Court Opinion

ID: 6409126
Source: CourtListenerOpinion
Date Created: 2022-06-25 11:51:16.940911+00
Date Added: 2024-06-11T15:51:18.851264
License: Public Domain

Dewey, J.
There is some obscurity on the face of the report of this case, and instructions are asked and given upon a supposed state of facts, which could not have existed; inasmuch as the Hales could not have been the plaintiffs in a suit upon these notes, they being the makers, and the defendant being their accommodation indorser.
We understand, however, that the real question intended to be presented is, whether the plaintiffs, having received these notes either in payment of, or as collateral security for, a precedent debt, must take them subject to all the equities existing between the original parties. It is insisted by the defendant, that, in fact, the notes were not received in payment, but as collateral security ; but that, in either event, the gtound of defence suggested is open to them.
The general question above stated has often been a subject of discussion, both in the state tribunals, and in those of the United States ; and, to some extent, there has doubtless been *166a diversity of opinion. In this commonwealth, the question has been before us at different times, and our opinions became pretty well settled, at a period when there was much less authoritative sanction for them thah there is now.
It is not proposed to pass in review all the various adjudications upon this subject, but I will briefly refer to a few of the leading cases. The case of Swift v. Tyson, 16 Pet. 1, furnishes a full reference by Mr. Justice Story to all the decisions, and presents his view of the early English doctrines upon the subject, beginning with Pillans v. Van Mierop, 2 Burr. 1663, and continued down to the case of Percival v. Frampton, 2 Cromp. Mees. & Ros. 180. Judge Story insists, that the whole current of English authorities is in accordance with the decision of the supreme court of the United States, in the case of Swift v. Tyson. He admits, that, to a certain extent, the courts of New York have taken a different view of this question ; but he confidently anticipates, from the qualifications and exceptions introduced and recognized in the cases of Bank of Salina v. Babcock, 21 Wend. 499, and Bank of Sandusky v. Scoville, 24 Wend. 115, that the courts of New York would soon be found to give their sanction to the principles of the case of Swift v. Tyson. As to this, his anticipations have not been realized. In the recent case of Stalker v. M’ Donald, 6 Hill, 93, it was held by the highest appellate court of New York, that a party receiving a negotiable note is affected by the equities as between the original parties ; “ unless he had given money or some new consideration for it, or given up a security which he held for the payment of the antecedent debt; and that it was not sufficient to protect the note in the hands of the purchaser, that he received it merely as security, or nominally in payment of a preexisting debt.” Chancellor Walworth sustained this view of the question in a very elaborate opinion. On the other hand, Mr. Justice Story reaffirms his views in his treatises on promissory notes and on bills. In the treatise on bills, § 292, he says : “Any person is treated as a bona fide holder for value, not only who has advanced money or other value for the note, but who has *167received it in payment of a precedent debt, or has taken it as collateral security for a precedent debt.” Chancellor Kent, 3 Comm. 80, (6th ed.,) says: “ Mr. Justice Story, in his treatise on promissory notes, p. 215, repeats and sustains the decision in Swift v. Tyson, and I am inclined to concur in that decision, as the plainer and better doctrine.” This confirmation of the doctrine of judge Story’s treatise, by chancellor Kent, it is to be remembered, was written after the publication of the decision of Stalker v. M'Donald, above cited.
The opinions of these learned jurists, upon this point, have been sanctioned by the courts of Connecticut, Ohio, and Maine. Brush v. Scribner, 11 Conn. 388 ; Carlisle v. Wishart, 11 Ohio, 172; Homes v. Smyth, 4 Shepl. 177; Norton v. Waite, 2 App. 175. Two cases, from the reports of the decisions of the superior court of New Hampshire, have been cited as of a contrary tendency. Upon examining those cases, it will be found, that Jenness v. Bean, 10 N. H. 266, was a case of a note payable on demand and indorsed after it was overdue. The case of Williams v. Little, 11 N. H. 66, is more in point; adopting to some extent the principle of the New York decisions. The decision in this case is to the effect, that the receiving of a negotiable note of a third person, in payment of a precedent debt, would, as respects the indorsee, exclude all equities between the original parties to the note ; but that the party, receiving such negotiable note merely as collateral security, would take the same subject to all the equities as between the original parties. If the present was a case of a note received as collateral security merely, the case of Williams v. Little would be an authority in favor-of the defendants.
Very few direct authorities upon this point are found in the published reports of the decisions of this court; although, as-already remarked, the subject has been occasionally before us, and much considered in cases where it was eventually found unnecessary to express any opinion upon the question. The case of Chicopee Bank v. Chapin, 8 Met. 40, is the *168more direct authority for the plaintiffs upon the point, that if the notes were taken as collateral security merely, the defendant cannot avail himself of the equities between the original parties; the plaintiffs being bona fide holders without a knowledge of these equities. The general question of the unrestrained negotiability of notes of this character, and the importance of giving effect to their transfer, was much considered in Wheeler v. Guild, 20 Pick. 545.
The present case, in our view, requires nothing more than the recognition of the principle, that the receiving of a negotiable note in payment of a preexisting debt will exclude all the equities between the original parties. The evidence shows, that these notes were thus received. They were applied directly in payment of precedent debts, and the amount of them was deducted from the debt due from the Hales. In this commonwealth, especially, where it is held that the giving of a promissory note is prima fade evidence of a payment of the demand, on account of which it is given, such a transfer should be considered as entitled to all the protection which is afforded by the rules of law to a note given as payment of a precedent debt. The evidence satisfactorily shows that the receipt of these notes by the plaintiff was in payment of a precedent debt; and, upon this ground, therefore, the plaintiffs are not to be affected by the equities between the original parties. It is true, nothing was given tip, and no securities were surrendered; and consequently the notes would not be protected under the rule adopted in the case of Stalker v. M'Donald, 6 Hill, 93. If, however, the case had been one of a note taken as collateral security, it is difficult for us to perceive any sound reason for a different result. All the cases, those of the New York .court inclusive, concur in this, that if the party receiving the note parts with any thing valuable, he is entitled to enforce the payment of the note, irrespective of 'the equities as between the original parties. But may you not as well show a legal consideration, by showing forbearance to act, as by showing an act done ? A damage to the promisee is all that is necessary to show a *169good consideration for a promise; and ought not the same rule to apply in protection of a note transferred to him ? If the party had not received the note as collateral security, he might have pursued other remedies to enforce the security or payment of his debt. He might have obtained other securities, or perhaps payment in money. It is a fallacy to say, that if the plaintiffs are defeated in their attempt to enforce the payment of these notes, by allowing this defence to prevail, yet, nevertheless, they are in as good a situation as they would have been in, if the notes had not been transferred to them. That fact is assumed, and not proved, and from the very nature of the case is a matter of entire uncertainty. The convenience and safety of those dealing in negotiable paper ,seem to require and justify the rule, that when a person takes a negotiable note not overdue, or apparently dishonored, and without notice, actual or constructive, of the want of consideration, or other defence thereto, whether in payment for a precedent debt, or as collateral security for a debt, the holder should have the legal right to enforce the same against the parties thereto, notwithstanding such defence might have been effectual as between the original parties.

Judgment for the plaintiffs.