Plant's Manufacturing Co. v. Falvey

The following opinion was filed at the June term, 1865. Downer, J. The circuit court instructed the jury as follows : “If the collaterals were received simply as security or indemnity for the payment of the defendants’ notes, the one in suit amongst others, and without any agreement to collect such collaterals, or in any way to apply or use them, except to hold them as security for such debt, then the mere possession of such collaterals is no payment of the debt or defense to its col [204] lection any further than the plaintiff has actually realized the money on the collaterals.” It is contended that the instruction is erroneous, because the court did not leave it to the jury to say whether the company had been guilty of any laches in neglecting to present the collaterals for payment, or in collecting them, so as to make them its own. This raises the question whether, when notes are transferred as collateral security without any special agreement, the law implies an agreement on. the part of the assignee to use diligence in the collection of the collaterals; and, if he did not, whether the burden of proof is on the plaintiff or defendants to prove loss by negligence. The defendant’s attorney cites various authorities to the point that the burden of proof is on the plaintiff. They are all authorities, however, in cases where notes were delivered as conditional payment, and not where they were transferred as collateral security. In cases where the plaintiff has received a note as conditional payment of a claim or debt, and he sues on such claim, he must bring the note received as conditional payment into court, to be cancelled or surrendered, or satisfactorily account for it, before he will be permitted to recover. But if notes are assigned as collateral security for a debt, the holder may at the same time, unless there is an agreement to the contrary, bring different suits, one on the original debt and others on the collaterals, and prosecute them all to judgment, and collect on the judgments at least the amount of the original indebtedness and the costs in all the suits. If he collects anything on the collaterals after the indebtedness which they were assigned to secure is paid, he receives it, of course, for the benefit of the assignor. In this case, the defendants set up in their answer that the notes, transferred according to the proof as collateral security, were transferred in satisfaction and payment of the plaintiff’s claim. They failed entirely to prove this defense, but did prove the transfer as collateral security. This is an entirely different defense from that set up in the answer. To set up the transfer of the collaterals as a defense, [205] they must have not only averred their transfer but that they had been paid, or some of them; or that the plaintiff undertook to collect them, and their conversion to his own use, or their loss, or something equivalent, on account of the negligence of the plaintiff. And having made these averments, at the trial they would have had to prove them. The defendants than had no right, under the answer, to raise any questions whatever respecting claims transferred as collateral security; and if they had, the burden of proof was on them to show loss of the col-laterals by the negligence of the plaintiff It follows that there is no error in the instruction to the injury of the defendants. By the Court. — The judgment of the court below is affirmed, with costs. A rehearing was denied at the January term, 1866.