Baxter v. Duren

The opinion of the Court, Howard, J. taking no part in the decision, having formerly been engaged in the cause, was delivered by Shepdev, C. J. A promissory note was made at Calais on June 17, 1847, by C. & J. S. Bedlow, for $368, payable to J. P. Wheeler or order, in thirty days from date, at the Suffolk bank, Boston, and purporting to be indorsed by J. P. Wheeler and by William Deming. This note the defendant handed to [439] William H. Wood, a broker, without indorsing it, for discount or sale. The broker sold the note at a discount to the plaintiff. The note was not paid. The indorsements of the names of Wheeler and Doming were forged. Of this fact, the plaintiff, defendant, and broker were entirely ignorant. The broker was informed that the defendant was acting as agent of the Bedlows. There is no proof, that the broker informed the plaintiff, that he was acting for the defendant, or that the defendant was acting for the Bedlows. The plaintiff may be presumed to have known from the nature of the broker’s business, that he was acting as the agent of some person unknown. The broker is, therefore, in the position of one dealing with the plaintiff as an agent, without disclosing his principal. When a person deals with a broker, knowing him to be acting as the agent of some person unknown, the rights of the parties are governed by the rule, which prevails, when a person not known to be an agent, deals with another as agent, without disclosing his principal. Thompson v. Davenport, 9 B. & C. 78. Wood, the broker, in this case, is therefore in the position, as it respects the plaintiff, of an agent dealing with him without disclosing his principal. The defendant is in a like position dealing with the plaintiff'by an agent, and yet dealing with him as an agent, without disclosing his principal. It would therefore seem to be clear, that if the plaintiff can maintain an action to recover back the money, which he paid for the note, of the defendant, on the ground alone, that he sold the note without disclosing his principal, he may upon the same principles, maintain an action for the same purpose against the broker, because he sold the note without disclosing his principal. For the broker cannot be considered as having disclosed his principal by stating, that the defendant said he would sell goods for the paper, when he says, that lie could not positively say, that he informed the plaintiff, that he was acting for the defendant. The broker might have stated the opinions of many persons respecting the paper, without making any disclosure that he was acting as their agent or as the agent of any one of them. [440] If Wood be liable to refund the money to the plaintiff, he will be relieved from that liability by enabling the plaintiff, by his testimony, to recover the amount of the defendant, for a recovery against the principal relieves the agent from his liability. Thompson v. Davenport, before cited. When a witness is so situated, that his testimony will relieve him from liability and place - him in a state of security, if the party calling him recovers judgment, he is regarded as interested in the event of the suit, and as incompetent. 1 Greenl. Ev. § 393, 396. It becomes therefore necessary to inquire whether Wood, by making ;,sale of the note, by delivery merely without indorsement, and without making as of his own knowledge any representations respecting it, and without disclosing his principal, became liable to refund the money, which he obtained by the sale of it. The determination of this question will also determine, whether the defendant is in like manner liable, unless he shall prove to be liable on account of what he said respecting the note. The cases decided upon this point are apparently rather than really in conflict, although it may be difficult to reconcile all the observations made by different Judges in communicating their opinions. This apparent conflict arises from an omission to notice a distinguishing feature. When an innocent holder of negotiable paper parts with it by delivery without indorsing it, in payment of a debt due, or then created, as for example, in payment for goods then purchased, or by way of discount for money then loaned by a bank, banker or individual, and the paper proves to have been forged, the debt or loan, not being paid by it, may be recovered. In such case there is a warranty implied by law, that the paper is genuine, as there is, that coin or bank notes used for like purposes, are genuine. Jones v. Ryde, 5 Taunt. 488; Fuller v. Smith, 1 C. & P. 197; Camidge v. Allenby, 6 B. & C. 204, per Littledale, J.; Coolidge v. Brigham, 1 Metc. 547. When no debt is due or created at the time, and the paper [441] is sold, as other goods and effects are, the purchaser cannot recover from the seller the purchase money. There is in such case no implied warranty of the genuineness of the paper. The law respecting the sale of goods is applicable. The only implied warranty is, that the seller owns or is lawfully entitled to dispose of the paper or goods. Bank of England v. Newman, 1 Ld. Raym. 442; Fenn v. Harrison, 3 T. R. 757; Fydell v. Clark, 1 Esp. R. 447; Emly v. Lye, 1 5 East, 6; Ex parte Shuttleworth, 3 Ves. 368 ; Ex parte Blackburne, 10 Ves. 204; Ellis v. Wild, 6 Mass. 321. This distinction is recognized and stated to be the law, in Chitty on Rills, 10th American ed. 245, 246. The same doctrine, although not stated in the text, is cited with approbation as derived from Chitty, by Story on Promissory Notes, in note 4, under § 118. The principal difficulty appears to have been experienced in coming to a conclusion, whether the paper when discounted or sold, was received in payment of a debt or loan due or then created, or taken by way of purchase and sale. The use of the word discount in two different senses, has also contributed to introduce obscurity. It being used in some of the cases, and by some Judges to designate the reception of paper in payment of a loan, or debt, and in other cases and by other Judges, in the sense in which it appears to have been used by the broker in this case, to designate the reception of it on a sale as a piece of property. In the present case there can be no such difficulty, for although the broker speaks of the transaction as a discount of the note, there was no proposal to obtain a loan, and the paper was sold at its estimated value, being much less than the sum, for which the note was made. Wood therefore, not being liable to refund the amount received for the note, is a competent witness. It results also from the application of the same rule of law,, that the defendant is not liable without proof of an express warranty, for he had a right to dispose of the note as a piece: [442] of property, deriving his authority from the makers, who were liable to pay it. Note_Howard, J. had been of counsel and took no part in this decision. The only remark, which according to the proof the defendant made respecting it, was, that “ he would sell goods for the paper.” This cannot be regarded as a warranty that the signatures were genuine or that the makers or indorsers were responsible. It was the expression of confidence or of an opinion by way of recommendation, that the paper was good, and that it would be paid. The expression of such confidence renders the person liable only, when fraudulently made with a knowledge, which would prevent its being truly made. It is evident also, that it was not regarded as a warranty or relied upon by the plaintiff as such, for according to the testimony of Wood, he knew, that the credit of the indorsers was undoubted. Plaintiff nonsuit.