Case Name: MORRISON vs. CLAY
Court: Kentucky Court of Appeals
Jurisdiction: Kentucky
Decision Date: 1808-05-13
Citations: 1 Hard. 421
Docket Number: 
Parties: MORRISON vs. CLAY.
Judges: 
Reporter: Kentucky Reports
Volume: 3
Pages: 421–432

Head Matter:
MORRISON vs. CLAY.
1⅛ account, ^twee^A^aS b, a gives his bond to C, who B.VcannotbÍ relieved from bond, be-eomtóttedí'B ⅛ his contrail with A j pro. v"Jeii c„w're b, nor o-therwife con-f,4r"¿l.c”mtfee RCp, ^
MORRISON, the appellant, exhibited his bill against Edward West, Henry Clay, and others ; praying, among other things, for an injunction, and for relief against a judgment at law, obtained against him by the defendant, day.
It appears that the complainant and George Man-sel, entered into a contract with Edward West, who claimed to be the inventor of a machine ÍSr cutting, and for cutting and heading nails, for the purchase of the said invention ; reserving to West, the right of using the machine in Kentucky: for which machine they agreed to give him the sum of nine thousand three hundred and seventy-five dollars. West, on his part, agreed to proceéd, without delay, to the city of Washington, and obtain patents for his invention, and assign the same to Morrison and Mansel.
Morrison, Mansel, and West, afterwards, on the ——— flay of September 1802, entere^ into a new c^ntcact, and .annulled the first one. By this second contract, it was agreed, that West, Morrison, and Mansel, should become partners in the machine ; and the said Mansel and Morrison were to pay two-thirds of the original price ; and that in malting those payments, they should have credit for the amount of certain debts of West’s, settled, or to be settled, by them, with his creditors.. Peacock, Wrenshall, and Co. for whom Clay was attorney and agent, had, previous to that time, obtained a judgment for a considerable sum, against the said West and Jesse Guthrie. In the treaty concerning the second contract, West insisted that Morrison should settle this, debt in particular, to which Morrison agreed ; and for that purpose he went in quest of Clay, and when he met with him, made a proposition to Clay to. settle, or pay him the amount of West’s debt to his principals, in land. This proposition was rejected by Clay : Morrison then proposed paying it in land, and, money, in certain pro-, portions, upon a credit; to which proposition Clay assented; and they went together to John Bradford’s, where Morrison gave Clay his bond for 271/. 14s. 6d. in money, and also his bond for 271/. 14s* 6d. payable in certain lands ; and Clay thereupon executed to West and Guthrie, a release of the judgment obtained by Pea-, cock, Wrenshall, and Co. against them. And the se-, cond article of agreement recites, (among other consi-, delations) that in consideration of Morrison’s “ having; settled with Henry Clay, attorney for Peacock, Wren-shall, and Co. a debt due by said West,” &c. the contract between them had been entered into ; from which it appears that Morrison received a credit for the amount of the debt so settled ; and that West was discharged, therefrom.
Clay threatening to sue Morrison on those bonds, he confessed judgment, ahd filed his bill for relief against the same. The grounds of equity alleged in the bill, were, that Ae consideration had failed, in as much as a Mr. Perkins had previously invented, and obtained a patent for a nail cutting machine, constructed on the same principle of West’s ; and that in fact, West’s was, not a new discovery ; and that neither he, nor his as-, signees, could have the benefit of the machine ; and that West had practised a fraud on Morrison and Mansel, in having denied that Perkins’s machine was constructed upon the same principle with his own, when he knew it to be so constructed.
Clay, in his answer, admits having knowledge that Morrison had undertaken to pay West’s debt to Peacock, Wrenshall, and Co. for whom Clay was agent; and that in fulfilment of that agreement, he had executed him the bonds in question ; in consideration whereof, he released the original debt and judgment; but he denied that he had any knowledge of the fraud alleged to be committed by West, in having denied the interference of Perkins’s machine. He denied also, that he was present at the making of the second contract between Morrison, Mansel, and West, or that he was privy thereto, otherwise than his having understood, that in consequence of that contract, Morrison was to satisfy West’s debts, or procure his discharge therefrom.
Morrison’s injunction was dissolved, on motion; from which he appealed to this court.
Bledsoe and Talbot, for the appellant
Contended that West had committed a fraud on Morrison ; and that the second contract was also entered into by Morrison, under false impressions made by West. In this branch of the argument, they cited 2 Powell on contracts, 195-6 —3 P. Will. 251. On the remaining branch of the cause, they proceeded as follows :
If Morrison is entitled to be relieved from this contract, against West, he is entitled to the same relief against Clay. Clay is to be considered in no other light than as the assignee of West; andan assignee takes abond subject to all the equity attached to it in the hands of the assignor. The principles of the mercantile law, which protect mercantile paper from latent equities, cannot apply to this case. The case of Drake vs. Johnson , shows that those principles do not extend to bonds in this country. The consideration to Morrison, for entering into this contract, and giving these bonds, was his contract with West, and the probable emolument arising from the patent right. These have totally failed : and no benefit ever can arise to Morrison from that contract. It cannot, therefore, be equitable, that Morrison, who has been defrauded by West, should be compelled to pay the debts of West. Clay knew of the consideration for entering into this contract. It was, therefore, as much his duty to see that West was acting fairly, as it was the' duty of Morrison. If he did not discover the -fradd* and one was in fact committed, he must bear the loss of that part of the contract which would have enured tó his benefit.
May 13th.
That Morrisbn gave the bonds in question directly to Clay, cannot alter the case. It was given by Morrison* under an impression, that he had, in the purchase of the patent for making nails, received a valuable consideration therefor ; but in this he was mistaken, and is therefore entitled to relief.
The giving a new bond to an innocent person, oh account of a contract in which the obligor was defrauded* but, at the time of giving the bond, was ignorant of that fraud, does not render the bond obligatory; but thé obligor is, notwithstanding, entitled to relief. Such was the decision of this court, in the case of Pile vs. Shannon, ( ).
A case which the court will recollect is reported in. one of the English reporters, ⅛ which the indorser of á bill of exchange, which had been protested, gave his note to the holder, for, the amount, under the impression that he was liable. It was afterwards discovered that the holder of the bill of exchange, had delayed proceeding on it, &c. so as to discharge the indorser. Upon this being made appear, the indorser was relieved from his note. This was a case of mercantile paper, and shows that a change of paper security, when there is no actual consideration passing, does not better the situation of the one, nor impair that of the other. So in the case of Bibb vs. Prather, Smiley, and Morehead , Bibb was relieved from his bond, given to Prather and Smiley, on account of the fraud of Morehead.
May 13th and 14th.
Hardin and Clay, for the appellee
‘Contended that there was no fraud on the part of West : but if Morrison would have been entitled to be relieved from the first contract, that the second was a confirmation of it. On these points, they cited 2 Powel on contracts, 143 — ■ 2 Vern. 423 — 2 Powel on contracts, 163 — -3 Pr. Wms. 193-4 — 1 Pr. Wms. 727 — 4 Wilson, 286.
On the other point, they proceeded — But if Morrison should be entitled to relief against West, he cannot be against Clay ; or rn other words, against Wrenshall, Peacock, and Co. for whom Clay is a trustee. Clay is not, in fact, the assignee of West; and cannot, therefore* ⅜⅜ Ribetea by the doctrine of assignments. He wás sip original, contracting party with Morrison, and must be entitled, ¡tó the benefit ^Of that contract, unles? it be im-peachbjj. , If js not upon ¿mercantile principle, fhat we claiixv ái¡jghtftÓ ^recover; biitupon the well-settled principles óf tjie, c-ommon law, ^hat Clay, for Wrehshall, Pea-toekvan<^ Co. gave to Morrison, a Valuable consideration for these bonds. That consideration was the release of thelfjudgnient against West and Guthrie; That release was given^ and was .made complete, when those bpp& were executed. This was the consideration which Morrison, stipulated for, and which he received; and whether &⅛ could make that release operate beneficially to himSelf, or jjótj is imiriaterial — it ,was a loss to us i and thelqss of one party, is as valuable a consideration^ in láw, as the gain of the other;
Clay' never entered into any contract. With West on this subject; he does not claim under West 5 and cannot, therefore, be, affected by any equity which may ex-tendió West.. The contract with West, may have been the capse of Morrison^ contract with Clay, but it was rioi the consideration.
. It isr, however^ s^id that, Clay had notice of the contract between West arid Morrisort,and&hould, therefore, be affected by West’s fraud. That Clay had notice of the contract, may be admitted 5 but it is not pretended, that Clay ha<|' any .knbwledgie of the fraud of West, if any were practised, And notice, to affect a third person, must he á notice of t defraud, not notice Of the contract only. ( ,
The case of Pile vs, Shannon, Edc* has been relied oh by the other side. That case cannot be law; The court, in that decision, place a strong reliance upod there being no new consideration passing between the parties, upoiigívíng the new bond. But this is surely. faTIatious. The giving further day of payment, and faking ahptherikidd of property, must have been deemed benéficiáí to„ the obligor, or he would not have entered into it. Postponement, is, in itself a valuable consideration in jaw, ífut if there could be any doubtj as to the cohsidejatiop .being beneficial to the Obligor, there canbe'none, but that there was injury to the obligee, id ⅜¾⅛ case.' He gtvvé'üjF the old bortd, which he held by assignment, and by so doing, he lost his recourse against the assignor. ' ■
This decision, wheti it places a reliance upon the absence of a new consideration passing to the obligor, at giving the new bond, is, in principle, opposed to other decisions of this, and other courts. It has Uniformly been held, that if an obligor induces a third person to take an assignment of his bond, under an assurance that it will be paid, he thereby bars himself of all legal and equitable objections against the payment. Such is the decision of this court, in the case of Short vs. Jackson and Toung , — and in the case of Duncan vs. Snell —-So also, is the decision of the court of appeals of Virginia, in the cases of Buckner, &?c. vs. Smith, c. 1 Wash. 299 — and in the case of Hoomes vs. Smock, ibid 389. In none of those cases, was there any new consideration passing to the obligors, at the doing of the act, which barred them of their defence against an innocent third person.
But if the case of Pile vs. Shannon, ⅛?c. should be considered to be law, it is clearly distinguishable from the present. There, Meriwether held the first bond, subject to the latent equity. But Clay, in this case, never held any bond, or contract, that subjected him to the equity against West.
If the case of Bibb vs. Prather, Smiley, and More-head, is in any respect contrary to the doctrine here contended for, it deserves to be ranked with the case of Pile vs. Shannon, But an examination of the record in that case, will shew, that Prather and Smiley were connected with Morehead, in that part of the contract with Bibb, and therefore, subject to all the equities attached to that contract, and were not innocent third ■persons.
The same answer may be given to the other case referred to by the counsel for the appellant ; that the parties to the contract complained of, and no others, were before the court; consequently, a material misrepresentation, or mistake, in any part of the transaction, was properly inquirable into at any time.
But if Clay were to be considered in tile light of an assignee of West, yet Morrison could not. be relieved from these bonds, for he induced Clay to accept them ; and is, therefore, within the principle of the decisions just cited on that point.
Upon the general principles of equity, the. complainant cannot succeed. Clay stands before the court, with the law in his favor, and with equal equity., The law must therefore prevail, and. Morrison must have his relief, if entitled to any, against West.
If you say, that Wrenshall, Peacock, & Co. through Clay, are not to have the benefit of these bonds, and you set aside the contract; you have it not in your power, to reinstate them in their former situation.. Their judg-, ments against West and Guthrie are satisfied. Admitting that the chancellor could, on a proper suit by them againt West and Guthrie, have the release given up ; yet that refrase destroyed the lien upon their property, and intermediate purchasers, under them, will, hold against the judgment.
The time which has elapsed, in which the collection, has been delayed, cannot be recalled ; and intermediate changes of circumstances, cannot be investigated, nor provided against. Chancery will never set aside a contract, where innocent third persons, having the law in their favor, would be affected thereby ; unless they can, be placed in their former situation,
This question has lately been deeided in our favor, by the federal^ district court of this state, in the case of, Mansel vs. Boyee and M'Calmuty on another branch of the contract relating to this patent right. The decision of this court, pronounced a few days since, in the case of Davis vs. Bayton, is also, ⅛ point for us.
May 12th.
Ta¡bot, in reply.
-fa to the last paint; ^hffl.Clgy, jpr= procuring a bond from Morfispn, run off with tpe. iqp-ney, when Morrison has received no considératfoq for it ? He can have no better plaim to hold it, fofo foe innocent purchaser of a stolen horsp, would foave. 7⅛. case of Pile vs. Shannon, 'fsfc. is in, point for us, .T]néj^, Meriwether was an innocent purchaser. He had iakp» a bond to himself; given q further day of payment; an.d stipulated for a different kind of property- Yet, \yhpn Pile discovered the fraud practised oji him by Daniel, he was relieved against this bond to Meriwether- That was a decision, not lightly given. It was re-argued, fe-considered, and adhered to. It was a decision, bottomed, not upon the act of assembly relative to assignments, but upon the broad principles of morality-justice says, no man shall be compelled to pay, without receiving an adequate cpnsideration. The English, pre,-cedents, lay it down as a rule, that an equity will go along with foe subject, into the hap.ds of .every assignee, how remote he may be, except ⅛ foe cases of mercantile paper ; and foe giving mercantile paper, ⅛ a wpiver of every equity, except between foe contracting parties.
Morrison has received no, cpns¡,der$tÍQn for thesp, bonds. He cannot, therefore, be compelled tp pay them, unless he has waived his equity. The giving the bpnd, to Clay, was no waiver of that equity ⅝ for Morrison was then ignorant of the fraud practised °n him- No confirmation; no new secury; can yfaiyp aq equity, When made under the same false impqsssfoqs whiph ppp-duced the original contract.
This feature will distinguish foe case of Pile vs. Shannon, and fois case, from the case of Short vs. Jack - son and Toung, and the pthers cited on the saipe part, In each of foose cases, the obligor, when he gave foe assurance tp pay, was fully acquainted with his equity, and should then have set it up; and his pot doing ⅝0, would l^ave been a fraud upon ¡the assignee, if there* after be could have availed himself of it.
If the chancellor sets aside the contract of Morrison and West, for the fraud of the latter, he will also direct die release given by Clay, as the attorney and agent of ■Wrenshall, Peacock, and Co. to West and Guthrie, to be delivered up. It is true they must be before the court for that purpose, and can be brought before the court before the final decree is pronounced, when complete justice can be done to die parties. If Clay apprehended that West and Guthrie’s circumstances had been impaired, since the giving of the release, he should have a-'ycrred it in his answer, and thereby put it in issue. He has not done so. That circumstance is, therefore, to be totally disregarded, in making a decree in this cause.
May 20th.
Abftnt, Jsbge Bibb,
Ante 218.
(a) Ante 53.
Pr. Dec. 158.
Pr. Dec. 224, 225.
Pr. Dec. 375.
Same point decided in Hammond vs. M'Cullon, Oñober J793 — See. Littell’s principles of law and djuitj, 18,
DAVIS vs. PAYTON.
PAYTON filed his bill again#: Jeffe and Travis Davis, in which he ftated-that Jeffe Davis fold to him his claim tp pay, &c. an.d right to land, which were due to him, as a captain in a Virginia/¿pgiment, in the late war with Great Britain ; affuring him, that he had been a ciptam in faid fervice, and was entitled, &c. as fuch. That, in confide^actea,, th^repf, he, Payton, executed to, Jeffe Davis his bond for 2,200 acres of land $ that in the fame month, the. faid Jeffe and, Travis Davis, met with the complainant, and faid Jeffe informed him, that he had fold faid bond to feíd .Travis Davis j and, at the re- . queft of faid Jeffe, he cancelled the and gave a new one to Travis Davis; that Travis Davis had recovered# judgment on this bond. The bill further charged, that Jeff^ Davis, in fail, was not a captain in faid fervice, nor entitled to pay, &c.as fuch.; that Travis Davis was prefent at the.original contradi ; and, that there was a fraudulent combination between the two Davises, to cheat him. The anfwer denied the ground of equity fet up in the bill. The inferior court decreed in favor of ⅜⅛⅜.complainant.' The cauf&was-argued by tor the appellant4
Th e Chiej* Justice, deli vered the opinion of the court ; by which the, decree was reverted, on the queilions of fact in the cause* The opinion, however, contained the following remark :
<( W.ete the ftatéments true, as they relate to the appellant, Jefle, it would be highly unjuft and iniquitous, to afleét the right of Travis, in cbnfequence thereof, unless he had colluded with the faief Jefle, and ;had participated 'in his fraud j of this, or of his'even being prelent at the original contract,' there ⅜ not the flighted fliadow of evidence. Therefore, if th^appcllec hácj any re-he could only be relieved againfl Jefle Davis.

Opinion:
Edwards, Ch. J.
delivered the opinion of the court. After stating the case, as above, he proceeded—
Several questions have been argued at the bar; sueh as; first, whether the first contract was fraudulent on the part of West; second, whether the second was fraudulent; or whether it operated as a waiver, on the part of Morrison, to all objections on account of Perkins's machine.
It is not necessary to decide these questions, either tray; for Clay cannot be affected thereby: unless, indeed, he had been guilty of fraud, or collusions, or was criminis with West, of which there is no proof.
' The arguments on the part of the appellant, have rested upon premises assumed, which have no foundation in fact ®r in law.
They have gone upon the ground, that the consideration that, passed between Morrison and West, inducing Morrison tq enter into the contract with him, was the consideration of the bonds giveá by Morrison to Clay ; or in other words, that the nail-cutting machine sold by West to Morrison and Mansel, was the consideration moving between Morrison and Clay, in the contract between them. Hence, it is argued, that- the consideration between. Morrison and West (that is, the nail-cutting machine) having failed, the consideration between Morrison and Clay, has failed; and that- the bonds or judgment founded thereon, ought to be relieved against.
But jt is obvious, that the consideration moving between Clay and Morrison, was entirely different. The pqnsi^eratiou given by Clay, was the release or discharge of the judgment against West and Guthrie, at Morrison's request; and the consideration moving from Morrison to Clay, for the release, was the execution of the bonds in question. This consideration moving from Clay has not failed, nor has any fraud been practised by him ; and the consideration is. sufficient in law and equity to support the contract.
As to what induced Morrison to offer his bonds to Clay, in consideration that he would release his debtor, it is nothing to the purpose. It is a subject with which Clay had nothing to do, and he was not bound to take notice of it.
Although the contract between Clay and Morrison, may have been occasioned by the contract between Morrison and West, yet the contracts were wholly distinct-day was neither party nor privy to the contract between West and Morrison. The contract, as between Clay- and Morrison, was original — -not derivative.
It has been urged, that an assignee of a bond, both at. common law and by the act of assembly, takes it sub-, ject to all the equity attached to it in the hands of the ori-" ginal obligee.
But how can the doctrine apply to this case? If Clay, is an assignee, it may be asked, who. is the assignor ? Morrison cannot be, for he is the original obligor in the-bond; and Clay himself is the original obligee, and cannot therefore be assignee. This will shew that the case is not within the act of assembly, and that it must depend on other principles.
But how does the common law principle apply ? It was held that the assignee should take the bond subject-to every objection which might have been made to it in the hands of the assignor, or obligee ; because it was assignable in equity only, and the assignee had to come into equity as complainant, to have the benefit of it. There the defendant had the law on his side, and his equity be-, ing equal, he must prevail. Clay is neither assignee, nor is he asking relief as complainant in equity. Neither the common law principle, nor the act of assembly relating to the assignees, can affect the case ; because. Clay takes, not as assignee,but, as has been before shewn, as, an original contracting party', upon a consideration distinct from the consideration passing between Morrison and West, attempted to be set up as the ground of. equity.
The case of Pile vs. Shannon, & c. ( ), in this court, has been greatly relied on by the counsel for the appellant, to prove that the bonds having been executed to Clay, in consideration of his discharging his original debtors, cannot help his case ; and that he must be subject, nevertheless, as if the bonds had been originally given to West, and by him assigned to Clay.
It is very doubtful, whether that case, to its full extent, can be supported upon principle. It is, however, not like this case. In that case, Meriwether, who held a bond on Pile, as assignee, surrendered the bond, and took from him a new bond, varying, in some respects, the payment; which new bond came to Shannon by assignment. Pile having an equity against the old bond, was held not to have lost that equity, by taking it up from Meriwether, and executing in lieu thereof, a new one; and he was relieved.
If the case can be supported upon any thing like principle, it must be on these grounds : that the original bond was once affected with the equity in the hands of Meriwether, who took it as assignee ; and that bond being the consideration of the new one, they should both partake of the same qualities ; and that a mere change of the paper, could not take it out of the act of assembly, which had once attached to the transaction ; and that the new bond, being thus affected in the hands of Me-riwether, it went with its defects into the hands of Shannon, as assignee. Even if all this were so, it would not affect the present case. It is a new, distinct, original contract, founded on a new, distinct, original consideration-.
The difference between Clay's taking the bonds, as an original- party contracting with Morrison, and his taking, as assignee from West, had they been executed to him by Morrison, will be further elucidated by the following considerations : Had the bonds been given by Morrison to West, and by West assigned to Clay, in consideration of Clay's releasing the judgment, Clay would really have taken as an assignee, deriving title through West; the contract by which Clay obtained the bonds, would have been a contract with West, and not with Morrison ; and the Consideration, (that is, the release) would haye been a consideration moving from Clay to West, and not from Clay to Morrison, who, therefore, WOÜláílctt Bkve beett-bound by that eonáidé'rátibb. Biií eV%& m the éáse'bf Cliffs tkking as assignee, if hfe haa tíáid the consideration; áitd tdók the aSsignAent, tipdtt MbffiSbfi's reqtíést, the consideration wtíuld háVembV-⅜⅛ from Clay towards Morfisori, feetatisé of tbiat request, .arid'hé would háve been btiuhd thereby.
There areiriany cases at cdtóAon law, in Which it ⅛ held, that if1 A. prbmise B; that in consideration B. will fdrbeaf, and' not sue his1 debtor for a certaiíi tiírié, At will !priy the dSbt ; and B. ddeS forbear, it is a good cóá-kideratibtt tb feripport the assumpsit; and A. shall be compelled'by action, to pay the debt: and it was never heard,' either iníaiv Of eqnit}', that A. should be excused frani the performance of hiS promise1, because of any fraud Which might have been practised by the debtor, inducing A. to make the proAise, lAless B. hiAsélf, WaS partaker in the fraud.
\¥⅛ are Of opíííiOh théré is no error in the decree of tWcirCüit court; dissolyihg the appellant's ínjúrfcíióri therfciW.-^-^Decree affirmed;
(a) Ante 53.
The principle upon which this cauft was decided, is recognized and aflef upon, in the ccfes of Copeland vs. Fugate, and Lee vs. Vaughan, both decided at the Mí1 tefrii l?o8'.