Case Name: Clark, &c. vs. Finnell, &c.
Court: Kentucky Court of Appeals
Jurisdiction: Kentucky
Decision Date: 1855-12-05
Citations: 16 B. Mon 329
Docket Number: 
Parties: Clark, &c. vs. Finnell, &c.
Judges: 
Reporter: Kentucky Reports
Volume: 55
Pages: 329–338

Head Matter:
Clark, &c. vs. Finnell, &c.
APPEAL FROM KENTON CIRCUIT.
1. An entry of judgment against the defendants will be regarded as a judgment against such only as have been served with process or have appeared.
2. An error in the date, from which interestis to be computed in entering judgment on a note or bill of exchange, or allowing costs of protest, will not be cause for reversal, unless the Circuit Court has refused to correct it on motion.
3. An answer to an action on a bill of exchange, that the defendant does not ado it a certain fact, and calls for proof, or does not admit that he owes the debt sued for, is not a denial, nor sufficient under the Code to put in issue a fact of which the defendant might have knowledge or belief. It is not the denial of any allegation of fact, nor the statement of any matter constituting a defense, (Code of Practice, sec. 125,2 and 3 clauses,) and is therefore bad on demurrer.
4. It is not a valid plea of set off to plead to a suit by the commissioners of the Kentucky Trust Company Bank, appointed to collect the debts and pay the creditors pro rata, that the notes received of the company were under par, and defendants suffered a loss without a tender back of the notes, and bringing them into court.
5. Nor is it any ground for injoining a suit for the debt created by the loan of the notes that defendants had parted with the notes, and were sued for their nominal value, and the suit still pending. The court could not rescind the contract without restoring the notes.
The facts of the case are stated in the opinion of the Court. Rep.
J. W. Stevenson and J. Harlan for appellants—
Finnell, Kinkead, and Winston, as commissioners appointed by the Judge of the Kenton Circuit Court to wind up the affairs of t.he Kentucky Trust Company Bank, sued Clark, Robbins, Mack, and Payson, to recover the amount of a bill of exchange drawn by Robbins on Clark in favor of Mack, and by him indorsed to Payson, and by Payson indorsed to the Kentucky Trust Company Bank.
Process issued against Clark, Robbins, Mack, and Payson, and was executed on Robbins and Payson only.
An answer was filed, commencing with the words “The defendants admit, &c.” This,'acording to the repeated decisions of this court, embraces only those who were served with process; but as Mack’s name appears in the jurat the answer must be construed as the answer of all of the defendants except Clark.
There is no abatement of the action against Clark, and the court rendered judgment against all of the defendants. A judgment has been tendered against Clark without the service of pfo'ctess, or any appear anee for him. This is the first error upon which we rely for the reversal of the judgment.
The answer of Robbins, Mack, and Payson contains three separate and distinct grounds of defense, to each of which the plaintiffs demurred, and the court sustained the demurrer.
If the answer contains any matter of defense the judgment must be reversed.
1. The first ground oí defense puts in issue an essential averment of the petition, tó-wit, the giving of notice to the drawer and indorsers of the nonpayment of the bill. The answer denies the allegation in these words: “They do not admit the regular protest thereof, or that due notice of said protest was given to said drawer and indorsers thereof, as charged in said petition, and require proof thereof.”
It seems to us this was intended and does put in issue the fact of the service of notice ; and without proof of notice to the drawer and indorsers no recovery could be had.
The second and third grounds, when taken together, present an equitable defense and set-off for a very large proportion of the amount claimed.
The condition of the bank at the time the bill in question was purchased, must have been known to its officers, and that knowledge made it certain the bank must fail in a very short time. The demurrer admits the agreement that the bills Of the bank received for the bill of exchange were to be put into circulation in Masón county, Virginia. Of the sum received $3,796 were paid out there by the agents of defendants, the 19th of October, 1854, the day after the failure of the bank. But the probability is the agent will be compelled to refund the money. In addition, the balance of the proceeds of the bill were sold in the market at a loss of $2,170 04. Now, in a court of equity — to which docket the Circuit Court of Kenton should have transfeired this case- — are not the defendants entitled to relief? Between ihdxvid uals what would be the judgment of a court of equity upon the admitted facts ? Certainly the holders of a bill of exchange, obtained under the circumstances, would not be permitted to collect the whole amount thereof in gold or silver, or its equivalent. A corporation should not have greater or more extensive liberties, in a court of justice, than an individual.
The mere fact that the chancellor has appointed commissioners to wind up the affairs of the bank cannot change the legal rights of the parties. "Whatever equity the defendants possessed existed at the date of the chancellor’s order, and that equity is by no means impaired by the order.
If there were no other valid grounds for reversal the manner of rendering judmenfc is sufficiently erroneous—
1. The bill is dated 6th October, at thirty days; allowing three days of grace the bill became due the 8th November, and that is the day it was protested for non-payment, yet interest is given from the 6th, thereby giving two days too much interest. In buying bills of exchange the banks always include the days of graee ; and they retained or rather deducted the amount of interest, including the days of grace in this case.
2. The petition claims $-- costs of protest. The court rendered judgment for seventy-five cents for costs of protest, without allegation, or evidence, or any indorsement on any paper, showing that plaintiffs were entitled to it. The same principle applies in a matter of seventy-five cents as if it were seventy-five dollars.
The circuit court refused permission to amend the answer. That amendment proposed to put the plaintiffs on proof of their cause of action — for example, suppose under the old system the plaintiffs had sued in assumpsit, they would have been compelled -to prove the signatures, &c., of the defendants. In this case the execution of the bill is not denied, but the defendants denied having received notice, and the-amendment they proposed to make was a conclusion from that fact.
Morehead Sf Brown and W. B. Kinkead for appellees — ■
The first paragraph of the answer is clearly insufficient under the Code of Practice, {section 125.) It is a mere denial of the indebtedness charged, and a refusal to admit the regular protest of the bill — not a denial of notice, but only a refusal to admit.
The second paragraph is not an averment of tender to the commissioners of the money of the company ; it is only pretended that a part of the paper borrowed was not disposed of, but brought back to be handed to the commissioners, but they refused to refused to receive it.
This paragraph presents no valid defense to the action. The fact averred that they had parted with a portion of the notes, and were liable and actually sued for them, is not available, in this suit, as a defense.
The third paragraph is equally defective as a defense. It alleged that the bank was in failing circumstances, and that the defendants were defrauded. The facts to constitute fraud are not set out. The notes issued were payable on demand, and might immediately have been returned to the bank. The arrangement which is averred, that the notes would be circulated in Mason county, Virginia, was not legally binding, and could not justify the bank in refusing to redeem the notes on demand. The answer does not show that the defendants passed off the notes after the bank failed, and that they are liable to redeem them.
They do not tender back the notes received, and cannot ask a recision of the contract of loan.
The judgment of the court sustaining the demurrer to the answer was correct.
1. An entry ®f judgment against the defendants will be regarded as a judgment againstsuch only as have been served with process, or have appeared.
2. An error in the date from which interest is to be computed in entering judg ment on a note or bill of exchange, or allow ing costs of pro test, will not be ga“seufjeSrsevt“¿ Circuit Court correetiton^mo” tion-
December 5.

Opinion:
Chief Justice Marshall
delivered the opinion of the Court.
Finnell, Kinkead, and Winston, commissioners appointed by the Kenton Circuit Court to close the affairs of the Kentucky Trust Company Bank, under the 3d section of an act to amend the charter of said bank, approved January 2, 1852, (Session Acts, 14,) brought this action by petition against Clark, the acceptor, Robbins, the drawer, and Mack and Payson, indorsers, of a bill of exchange for $7,321 40, dated at Cincinnati, October 6, 1854, payable thirty days after date, at the Mechanics' Bank of New York, and addressed to Clark at the New England Bank, Boston, Massachusetts. Process upon the petition was served upon Robbins and Payson alone, but Mack united with them in filing an answer sworn to by these three, and a demurrer having been sustained to each paragraph of the answer, judgment was rendered against the defendants without naming them, for $7,321 40, with interest from the 6th day of November. 1854, and for seventy-five cents, the cost of protest, together with the costs of the suit.
From this judgment Clark, with the other defendants, has appealed; and it is objected that judgment was rendered against him without service of process or appearance. But according to the decisions of this court there is no judgment against Clark —the word defendants being understood to apply to those defendants only who had either appeared or been served with process. And there is nothing in the entries made in this case to repel or weaken this construction. There is therefore no error in this respect.
The error in the judgment of giving interest from the 6th instead of the 8th of November, if it be one, might have been corrected by motion in the Circuit Court. The date of the protest exhibited with the petition is the only evidence that three days, or any other number of days of grace are allowed in New York for the payment of bills. If it was erroneous to render judgment for seventy-five cents as the cost of protest, when no sum is specified in the petition, that error might have been corrected on motion, and cannot be moved in this court for the first time. But although there is a blank in the petition, as to the amount of the cost of protest, there is a claim for it, and the Court may have heard evidence on the subject.
3 An angwer t0 a? action on a bill of exchange that the defendant does tain fact, and orldoes° not °ad-that he owes the debt sued for, is not a de"j°jersu*¿ pode to put in which the defenUullu UdiVB knowledge or belief. Itisnot the denial of any allegation of fact, nor the statementof any matter constituting a defense, (Code of Prac. sec. 125, 2 and 3 clauses,) and is theretore bad on demurrer.
The material questions, however, arise on the demurrer to the answer. The first paragraph says the defendants do not owe, and ought not to pay, the amount of the bill, "for they do not admit the regular protest thereof, and notice, &c.," as charged in the petition, and require proof, &e. This paragraph of the answer is clearly insufficient under the rule prescribed by the 2d and 3d clauses of section 125 of the Code. It neither sets forth new matter, as allowed by the 3d clause, nor contains a denial of any allegation contained in the petition, nor of any knowledge or information thereof sufficient to form a belief. That the defendants do not admit a certain fact, and call for proof, &c., is not a denial, nor sufn . i i /-H i . ,. ncient, under the Code, to put m issue a fact as to which the defendants might have knowledge or belief. The general statement that the defendants do not owe, when the petition merely states the facts from which indebtedness or liability is implied by law, is , . ' r . . no proper response to the petition, because it neither denies any allegation of fact, nor states any new matter constituting a defense. But if it were allowed to be good in analogy to the plea of nil debit or non assumpsit, it might authorize a defense to be made, in the evidence of which there was no indication in the answer. And the object of the Code is that the pleadings shall state facts, and not mere implications of law. The court, therefore, properly sustained the demurrer to the first paragraph of the answer, and for the same reasons it properly rejected the proposed amendment, which in form and substance was nothing but a plea of nil debit.
The second and third paragraphs state in substance that the defendants received from the bank its own notes in purchase of the bill, and under an agreement that they were to circulate the notes in the county of Mason, in the state of Virginia; that at the time the bank, (or its officers,) knew, but the defendant did not know, that the bank was in a failing condition ; that soon afterwards, (on the 18th of October, 1854,) the bank refused payment of its notes, &c., and still refuses; that about the 19th of the same month the agents of the defendants, in the said county of Mason, then ignorant of the failure of the bank, used a specified amount, (between three and four thousand dollars,) of said notes in payment of hands in the employ of defendants. And the second paragraph states that the residue of said notes, the amount being named, were handed by them to the commissioners soon after their appointment, but refused by them, and the defendants afterwards sold them for the best price they could obtain, and got for them only about $1,300; and they claim as a set-off against their liability on the bill the difference between the sum obtained and the nominal amount of the notes sold, and also twelve per centum damages on said nominal amount, as due by the charter, on account of the refusal of the bank to pay the same. The third paragraph states that the persons to whom the notes had been paid in Mason county, Virginia, had, upon being informed of the failure of the bank, brought suit to recover their demands as if unpaid by the defendants, who, as they feared might, by the event of said suit or suits, which are still pending in Virginia, be compelled to pay said demands in good money; and they pray that proceedings in the present case maybe suspended, or judgment enjoined, until the decision of said suit or suits in Virginia, and if the decision should be against them, that the amount of said notes passed in payment in Mason county, Virginia, and also twelve per centum damages there on may be set-off against the demand set up in the petition.
4. It is not a valid plea of set-off to plead to a suit by the commissionersof the Kentucky Trust Company Bank, appointed to collect the debts and pay the cred itors pro rata, that the notes received of the company were under par, and defendants suffered a loss with out a tender back of the notes,and bringing them into court.
5. Nor is it any ground for in-joining a . suit for the debt created by the loan of the notes that defendants had parted with the notes, and were sued for their nominal value,. and the suit still pending. The court could not rescind the eon-.tract without restoring the notes.
The 2d paragraph, -which claims an immediate set-off for the loss on the notes sold, and for twelve per cent, damages, is fatally defective not only in failing to produce and tender the notes prayed to be set-off, or any of them, but in showing that the defendants have voluntarily parted with them for a valuable consideration, and have thus deprived themselves at once of the ability and the right to use them as a set-off. Besides, the amended charter before referred to, provides that in ease the bank should fail to pay its notes, &c., its debts shall be collected and paid pro rata to its creditors. We are not prepared to say that it would be consistent with the object and terms of this provision to allow a set-off for notes of the bank actually in the hands of its debtors, beyond the asetertained pro rata share properly distributable upon the same notes ; and it does not appear that any dividend has been made or is due, or that there has been or can now be any ascertainment of the distributable fund. But it is not necessary to decide the general question of set-off under this statute. It would be clearly inconsistent with the provision to allow twelve per centum damages on notes, even formally presented for payment to the commissioners appointed to close the concerns of the bank, by collecting and realizing its assets, and making pro rata payment of its debts. The answer, however, does not allege a demand of payment, but merely that the notes were handed to the commissioners, who refused to receive them. Thei'e was no error in deciding this paragraph to be insufficient.
The 3d paragraph, so far as it claims a future set-off, is subject to substantially the same objections as the second; and so far as it asks for an injunction until a suit in another state shall be decided in order that the defendants may know whether they will have a claim against the bank, for its notes which they have passed into other hands, in the way of their business, is unreasonoble, and, as we suppose, unprecedented. The defendants have put it out of their power to rescind the contract on the ground of fraud, and if the fraud were sufficiently shown they have not shown that they were wholly without fault in circulating the notes received from the bank, and thus putting it out of their power to restore them. Nor does it appear that they might not, at their own discretion, by re-payment or otherwise, re-possess themselves of the notes paid by their agent in Virginia, and thus enable themselves to restore the notes on a rescission.
We are of opinion that the demurrer to the third paragraph was properly sustained, and no sufficient answer having been offered it was proper to render judgment against the defendants.
Wherefore the judgment is affirmed.