Case ID: mass_6/html/0071-01.html
Source: Caselaw Access Project
Author: {"author": "Sedgwick, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Fitzwilliam Sargent versus Nathaniel W. Appleton.
    A discharge of the acceptor, by the payee of a bill of exchange, is not a discharge of the drawer, where the acceptor has no funds of the drawer in his hands.
    The plaintiff declared in case upon a bill of exchange drawn by the defendant upon William Smith, for the sum of 1659 dollars 58 cents, payable to the plaintiff, and also for the like sum of money had and'received by the defendant to the use of the plaintiff.
    The action was tried upon the general issue, at the sittings after the last November term in this county, before * Sewall, J., and a verdict taken for the amount of the [ * 86 ] bill of exchange, with the customary damages and interest, subject to the opinion of the Court upon the case as reported by the judge.
    On the trial, it appeared that the defendant was agent and supercargo of the said Smith in his brig Levant at Marseilles, and had in his hands a balance due to the plaintiff, for a quantity of tobacco, which had been consigned to the defendant, by him sold, and, with other effects belonging to Smith, invested in a cargo of oil. For that balance he drew the bill of exchange in question upon Smith. The bill was accepted, and duly presented for payment ; but Smith having then become insolvent, payment was refused, and the bill was protested on the 11th of February, 1805.
    On the 27th of that month, Smith negotiated a composition with divers of his creditors, and by an indenture, to which the plaintiff was a party, assigned to the creditors, among other property, the brig Levant, with her earnings by freight or otherwise ; subject, however, to the payment of any bills which the defendant had already drawn on him, or might thereafter draw on him, or on Thomas Wilson, Esq., of London, for the purchase of a cargo, or any part of 
      
      a cargo, for the said brig Levant. The creditors, in consideration of the said assignment, released Smith forever from all their respective debts and demands against him.
    The oil was transported from Marseilles to London, and there deposited by the defendant with the said Thomas Wilson, by whom it was sold, and the proceeds thereof placed to the credit of Smith.
    
    The defendant commenced another voyage from London in the brig, in which he had the assistance of Mr. Wilson, as well on the credit of Smith as the guaranty of the defendant. The amount of Wilson’s supplies were afterwards remitted to him, by the defendant, from the Mediterranean.
    
    [ * 87 ] *The defendant arrived in the United States in April, 1805, with a cargo on board the Levant; having drawn no other bill for the Levant’s cargo, than the one on which this action is brought; and he has retained sufficient property belonging to Smith to discharge the bill, and for that purpose.
    In a letter dated at New York on the 13th of June, 1805, from the defendant to the plaintiff, he says, “Your letter of the 9th instant I have just received. In regard to the bill on Mr. Smith, not paid, I shall be on in a few days to Boston, when I shall call and adjust it.” In another letter of the 31st of July following, speaking of this bill, he says, “I have no doubt your demand is good against me, for any deficiency after receiving your proportion of Mr. Smith’s dividend.”
    The defendant had expressed his desire to pay the bill in question, but had been prevented by D. D. Rogers, Esq., a creditor of Smith, and a party to the said indenture, who had forbidden him to discharge it, claiming to hold the effects in the defendant’s hands in virtue of said indenture.
    In addition to the above facts, appearing from the evidence at the trial, the parties agreed that several parcels of the real estate and effects assigned by the said indenture had thereby vested in the said creditors, to whom the said assignment had been made; but that the plaintiff had received no part of the proceeds thereof, nor been otherwise paid any part of his demand.
    On these facts, the jury were directed to find a verdict for the plaintiff, and to assess his damages to the amount of the bill of exchange, with the customary damages and interest. The verdict was taken subject to the opinion of the Court upon the case reserved, and by the consent of the parties, was to be amended, or set aside, and a verdict entered for the defendant, as the Court should order.
    The action stood continued nisi for argument, and at the follow ing March term in Suffolk,
    
    
      * Jackson, for the defendant,
    contended that the plain- [ * 88 ] tiff, in discharging Smith, the acceptor, had likewise discharged the defendant, and in bringing this action violates his faith pledged to Smith. If the plaintiff’s case is within the exception in the indenture, he may recover this money of the assignees of Smith, after the defendant shall have paid it over to them. The defendant considers himself as a mere stakeholder, and is ready to pay the money according to the direction of the Court, either to the plaintiff or to the creditors of Smith, at whose instance the defence is in this case made. 
    
    
      Prescott, for the plaintiff,
    agreed to the general doctrine that the discharge of the acceptor was a discharge of all the prior parties. But he contended that the doctrine did not apply where, as in the present- case, the acceptor has no effects of the drawer in his hands. 
       The equity of the case is strongly on the plaintiff’s side. The defendant has retained in his hands funds for the discharge of this bill, and the creditors of Smith have virtually agreed that he may so appropriate them by accepting the assignment of Smith’s effects, subject to the payment of bills of this description. The defendant’s letters in the case, written with a knowledge of the transaction, are a waiver of any advantage he might conceive himself entitled to, and in fact amount to a renewal of his undertaking.
    The opinion of the Court (except the chief justice, who did not sit in the cause) was delivered at an after day in the same term by
    
      
       3 Esp. Rep. 46, Smith vs. Knox. — Ibid. 49, English vs. Darley. — 2 Bos. & Pul 61. — S. C. 3 Brown's Ch. Ca. 1, ex parte Smith. — Kyd. 165. — Chitty, 214, 119.
    
    
      
       2 D. & E. 713, Rogers vs. Stephens
      
    
   Sedgwick, J.

[After reciting the facts from the judge’s report.] It is undoubtedly true, as a general rule, as contended by the counsel for the defendant, that where the holder of a bill of exchange discharges a party who is liable to the payment of it, all other parties to it, whose liability is subsequent to that of the party discharged, are thereby discharged also; and it is likewise true that the acceptor is first liable. He is liable to the drawer, the payee, and to all the endorsees. The reason of * the rule is very [ * 89 ] clearly expressed by Lord Eldon, in the case of English vs Darley, cited at the bar. “ It is true that the holder of a bill of exchange has his remedy against all the parties on a bill; but the holder has it not in his power to give time to a party on the bill first liable, and afterwards to proceed against another; the holder may give time to his immediate endorser; he may discharge him out of custody, at the same time that he is proceeding to execution against a prior endorser to him, or against the drawer or acceptor; but he cannot give time to, or discharge the drawer or acceptor, and afterwards proceed against that endorser. Suppose the holder, a second endorsee, should give time to the payee, the first endorser, and take his warrant of attorney payable at a future time, — could he proceed and take out immediate execution against his immediate endorser ? I think not; for if that endorser paid the money, he would have a right to proceed immediately to his endorser, that is, to the payee, who had before had time from the holder; this is inconsistent.” And the same reasoning applies, certainly with equal strength, in the case of a discharge, as in one where time of payment is given, as was that then under consideration.

The rule, then, supported by the reason on which it is founded, would apply in this case, if, on a recovery against the defendant, he could support an action against Mr. Smith as the acceptor, and not otherwise.

But it is impossible this could be the case ; for the bill would be paid by the defendant with money which belonged to Smith, and which had been retained and appropriated for the express purpose, to which it would be applied ; and this must always be deemed a sufficient answer for Smith to an action by the defendant against him.

It is observable, that the real dispute in this case is between the creditors of Smith and the plaintiff in the action. But all the claim which the creditors can make is by virtue of the as- [ * 90 ] signment expressed in the indenture ; * but that assignment is explicitly made subject to the payment of any bill, which had been, or might be, drawn on Smith for the purchase of a cargo, or part of a cargo, for the brig Levant. Now, that this is a bill exactly of that description, and therefore that the money sufficient for its discharge, — the very money in the hands of the defendant, by him reserved for the payment of the bill,— is excepted from the assignment, is most evident.

Should the defendant in this case prevail, the consequence would be, that the money in his hands belonging to Smith must be paid over to him; for, by the terms of the assignment, it is excepted, as has been observed, from its operation; and of course the plaintiff would receive no more than his proportional dividend of the property assigned; which would be manifestly repugnant to the intention of the parties to the indenture — an intention fair and honest, and which, I think, ought not to be defeated.

It is the opinion of the Court, that the direction of the judge was right, and that the verdict ought to stand.

Judgment according to the verdict.