Naglee & Parrott v. Lyman

Field, C. J. delivered the opinion of the Court—Cope, J. concurring. In 1854, the defendant gave Clifford & Co. of San Francisco, a letter of credit, authorizing them to draw upon him at Boston or ¡New York, at sixty or ninety days’ sight, for any sums not exceeding twenty thousand dollars. The object of the credit was to énable Clifford & Co. to raise funds at San Francisco, and to remit the same to the defendant. They had, in fact, no interest in the transaction, the proceeding being a mere device on the part of the defendant to raise money on the time drafts of Clifford & Co. for his own use. Upon receiving the letter, Clifford & Co. applied to Page, Bacon & Co. to cash their bills on the defendant for the amount of the credit, payable sixty days after sight. Page, Bacon & Co. refused to do this, as the bills had too long to run, but after some negotiation sold their own sight bills on Boston, for the amount, to Clifford & Co. upon the promise of the latter to pay for the same within three or four weeks, retaining, by agreement, the letter of credit as collateral security for the payment. Soon afterward the costs of the bills were paid to Page, Bacon & Co. but through inadvertence the letter of credit was not withdrawn from their possession. Previous to this letter, Clifford & Co. were indebted on their own note to Page, Bacon & Co. in the sum of fifteen thousand dollars, of which amount ten thousand remained unpaid in February, 1855, when the latter firm suspended payment. For this balance security was demanded 5 and upon the suggestion of one of the firm of Page, Bacon & Co. a bill for the amount was drawn by Clifford & Co. upon the defendant at Boston, based upon the letter of credit, payable in sixty days after sight to the order of Page, Bacon & Co. and delivered to them. The bill was taken as collateral security merely, and not in payment of the note. Upon presentation of the bill at Boston, acceptance and payment were refused, and the bill was accordingly returned under protest. The plaintiffs were appointed receivers of the effects of Page, Bacon & Co. by order of the District Court, and authorized to institute suit for the collection of demands of that firm, in their hands as such receivers. They recovered judgment and defendant appeals. Some attempt was made to show that the credit was revoked [454] by the defendant previous to the drawing of the bill in suit, but the evidence on the point was too slight to justify any conclusion to that effect. The question upon which the case must turn relates to the sufficiency of the consideration given by Page, Bacon & Co. The non-acceptance of the drawee cannot affect his liability; the letter of credit containing an unconditional promise to accept the bills, drawn upon its faith, and the statute providing that such promise in writing, made before the bill is drawn, shall be deemed an actual acceptance in favor of every person, who, upon its faith, shall receive the bill/or a valuable consideration. (Laws of 1850, Ch. 100, Sec. 8.) The objection to the authority of the plaintiff as receivers to institute the suit is answered by the finding of the Court, which we must presume, in the absence of anything to the contrary in the record, was based upon proper evidence of the fact, and the objection that the special indorsements on the bill show title out of Page, Bacon & Co. as there was no retransfer from the last indorsee to them, is met by the proof that the several indorsements were made for the purpose of collecting the bill, and that the indorsees had no interest in it. (See the Chatauque County Bank v. Davis et al. 21 Wend. 584: Dugan et al. Executors, etc. v. The United States, 3 Wheat. 172; and Dollfus v. Frosch, 1 Denio, 367.) The point, then, for determination is this: Did Page, Bacon & Co. receive the bill in suit for a valuable consideration ? For its solution it is unnecessary to pass upon the much mooted question, whether negotiable paper, taken before maturity, as collateral security for an antecedent debt, without any change in the rights of the creditor in relation to such debt, is subject to the equities existing between the original parties, if such question can be considered as an open one after the decision of this Court in Robinson v. Smith, at the last term, (ante, 94.) In Payne v. Bensley, (8 Cal. 266,) the Court only intimated its opinion; the decision was placed on another ground. All the authorities, however conflicting in other respects, concur in the rule that where there is any change in the legal rights of the parties in relation to the antecedent debt, the creditor taking the collateral security is considered as a holder for value, and the paper not subject to equities existing between the original parties. Judged [455] by this rule, Page, Bacon & Co. are entitled to be considered as holders for value. By the provisions of the law in force in this State at the time, their right to proceed by attachment to enforce the payment of the note of Clifford & Co. was surrendered and lost upon acceptance of the security. Clifford & Co. hadjust previously suspended payment, and in surrendering the right to the process of attachment, Page, Bacon & Co. gave up the most effective, if not the only, remedy to collect the note. This surrender was a sufficient consideration for the security. It was so adjudged in Payne v. Bensley. Whether, in fact, Clifford & Co. did or did not profit by the surrender, is a mere matter of conjecture, and is of no consequence. Any suspension or forbearance of a legal right constitutes a sufficient consideration for a note or bill,\ without regard to the possible result, in the given case, of any attempt to enforce such right. We cannot say, without going into a consideration of collateral matters, whether Page, Bacon & Co. were in fact in any respect damaged. It is possible, that had they not received the bill, they might have sought other security, or have pursued with success the stringent remedy afforded by the attachment law. Judgment affirmed.