Case Name: Prentice & Weissinger v. Zane
Court: Supreme Court of Appeals of Virginia
Jurisdiction: Virginia
Decision Date: 1845-07
Citations: 2 Gratt. 262
Docket Number: 
Parties: *Prentice & Weissinger v. Zane.
Judges: (Absent BROOKE, J.)
Reporter: Virginia Reports
Volume: 43
Pages: 359–361

Head Matter:
*Prentice & Weissinger v. Zane.
July Term, 1845,
Lewisburg.
(Absent BROOKE, J.)
i. Negotiable Paper-Taken as Collateral Security-Rights of Holder. — The holder of a negotiable note taken as a collateral security, holds it subject to all the equities of the maker against the party from whom the holder received it.
2. Same — Same—Same.—The holder of a negotiable note, though he has taken it as a collateral security, is entitled to recover from the maker, if the party from whom he received it took it for value, without notice of any matter that rendered the note invalid as between the maker and the payee.
This was an action brought in the Circuit Superior Court of Law and Chancery for the county of Ohio, by Prentice & Weissinger against Platoff Zane, upon the following note:
$5437 50. Philadelphia,
November 28th, 1836. Five years after date I promise to pay to the order of James H. Johnson five thousand four hundred and thirty-seven dollars and fifty cents without defalcation for value received.
Platoff Zane.
The defendant pleaded nil debet, upon which plea issue was made up; and upon the trial of the cause the jury found a special verdict, from which it appears, that the note was executed and delivered to the payee, at the date thereof, in Philadelphia; that it was endorsed by the payee to one John Stivers in the City of Louisville, Kentucky; and by him delivered without his endorsement to the plaintiffs, before the maturity thereof. The consideration for the transfer of the note by Stivers to the plaintiffs is not stated in the special verdict, but the evidence on that point is given, from which it was agreed by the counsel, that the Court might draw such inferences as the jury might have done; and the Court below, as well as this Court, were of opinion, that the *note was transferred to the plaintiffs as collateral security for moneys paid by the plain tiffs for Stivers, and for liabilities they were under for him. It farther appears, that the consideration of the note was fraudulent on the part of the payee, and such that he could, not recover upon it against the defendant Zane; but that the plaintiffs had no notice at the time the note was transferred to them, of the fraudulent consideration thereof.
The special verdict also found a statute of Pennsylvania by which it was provided, that a note such as that sued on in this case “should be held by the endorsee discharged from any claim of defalcation or setoff by the drawers or endorsers thereof; and the endorsee shall be entitled to recover against the drawer and endorser such sum as on the face of the said note,’ or by endorsements thereon shall appear to be due. ” And the parties agreed that the Court in deciding upon the special verdict, might look to and regard the decisions of the Courts of Pennsylvania, as found in the several books of reports of the same, upon the subject of the commercial law of Pennsylvania, and the construction of the statutes thereof, to avail as much as if the decisions were found by the special verdict; and to have such weight as in the judgment of the Court they ought to have.
Upon this special verdict the Court gave judgment for the defendant; and the plaintiffs obtained an appeal to this Court.
Goode, for the appellants,
after stating the proposition, “That the holder of negotiable paper before it is due is not bound to prove that he is a bona fide holder for a valuable consideration without notice, for the law will presume that, in the absence of all rebutting proofs, and it is therefore incumbent on the defendant to establish the contrary by satisfactory proofs, and thus to overcome the prima facie title of the plaintiffs;” for which he cited Bailey on Bills 499, 500, went into an examination of the evidence to shew that there was no satisfactory *proof that the note sued on had been received by the plaintiffs from Stivers as a collateral security ; and that it had been in fact received in satisfaction of debts due from Stivers to the plaintiffs, for moneys previously paid for him.
But if the note had been taken as a collateral security,, he insisted the plaintiffs were entitled to recover, under the authority of the case of Swyft v. Tyson, 16 Peters’ R. 1; which he insisted should be followed rather than the decisions of some of the State Courts.
C. & G. JST. Johnson, for the appellee,
insisted that the evidence established the fact, that the note sued on was received by the plaintiffs as a collateral security. Such being the fact, and this being a contract made in Pennsylvania, and to be construed as influenced by the statute of that State, the construction which has been given to that statute by the Pennsylvania Courts, must be followed by this Court. And to shew that these Courts had held that the receipt of such paper as collateral security, was not considered as putting the holder on the footing of a holder for value, but that he takes subject to the equities existing between the original parties, they referred to Cromwell v. Arrott, 1 Serg. & Rawle 180; Lewis v. Reeder, 9 Id. 193; Harrisburg Bank v. Meyer, 6 Id. 537; Holme v. Kars-per, 5 Binn. R. 469; Betshoover v. Black-stock, 3 Watts’ R. 26; Petrie v. Clark, 11 Serg. & Rawle 377; Jackson v. Pollock, 2 Miles’ R. 362; Walker v. Geisse, 4 Whart. R. 252; Depeau v. Waddington, 6 Whart. R. 220; Evans v. Smith, 4 Binn. R. 366.
The decisions in ISTew York, it was insisted, agreed with the decisions in Pennsylvania, as would be seen by the cases of Bay v. Coddington, 5 Johns. Ch. R. 54; S. C. 20 Johns. R. 637; Wardell v. Howell, 9 Wend. R. 170; Rosa v. Brotherson, 10 Id. 85; Bank of Salina v. Babcock, 21 Id. 499; Bank of Sandusky v. Scoville, 24 Id. 115. And the English cases from' *Hinton’s Case, 2 Showers’ R. 235; and Miller v. Race, 1 Burr. R. 452; hold the same doctrine. De La Chaumette v. The Bank of England, 17 Eng. C. L. R. 356.
It was farther insisted that though there was a valuable consideration for the endorsement by Johnson to Stivers, of which the special verdict said nothing, that did not authorize the plaintiffs to recover, if they had not given value for the note; and for this principle, was cited Hinton’s Case, 2 Showers’ R. 235; ‘Grant v. Vaughan, 3 Burr. R. 1516; Holme v. Karsper, 5 Binn. R. 469; Betshoover v. Blackstock, 3 Watts’ R. 26; Knight v. Pugh, 4 Watts & Serg. 445; Munroe v. Cooper, 5 Pick. R. 412; Collins v. Martin, 1 Bos. & Pul. 648.
NegotiabIe Paper — Taken as Collateral Security— Rights of Holder. — In Davis v. Miller. 14 Gratt. 14, Judge Moncure, delivering the opinion of the court, said: “There is perhaps no question connected with the mercantile law which is of more importance, and upon which, at the same time, there is a more distressing conflict of authority than the question, whether a holder of a negotiable note received as collateral se-! curity of a pre-existing debt, is such a bona' fide holder as to be free of all equities existing against the note in the hands of the person from whom he received it. The affirmative of the proposition, it seems, is maintained by the decisions in England, of the Supreme court of the United States, in Massachusetts, and in some other states; also by Judge Story in his Treatise on Promissory Notes, § 195. While the negative is maintained in New York, Pennsylvania, and other states. See the cases, or most of them, collected in 2 Rob. Pr. new ed. 249-251. In this state, Prentice, Sc. v. Zane, 2 Gratt. 262, is the only case which hears upon the subject, and seems to have been based upon the supposed correctness of the negative side of the proposition: though •the case is not referred to in the work last cited. The note in that case was made in Philadelphia; and the decision conformed to the well-settled law of the place of the contract. Whether the case would have been decided in the same way if the note had been a Virginia contract, is uncertain. The question may therefore be considered as still unsettled in this state. But 1 deem it unnecessary to express any opinion upon the vexed question in this case: in which it may be conceded, pro hac vice, that the negative side of the proposition is correct, and that a holder of a negotiable note as collateral security, holds it subject to the equities existing against it at the time it was received by him.”
In Smith v. Lawson, 18 W. Va. 235, the court, after quoting the above citation from Davis v. Miller, said, that the question was also unsettled in West Virginia, but refused to decide it in the case at bar as they considered it unnecessary for a proper decision of that case. Por further discussion of this subject, see monographic note on “Bills, Notes and Checks” appended to Archer v. Ward, 9 Gratt. 622, where the Virginia and West Virginia cases in point are collected.
Lien — Definition of. — A lien is a hold or claim which one person has upon the property of another, as a security for some debt or charge, and when the debt is paid, the right to subject or charge the property is gone and extinguished. Hardy v. Norfolk Mfg. Co., 80 Va. 418.

Opinion:
STANARD, J.,
delivered the opinion of the Court.
The Court is of opinion, that the special verdict in this case is defective in this, that while it finds that the note of Zane was endorsed by the payee to Stivers, under whom the plaintiffs in error claim, it does not find whether or no such endorsement by the payee to Stivers was for value, and if for value, whether or no, at the time of such endorsement, Stivers had notice of any matter that rendered the said note invalid as between Zane the maker, and Johnson the payee and endorser thereof; and that the said.judgment is erroneous for the defect aforesaid in the special verdict.
Therefore it is considered that the judgment be reversed and annulled, and the special verdict set aside; and that the defendant in error pay to the plaintiffs in error the costs by them expended in the prosecution of their writ of supersedeas in this Court. And the cause is remanded to the said Circuit Superior Court for a new trial to be had therein, on which should the jury find a special verdict, they shall therein respond to the enquiries indicated by the above specification of defect in that heretofore found.