Source: https://supreme.justia.com/cases/federal/us/118/152/
Timestamp: 2019-04-21 08:18:07+00:00

Document:
In an action in the circuit court of the United States, submitted by stipulation of the parties in accordance with the practice prevailing in the state where the court is held, to the decision of the judge "as referee," the only matter reviewable by this Court is error of law in the judgment of the court upon the facts found by the referee.
A promissory note payable on demand, with interest, was made by a railroad corporation to a stockholder for money lent, and with the understanding that assessments to be laid on his shares should, when payable, be considered as payments upon the note. Assessments to a greater amount than the note afterwards became payable, and the difference only was paid by him. Held That the note was paid as between the corporation and the payee, and as against a subsequent endorsee taking the note when overdue. By the statutes of Massachusetts and of Vermont, promissory notes payable on demand are overdue in sixty days after date.
"$5,000 Boston, July 10, 1873"
"On demand after date, with interest, we promise to pay to the order of H. B. Wilbur, treasurer, five thousand dollars."
"As Receivers and Managers Vermont Central"
"and Vermont & Canada R. Co."
"By H. B. WILBUR, Treasurer"
"No. 8. Value received. Approved."
with a specification of defense, in accordance with the statutes of Vermont (Gen.Stat. 1862, c. 30, §§ 15, 32; Rev.Laws 1880, §§ 908, 909), that the defendant was organized as a corporation on May 27, 1873; that on July 10, 1873, it delivered the note in suit to John Q. Hoyt, an original subscriber to the defendant's capital stock, and then holding shares of that stock of the par value of $50,000, only partially paid for; that on that day, the defendant being in urgent need of money, and not having time to regularly lay and collect an assessment on its capital stock, Hoyt advanced to the defendant $5,000, and the defendant gave him this note, under an agreement that he should hold it until an assessment covering that amount should be made on his stock, and it was understood and agreed by and between him and the defendant that when such assessment should be made, the $5,000 so advanced should be applied in payment thereof, and the note should be thereby paid and extinguished, and should be surrendered; that on August 10, 1873, such an assessment was made by the defendant upon its capital stock, including Hoyt's shares; that on October 28, 1873, the $5,000 advanced as aforesaid was duly applied in payment of that assessment, whereby the note was paid and extinguished, and the note was suffered to remain in his hands through inadvertence, and that the plaintiff received the note from Hoyt long after its payment and extinguishment as above stated, as security for a preexisting debt from Hoyt to the plaintiff, and with full knowledge of such satisfaction and payment, and after the note had ceased to be current.
On May 16, 1882, the counsel of the parties signed and filed an agreement in writing, by which it was "stipulated and agreed to refer this case to Hon. Hoyt H. Wheeler to try and decide this case as referee."
bonds, called income and extension bonds, a part of which had not been negotiated. The defendant was chartered with power to temporarily operate those roads, subject to the order of that court, and to assume the contracts of the receivers and managers. Subscriptions to the capital stock of the defendant were opened, and two millions in amount subscribed for April 30, 1873, of which John Q. Hoyt, of the City of New York, subscribed for $50,000, and it was expected by the subscribers that when the company should be organized it would be appointed receiver of those roads, and assume the obligations of the other receivers. Five percent of the subscriptions was required by the commissioners of subscription to be paid down. The receivers were in need of funds, and by arrangement with them one of the subscribers advanced $200,000, ten percent of the subscriptions, in behalf of all the subscribers, as a temporary loan to the receivers pending the organization of the company and proceedings to carry out the expectations of the subscribers, and a note of that amount was made, and, with $400,000 in amount of the income and extension bonds as collateral security for its payment, delivered to the subscriber making the advance, upon the understanding that the note should be paid if the defendant company did not come into possession of the roads and assume the obligations of the receivers, and stand against the subscriptions for stock if it did."
each his proportion of it, and received the notes and a proportionate amount of the collateral bonds. Hoyt paid $5,000, and received the note in suit, and $10,000 of the bonds. Hoyt paid the assessment of August 13th, and one-half the assessment of October 28. The other half of the latter was rescinded, and stock issued for one-half the amount subscribed. The assessments paid amounted to fifty percent of the subscription. Hoyt paid, as stated, fifty percent, and no more, of his subscription. There was no other consideration for this note, and by the understanding of the parties, it was to be delivered up, with the collateral bonds, on delivery to him of stock certificates for his stock."
"About November 1, 1873, Hoyt became indebted to the plaintiff at New York, for $7,000 lent, with the understanding that the loan should be increased to $10,000, and delivered this note and these bonds to him as security for the payment of the loan. The plaintiff at that time knew, from previous conversations with Hoyt generally, about the subscription for stock and the situation and circumstances of the roads, but he did not know before, and was not then informed, that the note was to stand against the subscription for the stock, nor that the bonds, which then had a long time to run, were collateral to the note, but took all of them supposing that they were valid securities for what they purported to be. Certificates of stock were issued for all the subscribers in 1874 and delivered to them, and all but Hoyt delivered up the notes and bonds. He endeavored to procure the note and bonds of the plaintiff to deliver up to the defendant, but was unable to do so."
ask him to wait again, but would provide for the payment of this one. Just before this suit was brought, a similar interview was had during which the president told him that he thought and had been advised that the circumstances under which the note was given would constitute a good defense to the note, and did not pay it."
"The income and extension bonds were sold in the market, March 24, 1881, for $5,000, less $12.50 commission, without notice to Hoyt or the defendant. They had been worth more while the plaintiff held them, but this was their then market value. The note is made a part of this report. It was executed, as to time and place, according to its purport."
"All the evidence showing the circumstances under which the note was given and the proceedings in relation to it were seasonably objected to, and admitted against the objections. The respective rights of the parties to recover in this action are, upon these facts, submitted to the court."
"said cause came on for trial, upon the report of the referee, before the Honorable Hoyt H. Wheeler, district judge of the United States within and for the District of Vermont, and, after hearing the arguments of counsel for the plaintiff and defendant, the court on November 7, 1882, filed its decision in said cause rendering judgment for the defendant,"
"Upon the report of the referee, the court rendered judgment for the defendant, to which decision and judgment the plaintiff excepted. Exceptions allowed, and ordered to be placed on record."
This case was not submitted to the decision of the court without a jury, pursuant to the Revised Statutes of the United States, §§ 649, 700, but to the decision of the judge as a referee, in accordance with the statutes and practice of Vermont. Gen.Stat. 1862, c. 30, § 52; Rev.Laws 1880, § 985; White v. White, 21 Vt. 250; Melendy v. Spaulding, 54 Vt. 517. The only question presented by the writ of error, therefore, is whether there is any error of law in the judgment rendered by the court upon the facts found by the referee. See Bond v. Dustin, 112 U. S. 604, 112 U. S. 606-607, and cases there cited.
"The assessments paid amounted to fifty percent of the subscriptions. Hoyt paid, as stated, fifty percent, and no more, of his subscription. There was no other consideration for this note, and by the understanding of the parties, it was to be delivered up, with the collateral bonds, on delivery to him of stock certificates for his stock."
originally advanced by the lender "in behalf of all the subscribers," and which was repaid to him by Hoyt when the notes to the several subscribers were substituted for the single note for the whole original advance, is to be considered as part of the fifty percent paid by Hoyt toward his subscription, and that he paid directly to the defendant only forty percent The difference in form of the statements, that "the assessment of June 24 was paid by the subscribers, respectively, including Hoyt," but that "Hoyt paid" the two later assessments, is, to say the least, quite consistent with this view. And any other is wholly inconsistent with the ultimate facts expressly found, that "Hoyt paid, as stated, fifty percent, and no more, of his subscription," and that "there was no other consideration for this note."
The effect of the agreement between the defendant corporation and Hoyt was that the assessments to be laid upon his stock in the corporation should, when payable, be not only set off against, but considered as payments upon, the note for $5,000 from the corporation to him, now in suit. When Hoyt delivered this note to the plaintiff, on November 1, 1873, the assessments already due and payable upon his stock amounted to much more. As between the defendant and Hoyt, therefore, as well as against anyone who took this note from Hoyt, when overdue, the note had been paid. American Bank v. Jenness, 2 Met. 288; Gilson v. Gilson, 16 Vt. 464.
In this country, a promissory note payable on demand has always been held to be overdue, so as to subject anyone taking it to all defenses to which it would be open in the hands of the payee, unless transferred within a reasonable time after its date, and what is reasonable time is a question of law, depending upon all the circumstances of the particular case. Morgan v. United States, 113 U. S. 476, 113 U. S. 501; Losee v. Dunkin, 7 Johns. 70; Sylvester v. Crapo, 15 Pick. 92; Dennett v. Wyman, 13 Vt. 485; Cump v. Clark, 14 Vt. 387. See also Chartered Mercantile Bank v. Dickson, L.R. 3 P.C. 574, 579.
of the note in suit, the statutes both of Massachusetts and of Vermont had defined reasonable time, for this purpose, to be sixty days from the date of the note. Gen.Stat.Mass. 1860, c. 53, §§ 8, 10; Pub.Stat. 1882, c. 77, §§ 12, 14; Stat.Vt. 1870, c. 70; Rev.Laws 1880, § 2013. The power of the state legislatures to establish such a rule prospectively, with regard to promissory notes made and payable within their respective jurisdictions, has not been and cannot be doubted.
The note in suit was endorsed to the plaintiff more than sixty days after its date. It was made in Massachusetts, and, if not payable there, was payable in Vermont, where the defendant was incorporated. The construction and effect of the contract must be governed by the law of the one or the other of those states, and it is superfluous to consider by which, because by the law of either the note was overdue when the plaintiff took it, and therefore he cannot recover upon it.
As to the evidence stated in the report of the referee, upon which the plaintiff relies as tending to prove a promise to himself by the defendant to pay the note, it is sufficient to say that, it not being shown that the plaintiff, in consideration of or reliance upon such a promise, either agreed to forbear or actually forbore to sue, there was no consideration for the promise, and no ground for giving it effect as an estoppel.

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