Court Opinion

ID: 8505507
Source: CourtListenerOpinion
Date Created: 2022-11-23 01:26:40.804833+00
Date Added: 2024-06-11T16:50:52.056410
License: Public Domain

Eastman, J.
The facts presented in this case raise several questions for our consideration. The amount claimed is $9,263.68, being the sum alleged to be due from the defendants to the plaintiffs, August 1st, 1848, the date of the plaintiffs’ writ. Of this sum, $6,369.11, were for drafts drawn by the defendants upon the plaintiffs and accepted by them; but *291which, being on time, were not due at the commencement of the suit and had not been paid. At the time of their acceptance however, they were charged in the plaintiffs’ books of account against the defendants. A large part of the plaintiffs’ claim is therefore based upon these drafts ; and the first question which we propose to consider is, whether they can be recovered in this suit.
Bills of exchange, technically speaking, do not very generally enter into the business transactions of this State, and the particular liabilities of the parties to a draft or bill have not undergone very frequent discussions in our Courts. The principles, however, which govern this class of mercantile paper, appear to be well settled in those jurisdictions where the questions pertaining to it have come under consideration.
Ordinarily, a bill of exchange has, in the first instance, three parties to it, the drawer, the drawee, and the payee. It is not unusual, however, for the drawer to make the bill payable to his own order, and then indorse it and ¡rat it into circulation. The drafts in this case appear to have been drawn in that way. After the bill has passed by indorsement from the hands of the original parties to it, and becomes holden by those who are not privy to its inception and real consideration, the drawee, who is the acceptor, unless the bill shall have been dishonored by his refusal to accept it, is the party primarily holden; the drawer is the second who is liable, and the payee, who is the first indorser, is the third. Saxton v. Peat, 2 Camp. Rep. 155, note; Smith v. Knox, 3 Esp. Rep. 46. The contract of the acceptor, by his acceptance, is, that he will pay the bill, upon due presentment thereof, at its maturity, or its becoming due. The contract of the drawer, and of the indorsers, also, respectively is, not only that the bill shall be duly accepted, but that it shall be duly paid by the acceptor, upon due presentment for payment; and if not then paid, and due protest is made, and due notice of dishonor is given to them respectively, they will, upon demand, pay the bill, and also the damages and expenses accruing to the holder thereby. Story on Bills, § 323; Chitty on Bills, ch. 9, pp. 384, 385, 8th ed. While, then, ordinarily, the contract of the *292acceptor is absolute, that of the drawer and indorsers is conditional. The holder has his remedy upon either party; but in order to charge the drawer and indorsers, he must make demand of payment upon the acceptor and notify the other parties. Corvley v. Dunlop, 7 Term Rep. 561; Munroe v. Easton, 2 Johns. Cases, 75; Griffin v. Goff, 12 Johns. Rep. 423 ; Heylyn et al. v. Adamson, 2 Burr. Rep. 669, 674.
So far as the holder of the bill is concerned, it is immaterial what may be the real and private relations existing between the drawer and acceptor in regard to it. He is to pursue the legal course to charge them, and has his remedy accordingly, regardless of their private undertakings to each other. But as between the drawer and drawee, their relations to each other may be materially changed, according to the character of the real transactions between them. Thus, where the drawer of the bill has, at the time of drawing it, funds in the hands of the drawee, upon the strength of which the draft is drawn and the acceptance made, the drawee occupies the position upon the bill that a maker does upon a note ; his liability is absolute ; and the drawer occupies the position of a surety. Clark et al. v. Delvin, 3 Bos. & Aul. 363, 366; Story on Bills, §§ 113, 119; Munroe v. Easton, 2 Johns. Cases, 75 ; Berry v. Robinson, 9 Johns. Rep. 121; May v. Coffin, 4 Mass. 341.
But where the drawee is a mere accommodation acceptor, and the drafts are drawn to facilitate the business transactions of the drawer, their'positions are changed. The drawer stands in the position of maker and the drawee in that of surety. Stedman v. Martinnant, 13 East’s Rep. 427; Collott et al. v. Haigh, 3 Camp. Rep. 281; Young & Gill v. Hockley, 3 Wils, 346; Bagnal et al. v. Andrews, 7 Bing. Rep. 217; Story on Bills, §,$ 113, 119 ; Whitwell v. Brigham, 19 Pick. 117.
But whether the drawee be an accommodation acceptor or not, he cannot maintain an action upon a draft until he has paid it or done some act equivalent to payment. Vanderheyden v. De Paiba, 3 Wilson, 528 ; 2 Wm. Black. 839; Young & Gill, v. Hockley, 3 Wilson, 346 ; Parker v. United States, 1 Peter’s C. C. Rep. 262; Greenleaf v. Maher et al. 2 Wash. C. C. *293Rep. 44, 393 ; Haseltine v. Guild, 13 N. H. Rep. 390. In Parker v. United States, Mr. Justice Washington, says: “ It is admitted by the counsel for the United States, that no case precisely like the present is to be found in the books ; that is, of an action for money had and received, brought by the acceptor of a bill of exchange before the same has been paid; and I confess I should be greatly surprised if any decision to sanction such an action could be met with. If there be any case in which responsibility to pay money has been decided to afford a ground of action for money had and received, I have never met with it.” And again: “ It was never yet heard of that the acceptor of a bill of exchange, without funds of the drawer in his hands, was allowed to sue the drawer, without proving that he had paid the bill or done something equivalent thereto.” “ The cases are all the other way.” Applying the foregoing principles to the facts before us, there would seem to be no doubt, that upon general grounds this suit cannot be maintained upon the unpaid drafts. Nor do we discover any thing in the fact, that the plaintiffs charged the drafts to the defendants as soon as accepted, that can change the defendant’s liabilities. If such a principle were to be adopted; if the acceptance and charging of the drafts could make the drawers liable and a suit at once be sustained upon them, notwithstanding they were not due and the acceptors had paid nothing thereon, then might the drawers be compelled to pay them twice ; once to the acceptors for their undertaking, and again to the holder, who, should he fail to receive the contents of the acceptors, might well seek his remedy against the drawers. The charging of the drafts may be matter of convenience, but it cannot alter the liabilities of the parties.
Neither are the plaintiffs aided by the transactions in regard to the assignment. The fact that the holders of the drafts signed a composition deed and agreed to discharge the acceptors upon certain terms, would have discharged the drawers from liability to them, if the drafts had been based upon funds in the hands of the drawees; because in such case the liability of the drawees would be antecedent to that of the drawers, and the contract of discharge would be prejudicial to the interests of the drawers. *294Ex parte Wilson, 11 Ves. 410; Lewis v. Jones, 4 Barn. & Cress. 506; Story on Bills, § 429; Scarborough v. Harris, 1 Bay’s Rep. 197; Robertson et al. v. Vogle, 1 Dall. Rep. 252; Lynch v. Reynold, 16 Johns. Rep. 41. But here the drawers haying assented to the arrangement and signed the deed themselves, are estopped from saying that it is a contract to which they did not agree. In an action of the holders they could not successfully plead the discharge. Bruen v. Marquand, 17 Johns. Rep. 58. If a party agrees to the discharge of one liable before himself, he cannot afterwards take advantage of the discharge. Bradford v. Hubbard, 8 Pick. Rep. 155 ; Smith et at. v. Winter, 4 Mees. & W. 454.
But there is a further and complete answer to this position. These drafts having been drawn for the accommodation of the drawers, they are themselves principals on the bills. They occupy a position antecedent to that of the acceptors. The acceptors are the sureties, and any discharge of them by the holders cannot alter the liability of the principals. A discharge of a party to a bill does not affect the liability of those whose position is antecedent to the party discharged. It discharges only those who are subsequently liable. Sargent v. Appleton, 6 Mass. 85 ; English v. Dailey, 2 Bos. & Pul. 61; 3 Esp. Rep. 49 ; Mallet v. Thompson, 5 Esp. Rep. 178; Walwyn v. St. Quintin, 1 Bos. & Pul. 652.
In the discussion of this point, we have considered the drafts in question as accommodation paper. It is not so stated in the case in distinct terms, but they are so treated by the counsel on both sides, and such, we presume, was their intention the Court should understand them to be, by the facts in the case..
So far, then, as the drafts which were not due at the time of the commencement of the suit, and which the plaintiffs had not paid, are concerned, the action cannot be sustained. The suit ■ on them was prematurely brought. Striking out from the plaintiff’s claim the amount of these drafts, and there is left the sum of $2,894.17, being for balance due on account of acceptances paid for the defendants, and goods sold to them prior to the commencement of the suit. Can the plaintiffs have judgment for that sum ?
*295At the time this suit was commenced, there were in the hands of the plaintiffs, independent of the credits given on the account rendered, goods of the defendants to the amount of $5,245.85, as subsequently ascertained, after deducting charges for commissions and guaranty in the sale. These goods were held by the plaintiffs as the agents or consignees of the defendants, to be accounted for after sale. They formed no fund until sale made, and therefore were not a subject of set-off at the time of the commencement of the action. The account of the sales appears to have been rendered in January, after the institution of the suit in August.
Had the unpaid drafts been specifically drawn upon those goods, the avails might perhaps have been appropriated to their ■liquidation; because a lien would thereby have been created upon the goods, and they could not afterwards be appropriated for any other purpose. McMenomy et al. v. Ferrers, 3 Johns. Rep. 71; Peyton v. Hallet, 1 Caines’ Rep. 363 ; Powell v. Gordon, 2 Esp. 735; Rowe v. Dawson, 1 Vez. 331; Yates v. Groves, 1 Vez. jr. 280. But the drafts were general. At the time of the acceptances the goods were not even credited to the defendants, and no authority existed in the plaintiffs to appropriate them to the payment of paper which was not due, and for which they had themselves made no advances. Nor, upon the facts presented at the time the drafts fell due, and situated as these parties then were, could the funds arising from the sale of these goods be appropriated to the payment of the drafts, but, so far as necessary, they should go to the payment of the oldest legal claims. When a debtor makes a payment, he has a right to direct to what debt it shall be applied. In case he gives no direction, the creditor may make the application to claims then due. But where no application is made by either, the law will make the application to the oldest legal claim then due, if there is no particular equity or reason for a different course. Caldwell v. Wentworth, 14 N. H. Rep. 431; Sawyer v. Tappan, 14 N. H. Rep. 352. When these funds were received neither party was in a situation to make any particular application of the same. The defendants had been sued and did not know till *296January after, where the funds were received; and the plaintiffs, if they had any right as assignees to make an application, assigned their property before making it. The law will therefore appropriate the funds upon the principles of the above authorities, to the extinguishment of the oldest legal claims then due. And such were those which went to make up the amount of $2,894.17, the claim now under consideration, being the balance sued for after deducting the unpaid drafts.
The sales of the goods amounted to $5,245.85, which sum far exceeds the balance of $2,894.17; and although these funds cannot be treated as a set-off, nor as a full bar to the plaintiffs’ action under the present state of the pleadings, yet there is no objection to their consideration in the reduction of damages; and so much of the same as shall be necessary to pay the plaintiffs’ claim of $2,894.17, is properly to be applied for that purpose. Pemigewassett Bank v. Brackett, 4 N. H. Rep. 557; Wagner v. Wagner, 9 Barr. 214. The action therefore cannot be maintained for any sum in damages. The costs will be regulated by the Court below.