 1st of April 1827, and on 85 dollars 80 cents the residue thereof from the 7th of December 1827, till payment, and their costs about the said lastmentioned suit expended.”
    The award being returned to the supe-riour court of law at October term 1830, judgment was rendered pursuant thereto in each action. And then Harrison applied for and obtained from, the court of appeals a supersedeas to the judgment in the action of assumpsit.
    John Robertson, for the plaintiff in error.
    Samuel C. Scott, for defendants in error.
    
      
       Judge Parker took his seat in the court of appeals on the 18th of March 1837; but of the cases reported in this volume, this is the first which was argued before him.
    
    
      
       JuDGE Brookenbrougii decided the cause in the superiour court.
    
    
      
       The principal case is cited in B. & O. R. R. Co. v. Jameson, 13 W. Va. 844.
    
    
      
       See generally, monographic note on '‘Arbitration and Award” appended to Bassett v. Cunningham, 9 Gratt. 684.
    
   PARKER, J.

The judgment in this case ought, I think, to be affirmed. The submission was “of all matters of difference between the parties in this suit.” There is a well settled distinction between such a submission, and a general reference of all matters in difference between the parties. Malcolm and others v. Fullerton, 2 T. R. 645. The umpire was therefore right in looking to the pleadings to determine .the extent of his authority. The issues were payment or no payment, set-off or *no set-off; and the matters in difference between the parties were, whether the defendant had paid the debt or had an available set-off against it. Payment was not pretended; and the set-off consisted of an order on Jerman Baker in favour of the plaintiffs, payable at sight, which draft the defendant enclosed to the plaintiffs in a letter, directing the money, when received, to be placed to his credit. It is manifest that this was no payment to the Plaintiffs, until the money was received; for he directs it to be placed to his credit when received. Nor is it a good set-off, unless the negligence of the plaintiffs in collecting the amount of the draft made them liable for liquidated damages, and entitled the defendant to bring assumpsit for that amount. But the umpire decided (and' in my opinion correctly) that the liability of the plaintiffs was not necessarily to the amount of the order on Baker, but for such damages as a jury might assess for any supposed misconduct of the plaintiffs in collecting the debt; which damages were wholly unliquidated and uncertain. They might be merely nominal, or they might amount to the sum of 155 dollars mentioned in the draft or order. If Baker was insolvent at the date of the bill, or when it came into the plaintiff’s hands, or if any other cause rendered it prudent for these agents to take an acceptance at 60 days, instead of returning it to their principal, a jury would give no damages; and other circumstances might vary their amount, from one cent to the full amount of the bill.

If this be the nature of the defendant’s claim, he could not offer it as a set-off, even if the arbitrators are to be regarded as chancellors; for although the law allows all just discounts, it does not, in any court, permit unliquidated demands to be set off. Webster v. Couch, 6 Rand. 519.

The objection taken that the award is not final seems to me to have no weight. An award is final which settles *the matters submitted; and I have en-deavoured to shew that this claim for un-liquidated damages was not included in the order of reference. The award itself, too, shews that the subject matter of this claim was not passed upon by the umpire. The idea therefore that Harrison, by the award, is denied the power of recovering any claim against Wortham & M’Gruder for a breach of their implied undertaking to use due diligence in the collection of the bill, is wholly without foundation. If in such action the defendants should plead the award, the plaintiff might reply that the subject matter of the present action was not included in the reference, and not considered or determined by the arbitrator?. And even if the reference had been more general, it would not have barred the action. Ravee v. Farmer, 4 T. R. 146.

This view of the case renders it unnecessary to give any opinion upon another point arising in the cause; namely, whether the appellant can be permitted to urge objections to the award, in this court, when it does not appear by the record that any objection or exception to it was taken in the court below.

TUCKER, P., and CABEEE, J., concurred in the opinion of judge Parker.

Judgment affirmed.