Case ID: mass_25/html/0159-01.html
Source: Caselaw Access Project
Author: {"author": "Parker C. J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

William B. Bradford versus William H. Hubbard et al.
    
    
      A bill of exchange was drawn in Boston, by J. R. B. on H. & Co of Richmond, who accepted it for the accommodation of the drawer, and on his engagement to place funds in New York, where the bill was payable, to meet it at its maturity. The bill was indorsed by the plaintiff, also for the accommodation of the drawer, with a knowledge of all the circumstances, and he advised the drawer to adopt this mode of raising money. The drawer having failed and assigned his property for the benefit of his creditors, before the bill became payable, it was dishonored and returned to Boston, where it had been discounted for the drawer, and where the plaintiff took ft up as indorser. The assignment provided for indemnifying the plaintiff against all indorsements made by him on account of the drawer, and there were funds in the hands of the assignees to which he could resort for the payment of the bill. Held, that the acceptors were exonerated, and that the holders must resort to the funds in the hands of the assignees, for payment of the bill
    This was assumpsit on a bill of exchange drawn by John R. Bradford, in Boston, on the 15th of March, 1826, on the defendants, merchants of Richmond, Virginia, for 1000 dollars, payable in four months at the Mechanics’ Bank in New York, to the order of the. drawer, by whom it was indorsed. The plaintiff was the second indorser. It was duly accepted by the defendants ; but on presentment at the Mechanics’ Bank at maturity, was not paid, and was thereupon duly protested for non-payment. It had been discounted for John R. Bradford on the 17th of April, at the American Bank in Boston, to which it was returned on non-payment at New York, and was thereupon taken up by the plaintiff, as indorser. The bill was accepted by the defendants, and indorsed by the plaintiff, merely for the accommodation of the drawer, who promised the defendants, at the time of their accepting the bill, that ho would place funds in New York to take it up at maturity, ana the plaintiff knew of its being accepted for the accommoda.imi of the drawer, and he knew of the undertaking, on the part of the drawer, to place funds in New York to take up the bill, and the drawing of the bill was advised by the plaintiff as a means of raising money. The drawer stopped payment in June, before the bill became due, and on the 19th of that month made an assignment of his property for the benefit of his creditors, providing in the first place for the payment, in full, of the debts due to his father, and secondly for the payment of certain debts due to the plaintiff, and also for securing and indemnifying him against any liabilities by indorsement of any notes, bills, &c. on account of John R. Bradford ; and there were sufficient proceeds of the assignment in the hands of the assignees to take up the bill, after discharging the other preferred debts, and the assignees held the same for the purpose of paying the plaintiff in case he should fail to recover in this suit; all which was known to the plaintiff. At the time of accepting the bill, the defendants were indebted to the drawer "about 300 dollars, not then due, but which had become due and had not been paid at the time of commencing this action. The drawing and acceptance of the bill had, however, no reference to this balance. After the failure of John R. Bradford, the defendants commenced a process, in the nature of a foreign attachment, in a court of equity in Virginia, and recovered, by decree of the court, of one Putney, a debtor of John R. Bradford, the sum of 270 dollars, the ground of that process being the liability of the defendants as acceptors of this draft. The sum so recovered was subject to the control of the court, and, pursuant to a decree, the defendants gave bond to respond for the amount, whenever the court should so order. The defendants were ready to pay over to any person authorized to receive the same, the balance due from them to John R. Bradford, and also the sum recovered under the decree of the court of equity, on being discharged from their bond.
    
      Parker C. J. directed a nonsuit, subject, &c.
    
      Rand, for the plaintiff,
    contended that the acceptor of a bill is liable to all the other parties to it. The plaintiff’s knowing it to be accommodation paper, made no difference in regard to his right to resort to the acceptors. Fentum v. Pocock, 5 Taunt. 192 ; Mallet v. Thompson, 5 Esp. R. 178; Chitty on Bills (6th ed.) 183 ; Bank of Ireland v. Beresford, 6 Dow, 239. Nothing but payment will discharge the acceptors. Brown v. Mott, 7 Johns. R. 361. The plaintiff is not bound to resort to the drawer. It was intended that he should resort to the proceeds of the assignment for liabilities which he is under on account of the drawer, after having indemnified himself, as far as he is able, by resorting to other parties. His discharge of the drawer under the assignment, does not discharge his claim upon the acceptors, who are the parties ultimately liable. Notwithstanding his general release of the drawer, he has a right to resort to the acceptors. They were included in John R. Bradford’s schedule of creditors, on account of this acceptance.
    
      
      March 1 ith.
    
    
      
      Fletcher, for the defendants,
    contended that the plaintiff, by becoming a party to the assignment, had released this very debt. The assignment was a substitution for John R. Bradford’s agreement to remit funds to New York to meet this bill. If the acceptors are liable to the plaintiff, could not they come upon the drawer for reimbursement, and he again on the plaintiff, if, having the means of satisfying the bill without resort to the acceptors, he should neglect to avail himself of those means ? Sargent v. Appleton, 6 Mass. R. 35; English v. Barley, 3 Esp. R. 49; S. C. 2 Bos. & Pul. 61. Having discharged the party ultimately liable, he has discharged all intermediate parties. The plaintiff must avail himself of the security he has in his hands, or within his reach. Hayes v Ward, 4 Johns. Ch. R. 132; People v. Jansen, 7 Johns. R. 332, 337.
    
      April 2d
    
   Parker C. J.

delivered the opinion of the Court. We think the defendants are not liable in this action, they having accepted the bill which is in suit, entirely for the accommodation of John R. Bradford, by whose order and for whose use it was drawn, and who had agreed to place funds in the bank in New York to meet it when due. The plaintiff knew of this arrangement, and therefore is not entitled to recover, if he is indemnified from another source.

It appears by the authorities, that a bona fide holder of a bill accepted for the accommodation of the drawer, may recover of the acceptor, although he knew it was not drawn on account of funds ; but if he is secured or indemnified by the drawer, there is no reason to allow him to recover of the ac ceptor, and thus drive the acceptor to an action against the drawer.

In this case it appears, that provision is made in the assignment of the drawer, for indemnity to the plaintiff for all liabil•ities on bills, &c. and it is agreed in the case, that the funds are sufficient to indemnify the plaintiff, and that the trustees are ready to pay him the full amount of this bill whenever it shall be decided that he cannot recover of the defendants. There is no reason in compelling the defendants to pay him, in order to release that portion of the funds for other creditors, and oblige the defendants to come in among the unpreferred creditors to obtain probably a small part, and perhaps nothing, of their debt so created.

The cases cited by Mr. Rand, to show that the acceptor of an accommodation bill is always answerable for the amount of the bill until it is paid or a release is given, were well decided under their particular circumstances, and perhaps are founded on a good general rule ; but there are exceptions, the justice of which is as manifest as that of the rule.

If the holder has in his hands funds of the drawer who is the real debtor, with a right to apply them to the discharge of the bill, he can have no right to call on the acceptor. Indeed the bill ought to be considered then as paid. Now we consider the appropriation of the proceeds of the effects of John R. Bradford to the payment of the plaintiff as indorser of this bill, in the same light as if the money was in his own hands. It is so appropriated by the assignment, and the money is at the command of the plaintiff whenever he chooses to receive it.

The case cited from 5 Esp. R. 178, to show that the acceptor was liable notwithstanding a deed of composition in which the holder of the bill was provided for, and he had discharged the drawer, is without doubt good law, for the holder having received less than the whole debt, has a right to call on the acceptor for the residue, and his discharge of the drawer does not affect the acceptor’s claim upon him. The principle of the case we admit, but it does not govern this case, for here the whole debt is paid into the hands of trustees, who hold it for the use of the plaintiff.

The proceedings of the defendants in Virginia, whereby they attempted to secure themselves out of debts due there to John R. Bradford, by a process in chancery, does not affect their liability in this action. The process itself shows, that it is intended only as an indemnity against eventual liability, for the defendants are under bonds to restore the money, if it shall be so ordered by the court. Their charge of the acceptance in their account, did not, under the circumstances, fix them upon the bill, for their contingent liability was a sufficient reason for the charge and for the measures taken for their security. Neither does their indebtedness in a balance of account at the time they accepted the bill, affect the case, as the bill had no reference to that balance, and was manifestly a mere accommodation bill.

We think it very clear that the defendants are not liable in this action. The motion to take off the nonsuit is therefore overruled.