Beebe v. Real Estate Bank

By the Court, Ringo, C. J. Several questions are presented by the record and assignment of errors; the most important of which, as we conceive, arises out of the adjudication upon the demurrers of the plaintiff to the pleading of the defendants below, which, according to the well settled rales of law, imposes upon us the necessity of considering not only the validity of the pleas, but also the sufficiency of the declaration, and pronouncing judgment against the party whose pleading exhibits the first fatal defect. We shall, therefore, in the first place, confine our inquiries to the first count in the declaration; because, if that shows no cause of action, it is useless to inquire whether the pleading in response to it be good or bad, as the legal result would, in either event, be the same. The count of the declaration is, in form, sufficient, but it presents, broadly, this question: What is the legal consequence of the holder of a bill of exchange endoEsing it to the acceptor, where there are several parties to the bill? In the present case, the bill of exchange mentioned in the first count, is stated to have been drawn by Woodruff, in favor of Crutchfield, and accepted by him, and then to have been .endorsed by the payee to the acceptor, and by him to the Bank. Under these circumstances, the rights of the Bank in respect to the bill and the transaction, whatever they may be, are such only as she acquired under, and by virtue of, the endorsement of the bill to her by the acceptor, who is, by this suit, sought to be charged, not as an endorser, but as the acceptor of the bill. Now, it is understood to be well settled, that the law regards the acceptor of a bill of exchange as the principal debtor, and not only primarily liable to the holder, but also ultimately responsible to every other party to the bill, by whom it may have been bona fide taken up or paid, unless his acceptance was made for the accommodation of either the payee or drawee, and that fact be made distinctly to appear. In the case before us, such is not shown to be the fact, and the law does not presume it. What, then, was the legal obligation of the parties to the bill, respectively, after it was endorsed by the payee to the acceptor, while it remained in the hands of the latter? Could any action be maintained upon the bill, either by or against any party to it? In our opinion, the answer must be in the negative. And, if this be true, is it not a necessary consequence, that every party to the bill was thereby discharged from all legal liability upon it? Such, we think, is the legal conclusion upon the facts, as stated in the first count of the declaration. And, if these positions bo true, as we consider them to be, the instrument, when the acceptor became the proprietor and legal holder thereof, was divested of all obligation, and the parties to it were, of course, discharged from all responsibility thereon. And we consider it equally clear, that the simple endorsement of the bill, by Beebe, could not revive its obligation, or in any manner bind the other parties to the transaction, notwithstanding he might thereby charge himself, as we have no doubt he did, though not as the acceptor of the bill, because, as before shown, its legal obligation was previously extinguished, and it had ceased to be a negotiable security. The Bank, therefore, if she sought to charge the parties to the bill, as the acceptor, drawer, and endorser theréof, as she has attempted to do, should have shown at least their assent to the transfer thereof to her by Beebe, so as to avoid the legal presumption that it had been paid, taken up, and extinguished by the acceptor, which, as we conceive, necessarily results from the union, in him, of both the legal title and possession of the instrument. This she has not attempted to do, as there is nothing in the record to warrant the conclusion that such was the fact. The legal presumption, therefore, that the bill had been bona fide satisfied and extinguished by the acceptor, previous to his endorsement thereof to the Bank, must be indulged; and, upon this ground, the first count in the declaration is fatally defective, the allegations therein showing no legal cause of action whatever, against either of the defendants below. In this opinion, we are fully sustained, as we conceive, by the judgment of the court of appeals of Kentucky,, in the case of Long & Robertson vs. The Bank of Cynthiana, reported in Littell, 290, which is the only adjudication expressly in point, of which we have any knowledge. We have carefully considered all of the cases cited by the appellee, but none of them, in our opinion, warrants the conclusion sought to be deduced from them. The facts in them were essentially different from those appearing in this case, and they establish no principle adverse to the one above stated. The-controverted question, in the cases cited, was, whether a negotiable-note or bill of exchange, after it had-been paid to the holder, and taken up by some party to it other than the principal debtor, was negotiable; and in such case, they have been held to bé negotiable, notwithstanding the payment. Such is the case where the transfer will not subject any parly thereto, whose liability thereon was discharged by the payment, to an action at the suit of the endorsee or holder. But when the effect of the transfer would be to subject any party to the instrument, whose liability was extinguished by the payment, to a suit by, or in the name of, the assignee, endorsee, or holder, they have uniformly been considered and held to be not negotiable.. In our opinion, therefore, the demurrer to the pleas, to the first count of the declaration ought to have been overruled, and that count of the declaration adjudged insufficient,in law, to support the action; and the court, in sustaining the demurrer to said pleas, in our judgment, unquestionably err fed. The only remaining question which we deem it proper to notice, is as to what is the legal effect of the nolle prosequi, or discontinuance of the cause, by the'plaintiff below, as to two of the defendants, Wood-ruff and Crutchfield, upon the case as to their co-defendant, Beebe. This court has decided at the present term, that where a plaintiff enters a nolle prosequi or discontinuance as to a part of the defendants, upon whom process has been duly served, and who are then bound to appear in the case, whether the action be founded upon a joint or joint and several contract, it is, in law, a discontinuance of the action as to all of the defendants, and the case is thereby out of court. And that such is the general rule on the subject, we think there can be no doubt; but, on the part of the appellant, it is urged, that this case forms an exception to the general rule, and some cases are cited in the brief as establishing this proposition. The first that we shall notice is the case of Fuller vs. Van Schaick et al., 18 Wend. 547, which was a joint action against the maker and endorsers of a promissory note, in which the plaintiff discontinued as to the endorsers, and took a verdict against the maker alone, which the Supreme Court of New-York refused to set aside. In deciding this case, that court expressly admits the general rule to be, as we have stated, but deny its applicability to the case, on the ground, as we understand it, that thq statute of that state, allowing the plaintiffs to include all the parties to a bill or note in one action, does not turn distinct liabilities into a joint contract, but only gives a joint action to enforce the several liabilities of the different parties. But this decision, as we apprehend, was influenced more by the statutory provisions contained in the statutes of 1832 and 1835, cited by the court, a portion of one of which, as quoted in the opinion, declares, that judgment may be rendered for the plaintiff against some one or more of the defendants, and also in favor of some one or more of the defendants, against the plaintiff, than by any other consideration. Besides, the opinion states, expressly, that the 2d section of the act of 1835, carries this severance of the action still further. And in the case of The Bank of Tennessee vs. Field et al., 19 Wend. 643, the same statutes of 1832 and 1835, are again cited by the court, and the judgment is, we think, evidently based upon their provisions. There are no such statutory provisions in force here, Consequently, these adjudications are not applicable to the present case, and can have no influence upon it. In the cases of Minor et al. vs. The Mechanics' Bank of Alexandria, 1 Pet. 46, and The United States vs. Lafler, 11 Pet. 86, the Supreme Court of the United States appears to have proceeded upon the ground that, inasmuch as the cause of action was several as well as joint, and the defendants had severed in their pleading, a nolle prose-qui as to such of the defendants as had severed in their defence, could be entered, and, in such case, would not operate as a discontinuance of the action as to the other defendants, as to whom, notwithstanding the nolle prosequi, the plaintiff might proceed to judgment; and the judgment would not, for that cause, be reversed; at least it would not, when, as in these cases, no objection was made to the nolle prosequi, or subsequent proceedings, at the time, or in the inferior court. This we understand to be the extent of the rule established; and, although it may be extended beyond the limit prescribed to it by the common law,' as it is understood in England and many of the State courts, still, it is not sufficiently enlarged to embrace the case before us; for, notwithstanding the cause of action is, in this case, only several, and the liabilities of the parties distinct and entirely independent, the action against them is joint; and, as the defendants all joined in one defence, the case is, on this account, clearly not within the extension of the rule, as established by the Supreme Court, but falls expressly within the operation of the principle asserted by this court; which is, that, in all actions of contract, notwithstanding the contract is several as well as joint, and the plaintiff may sue each separately, or all, or as many of the parties to the contract jointly, as he may think proper, when he has made his election by instituting a joint action against all or any number of the parties, he must be held to his election, and prosecute and conduct the suit as he would be bound to do if the contract was merely joint. The law making all contracts several as well as joint, and giving the plaintiff this election in the first instance, is not more liberal than just, and was made exclusively for his benefit; but it is equally regardful of the rights of defendants, and, for their benefit, it binds him to abide his election, when once made, until the suit is determined, except in cases where the process is not served, or not served in time to bind the defendant to appear at the term to which it is returnable; in which case, the plaintiff, by virtue of the statute, may discontinue as to those not served or not served in time, and proceed against those who are bound to appear; or, he may continue the suit until the next term of the court, and take new process against those not served; but, at the second term, the suit shall proceed against all the defendants who may have been served with process in due time. Rev. St. Ark. 626, sec. 45, 46, 47. We are, therefore, clearly of the opinion, that neither the common law nor statute authorized the plaintiff to proceed, in this case, against Beebe,, after it was discontinued as to Woodruff and Crutchfield, without his consent, the suit thereupon, by the mere operation of law, being immediately out of court, and discontinued as to all of the defendants. Judgment reversed.* Footnotes [*] Upon the question of discontinvance, in this case, Lacy, J., did not assent to the opinion, as he subsequently declared.