Havens v. Huntington

Woodworth, J. The question in this case is, whether, after payment to the bank, the notes continued negotiable, and could be transferred to the plaintiff, so as to enable him to sustain an action in his own name ? The objection to the right of recovery is merely to the form of action. It is urged on this principle, that by payment of a bill or note, the contract of the parties to it ceases. It is not necessary to controvert this proposition, in order to decide the present cause. A remedy in this form, on the note itself, is certainly convenient; and if it can be shown that no injury can arise by sustaining it, I should be inclined to uphold it, unless restrained by a uniform current of authority. The case of Beck v. Robley, (1 H. Bl. 89,) is relied on by the defendant’s counsel as in point; but it will be found, on ex393 animation, to be clearly distinguishable. The facts were these : Brown drew a bill of exchange upon Robley, payable to Hodgson, or order, which was accepted by Robley, and indorsed by Hodgson. Not being paid when due, Hodgson returned the bill, and Brown took it up, Hodgson’s indorsement still remaining. Brozan afterwards gave the bill to Beclc, as a security for money. The jury found a verdict for the defendant, on the ground that thé acceptor was discharged by Brown’s taking up the bill, and that there Was an end to its negotiability. The Court held the action not maintainable ; not on the ground, that where a bill Comes back unpaid, and is taken up by the drawer, it ceases, in every case, tó be a bill, but that the facts in that case required it so to be considered. This is evident from the expressions of Lord Mansfield, Who observes, “ if it were negotiable, Hodgson would be liable, for which there is no colour.” The consequences that would follow from a different decision, could not be sanctioned. The payment by Brown to Hodgson, wholly exonerated the latter. It was the same thing as striking out his indorsement; and if so, Beck could have no title to the bilk If, notwithstanding the payment to Hodgson, his indorsement passed the interest in the bill to Beck, it follows that he Would be liable as an indorser—a proposition too absurd and unjust to be tolerated. The distinction, in the present case, is manifest. It is true, the indorsers here have taken up the note, as the drawer did in Beck v. Robley : they afterwards passed it, but on their own indorsement solely. -‘The plaintiff derives his right from Jenkins & Havens, Who ought to be liable as indorsers ; for it must be presumed they have received value for the transfer. Supposing Havens had indorsed this note, and Jetókins & Havens had paid hiin and taken it up, but omitted to strike out his name ; the holder could not recover on a Count, stating the indorsement to him to have been made by Havens; because then the principle in Beck v. Robley would apply. The two cases would be alike. Here there are no interests of third persons to be affected, but in the manner prescribed by law. The note continued negotiable in the hands of Jenkins Havens, by their own indorsement. If [394] they passed it, there is no reason why they should not he liable. In Callow v. Lawrence, (3 M. & S. 95,) the case was this : The drawer of a bill, payable to his own order, indorse(l ü to Taylor, who discounted it for him. Taylor indorsed it to Bassett. Upon the bill being dishonoured, the drawer paid the amount to Bassett, who struck out his own and Taylor's indorsement, and returned it to the drawer, who afterwards passed it to the plaintiff. It was held that he might recover against the acceptor. Lord Ellenhorough, in that case, says, “ If the drawer has paid the bill, he may sue the acceptor on that bill, and if, instead of suing the acceptor, he put it into circulation on his own indorsement only, it does not prejudice any of the other parties.” He considered that Bywell, the drawer, became the purchaser of the bill when he passed it and took it up ; that it was not paid animo solvendi, in order to extinguish it, but only to relieve himself from the situation in which he stood upon the bill. All the Judges concurred in the opinion, that the case of Beck v. Rohley was decided on the distinction I have laid down. In Gomez Serra v. Berkley, (1 Wils. 46,) the point in question seems to have been settled. There the payees of a promissory note, payable to them or order, indorsed it to the plaintiff, and afterwards paid the note and took it back, and then passed it a second time to the plaintiff. It was held that the plaintiff might recover against the maker ; for he was still liable to the payees, when they passed the note a second time ,to the plaintiff; and that the plaintiff ought to stand in their place. The next objection is,, that Jenkins <5- Havens could not have maintained an action on the notes themselves, as they were accommodation notes, though they may for the money paid. It will be conceded that Jenkins & Havens could not sustain an action on the notes, before payment at the bank. Previous to that there was no consideration, but becoming liable on the notes as indorsers, and it being their duty to take them up, the money paid operated as a purchase of the security; and from that moment it ceased to be an accommodation note, indorsed by them for the defendant, but a valid note to Jenkins & Havens, founded on good consideration. I am of opinion, that the plaintiff is entitled to judgment. [395] Sutherland, J. The only question is, whether the notes oeased to be negotiable in consequence of having been dishonoured by the maker, and paid by the indorsers. All the doubt that exists upon this point, has grown out of the case of Beck v. Robley, (1 H. Bl. Rep. 89, note.) And all the cases, in which the negotiability of a note, or bill of exchange, circumstanced like these, has been called in question, put themselves upon the authority of that case. That was the case of a bill of exchange, drawn by one Brown upon Robley, in favour of one Hodgson, accepted by Robley, and endorsed by Hodgson. Not being paid by the acceptor, when due, Brown, the drawer, took it up, Hodgson’s endorsement being still upon it. Brown subsequently passed it to Beck, the plaintiff. It was held, by Lord MansJield, that the drawer, after having paid the bill, could not again put it in circulation ; because, by so doing, Hodgson, the payee and endorser, would be subjected to a suit upon it, which clearly ought not to be. This case has always been Considered, in England, as standing upon its own particular grounds; and has never been held to decide, that a bill or note is not negotiable after it becomes due, and has been taken up, unless by putting it in circulation again : some party to it might be subjected to a suit, who ought not to pay it. The case of Callow v. Lawrence, (3 M. & S. 94) is decisive upon this point. There a bill of exchange was drawn by one Pywell, payable to his own order, upon, and accepted by Lawrence, the defendant. Pywell endorsed it to one Taylor, and Taylor to one Bennett, who held it when it became due. Not having been taken up by Lawrence, the acceptor, Pywell, the drawer and first endorser, paid it; and, striking out the subsequent endorsements of ’ Taylor and Bennett, passed it to Callow, the plaintiff. It was held, by all the Judges, that the fact of the bill having been taken up by the drawer, did not destroy its negotiability : that the test was, whether it could be put in circulation again, without prejudice to any party who ought not to pay it: and that, as the drawer was also the first endorser of the bill, its negotiability could be preserved, [396] without prejudice to the subsequent endorsers, by striking ou£ j-jjgjj. ilameSj and leaving his own upon it. The case of Gomez Serra v. Berkley, (1 Wils. 46) is to the same P°*nk This question was. very fully discussed in the Superior Court of Massachusetts, in Guild v. Eager et al. (17 Mass. Rep. 615,) and the principle of Callow v. Lawrence was sanctioned and adopted, although two decisions of a contrary character had been made, in that Court, under a misapprehension of the case of Beck v. Robley. It is clear, then, upon the authority of these cases, that the negotiability of the notes upon which this suit was brought, was not impaired by the fact of their having been paid and taken up by Jenkins <£• Havens. They were the payees and sole endorsers of the notes ; and no party, who was not at all events bound to pay them, could be sued or molested, in consequence of their being again put in circulation. If, as between Jenkins & Havens and the defendant, there was any fraud in the transfer of these notes, or if he has any ground of defence against them, he can avail himself of it against the plaintiff; for, having taken the notes after they became due, he took them subject to every defence which existed between the original parties at the time of their transfer to him. (Brown V. Davies, 3 T. R. 80. Taylor v. Mather, id. 83, note. Johnson v. Bloodgood, 1 John. Cas. 51. 2 Caines’ Cas. in Err. 303. Sebring v. Rathbun, 1 John. Cas. 331. Lansing v. Gaine & Ten Eyck, 2 John. Rep. 306. O’Callaghan v. Sawyer, 5 John. Rep. 118. Lansing v. Lansing, 8 John. Rep. 454.) The nonsuit must, therefore, be set aside, and a new trial granted, with costs to abide the event of the suit. Savage, ph. J. concurred. Rule accordingly.