Russell v. Scudder

By the Court, Miller, J. I think the learned justice erred in his charge to the jury upon the trial of this cause. The evidence showed, that Pierce obtained of Lawrence on account of the check, $250, at one time and $310 at another time, being the next day, and the day of the date of the check, the 12th of October. At one of those times he showed the check to Lawrence; but gave his individual checks, on each occasion, for the amount of the moneys which he received. Pierce retained possession of Scudder’s check, deposited it in the bank, and after the check had been presented and [34] payment stopped, he gave Lawrence an order on the hank for the check. It will be noticed that there was no delivery of the check to Lawrence, nor any actual agreement that he should become the owner of it. The most favorable view that can be taken of the transaction, so far as Lawrence is concerned, is, that he relied upon the money received in payment of the check to reimburse him for the advances he had made upon Pierce's checks. Considering the law merchant as applicable to commercial paper, I am inclined to think that this was hardly sufficient to pass title to the check to Lawrence so as to place him in the position of a bona fide holder and to relieve him from the equities which existed against the original holder. The doctrine that a bona fide holder may recover upon paper taken innocently is founded upon the commercial policy of sustaining the credit of negotiable paper. (3 Kent’s Com. 79.) Something more should bo required than simply parting with money upon the individual checks of the borrower, upon the faith of receiving the avails of a check when paid. There should either be a delivery or some positive act showing an actual transfer of the check itself. A delivery is not always essential to vest the legal title in the payee or indorsee where the transfer is complete. (Chit. on Bills, 262.) And even actual possession might not affect the right to recover on a bill or note, if the plaintiff has a clear right to the money due upon it. (5 East, 476. 2 Sand. 47, a. n. 1. Selden v. Pringle, 17 Barb. 458. Smith v. Maine, 25 id. 33. Johnsons v. Jones, 4 id. 369. Armstrong v. Tuffts, 6 id. 438.) But where there is no assignment; no transfer of the title; no understanding or agreement by which the ownership is changed; and when other paper or security is taken, it has never been held that title to negotiable paper passes without a delivery. In the absence of delivery the proof should be exceedingly strong that a valid transfer or assignment was made, and that the title passed. ' In order to [35] maintain an action as a bona fide holder of paper of this character, there must be something more than parting with money on the delivery of the checks of the payee. There should be evidence to establish that the holder actually parted with his right to dispose of the check. There is certainly no such testimony in the case, and it would he an exceedingly dangerous doctrine to hold, in reference to paper of this character, that where the original holder kept entire possession and full control of the check and gave other paper for moneys advanced, the party making the advances occupies the position, and is entitled to the protection of a bona fide holder of negotiable paper. The charge of the judge left .the case to the jury to be satisfied, from the testimony, that there was a pledge of the avails of the check, and that Pierce obtained the money on the faith of it, when in fact the check was not delivered and Lawrence did not, by reducing it to possession, do what ordinarily would be considered proper and essential if he had trusted to the paper itself. Can it fairly be claimed that Lawrence advanced the money on the faith of the check, when there is no positive evidence of that fact, and it appears that he never had control of it until it was stopped ? If he intended to rely upon it why take Pierce’s checks and leave the defendant’s check in Pierce’s hands ? Why not take possession of the check upon which he claimed that the money was advanced ? As he had done nothing of the kind, must it not be assumed that Lawrence never had the control of it so as to entitle him to claim it as a bona fide holder. ' Conceding, however, that there may he some evidence from which it may by possibility be inferred that Lawrence parted with his money, on the faith of the check, yet I think that a -verbal 'pledge of a negotiable instrument of this kind, without a delivery or an absolute transfer, would not make him a bona fide holder, and the charge of the justice was therefore erroneous. It perhaps may be questionable whether the transaction [36] presented would not place the holder in the position of a mere assignee who takes negotiable paper after due subject to all equities existing in favor of the original maker. (Franklin Bank v. Raymond, 3 Wend. 69. Hedges v. Sealy, 9 Barb. 214. Chamberlain v. Gorham, 20 John. 144. Edwards on Bills, 286, 287.) As however a new trial must be granted for the error of the judge in his charge to the jury, I forbear a discussion of this point and the other questions made. [Albany General Term, December 7, 1863. The judgment must be reversed and a new trial granted, with costs to abide the event. Eogeboom, Peclchmn and MiU Ur, Justices.]