Case ID: ny-super-ct_2/html/0252-01.html
Source: Caselaw Access Project
Author: {"author": "\n      Oakley, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Charles Potter and Charles H. Russell versus Charles Everett and George B. Reese.
    It is a general principle, that if one person pays money to another, under a mistake of fact, without any legal obligation to do so, and without the means of ascertaining the tratli; or if he be induced to pay it under false representations, he may recover back the money thus paid, in an action of assumpsit.
    The defendants, merchants in England, and the correspondents of the plaintiffs, merchants in America, received orders from the latter to purchase a quantity of goods, on their account, and pay for them by drawing bills on S. Williams, (a banker in London, with whom the plaintiffs had placed funds for that purpose,) at 60 and 90 days’ date. The defendants purchase the goods, and drew upon Williams for the amount; but made one of the bills for 5001. payable at four months. Williams failed before this bill came to maturity, having considerable funds in his hands belonging to the plaintiffs. W. H. R., an agent of the plaintiffs in England, not knowing that the bill at four months was drawn contrary to orders, but believing that the plaintiffs were bound to provide for it, (the defendants having threatened to attach the goods, and funds of the plaintiffs, in England, if it were not paid,) took up the bill without the knowledge, orders, or consent of the plaintiffs. The plaintiffs, as soon as the facts of the case came to their knowledge, protested against the conduct of the defendants, and afterwards brought an action of assumpsit to recover back the amount of the bill. Held, that they were entitled to recover.
    Assumpsit to recover back a sum of money, paid by the plaintiffs to the defendants, under an alleged mistake. The declaration was in the common form, and contained the usual counts for money paid, money had and received, &c. Pleas, the general issue, and payment, with notice of set-off.
    The cause was tried before Mr. Justice Oakley, on the 14th of April, 1829 ; and, by consent of parties, a verdict was taken for the plaintiffs, subject to the opinion of the court, upon a case to be made.
    The evidence in the case was contained, principally, in a deposition given by William Henry Russell, a witness for the plaintiffs, (taken by consent, de bene esse,) and in the correspondence between,the parties. Mr. Russell testified, that in the month of July, 1828, he left this country, as the agent of the plaintiffs, for the purpose of purchasing goods for them in England. That on the 24th of October following, Samuel Williams, who was the banker of the plaintiffs in London, and with whom they had extensive dealings, stopped his payments and became bankrupt, having then in his hands funds belonging to the plaintiffs, to an amount exceeding ¿£2500. That the money in Williams’ hands, had been deposited there by the plaintiffs, for the purpose of enabling the deponent, and other correspondents of the plaintiffs, to draw bills upon that fund, to pay for goods purchased on their account, whenever the plaintiffs should give orders t() that effect.
    That, at the time of Williams’ failure, it was well known to him, (the witness,) that several of Potter and Russell’s correspondents had drawn bills upon Williams, payable at periods subsequent to the 24tli of October;—which bills had been accepted by him, but not being due, were unpaid at that time. That he, (the witness,) believing that all the bills accepted by Williams, on account of the plaintiffs, had been regularly and properly drawn, in conformity with their orders, but without any knowledge of the fact, and without the knowledge, or orders of Potter and Russell, withdrew all such bills as had been accepted by Williams on their ostensible account, and paid the same for the honor of the plaintiffs, with their funds-
    Among the bills so drawn upon, and accepted by Williams, and paid by the witness, was a bill for £500, drawn by the defendants, bearing date the 18th of July, 1825, and payable four months after its date.
    That on the 17th of November following, before the bill for ¿£500 became due, and before the bankruptcy of Williams was known to the plaintiffs, he, (the witness,) received a letter from Potter and Russell, informing him that the defendants had overdrawn their account, to the amount of ¿£134; and that the plaintiffs also had a claim upon them for the sum of" £15, for other matters; all which the witness was directed to adjust with the defendants.
    
      That he, (the witness,) supposing that the bill for £500 was correctly drawn by the defendants upon Williams, on the plaintiffs’ account, and by their orders, and having no means of ascertaining the contrary, addressed the following letter to Mr. Everett, one of the defendants, as it was not known to him, at the time, that Reese, the other defendant, was connected in business with him.
    “ Manchester, 17th November, 1825.
    “ Charles Everett, Esq.
    “ Sir,—I have a letter from my friends, Messrs. Potter, Russell “ & Co., per John Wells, which came to hand this day, in which “ they say you have overdrawn your account £130, and that they “ had made a claim on you for £30, for loss on cloths sent without “ orders; of which you had agreed to allow £15, making toge- “ ther £145, and ordering me to adjust it immediately.
    “ By referring to your books, you will see that a bill, drawn by you for account of my friends, £500, falls due 21st, accepted by Samuel Williams. This I have ordered Brown, Janson & “ Co. to pay for their account, on your paying them this balance, “ £145 ; but which, if you declined, to let the bill be noted for “ non-payment. My orders are to settle this; and as I am only “ an agent for the house, I must proceed in such a manner as to “ avoid their censure.
    (Signed) Wm. H. Russell.”
    In reply to this communication, the witness received a letter from the defendant, Everett, dated on the 19th of Nov., wherein he stated the balance due the plaintiffs to be £124. 17s. 8d.; and which he offered to pay, provided the witness would also pay the bill for £500 before mentioned. Everett also threatened the witness, that if this bill were not paid, he would attach the property of the plaintiffs, in England ; and he made inquiries after such property, in London, for the purpose of attaching it.
    Under these circumstances, the witness, supposing that the plaintiffs were liable to pay said bill, and fearing that the defendants would attach their funds in England, gave orders to Brown, Janson & Co. to pay the bill for £500, whenever the defendants should pay the said sum of £124 17s. 8d. This last mentioned sum was accordingly paid by the defendants, and Brown, Janson & Co. then paid the bill for £500, out of funds belonging to the plaintifis, then in their hands.
    The witness also testified, that, at the time said bill of £500 was paid, he had no knowledge of the orders or directions under which the same was drawn by the defendants, but supposed that it was drawn in conformity with the instructions of the plaintiffs; and that, had he known the actual orders, under which said bill was drawn, as they afterwards came to his knowledge, he would not, upon any consideration, haw paid it. That he paid the bill upon his own responsibility, under a misapprehension and mistake of facts, and under an impression that the bill was drawn in conformity with the instructions of the plaintiffs ; and that the bill was paid without their knowledge or approbation. That the plaintiffs had never directly sanctioned the conduct of the witness in any way; but they had passed his accounts, when rendered, without any intention, however, of allowing such accounts to bear upon the questions arising upon the payment of said bill. That the plaintiffs had taken the earliest means in their power to regain the amount which they supposed was improperly paid, and had persevered therein, without remission.
    The witness also testified, that the defendant, Everett, had dealings with Williams upon other accounts, besides those of the plaintiffs,—and that at the time of the bankruptcy of Williams, and for ten months thereafter, Everett was indebted to Williams, to an amount considerably exceeding that of the said bill. Upon his cross-examination, he stated, that the plaintiffs had, in the hands of Williams, at the time of his failure, funds to the amount of £2700 ; and that there had been two dividends paid on his estate; one of four shillings, and the other of one shilling on the pound. Those bills, which Williams accepted, and which, the deponent paid, were not proved against his estate, but were stricken from his accounts.
    The bill for £500 was drawn to "pay for goods, shipped by the defendants to the plaintifis.
    
      By this witness, the defendants also proved the letters which are hereinafter introduced on their part.
    The counsel for the defendants admitted that he had received a notice from the plaintiffs, to produce, at the trial, their letters to the defendants ; but stated that they were not in his possession. The plaintiffs then introduced copies of several letters from themselves to the defendants ; the first of which was dated the 23d of March, 1823. In this letter, after giving directions to the defendants to purchase certain goods for them, the plaintiffs proceeded as follows: “ In our next, we will advise you as to the source “ of payment for these orders.”
    On the 8th of April following, the plaintiffs informed the defendants, that they had “ lodged a credit of £1500 with Mr. Samuel Williams, on account of the preceding orders, and should remit them further very shortly, and probably with some further orders.”
    The third letter was unimportant; but the fourth, which bore date the 16th of May, 1825, was in the following words : “ Geu- “ tlemen,—We have lodged a further credit of £1500 with Mr; “ Samuel Williams, which you can draw for, on account of our “orders, already given, and make your bills at 30 and 60 days”
    
    Yours, &c., Potter, Russell & Co.”
    In their fifth letter, the plaintiffs wrote the defendants thus— “ As our orders for pins and plaids cannot be executed, we now “say to Mr. Williams, to accept your bills for about £1000, in- “ stead of £3000. This, we presume, will be about the amount “ of the gloves,, hosiery, &c., ordered on the 23d of March last; “ and you will be pleased to advise him accordingly, as we shall “ make other .disposition of the funds.”
    The sixth letter, (dated the 26th 'of Majr, 1825,) was as follows :—“ Since our last letter, of which a duplicate is above, we “ are in receipt of Mr. Everett’s letter of the 22d of April, from “ which we infer that he will find it difficult to purchase even all “ the articles ordered on the 23d March last. In order, however, “ that you may invest to the amount of £1000, (which sum is sub- “ ject to your order with Mr. Williams, as we before advised you,) we now authorise you, in case that sum cannot be expended in the articles named in the order of the 23d of March, to send us the . . balance m more hosiery,” &c. &c„
    The last letter from the plaintiffs to the defendants, was in the following words, viz:
    New-York, 15th Dec. 1825.
    Messrs. Everett & Reese, London.
    “ Gentlemen—We received by the Manchester your letter of the “ 28th of October, and we have received also a statement of Mr. “ Williams’ account with us, in which he charges the amount of “ your bill for <£500, drawn in July, atfour months date, and payable “ the 21st of November, 1825. In drawing on this gentlemen at “ this date, you have assumed a responsibility which you should not “ have done. We do not know what arrangements Mr. Wm. H. “ Russell may have made in regard to.retiring the acceptance of “ Mr. Williams on our account, due after his failure, or whether “ provision will be made for this bill of yoürs. We can only say “ at present, that we shall hold you responsible for any loss that “ may arise in consequence of this bill’s being drawn .at this long “ date; for our instructions to you, particularly were, to make “ your bills on Mr. Williams at 30 and 60 days, and you will so per- “ ceive, on referring to our letter of the 16th of May last. Had “ you followed our instructions, your bill would have become due “ long before Mr. Williams’ failure,, and have been paid. Any “ loss, therefore, arising from this deviation of our orders, we shall “ claim'on you for. (Signed) Potter, Russell & Co.”
    P. S. “ We wish a statement of acc’t current, as by our books “ there appears a balance of more than £100 overdrawn.”
    To the reading of this last letter, the counsel for the defendants Objected ; but the presiding Judge permitted it to be read, for the purpose of showing that the plaintiffs had not acquiesced in the accounts of the defendants, relative to the bill for £500, but had given notice of their objections as soon as the facts were known.
    The plaintiffs then proved the correctness of the copies of their letters, and that the originals were all forwarded at or about the times of their dates, by the regular course of conveyance. One of their clerks also testified, that the first intimation obtained by the plaintiffs, as to the length of time, at which the bill for ¿£500 was drawn, was derived from an abstract of the accounts of Williams, received about the beginning of December, 1825, at which time, also, the news of his failure reached New-Yorlc,
    The defendants, on their part, introduced a letter from the plaintiffs to the defendant, Charles Everett, bearing date the 15th of July, 1825, in the following words :—“ We b.eg leave to intro- “ duce to your acquaintance the bearer, Mr. W. H. Russell, (bro- “ ther of our C. H. R.,) who now visits England on commercial “ pursuits, and to attend particularly to the business of this house, “ and as our authorised agent. We shall feel particularly obliged “ by your rendering him such assistance, as he may need in his “ business in your city, &c.-
    (Signed) Potter, Russell & Co.”
    The defendants also introduced the original letter from William H. Russell, to them, dated November 19tb, 1825, which hasjbeen already set forth in his deposition, together with another letter from him, under date of November 21st, in the following terms, viz :—“ I have requested Messrs. Brown, Janson & Co. to receive “ from you the balance of ¿£124.17$. 8 d., if not already done, and “ settle the bill of ¿£500. (Signed) Wm. H. Russell.”
    The defendants also read in evidence a letter from C. Everett to W. H. Russell, bearing date the 19th of November, wherein, after recapitulating the facts of the case, he remarks that the plaintiffs’ order for hosieiy and gloves, bearing date the 31st of May, was received by the defendants on the 28th of June, and that the bill of ¿£500 was drawn on account of that order. The letter then concluded with the following words:—“ I think pro- “ per to state these facts, although I cannot but consider the terms “ in which the demand is made, as very extraordinary, considering, “ that I have been for years in advance to your house, and re- “ peatedly obliged to wait for funds, because Mr. Williams would “ not accept. The old account with P. & R. remained unsettled “ until their unjust demands for losses and short measure were “ arranged. The balance due them now, is - - “ The balance, if the bill for =£500 is paid, will be £45.10
    “on new acc’t, - - -- -- -- -- ' =£12417 8 79.7 8
    
      “ This I am ready to pay, if the bill for =£500 is paid on the “ 21st. But it cannot be expected that I shpuld pay, before I am “ certain that the ¿£500, accepted by a party that has failed, is “ paid.
    “ If the bill for ¿£500 is not paid, I shall, in this case, think myself “justified in attaching the property of Messrs. Potter, Russell fy Co., “ wherever it is to be found.
    
    “ I shall pay the bill for ¿£500 on the 21st, and present to “ Messrs. Brown, Janson & Co., and I have no doubt but they “ will perform their promise. (Signed) Charles Everett.”
    “Enclosed are the accounts current of C. Everett withPotter “ & Russell, and P. R. & Co., Everett & Reese with Potter, Rus- “ sell & Co.”
    The defendants’ counsel also introduced copies of the accounts referred to in the last letter, in one of which the bill for =£500 was charged under date of Nov. 21st, 1825, and the money received of Brown, Janson & Co. (£375.6s. Ad.,) credited under date of November 23d. Jill other bills, prior to that in question, were drawn at four months. These papers closed the evidence on the part of the defendants. The plaintiffs then called one of their clerks,, and proved by him that the defendants never were in advance for the plaintiffs, and that the latter never gave the former any or- ' ders for goods, without furnishing the means of payment at the same time. It was also proved that the defendants, at the time the bill for £500 was drawn, were merchants in company, under the name of Everett & Reese, and the plaintiffs were merchants in company, under the name of Potter, Russell & Co.
    The facts of the case being ascertained, the presiding Judge observed, that as the plaintiffs’ right of recovery depended upon questions of law, he would recommend that a verdict should be rendered for them, subject to the opinion of the court upon a case to be made, either party having leave to turn the same into a bill of exceptions.
    A verdict was accordingly taken in favour of the plaintiffs, for the sum of $2,500, it being understood, that if the judgment of the court should be for the plaintiffs, that the amount of their recovery should be =£375.6$. 4cl., (being the amount of the bill for $£500, after deducting the dividends received from Williams’ estate,) together with interest and exchange, if the court should deem them entitled to it.
    If the court, however, should be of opinion that the action was not well founded, then a judgment of non-suit was to be entered.
    The cause was now argued by Mr. Slosson for the defendants, and by J. Prescott Hall and Mr. Anthon for the plaintiffs.
    For the defendants it was contended,
    I. That no action would lie against the defendants on the ground of a failure of consideration, because the plaintiffs having received the goods for which the bill was drawn, received value to that amount, of course. That the only ground upon which the plaintiffs could pretend to rest their claim, was the supposed deviation of orders on the part of the defendants, in drawing the bill at four months instead of sixty days. This demand was founded strictly in misfeasance, and the action for money had, or money paid, would not lie. The defendants ought to have been apprised of the nature of the claim, and the action, therefore, should have been special. [Pal. on Agen. ch. 1, p. 8, 68.]
    II. The settlement made by the agent was a full discharge to the defendants of all liability. The defendants paid to the plaintiffs the balance of their account, and the plaintiffs took up the draft on Williams with their own funds. This was an end of the matter,—Wm. Henry Russell being the general agent, of the plaintiffs, and having full power to make the arrangement. [1 Peters’ R. 290.]
    
      III. As Everett and Reese were indebted to Williams to a greater amount than that of the bill, they would have had a right, in case it had not been taken up by the plaintiffs, to set off the amount of the bill against his claims. By this means they would not have been prejudiced by the bill, and might have claimed the value of the goods of the plaintiffs, to the extent of their present claim.
    IV. If the agent was ignorant of the original instructions given by the plaintiffs to the defendants, the latter did not know him to be so; and the letter of introduction recognized W. H. Russell as the unlimited agent of the plaintiffs, in their general business in England. The defendants, therefore, had a right to presume, that, as he acted with full powers, he acted with full knowledge also.
    V. The payment of the bill was voluntary, and no action lies to recover back the amount thus paid, even if the defendants had violated their instructions. But the evidence does not support such a position: the defendants were not restricted to any particular time of drawing, but had a right to exercise their discretion on the subject.
    For a part of the fund in Williams’ hands, there was an unlimited power to draw; and that part was not exhausted by the bill of £500. The extension of the credit was for the benefit of the plaintiffs; and as all the drafts, prior to the one in question, were at four months, the inference is, that the plaintiffs merely required their bills to be at less than four months, in case a credit for that time could not be obtained. But the whole scope of the case shows, not only an adherence to orders on the part of the defendants, but an acquiescence in their acts on the part of the plaintiffs.
    VI. The difference of exchange, at all events, is not to be allowed, and cannot be recovered.
    For the plaintiffs, it was urged,
    
      I. That the order given to the defendants, by the plaintiffs, for the purchase of goods, was coupled with a direction to pay for them in a particular manner, out of a specific fund provided by the plaintiffs for that purpose. The defendants, by accepting the order to'purchase, were bound to pay for the goods in the manmer pointed out hy the plaintiffs, and were bound to draw bills upon Williams for that purpose as directed. They could not accept one part of the order, reject the other, and thus leave the fund at the risk of the plaintiffs, without some satisfactory reason for so doing. [4 J. R. 103, 104. 3 East. 147. 1 Com. on Con. 246. 230. 238. Liv. on Agen. 17. 2 Kent’s Com. 484. 13 John. R. 332.]
    II. If the defendants were bound to draw bills upon Williams, to pay for the goods, then they were bound to draw them, in all respects, as directed by the plaintiffs. They were directed to draw at 30 and 60 days: they drew at four months, and were, therefore, answerable for all the consequences of disobeying and exceeding their instructions. Those consequences have been the loss of the money; and that loss must be borne by the defendants, who are the culpable party. [Liv. on Agen. 2, 3. 25. 1 Com. on Con. p. 6. 236-240. 2 J. R. 45. 3 Term. R. 757. 1 Esp. R. 111. 3 John. Cas. 36. Rundle v. Pollock.]
    III. The plaintiffs were not liable upon the bill for ¿£500, drawn by the defendants upon Williams, and were not bound to take it up. Their agent, under a mistake and misapprehension of facts, and without a full knowledge of the circumstances of the case, but in good faith to his principals, and without negligence, advanced their money to take up the bill. -It may be recovered by the plaintiffs of the defendants in this action. [Archer v. Bank of England, Doug. 637. Garland v. Salem Bank, 9 Mass. R. 408. Martin v. Morgan, 3 Moore’s Rep. 635. Clark v. Penney, 6 Cow. R. 301. Waite v. Leggett, 8 Ib. 195. Robinson v. Anderson, Peake’s Cas. 94. Cripps v. Reade, 6 T. R. 606. Com. on Con. Vol. 2. p. 35. 2 Bl. Rep. 825. 1 Salk. 22.]
   Oakley, J.

The plaintiffs, on the 23d of March, 1825, remitted to the defendants, merchants, in England, orders for the purchase of a quantity of goods, and informed them that, in their next letter, they would advise them as to the source of payment for the said orders.

On the 8th April, 1825, the plaintiffs wrote the defendants, that they had lodged a credit of ¿£1500 with S. Williams, a banker in Loudon, on account of their preceding orders. On the 16th May, 1825, they wrote the plaintiffs, that they had lodged a further credit with Williams, of ¿£1500, which they might draw for, on account of the orders already given, and directed the defendants to draw their bills at 30 and 60 days. On the 23d of May, 1825, the plaintiffs wrote to the defendants, that they had given directions to Williams, to accept their orders for about ¿£1000, instead of the ¿£3000, and on the 31st May, 1825, they also wrote to the defendants, to make purchases for them to the amount of ¿£1000, and that, that sum was in the hands of Williams, subject to their order, as they had been before advised.

After the receipt of these letters, and on or about the 18th of July, 1825, the defendants made certain purchases of goods for the plaintiffs, and on that day drew a bill, on the said Williams» for the sum of ¿£500, payable at four months, which was accepted by him. Before this bill became due, and on the 24th of October, 1825, Williams became a bankrupt. The agent of the plaintiffs, in England, being ignorant of the orders given by them to the defendants, as to the drawing of bills on Williams, and supposing that the bill in question, had been correctly drawn by the defendants, and the defendants threatening to attach the property of the plaintiffs, hr England, for the amount of the bill, agreed to pay the said bill, and accordingly did pay it to the defendants, after deducting a balance of account due from them to the plaintiffs. This action is brought to recover back the money, thus paid by the agent of the plaintiffs. The declaration is in assumpsit, and contains the common money counts.

The ground of the plaintiffs’ claim is, that the defendants drew the bill in question in violation of the instructions given them, in consequence of which, the funds placed in the hands of Williams, for the purpose of meeting the drafts of the defendants, were lost by his bankruptcy :—that their agent paid the bill in ignorance of the fact, that the defendants had violated the orders given them, and that the defendants thus receiving the money without right, and by mistake of the plaintiffs’ agent, cannot retain it.

It is well settled as a general principle, that where a man pays money without any legal obligation to do so, under a mistake of fact, and without the means of ascertaining the truth, or if he be induced to pay it under false representations, he may recover it back. (Garland v. The Salem Bank, 9 Mass. R. 389. Martin v. Morgan, 1 Brod. & Bing. 289.)

In the case of Martin v. Morgan, the action was for money had and received. The defendants obtained a check from the firm of B-& Co. on the plaintiffs, which was post dated. Having ascertained that B-& Co. were insolvent, the defendant presented the check to the plaintiff. The plaintiff paid it, having no funds of the drawer, but expecting to receive them in the course of the day. The plaintiff was ignorant of the insolvency of the drawer, and of the fact that the check had been post dated. The court held that the plaintiff had a right to recover the money thus paid, on the ground that the parties did not deal on equal terms, and that the defendants concealed the circumstances, which, if disclosed, would have prevented the plaintiff from paying the money, and that the plaintiff had thus paid it, without legal obligation, and in ignorance of the true state of facts, which were known to the other party.

The principle of that case, seems to me to apply fully to the one now before us. The defendants here, accepting and actingunder the order for the goods, and receiving special directions as to the mode of payment for the same, were bound to adhere strictly to their instructions. Instead of drawing on the fund provided by the plaintiffs, at 30 or 60 days, as directed, they thought proper to give a larger credit to Williams, by drawing at 4 months. In consequence of this departure from their instructions, the fund in the hands of Williams was lost. Under these circumstances, the plaintiffs were not bound to take up the bill drawn by the defendants, or to indemnify them for having drawn it. It was drawn on their own responsibility, and at their own risk. Having taken up the bill, and knowing they had drawn it without authority, they induced the agent of the plaintiffs to pay it, by concealing from him the fact, that it had been drawn contrary to their orders, and by threatening to attach their property. It is, therefore, clearly a case in which the parties did not deal on equal terms. The agent of the plaintiffs was kept in ignorance of a fact, which, if he had known it, (as he expressly testifies,) would have prevented his paying the bill. The defendants having obtained the money under such circumstances, and from a party under no legal obligation to pay it. have no right to retain it. The agent, in making payment of the bill, acted without the knowledge, or instructions of the plaintiffs, and the plaintiffs, themselves, were ignorant of the fact, that the bill had been drawn contrary to their orders, until after it was paid. If the payment had been made, under the circumstances, by the plaintiffs themselves, their right to recover the money would have been equally clear; and there must be judgment for the plaintiffs.

Judgment for the plaintiffs.

[David P. Hall, Att’y for the plffs. W. Slosson, Att'y for the defts.]