Court Opinion

ID: 7128379
Source: CourtListenerOpinion
Date Created: 2022-07-24 15:16:08.3813+00
Date Added: 2024-06-11T16:14:22.251544
License: Public Domain

Petition for a Re-hearing,
By Mr. M. O. Johnson.
It is with reluctance that at this late period of the term I feel bound to pray a re-hearing in this suit. The Court seems- to have carefully examined the record, and their opinion is expressed as clear and free of doubt, yet not being convinced by the reasoning, it is my duty, in all proper modes allowed by the rules of law, to resist the decision.
I will not again present my views on the alledged fraud of Steele in making the contract. But taking as true, that there was fraud, and was champerty, I contend that Moore stands unaffected by it.
Before, however, going into that branch of the subject, 1 would call the attention of the Court to a defect of parties. It appears from the bill of Breckinridge, the an. swer of Moore and the proof, that the note and judgment *639Tendered upon it, belonged to Moore, Broaddus & Co. and that it was put in the name of Moore for the convenience of suing. Moore, Broaddus & Co. are consequently interested as the real owners of the note or claim, and should have been made parties by Breckinridge. He relies on the necessity of their being made parlies in his assignment of errors and brief, and although no cross errors are assigned, it is the practice and duty of the Court, upon a reversal, to notice all the errors which exist in the record; and it is erroneous to enter a final decree, as directed in the mandate, in the absence of such necessary parties: (3 J. J. Marshall, 528; Ibid, 533.)
It,is conceded, in the opinion delivered, that the note in question, by the general principles of comity, would be made a bill of exchange under the law of Tennessee, being made in Tennessee and the payee and holder residing there: but it is said that as this note arose from a sale of land in Kentucky, the general principle does not apply, and it is governed by the laws of Kentucky. Story's Con. of Laws, 300-2, is referred to, as sustaining this principle. With respect to the Court, I conceive the principles laid down by Story are misconceived. In a subsequent part of his work, chapter X, page 358, 391, he treats fully on the subject of real estate, and he lays down the correct proposition that the acquisition, transfer and loss of real estate, is governed by the law's of the country where situate, and that contracts for passing or binding real estate must conform to those laws or be invalid. Butin the present case, the contract for transfering the title was executed; the deed was made; the consideration is recited to have been paid, and the note is executed and received as a payment — is this note, thus arising from an executed transfer of land, to be considered as partaking of the realty, and not governed by the general rules in regard to notes or other negotiable instruments? The reasons of the rules relating to real estate are obvious principles of policy, requiring each nation or State to maintain its entire sovreignty over its soil, its mode of acquisition, transfer and descent, but no such policy can affect a mere personal debt. In no part of his work does Story suggest any distinction between *640negotiable instruments and other debts, arising from a sale of land and those arising from any other consideration. All debts are by him classed as personal. They are so by the common law. If the holder of this note had sought to enforce a lien upon the real estate sold, the existance and validity of such lien would, I admit, depend on the laws of Kentucky and not those of Tennessee. According to my view, the nature, legal effect and validity of the note, as a debt, would be governed by the laws of Tennessee; the lien for its payment by those of Kentucky. And if, by the laws of Tennessee, the note is a bill of exchange, and by the laws of Kentucky no lien exists where a negotiable instrument is given, then the combined operation of the laws of the two States would destroy the lien: see on that subject Story’s Con. 302, sections 366-7, where the effect of Scotch heritable bonds, and the proceeds of entailed estates, sold for land tax, are considered.
In no proper sense of the term do I consider a negotiable instrument or promissory note, containing no reference to the land, and only connected with land, by the conveyance of land being its consideration, as forming a part of the contract. In cases under our statute of frauds, the promise to pay the money is not treated as forming a part of the agreement, and may be merely by parol, and still be good.
The Court seems to lay some stress upon the sale of the land, being prohibited by our laws, and- the consequent propriety of our laws refusing to recognize the principles of comity in regard to such a contract. The general principle laid down by the Court is undoubtedly correct, but I contend it is not properly applied in this instance. The laws of this State will not permit the sale of pretended titles,, in violation of the laws of champerty, because made in another State, where no such prohibition exists. But suppose a champertous sale made in Kentucky, and a bill of exchange given for the price, and passed to an innocent holder for value, would the bill be void in that case? If so, then I do not deny that this note would be. This note being made in Tennessee, is to be considered as if its form were a bill of exchange. *641There is no principle in our laws prohibiting .the making of bills of exchange. If there were such law, and the note were sued on here, it would be treated simply as a note. There is no principle in the laws of Kentucky forbidding the making of a bill of exchange by using the form of a note, as may be done in most of the States of this Union. If a bill of exchange, made in regular form in Kentucky, upon a champertous sale of land in Kentucky, may, under our laws, ,be valid, what sound reason can be given preventing a bill of exchange, made in Tennessee, according to the forms used in that State, being likewise valid. There is no principle of policy requiring ns to be more strict upon contracts made out of the State, against the spirit of our laws, than upon contracts made at home. In my opinion, the Court confounded the rules relating to construction and nature of the contract with ■those relating to its validity. While the -construction .of contracts, as a matter of right, should -be governed by the law of the place where made, their validity elsewhere depends upon mere comity. Persons contracting in one -State, where certain instruments have a certain defined meaning and import, are, upon principles of justice and -right, supposed to have incorporated that meaning and ■import in the instrument used. But the legal meaning .and import being , thus fixed by the law of the place of the contract, its validity in other States depends upon ■the mere comity of that State. To make this note other than a bill of exchange is to violate its legal meaning. It is made, by the law of Tennessee, a bill of exchange, •as perfectly as if it had that form.
I do not understand the Court as saying that a regular ■bill of exchange, made in Kentucky, upon-a champertous .deed, would not be good in the'hands of an innocent -holder for value.
But the opinion states, that even were this to be treated •■as a bill of exchange, being void between the original parties on account of fraud and champerty, Moore has not placed himself in a better position, not having shown himself to be a bona fide holder, for valuable consideration, without notice.
*642I find it laid down, that where the acceptor of a bill of exchange proves fraud or illegal consideration the holder must prove himself to be an innocent holder, without notice, for full value. In this case judgment was rendered at law and Breckinridge filed his bill alledging fraud on the part of Steele; the sale of the note to Moore, Broaddus & Co. and that they had notice of the fraud and want of consideration in the note: but he no where alledges or suggests that Moore, Broaddus & Co. did not give full value for the note. In the case of Early vs McCart, (2 Dana, 416,) cited by the Court, it was decided that it was not sufficient for the defendant to alledge fraud, as a defence against a bill of exchange, but the special plea must, in addition, charge either that the holder had notice, or did not give valuable consideration for it. This bill in chancery should at least have the requisites of a special plea. In common fairness it should alledge distinctly the grounds of attack, and I contend it has done so. It alledged fraud by Steele and knowledge of it by Moore, Broaddus & Co. These allegations were sufficient, and are distinctly denied by Moore, and the Court does not intimate a defect in Moore’s case, upon the only matter put in issue. Looking at the bill of Breckinridge, would -not any one consider the question of value as conceded by him, and that he had placed himself on the question of notice? In common fairness, the person should be notified of what is required of him. If Breckinridge desired to know the consideration, why could he not'have notified Moore of his desire, by amended bill or otherwise. I •dornot think any one can really doubt that Moore, Broaddus & Co. did give full value for it. They say so on oath; they prove it by a witness; it is sworn to by Steele. He also states that it was traded for long before it was due, and had no notice of any defence to it, nor did he know the consideration for it. I am then wholly unable to per. ceive the grounds upon which the Court expresses the opinion that Moore is without apology in not proving what consideration he gave for the note. The consideration of the assignment had never been questioned. At common law, where the plea of non-assumpsit puts in issue every thing, and proof of fraud is held sufficient to put the *643holder on the proof of his being an innocent holder, for full value, the practice of the Courts require the defendant to notify the plaintiff before trial, that he will be required to prove the consideration: (Chitty on Bills, 58, 69, 400, 401.) When a special plea is drawn, it must alledge the want of value, or holder had notice. In chancery, equal fairness should prevail and the holder required to prove what the complainant contests. In this Court, for the first time, did I, as lawyer, hear that the question of consideration was insufficiently presented by Moore. To present the question here, for the first time, when no question was ever raised concerning it below, does certainly resemble the trap system of practice, rather than the plain and honest modes of controversy. In the absence of all impeachment of the consideration, I contend that so far from Moore being “without apology” for not proving more concerning the consideration, that he showed over caution in not only stating in his answer but also proving by a witness that valuable consideration was given for it.
June 9.
So far as hardship is concerned, Moore, Broaddus & Co. are the real innocent sufferers. Whether they succeed or not the note is worthless; Breckinridge and his surety in the injunction bond being both hopelessly insolvent, and the only real question being whether Moore, the only solvent man in the whole concern, shall be mulct into one or two hundred dollars of costs.
All of which is submitted.
M. C. Johnson.
Response,
By Judge Breck.
The petition for a re-hearing has been attentively examined and considered. It does not satisfy us that the other members of the firm of Moore, Broaddus & Co. were necessary parties. No decree was sought against them. Moore was the legal proprietor of the note, and was so constituted, according to his answer, for the very purpose of rendering it unnecessary that the other members of the firm should be parties to any controversy for its collection.' *644Moore, as well by the assignment as by being a merdber of the firm, had a right to control and dispose of the note as he pleased., The same defence could be'made, whether the other members of the firm were parties or not, and they were equally concluded as if made parties. And as the Court ought not to have reversed the decree at the instance of either party, because the other members of the firm were not brought before the Court, so we deem it unnecessary to provide, upon the return of the cause, that they should be made parties.
Moore states in his answer, that he was informed, before judgment at law was obtained upon the note, that Breckinridge contended, and would rely, that the note had been obtained by fraud. Breckinridge alledges fraud in his bill against Steele, and Moore, Broaddus & Co. and establishes his equity against Steele. According to the laws of Kentucky, that equity is equally available against Moore as against Steele’. The onus is thus thrown upon Moore, to show that he ought'not to be affected by the conceded equity against Steele. It is then his duty to apprize Breckinridge’of the ground upon which he'claims exemption. It was for this purpose it became necessary, and he filed his amended answer, insisting that in his hands the note was entitled to the character of a bill of •exchange, which he had obtained “in the regular course of business, and for a fair and valuable consideration,” and without notice of the alledged fraud. This was his plea, and which, if sustained, would exempt him from the equity existing against Steele. We think he failed in the requisite proof to sustain it. The note, so far as the legal controversy between the parties was concerned, never appeared in the character of a bill of exchange, till it was relied upon by Moore in his amended answer, that it was entitled to that dignity, nor indeed even then : it was-not till a copy of the law of Tennessee was produced and established. The note at that time stood condemned as having been obtained by fraud.
It may, therefore, be well questioned, whether any allegation in Breckinridge’s bjll of fraud as against Moore, or that he had not paid a valuable consideration for the note, was necessary,
*645In this branch of the opinion, therefore, our views are Unchanged, as they are also upon the remaining point, which will be very briefly noticed.
The doctrine is settled, “thatabillof exchange ornote, although in the hands of an innocent indorser, for a valuable consideration, is void when the consideration in the instrument is for money won at play, or it be given for a usurious debt. The English statutes against usury and gaming, and which have been adopted generally throughout the United States, are peremptory, and make the bill or note absolutely void.” This is the language of Chancellor Kent — and he adds, “the same rule would of course apply to every case[in which the contract is by statute declared void.
The note in this case is part of a contract, made in violation of the champerty laws of Kentucky, which declare the contract void; and conceding that in all respects it is entitled to the character of a bill of exchange, still we are of opinion it should be placed upon no better footing than a bill of exchange, when the consideration was usury or money won at play.
Besides, upon the assumption, to which we still adhere, that the-note constituted apart of a contract in violation of the laws of Kentucky, upon that ground alone, we are of opinion that the holder, whether innocent or not, is not entitled to the aid of our laws for its collection.
Wherefore, the petition is overruled.