Court Opinion

ID: 8058071
Source: CourtListenerOpinion
Date Created: 2022-09-09 04:35:00.234791+00
Date Added: 2024-06-11T16:37:49.641438
License: Public Domain

Van Dyke, J.,
(dissenting.) The plaintiffs sue on two promissory notes — one for §918, and the other for $1464.-28 — -both given by the defendant to David Rowland, and by bins endorsed to the plaintiffs.
The signatures on the notes were admitted at the trial, and the partnership of the plaintiffs duly proved.
The first defence raised to these notes is, that they were given without consideration between the original parties; in other words, that they were simply borrowed of the defendant by Rowland, the payee, for his own accommodation, to be discounted at certain banks, and that the defendant was in ho way benefited by or interested in the proceeds thereof,
It is also insisted that the notes were diverted from their original intention or purpose by Rowland; for that, instead of their being discounted at the banks mentioned for Rowland’s benefit aud accommodation, they were in fact deposited with the plaintiffs as security for a letter of credit issued or emitted by theca to Rowland, by which they made themselves liable on his account for §10,000. These facts seem all to be very well established by the evidence of Rowland himself and his clerk, whose testimony was offered in the form of depositions; but do they furnish any defence whatever to this action, inasmuch as it does not in any way or manner appear that the plaintiffs had any knowledge or notice whatever that the notes were either borrowed or given without consideration., or that they were to be discounted at any ¡particular bank dr banks? They were not made payable at either of the banks mentioned.
If the defendant can avoid the payment of these notes for the reasons assigned, then there is no faith or credit to be given to or placed in commercial or other negotiable paper, and every person who takes it, even before any dishonor or suspicion is placed upon it, and no matter how good the faith in which he took it, nor what the *148consideration was which he paid for it, is liable to be met, when he attempts to collect it, by every possible private arrangement or understanding which may have been made between the original parties, on purpose, it may be, to defeat it. And this notwithstanding the party who takes it had no knowledge or suspicion of any such state-of things, notwithstanding a full consideration has been paid for it, and notwithstanding it is declared on the face of the paper that it is given for “ value received.” No bank could safely discount such paper, no one could safely purchase it, no one could safely take it as collateral security. But such is very clearly not the law, and it seems like a useless effort to cite authorities to show its incorrectness. Every person who gives his promissory note makes it negotiable, and declares on its face that he gave it for value received, is bound to pay it in the hands of any person who took it in the ordinary way of business before it was due, without notice or knowledge of there being any difficulties or conditions about it, and who-paid for it a good consideration; and before a party giving such a note can defeat it in the hands of any such holder he must prove affirmatively not only that it was given without consideration, or that it was misapplied, but he must also prove either that the holder took it after it was due, and consequently under dishonor, or that' he knew of the want of consideration or misapplication when he took it, or that he obtained it without consideration. This part of the defence, therefore, admitting it to be all true, cannot be of any avail to the defendant, unless it be true, as is contended, that the taking these notes as a security against the letter of credit, which the plaintiffs issued to Rowland at the time of receiving them from him, was a taking without consideration, or for some other reason was unlawful. • But there can be nothing in this view of the case; for when these plaintiffs advanced to Rowland their absolute responsibility to the *149extent of $10,000 they were advancing to him a very valuable consideration, as well as a lawful one, to secure them, for which they had a perfect right to take the notes in question, supposing them to belong to Rowland. The consideration was valuable. It was in the way of their business, and is one which the law will sustain.
But it is contended that as these notes were merely deposited or pledged to the plaintiffs to protect or indemnify them against their liability on their letter of credit, they cannot be” prosecuted or recovered on, although past due, unless the plaintiffs go further, and show that they have had to pay in behalf of Leonard the whole amount of their letter of credit, or some part thereof, or, in other words, that these notes cannot be recovered on unless the plaintiffs have had money to pay for Rowland on their letter of credit, and that the burthen of proof is upon them to show, before they can recover, that they have at least paid so much on the letter of credit as that the money due on these notes is needed by way of indemnity to make them whole. There seems to be some plausibility about this idea, but I cannot think it is sound. It is true, if it appeared affirmatively that this letter of credit had been retained without having been used at all, it should defeat this suit; and so if it had been used to the full extent of it, and the plaintiffs had been put in funds by Rowland to meet all such liability, and so also if the letter had been returned after having been used only in part, and the plaintiffs had been put in funds to meet so much as had been so used — in all these cases there should be no recovery. But in the case before us the plaintiffs, in the first instance, gave their unqualified guarantee in writing for Rowland, to he used in Europe at his pleasure, and by which they were to bo, or might become actually bound at any time to the amount of ten thousand dollars.
Prima faeie they become liable at once for the whole amount of the letter, and if they held undoubted security for a like or greater amount as an indemnity they could *150not to be compelled to surrender a dollar of it until it should be proved by the party making the pledge of securities that that liability had been either removed or reduced. The liability for the whole letter of credit being once established by its delivery to Rowland, the presumption of law is that such liability continues until those who issued it have paid the whole that can be drawn by virtue of it, and whoever attempts or desires to avail himself of the fact that the whole letter has been returned unused, or that a part only has been used, or that such amounts as the drawers have had to pay thereon has been refunded to them, must prove it by some affirmative evidence.
The defendant put upon the witness stand a witness who might in the nature of things have told us all about the matters — I mean Mr. Rowland himself. He was the person to whom the letter was issued and delivered. He certainly could have told us whether it had been used or not, and if not actually used, he could have told us to what extent it had been used; or if he owed the plaintiffs nothing on or in consequence of that letter of credit which could at all justify their attempt to enforce the security which he gave them, he certainly could have said so. But the defendant, although relying on this trial of defence, did not ask him any question on the subject, and the plaintiffs, not anticipating such defence, asked him nothing on the subject, and we have no proof on the point either way.
The plaintiffs, being the lawful holders of the notes, were not bouud to prove anything whatever beyond the due execution of them and their own existence as partners. All else that they could possibly be called on to prove would be to rebut or overcome something that had been offered by the defence. Nothing of the kind now under consideration was offered by the defence, and consequently there was nothing of the kind for the plaintiffs to rebut or overcome, while the defendant, who in giving the notes made an unqualified promise to pay them to *151Rowland or to these plaintiffs, or to any one Use who should be the legal holder, and that they were given on consideration and for value received, and who seeks now to avoid the payment of them on the ground that certain things have happened concerning them by which his liability to pay has been destroyed, is bound to prove before the court and jury every one of those things, or every oik of those facts on which he relies for defence in this action. The plaintiffs, as has been shown, are not bound to disprove them before they are presented. They do not need or desire them in evidence; but as the defendant desires to avail himself of them, but has entirely failed to show their existence by proof, they are not before us, and having failed to establish the facts necessary to make out a defence, the defence itself must fail.
As before remarked, we have seen this letter of credit issued — we have not seen it returned. The presumption is it is still outstanding. It is also quite manifest that the matters between the plaintiffs and Rowland have not been settled ; they have the right, therefore, not only to retain the securities which they hold, and assuming, as they have a right to do, that they are business and not accommodation notes actually belonging to Rowland, they had the right to receive the money due on them at maturity, if the defendant had been ready to pay it and take them up. They had the right, also, if not paid at maturity, to collect them in any lawful way; and assuming the notes to be business notes, and belonging to Rowland, they were bound to exercise due diligence in such collection; for any unreasonable delay in so doing, by means of which the amount should be* lost by any legal bar, or by the failure of the defendant, would be such neglect on their part as to cause such loss to fall upon the plaintiffs themselves, as between them and Rowland.
Now, while it is very true that a defendant might, in the nature of things, have proved enough to have defeated this suit, yet he cannot do it by simply showing *152that the- notes were' borrowed, or that they were not used as originally intended, and then stop; for the proof of these things would not prove that the plaintiffs have knowledge of them, or that they have paid no consideration for them, nor would they show any other defect in the plaintiff’s right to recover 01^ them. But the defendant must go further, if he would successfully resist the claim, and in addition to showing the notes to have been borrowed or misapplied, he must also show that the plaintiffs knew it, together with every other fact and circumstance necessary to enable him to make his defence complete. If he do not do this his defence must fail. It is not for the plaintiff to disprove them in the first instance. The defendant, therefore, not having shown any sufficient reason why these notes should not be recovered upon, and no such evidence being before us, the defence must fail.
It is also insisted on, as a part of this defence, that the condition on which the note for $1464.28 was deposited was that the note of $918 was to be given up. Such is the evidence of Mr. Gouge; but this is denied'in the evidence of Mr. 'Leet, who says it was not the note for $918 that was to be thus surrendered, but another note of different amount, and which he says was given up according to agreement. It thus became a question of disputed fact, which the judge very properly submitted to the jury, who found that the note for $918 was not to be surrendered, aud they accordingly included it in their verdict. With the direction of the court aud the action of the jury in this respect I see no reason to interfere.,
Exception is taken also to the decision of the court in admitting the verbal evidence of Leet, which went to show that the note which was to be surrendered, and which was in fact surrendered when the note for $1464.28 was deposited, was a note for $1140.20, and not the note for $918. Gouge had testified that the note for $918* was to be given up when the one for $1464.28 was deposited, which he said had not been done. Leet was then reed led *153to prove that it was not the note for $918 that was to be then surrendered, but another note of $1140.20. This evidence was objected to, for the reason that the note thus referred to was not itself produced ; but the objection was overruled and the evidence admitted, and I think properly, for the great, if not the only point, as well as the effect of the evidence, wag to show that it was not the $918 note, then in controversy, that was to be surrendered, but another note, not that one, and it was totally immaterial whether he mentioned the amount of such other note or not; all that was important was to show that it was not the one then in suit, as the other witness had said, and I do not see how the defendant could have been affected, one way or the other, whether the witness gave any of the contents of the note or not.
I do not see, therefore, that the judge at the trial below, in any of the decisions that he made, or in the charge that he gave to the jury, or in the omission to charge as desired by the defendant’s counsel, committed any error, and think that the judgment of the Circuit Court should be affirmed.
Reversed, 5 Dutch. 521.