Johnston v. Allen

The Chief-Justice delivered the opinion of the court: The appellees, R. T. P. Allen and Julia A. Allen, brought suit in the Circuit Court of Orange county against the appellant on a draft, of which the following is a copy: “ Orlando, Aug. 12, 1881. “ Mr. A. D. Johnston, Jr. At sight, pay to John M. Pearce two hundred and seventeen dollars. A. D. Johnston, Sr.” “ Accepted, Sept. 1st, 1881. A. D. Johnston, Jr.” The defendant filed a plea on equitable grounds, setting forth that the plaintiffs did not become possessed of said draft in the due course of trade, or for a valuable or legal consideration; that one Judson Sharpe in the year 1881 was in the employ of plaintiffs on board the steamer Mary Bell, plying on the Kissimmee river, and was charged by plaintiffs with being a defaulter in a large sum of money, and criminal proceedings were instituted or threatened against the said Sharpe, for the alleged embezzlement. Whereupon, the parties agreed to compound and compromise the said felony, and as a part of said compounding the said felony said Pearce deposited with the plaintiffs, among other things, the said draft, as collateral security to — 232 — secure the plaintiffs whatever sum might be due to them by the said Judson Sharpe; that said Pearce did not receive any consideration for the same; that said Pearce after-wards informed him that the said draft was deposited as collateral, and forbade his paying the same unless it should be presented properly endorsed by him. On motion of plaintiffs’ counsel this plea was stricken by the court, and appellant assigns such action of the court as error. There is no reason why this defence should have been set up in a plea on equitable grounds. There is nothing in it that would give a court of equity jurisdiction—if a bill had been filed for relief. Whatever defence there was in it was available to the defendant by common law plea. This court, in the case of Spratt vs. Price, 18 Fla., 289, decided that when an equitable plea in a common law action consisted of matter which was a defence at law, that the court of its own motion should strike it out. The appellant also assigns as error the sustaining of plaintiffs’ demurrer to his plea of payment. We think this was erroneous. As the case must be reversed on this point, it is not improper that we should give our views for the guidance of the court in another trial of it. The draft was not a negotiable instrument. By the authorities the acceptor of such a paper had a legal right to pay the amount called for in it to the payee without demanding a delivery up to him of the draft, provided he had no notice that the payee had transferred the draft to a third person before demanding payment. Hart vs. Freeman, 42 Ala, 567 ; Story on Promissory Notes, sec. 106. Such a payment would be a valid defence against the note, should it afterwards appear, and suit be brought on it — 233 — against the maker by another holder. The question as to whether Johnston had notice of the transfer by Pearce to plaintiffs of the draft before he claims to have paid it is a question of fact to be decided by a jury. The burden of proof of this issue rests on the plaintiffs—if the defendant proves the payment—to show that the defendant had notice of the transfer before the payment was made. The pleadings thould be formed so as t© bring the issue of notice vel non before the jury. If Johnston had notice before or at the time of his alleged payment of the draft to Pearce, that Pearce had parted with the possession of it, either by transferring it absolutely, or by giving it to Sharpe to be used by him as collateral, his payment of it with this knowledge would not be a good defense, either as to an absolute transferee from Pearce, or the person who held it as collateral from Sharpe. The defendant says in his equitable plea that Pearce informed him that the draft was deposited as collateral and forbade his paying it unless it should be presented properly endorsed by him. If this be true, as to which we say nothing, it was a sufficient notice to him to deprive him of the right to pay the draft to Pearce, and Pearce having given the draft to Sharpe to be used as collateral could not afterwards prevent the payment of it to Sharpe’s transferee by forbidding the acceptor to pay it until he should endorse it. It would permit him, after agreeing to allow Sharpe to use the draft as collateral and delivering it to him for that purpose, and after Sharpe had passed it to another person in pursuance of such authority, to attach a condition to it, at the instance of his own will alone, which would nullify the whole transaction and opeí’ate as a fraud on the transferee from Sharpe. The third assignment of error is that the court refused to permit evidence to go to the jury as to whether Pearce — 234 — was indebted to Sharpe, or of the nature of the indebtedness from Sharpe to the plaintiffs, or whether Sharpe was indebted to the plaintiffs at all. We cannot see the materiality of this evidence. It was a matter in which the acceptor was in no wise concerned. His duty and liability were alike limited to the payment of the draft which by his acceptance he agreed to pay to the holder, for what indebtedness it was transferred, its amount, or whether there was any indebtedness existing from the payee, Pearce, to his transferee, Sharpe, or from Sharpe to the plaintiffs, has no bearing or influence on his rights or liability. Appellant also assigns as error the refusal of the court to give the fourth and fifth instructions asked. These instructions are as follows: “ Fourth, that the draft sued on is a non-negotiable instrument, and the defendant is entitled to defend against the plaintiffs, (not the payee,) in the same manner and on the same ground that he could against the payee, Pearce. That if they believe from the testimony that Johnston has paid the amount of the draft to Pearce in payment of the draft, they must find for the defendant.” “ Fifth, that even though Allen received the draft for a valuable consideration, the draft being a non-negotiable instrument, he took it subject to all the equities existing between Pearce and Johnston. That if, by reason of payment or off-set, Pearce could not recover by suit against Johnston, neither can Allen recover from Johnston. Hence, if the jury believes from the testimony, that Johnston has paid the draft to Pearce, Allen cannot recover, and they must find for the defendant.” Both of these instructions were properly refused. They each asked the court to instruct the jury that they must find for the defendant, if Johnston, the acceptor, had paid the draft to Pearce. They put no limit to the time within which Pearce had a right to demand payment from John — 235 — ston, and during which it was the duty of Johnston to pay Pearce. This was as long as Pearce was the owner of the draft.. After that time, and when Pearce had transferred the-draft to Sharpe, and Sharpe had transferred it to plaintiffs, if Johnston had notice of such transfer, and paid it toPearce, it was unauthorized, and was not a payment, so far-as the plaintiffs are concerned. The vital question is, “did Johnston, at the time he-paid the draft to Pearce, have notice that Pearee had transferred the draft to another person ?” Yet these instructions, ignore this question, and ask the court to charge that, be-, cause the paper was non-negotiable, that the acceptor had a right to pay it to the payee, regardless of the question as. to whether he knew that the payee had transferred it or-not. Supposing that the facts set up in the equitable plea, will be again brought before the Circuit Court in some-other form, it is not improper that we should state our views as to their validity as a defense to the action. The law of contracts relating to the compounding a felony is laid down very clearly. “ In all cases of offences, which involve damages to an injured party, for which he may maintain an action, it is competent for him, notwithstanding they are also of a public nature, to compromise or settle his private damage any way he may think fit, but that an agreement for suppressing evidence, or for stifling or compounding a criminal prosecution for a felony, is void.” Chitty on Contracts, Vol. 2, p. 991. The mere fact that Sharpe was under arrest for embezzlement from, the plaintiffs would not vitiate or taint any agreement he-made with the plaintiffs for the payment of whatever sum, he might be indebted to them, unless in consideration of such agreement the plaintiffs were to abandon or suppress, the prosecution against him. — 236 — But if such an agreement was made by plaintiffs and Sharpe, we cannot see how it is an available defence to the defendant. There is no contest as to the validity and binding force on him of the draft in its inception. He was not privy to the agreement between plaintiffs and Sharpe. His interests are not affected by it in any way. Mack vs. Clark, 1 Met., 423. Judgment reversed and new trial granted.