Case Name: Daniel H. Ferguson vs. Alfred H. Fisk and another
Court: Connecticut Supreme Court
Jurisdiction: Connecticut
Decision Date: 1859-10
Citations: 28 Conn. 500
Docket Number: 
Parties: * Daniel H. Ferguson vs. Alfred H. Fisk and another.
Judges: 
Reporter: Connecticut Reports
Volume: 28
Pages: 409–418

Head Matter:
* Daniel H. Ferguson vs. Alfred H. Fisk and another.
The plaintiff agreed to loan $15,000 to an incorporated company in Oregon, of which he was a member, and tbe company agreed, when the whole sum was advanced, to give its note for the whole amount, and a mortgage of
• all its property, upon the request of the plaintiff. The plaintiff, then in Oregon, thereupon drew sundry drafts on his agent in this state, to tbe amount in all of $7,600, as a part of the loan, and delivered them to the company. The drafts were forwarded to this state and accepted by the plaintiff’s agent. A part were paid by the acceptor when due, but one of them was protested for non-payment, the acceptor not having been able to dispose of certain property of the plaintiff in his hands in season to meet if* and it was sent back to the president of the company. Soon after this the company failed, and became unable to give the plaintiff the security promised; and the plaintiff advanced no more money on account of the loan. He also notified the acceptor not to pay the draft, and demanded it of the company, but the directors refused to give it up. After-wards, while the draft was in the president’s bands, B, a creditor of the company, and who was a member and director, and who knew all the facts, attached the draft, with other property of the company, and the president thereupon, on his demand, delivered it to him. B sent the draft to F, who was his creditor, to collect and apply the proceeds on his account, and Fbrought suit upon it in this state against the acceptor. The acceptor then had funds of the drawer in his hands, with which he intended to pay the judgment, if one was recovered against him by F. In this state of things the present plaintiff brought a bill in equity against F, praying for an injunction against the further prosecution of the suit and for a cancellation of the draft. Held that he was entitled to the relief sought.
The draft bad been indorsed specially by the original payee and by later indorsers, but had never been indorsed in blank. F erased all the later indorsements and the special part of the first indorsement, and brought suit on the draft in his own name. Whether he had such a title to the draft that he could maintain the suit: Quere.
Held that, if he had not, and if therefore, or for any other reason, the acceptor had a good defense to the action at law, it constituted no good reason for denying the relief sought by the plaintiff in the cancellation of the draft, since he might be harassed by other suits upon it.
Held also, that it was not necessary that the plaintiff should have offered to make up the stipulated amount of the loan, nor that he should have demanded of the company the security promised, since the company was unable to give the security, and the law never requires a mere nugatory act.
The objection of want of proper parties, can not be made to a bill in equity after a hearing on the merits.
Bill in equity, for an injunction against the further prosecution of an action at law by the defendant. The facts were specially found by the superior court.
*In the year 1854, the petitioner was a member of [ *502 ] an incorporated company, called the Willamette Falls Canal Milling and Transportation Company, organized in San Francisco, in California, for the purpose of owning and improving certain real estate situated on the Willamette river in Oregon, which had previously been owned by the petitioner and which he had conveyed to the company. After the orgauiza tion of the company the petitioner went to Oregon to superintend its affairs. The company purchased a steamboat, which was put under the care of- David. Paige, who was one of the company and its treasurer. Dexter Brigham, who resided in San Francisco, was president of the company. The majority of the directors also resided there. On the 22d of March, 1854, the company being in want of funds, the petitioner agreed with Paige, as treasurer of the company, that he would loan the company §15,000, for so much of which as should exceed an indebtedness of the petitioner to the company upon an unsettled account with them, security was to be given him on all the property of the company, real and- personal, in Oregon. He accordingly drew several drafts on Lyman Keeler, of Danbury, in this state, -who was his agent, amounting altogether to §7,600, as a part of the loan, and delivered them to Paige. Among them was one for §2,900, on which the suit was brought, against which the present bill sought an injunction. The draft was payable to the order of Paige, at sixty days after sight. The petitioner immediately after left Oregon for this. state, for the purpose, among other things, of seeing to the sale of property in Keeler’s hands, from which he expected to procure the means of paying the drafts and making the loan to the company. On his way he stopped at San Francisco, where the agreement which Paige had made for the security of the proposed loan was communicated to the directors and was approved by them, and the following bond was executed by the president in behalf of the company, and delivered to the petitioner.
“Whereas D. H. Ferguson, on the 10th day of this present month, (April, 1854,) proposed in writing to the Willamette Falls Canal Milling & Transportation Company, to [ *503 ] advance *and loan to said company a certain sum of money, on the terms and conditions stated in the said written proposal:—Now therefore, for value received, the said company doth hereby undertake and agree, to and with the said Ferguson, as follows, to wit:—That so soon as the said Ferguson shall have.advanced the said sum of money to the- said company, in accordance with his said written proposal, the said company will thereupon, on the demand of said Ferguson, make, execute and deliver to said Ferguson or his -assigns, the promissory note or notes of the said company for the amount so to be advanced by him, payable six months after the date thereof, or of the said advance, with interest at the rate of three per cent, per month, payable monthly-; and with the privilege to said company to renew said note at their option for the further period of six months, at the same rate of interest. And the said company doth further undertake and agree, to and with said Ferguson, that the said note or-notes, whether renewed or original, shall be secured by a mortgage, to be executed simultaneously with said notes by the said company, upon all its real estate, buildings, improvements, franchises, property and estate in the Territory of Oregon, and in whatever part of said Territory the same may be situate, which- mortgage: shall be the first incumbrance upon said- property-, except a mortgage already held by David Paige on the same -property ; it being distinctly agreed that no mortgage or incumbrance except that of said Paige shall be prior in point of-time, or of superior obligation, to that to be executed to said Ferguson. In testimony whereof, the president of said company, by the order thereof and on its behalf, hath hereunto set his hand and affixed the corporate- seal of said company, this 13th day of April, 1855.
D. Brigham, Jr. [r. s.]
President W. F. C. M. & T. Co.”
The court was not able to find with accuracy how the accounts between the petitioner and the - company stood, on the 22d of March, 1854, when the drafts were drawn, but found that his indebtedness was not so large as the aggregate amount of the drafts* The court also found that the draft *in question was not drawn in payment of any in- [ *504 ] debtedness from Ferguson to the company, but was drawn and delivered to Paige as part of the loan of $15,000 contracted for between them, and subsequently agreed to by the company at the time of the execution of the bond.
After the execution of the bond the petitioner came east, and made an effort to turn his property into money and meet the drafts. A draft for $3,000 drawn by him on Keeler, and a part of the $7,600, was paid by Keeler, and went into the hands of the officers of the company for its use. The $2,900 draft, the one in question in the present case, was accepted by Keeler, but was protested for non-payment, by reason of the fact that funds had not been realized by him • from the sale of the petitioner’s property at the time it became payable. It was returned to and retained by the president of the company, and it was then the expectation of-all concerned that -it would-soon be paid by the acceptor from funds so to be received. But, while the petitioner was here, the steamboat of the company blew up, Paige was killed', and the affairs of the company, which had been mismanaged by him,'became hopelessly embarrassed, and the company was utterly unable to carry out its contract with him-with regard to the securing of the proposed loan. After his return to Oregon, on finding that the company had thus become insolvent and could not fulfill its contract with him, he notified Keeler not to pay the draft, and demanded of the officers of the company that it be given up, on the ground that the company was not in a condition to fulfill the contract. The president was willing that it should be given up, but some of the directors were disposed to retain it, under an 'impression that they were entitled to do so by reason of an indebtedness from the petitioner to the company on his subscription to the stock of the company; but no such indebtedness in fact then existed. The petitioner made no demand upon the directors for a fulfillment of the stipulations of the bond, and he made no further advances.
While the draft was in the hands of the president, and after it had been demanded by the petitioner, C. C._ Baker, [ *505 ] *one of the member's and a director of the company, brought a suit against the company on a debt accruing for services rendered them, and attached all debts, stocks and other property in the hands of Brigham, belonging to the company. After the attachment the draft was delivered by Brigham to Baker, and was by him forwarded to Fisk, the plaintiff in the action at law. Brigham did not claim that the company had any legal right to the draft, or attempt to transfer it to Baker, but delivered it to him because he had attached it. At the time he attached and received the draft, Baker had full knowledge of all the facts, except that he was not fully acquainted with the state of the petitioner’s account with the company.
On receiving the draft Baker sent it to Fisk to be collected and applied upon an account which Fisk then had against him.Fisk received it for that purpose, and immediately instituted a suit thereon in his own name against Keeler as acceptor, in the superior court for Fairfield county, which suit was still pending. Keeler had funds of the petitioner in his hands sufficient to meet the draft, and if subjected in the suit wohld apply them in satisfaction of the judgment.
The draft in question, at the time when it came into the hands of Baker, was indorsed as follows :—
“ Pay to Sanders & Brenham, or order. David Paige.”
“ Pay to order of Beebe & Co. Sanders & Brenham.”
“ Pay to order of A. Seeley, Cashier. Beebe & Co.”
It hád never been otherwise indorsed. The indorsements remained until the time when the suit was brought upon the draft by Fisk, when all except the name of Paige were erased by his attorney. The draft, at the time of the bringing of the present suit, was in the hands of William F. Taylor, Esq., of Danbury, as attorney for Fisk in the action at law brought by him, and still remained in his hands.
The bill prayed for an injunction against the further prosecution of the suit by Fisk, and that he be required to deliver up the draft to the petitioner to be cancelled, and that Taylor might be required to deliver the draft to the clerk of the court, to be disposed of as the court should direct, and that he be *enjoined against delivering it to any other person. [ *506 ] Fisk and Taylor were made respondents. Baker was not made a party. A temporary injunction had been issued by a judge of the superior court.
The superior court, on the above facts, reserved the case for the advice of this court.
Dutton and Ferry, for the petitioner.
The draft was made in pursuance of the agreement of March 22d, 1854, made with Paige, acting as agent of the company, and the giving and receiving of security for the same entered into and constituted the real consideration for the draft. This agreement with Paige was ratified by the directors, and the president in behalf of the company gave a bond in which it was stipulated that the security should be given. The consideration has wholly failed. The company became hopelessly insolvent and unable to give the security promised. The petitioner was therefore not bound to pay the draft to the company, or to any person taking it from the company after it was due. Whoever should receive it after it was due would take it as dishonored paper, against which any defense could be made that could be made against the company. Baker took the draft, thus dishonored, and also with full knowledge of all the facts. He therefore acquired no rights above those of the company, and could communicate no better rights to Fisk. Baker further acquired legal Itle to the note, as it came into his hands specially indorsed to other parties and was never indorsed to him. He therefore could not give a legal title to Fisk, so as to enable him to sue on the draft in his own name. This might constitute a good defense at law but such a remedy would not be adequate, as the petitioner might be harassed by other suits, and can not be secure so long as the paper is outstanding. It is no objection that the petitioner did not offer to advance the remainder of the $15,000, and that he did not demand the security from the company. It is found that the company was hopelessly insolvent, and unable to perform its contract. The law never requires a mere nugatory act. *The petitioner upon well settled prin- [ *507 ] ciples of equity is entitled to the relief which he seeks in the cancellation of the draft. 2 Story Eq. Jur., § 700. Minshaw v. Jordan, 3 Bro. Ch., 17, (note.) Bromley v. Hol land, 7 Ves. Jr., 20. Jarvis v. White, id., 414. Bishop of Winchester v. Fournier, 2 Ves. Sen., 445. Wynne v. Callender, 1 Russ. Ch., 293. Reed v. Bank of Newbugh, 1 Paige, 215. The objection that Baker should have been made a party-respondent, is'made too late. It should have been made, if at all, ‘before the case w.as heard on its merits-. Chipman v. City of Hartford, 21 Conn., 488. Besides, Baker has no interest in the note. ' He has parted with it absolutely to Fisk, and has an interest only in the application of the avails of it to his account with Fisk. It is. not enough that he may be affected by the disposition made of the note, so long he has no. right in the note itself.
Hawley and Taylor, for the respondents.-
Ferguson is not a party to the suit below. Keeler, the acceptor, is sued there. He does not come here-for relief, but the drawer only asks for relief. He asks that the court will take the draft out of Fisk’s hands and cancel it, and this without making Baker a party. And it is said that the petitioner is entitled to the relief which he seeks, because he would be entitled to it against the company. But he. would be entitled to relief against the company only on doing what he has engaged to do, which it is not pretended that he has done or offered to do. The security was only to be given him when the whole amount was advanced, and he has advanced only $7,600 of the $15,000 stipulated for. And it was to be given him - by the terms of the bond on his making request for it, but it is not averred or found that- he ever demanded the security. The bond refers to a proposal in writing, made by the petitioner on the 10th of April, to loan a “certain sum” of money. No sum is mentioned. The written proposition was not produced. It was for the petitioner to produce it or account for its non-production; Without it the bond is utterly uncertain, [ *508 ] and can not be regarded *as embracing any sum whatever. The bond speaks of the writing as a proposal, and of the advancing of the money by him as future, whereas the draft in question was given, not only before the bond, but before the date of the written proposal. The bond refers to no advances previously made. [Sanvord, J. But the court has found that the draft was given under that arrangement.] It however is found to have been given, in Oregon, under the arrarigemént. with Paige, which was afterwards approved by the directors, under which the security was to be given only for so much of the money advanced as should exceed the amount of Ferguson,’s indebtedness to the company, which was not then ascertained, and is not now found, except as it is found to have been less than the amount of the drafts. And although it is found by the court that the draft in question was not given for an indebtedness of Ferguson to the company, but as a-part of the $15,000 loan, yet if thp whole $15,000 had been advanced, only so much of that amount as should exceed the indebtedness of Ferguson could be regarded as a loan.
But it is claimed that Baker acquired no title to the draft, and could of course give none to Fisk. But. it was delivered to Baker, to whom the company was largely indebted, by the president of the company, who, as we claim, had a right to make use-of it for the benefit of the company. It was moreover attached by Baker, and upon the attachment delivered to him. It-is said that he could acquire title only by the levy of his execution upon it; but it may reasonably be presumed, in the absence of any evidence on the subject, that under the laws of Oregon a lien upon the draft was created by the attachment, under which it was lawful for the president of the company to deliver, up the draft in satisfaction of the claim on which it was attached. It is again said that Fisk gets no title because the draft was specially indorsed, and was never indorsed to him; but he had a right, as he has done, to strike out the special indorsements, and leave the draft to stand indorsed generally by Paige. But if, for either of these reasons, Fisk has acquired no title to *the draft, the acceptor has a good [ *509 J defense at law, and there is no occasion for the interference of a court of equity.
It makes no difference to a bona-fide holder, that the paper is, as between the maker and the payee, accommodation paper. 1 Steph. JST. P-., 929. 1 Saund. PI. & Ev., 304. But this, if a defense any where, would be a good defense at law; so -that relief in equity would not be needed.
By what right is Ferguson here at all ? Is he here in behalf of Keeler? But Keeler has the money in his hands, and-has no-objection to paying it. He desires no relief. Is he here in his own right? But no suit has been brought against him. The controversy can not thus be transferred from the jury, where it properly belongs, to the court. . The rule under which courts of equity remove a cloud from a title, or require the cancellation of an instrument which may at some future time be used -against a party, has no application to a case where a suit has been already brought and is pending, as the party can there avail himself of-his defense, and have the matter adjudicated in the suit thus pending.

Opinion:
Sanfokd, J.
It is manifest from the finding of the superior court, that the collection of the draft specified in the petitioner's bill ought not to be enforced.
That draft was not drawn in payment of, or as security for, any debt, or in consideration of any money or property advanced by the payee, or received by the drawer; but as part of a loan of $15,000 to the Willamette Falls Canal Milling and Transportation Company, for which a mortgage was to be made upon the steamboat and all the other property of the company in Oregon. It was drawn and accepted in good faith, in expectation of the sale of the drawer's property, and the receipt of the proceeds of such sale, by the acceptor in time to meet its payment at maturity. But the acceptor being unable to make the anticipated sale in time, the draft was protested for non-payment, and returnéd to the president of the company. The company failed, its steamboat was destroyed, and it became confessedly [ *510 ] and *hopelessly insolvent, and utterly unable to make the stipulated security for the loan.
The drawer,- finding that the company had become insolvent, and unable to fulfill its contract with him for security, notified the acceptor not to pay the draft, and demanded of the officers of the company that it should be given up to him, because the company was not in a condition to perform its part of the agreement. They refused to surrender the draft, and the president' afterwards delivered it to C. C. Baker, one of the members and a director of the company, who forwarded it to the respondent Fisk, to be collected and applied upon an account which Fisk then had against Baker. It was payable to David Paige or order. Paige was dead before the delivery of the draft to Baker, and the draft was never indorsed to Baker, or to Fisk, by any one ; and the president of the company, who placed it in Baker's hands, did not pretend that the company had any right to it, or attempt to effect its transfer. It was protested, and long overdue, and Baker " had full knowledge of all the facts aforesaid." Fisk sued the acceptor in his own name. That suit is now pending, and the acceptor has now in his hands the funds of the drawer, which he will appropriate in payment of the draft, if Fisk shall recover a judgment against him on his acceptance. The draft, before its protest and return, had been indorsed by Paige, the payee, to Sanders & Brenham, by them to Beebe & Co., and by Beebe & Co. to Seeley, and all these indorsements were in full, and remained uncancelled at the time Fisk's suit was commenced, but, except the name of Paige, have since been erased by Fisk's attorney.
Upon this finding of the facts, the petitioner is very clearly entitled to the relief for which" he asks. .It would be the height of injustice to collect this draff from the acceptor, and, by consequence, from the petitioner, who has received for it no consideration whatever. The consideration for which it was drawn has entirely failed, and if the petitioner is compelled to pay it he will be altogether without redress. No principle of public policy, regarding the circulation of *negotia- [ *511 j ble paper, .is in jeopardy, because the draft was dishonored paper when it came into the hands of Fisk, and of Baker, for whose benefit the suit upon it is prosecuted. Baker had actual notice of all the equities attached to it, and Fisk has paid nothing for it, he being only to apply it on Baker's account when collected.
It is unnecessary to decide whether Fisk has such a title to the draft that he can maintain his action on it, or whether the facts found by the superior court would constitute for Keeler a good defense at law, because, if both of these questions were to be decided in Keeler's favor, still the petitioner would not have that adequate, obvious, and complete remedy, to which we think he is entitled, and which a court of equity alone can give.' The draft, though over-due, is still transferable; no fatal infirmity is apparent upon its face; the pending suit upon it may be withdrawn, and another instituted, either against the acceptor or the drawer, in the name of Seeley, or of any other indorsee from him into whose hands it may be transferred. Strangers may be defrauded by it, and the petitioner may be repeatedly harassed by an outstanding claim, which, upon every principle of equity, ought to be defeated, and effectually suppressed.
We entertain no doubt of the jurisdiction of a court of equity to afford to the petitioner the relief for which he seeks, and-we think this record exhibits, in a striking light, the necessity for such a jurisdiction, and the fitness of its exercise in. the case before us. See 2 Story Eq. Jur., § 700,700 a; Hamilton v. Cummings, 1 Johns. Cha., 517; Piersoll v. Elliott, 6 Peters, 95; New London Bank v. Lee, 11 Conn., 120; Chipman v. City of Hartford, 21 id., 489; Boyce v. Grundy, 3 Peters, 215.
Again, it is said that Baker ought to have been made a party to the bill. But this objection, if it could ever have been available, comes now too late. After a hearing of the cause upon its merits, either before the court or its committee, such an objection can not be entertained. New London Bank v. Lee, supra. Chipman v. City of Hartford, supra.
Finally, it is contended that no decree should be passed in favor of the petitioner, because the whole amount of the loan of $15,000 has never been advanced by him, and it is not found that he ever demanded his security. But the very ground on which the court affords to the petitioner its aid, [ *512 ] is, that the hopeless insolvency of the company, and its utter inability to perform its part of the contract by making the stipulated security for the loan, exonerated the petitioner from his undertaking to make to the company further advancements toward such loan, and entitled him to the surrender of the unpaid draft. The law never requires the performance of an entirely useless and nugatory act; and the conceded and hopeless insolvency of the company, and its utter inability to comply with any such demand, afford an adequate excuse for its omission.
We advise the superior court to grant the prayer of the petition.
In this opinion the other judges concurred.
Decree for petitioner advised.