Case ID: ohio_15/html/0242-01.html
Source: Caselaw Access Project
Author: {"author": "Read,. J. Birchard, J.,", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Martin Thayer and Thomas T. Mason vs. Benjamin King.
    An action will He, at the suit of the owner of negotiable paper, which has been lost after it fell due, at law j but if lost before due, the remedy is in Chancery, where the owner can be required to indemnify the maker.
    This is an action of Assumpsit, reserved in the County of Miama, upon an agreed statement of facts, as follows
    The plaintiffs declared upon three several promissory notes, given by the defendant to one Joseph Layman; one dated Dec. 5, 1837, for $65; one dated November 16, 1839, for $8, and the-other dated January 3, 1842, for $105.69; all payable on the day of their date, and duly indorsed by the plaintiffs.— Plaintiffs proved, by Robert C. Schenck, that, as attorney for plaintiffs, in the spring or summer of 1843, having a claim to collect for them, he called upon Joseph Layman, against whom the claim was, and received from him an assignment of the above notes; that the notes were all due at their respective dates aforesaid, stating their dates and amounts, as in the declaration; that they were payable to Joseph Layman, dr order, who then indorsed them, in blank, and delivered them to the plaintiffs. On the same day, being on his way to Cincinnati, he lost said notes, in a package of papers, dropped somewhere upon the turnpike; that every effort had been made, by inquiry and advertisement, to find them, but without avail.
    In Bank.
    Dec. Term, 1846.
    On this state of facts, the defendant’s counsel.moved to non-suit the plaintiffs, upon the ground, that an action at law cannot be maintained upon a lost note, payable to order, and indorsed in blank, after it became due; which question the Court reserved for decision at the Court in Bank. ■
    
      Odlin Sf Schenck, for Plaintiffs.
    The question, reserved by the agreed case, is, whether there is relief, at law, upon a lost negotiable promissory note, indorsed after, due? '
    In Story’s Equity Jurisprudence, vol. 1, page 102, sec. 85, it is said, equity will not entertain jurisdiction for relief upon a lost negotiable note,. so as to decree payment, upon the mere fact of loss; for no such supposed inability exists to recover at law, as exists for want of a .profert of a bond, at law. No proferí is necessary; and a recovery can be had, at law, upon mere proof of the loss. Walmsley v. Child, 1 Vesey, 345; Glynn v. Bank of England,, 2 Yesey, 38, 41.
    The first case was a bill in chancery, to be decreed payment of Goldsmith’s notes, payable to bearer, (and, by the custom of merchants, passing as cash,) which had been lost. Lord Chancellor Hardwicke says: “ Upon' the whole, therefore, the plaintiff must bring an action at law for the money.” And, again: “ I see no doubt of maintaining the action.” He.also remarks* that, so far as concerned inland bills of exchange, the merchants, procured the passage of the act of 9 and 10 William hi., by which the drawer of a bill of exchange, lost, and never indorsed* is not bound to pay, without indemnity. .
    
      The second case was for the amount of Bank of England notes, averred to be lost. The Chancellor decided, that the remedy on a lost note is at law; and he takes the distinction between a note and bond, on the ground of oyer, at law, of sealed - instrument's. The bill in this case was filed for relief, and with an offer of indemnity. 2 Vesey, sen. 38, 41.
    In Glover v. Thompson, Ryan & Moodie’s Rep. 403; 21 Eng. Com. Law Rep. 472, it was decided that an action may be maintained on a lost bill of exchange, if the loss did not happen until after the bill became due.'
    ■ In the case of Hansard v. Robinson, 14 Eng. Com. Law Rep. 20; 7 Barn‘&. Cress. 90, inT827, Lord Tenterden, C. J., held, that “ the holder of a bill of exchange cannot, by the £ custom of merchants, insist upon payment by the acceptor, ‘ without producing and offering to deliver up the bill;” and therefore it was held, “ that the indorsee of the bill having lost £ it, -could not, in an action at law, recover .the amount from the ‘ acceptor, although the loss was after the bill became due, and ‘ the indorsee offered an indemnity.” This case, being upon a bill of exchange,, the Court say, that the acceptor, paying the bill, has a right to the possession of the instrument, for his own security, and as his voucher and discharge in account against the drawer. The case is determined on the custom of merchants, and contains reasoning not applicable to promissory notes. Upon this question, it is admitted by the Court, that the decisions are not uniform, and cannot be reconciled.
    Story on Promissory Notes, page 114, sec. Ill; the authorities are collected in a note. “ There is,” says he, £C as in £ England, a diversity of judicial opinion as to- the right of the £ holder,' at law, to compel payment of a- promissory note from £ the maker, without a delivery or production thereof. In £ some of the States, the affirmativé has been maintained. In £ others, the English doctrine prevails; and in others, the- holder £ is entitled to recover at law, if he executes a suitable indemc nity.” To these authorities, as there collected, we refer, remarking that, in the case of Renner v. The Bank of Column 
      
      bia, 9 Wheat. Rep. 581, the Supreme Court of the U. States permitted a recovery upon a negotiable promissory note, which had been lost during the pendency of the suit, it having been in Court a few days before the trial, but had been mislaid, and, upon thorough search, could not be found.
    Judge Story, in his work upon Bills of Exchange, sec. 449, page 522, after noticing the discrepancy of the authorities upon this subject, remarks:
    “ Which doctrine (to wit, the recovery at law, or not) will £ ultimately prevail in America, is not for the Commentator to £ conjecture.” “ It may be difficult,” he says, “ upon satisfac- £ tory grounds, to overturn the reasoning of Lord Tenterden, ‘ already referred to.” ' /
    
      That difficulty consists, in the reasons assigned, of throwing the burden of proof upon the drawer as to the' loss, and of preserving and commanding the proof, in a future action. With all deference to this opinion, it may be answered, that, at law; the fact' of loss, and that the plaintiff is the true owner of the note, must be fully made out; and that all this difficulty equally arises in a court of equity; so that it is narrowed down to the simple question of indemnity. Neither will this indemnity be perfect; for the securities are equally liable to removal and insolvency, with the plaintiff. It must be judicially proved that the plaintiff, and the( plaintiff alone, is entitled to recóver; and that by disinterested testimony. It is true, that the defendant may be made liable, in future, upon the presumption, that the holder of the note, indorsed in blank, received it before it became due. But indemnity does not help him, except to increase his prospect of the ultimate recovery of his money. We are not aware of any decision in Ohio upon this subject. If the Court are free to adopt a rule amid these conflicting authorities, would it not be the better rule, if indemnity is required, to leave the defendant to his bill in equity, in cases where he may deem it necessary to require that indemnity ? — the presumption of future liability being against the direct proof at law.
    
      
      jt; Parsons, for Defendant. ‘
    _ The authorities relied upon to sustain the motion for a non-suit in this case, are, Chitty on Bills, 9th edition, 291, 297; Pintará v. Tackington, 10 Johns. Rep. 104; Swift v. Stevens, 8 Conn. Rep. 431; Holmes v. He Camp ', 1 Johns. Rep. 34) Angel v. Felton, 9 Johns.. Rep. 149; Cummings v. Hacliley, 8 Johns. Rep. 202.
   Read,. J.

This case was reserved for the determination of the single question, .whether a recovery could be had upon lost negotiable paper, at law, or whether the remedy, in such case, was in equity.

Upon this question, there is a conflict of decisions, both in England and the United States. In the decisions which have been made, different'and various reasons have been assigned in support of either side; but from a careful review of the authorities, and a full comprehension of the principles of law controlling the transfer and fixing the right of holders of negotiable paper, it would seem -that the only difficulty in the case grows out of the question of indemnity. All other matters, and the rights of parties, can be governed, controlled and modified in a court of law as well as equity.

It isa necessary and fundamental principle of negotiable paper, that the innocent holder receiving it before due, is entitled to its proceeds. This-is the essence and life of its negotiability. . Hence, if the maker should be compelled to pay in case of negotiable paper lost before due, such payment would be no bar to the recovery in , the hands of an innocent holder, who had received it before due; and in such case a double recovery might be had upon the same instrument.. But if former payment or recovery would be a complete bar to any subsequent payment or recovery, the reason of the rule ceases, and the objection to a recovery by the owner, no longer exists. Hence, if the circumstances of the case are such that- the negotiable paper can never be produced for payment a second time, or if produced would permit no right of recovery in the hands of the holder, no indemnity in such cáse being required, to • • " guard-against..a second payment, recovery may be had in a 'court of law. ' Thus, if the instrument be .totally destroyed, or if it. pass into the hands of the holder, .charged with alb the equities which exist against the original holder, the action may be at law. Now, it is a well .recognized principle, that negotiable paper received after it is due,.is charged with all the equities existing between the original p'arties. So, if payment be made to the original holder, and a recovery.be had by him, it would constitute a complete bar to another' action - brought by any person who should receive' it after due. But if it be lost before due, and the original holder commence suit, there is á possibility that the paper may be outstanding in' the hands of .an innocent .holder — -upon which recovery could be had; ■and hence the law will not permit, in such case, a recovery to be ‘had until complete indemnity is furnished against such possibility. ■ Now, a court of law has not the.power to compel this indemnity;. and hence is forbidden to give judgment or to entertain jurisdiction of the case. A court of law proceeds upon ■fixed principles, and if the party' is entitled to judgment, he is entitled to execution without limit or restraint. But a court- of equity being called upon'to give its aid, will guard'the rights of all parties, and will not permit a recovery until the party seek-. ing it will guard the opposite, party from a danger which exists by the misfortune of the very person seeking its aid. It will say, Y.ou have been unfortunate in the;loss of your instrument — we-will relieve you from this difficulty, provided you will fully guard the other party from all harm which may, ,by possibility, result from what, except from our aid, would be a misfortune.to you. It has the power to determine the nature of the indemnity and the security.. Hence, in those cases in which indemnity is to be given, relief must be had in equity. A court of law, it is true, -might do the same thing, if it had the .power; and théré is no direct impossibility to prevent its having such powers; yet, as such is not the case in the distribution of law and equity- jurisdiction, as the systems now stand, ■’ relief can only be had in equity. - . '

In the case, however, before the Court, no such difficulty exists, as those notes were lost after they were due.

Judgment for Plaintiffs.

Birchard, J.,

argued that judgment should be entered for the plaintiffs, but doubted the accuracy of the position taken by the majority of the Court. He held that the weight of the evidence showed that the notes sued for were lost and out of circulation. Also, that the Court might order a stay of execution until an indemnifying bond should be filed by the plaintiff. On the hypothesis that the negotiable paper had been found and put in circulation, and had come to the possession of a bona fide holder, for a valuable consideration, in the regular course of trade, without notice, he was of opinion that, under the rules of the commercial code, such holder might collect it. That the defendant, whether the paper was past due when negotiated or not, could not set up as á defence > any matter that arose subsequent to the good title acquired by the bona fide holder.