Lunt v. Wrenn

Mr. Chief Justice Scholfield delivered the opinion of the Court: It would seem to be more accurate, in this class of cases, to say that the right of recovery is for the purchase money, because of the failure of the consideration upon which it was paid, than to say that it is for the breach of an implied warranty that the article is that which was professed to be sold. That which was delivered by the seller to the buyer was not that which was sold, but only a worthless counterfeit resemblance of it. The seller has got the buyer’s money, and the buyer has received nothing from him for it. It is not the case of a failure of title, but one of the non-existence of the subject matter of the sale. The distinction pointed out by Lord Abinger, in Chambs v. Hopkins, 4 Mees. & Wei. 399, has been generally approved, and seems to be sufficiently accurate. He said: “A good deal of confusion has arisen from the unfortunate use made of the word 'warranty.’ Two things have been confounded together. A warranty is an express or implied statement of something which the party undertakes shall be part of a contract, and though part of the contract, yet collateral to the express object of it. But in many of the cases, some of which have been referred to, the circumstance of a party selling a particular thing by its proper description has been called a warranty, and a breach of such a contract a breach of warranty ; but it would be better to distinguish such cases as a non-compliance with a contract which a party has engaged to fulfill, as, if a man offer to buy peas of another, and he sends him beans, he does not perform his contract, but that is not a warranty. There„is no ivarranty that he should sell him peas. The contract is to sell peas, and if he sells him anything else in their stead, it is a non-compliance of it.” Benjamin, in his work on Sales, (1st Am. ed.) p. 443, after copying this quotation, observes: “There can be no doubt of the correctness of the distinction here pointed out. If the sale is of a described article, the tender of an article answering the description is a condition precedent to the purchaser’s liability, and if this condition be not performed, the purchaser is entitled to reject the article, or, if he has paid for it, to recover the price as money had and received for his use; whereas, in case of warranty, the rules are very different. ” He then adds that there is no controversy as to this principle, and as illustrative, cites and quotes from a number of modern English cases, after "which he says: “Under this head may also properly be included the class of cases in which it has been held that the vendor who sells bills of exchange, notes, shares, certificates, and other securities, is bound, not by the collateral contract of warranty, but by the principal contract itself, to deliver, as a condition precedent, that which is genuine,—not that which is false, counterfeit, or not marketable, by the name or denomination used in describing it. ” And he cites, in support of this, Jones v. Ryde, 5 Taunt. 488; Young v. Cole, 3 Bing. (N. C.) 724; Westrop v. Solomon, 8 C. B. 345; Gompertz v. Bartlett, 2 E. & B. 849; 23 L. J. (Q. B.) 65,—and the cases cited fully sustain his language. To like effect, see, also, 1 Smith’s Lead. Cases, (7th Am. ed.) 325; 2 Sehouler on Personal Prop. 320; Chitty on Contracts, (11th Am. ed.) 931; Story on Sales, (2d ed.) secs. 147, 148, 377; Biddle’s Warranties on the Sale of Chattels, sec. 89; Smith v. McNair, 19 Kan. 330; Paul v. City of Kenosha, 22 Wis. 266; Webb v. Odell, 49 N. Y. 583. It is true, this court, in Tyler y. Bailey, 71 Ill. 34, without alluding to the distinction between a breach of an implied warranty and the non-performance of a condition of sale, speak of an implied warranty of the genuineness of the thing sold; but at the same time, it will be observed, it is held that the right of recovery in the ease of a contract to sell land warrants, and the delivery of counterfeits in their stead, is of the money paid by the buyer, on the ground of failure of consideration. If the right to recover is upon the ground of failure of consideration, it is quite evident that the Statute of Limitations is a complete defence, since, in that event, it began to run from the date of the transaction, for the condition of the scrip was then precisely what it is now,—counterfeit and worthless,—and the evidence discloses no circumstance whereby, in any contingency, legitimate profit could be derived from its possession, either then or prospectively. And if we shall concede that the liability to recover is upon the ground of an implied warranty of genuineness, we think it is equally clear that the Statute of Limitations, on the facts admitted in this record, is a complete defence. The implied warranty, if it existed, was broken eo instanti it was made. (Blethen v. Lovering, 58 Maine, 457.) The scrip was then counterfeit, and a nullity. There was nothing of title or value that passed by the change of its possession, and no future contingency could possibly affect its legal character. In this the case is essentially different from the class of eases wherein some courts have held that a warranty of title to personal property, where the property has been delivered, is not broken until the purchaser is dispossessed. Those cases proceed upon the theory that until dispossessed, the purchaser has all that he bought, and his possession, alone, may ultimately become sufficient evidence of title. There was no necessity to return, or to offer to return, the scrip, because it could be of no possible value to the owner. (Paul v. City of Kenosha, and Smith v. McNair, supra.) The reason why it is held, where payments have been made in counterfeit bills, the bills must be returned within a reasonable time to authorize the payee to recover from the payer, is to enable the payer to trace out and fall back upon the person from whom he received them. (Simmons v. Clark, 11 Ill. 137; Magee v. Carmack, 13 id. 289; Bank v. Baldenwick, 45 id. 375.) But this can have no application to the present case, for this scrip can be traced back- to its original holder as well without as with its possession. We can perceive no reason why appellants should have waited until prosecuted successfully by their vendees on account of a subsequent sale by them of the same scrip. The only effect of such an action was to judicially establish the fact that the scrip was counterfeit, and if that fact was known before, appellants were not justified in defending the suit, and they could not charge appellee with the costs occasioned thereby, for, in that event, the suit was unnecessarily resisted, and costs are not chargeable against the vendor in such cases. Sedgwick on Measure of Damages, (2d ed.) 292; Chitty on Contracts, (11th Am. ed.) 658; Wrightup v. Chamberlain, 7 Scott, 598. See, also, Penley v. Watts, 7 Mees. & Wel. 609. It is here stipulated that “the plaintiffs in this suit had notice that the scrip above mentioned” (i. e., the scrip on account of the sale of which the suit is brought,) “as having been purchased by plaintiffs from defendants, was counterfeit and worthless, prior to the 8th day of January, 1872,”—and this was long before the trial of the suit in which appellants’ vendees were plaintiffs, and appellants were defendants, and more than five years before the bringing of the present suit. The admission of notice was not, as counsel for appellants insist, simply from “common rumor and suspicion,” but that the plaintiffs had notice of the fact. No mitigating or qualifying circumstance is inserted in the stipulation,—and thus the ease is entirely different from Ripley v. Wither, 27 Texas, 14, cited by counsel for appellants. The admission of notice in this general, unqualified language, is equivalent to an admission of knowledge of the facts as they existed. 2 Bouvier’s Law Dic. (15th ed.) 307; 1 Story’s Eq. Jur. sec. 399. See, also, Wade on Notice, sec. 3, et seq. Merchants’ National Bank v. First National Bank, 4 Hughes, 9, (3 Fed. Rep. 66.) cited on behalf of appellants, was an action brought on this state of facts : On the 16th of March, 1867, the treasurer of the United States made his draft on the First National Bank of Baltimore, a government depository, for $1609.55, payable to the order of William Orndorff. This draft, apparently indorsed by the payee and one Haggart, was forwarded by the Shenandoah Valley National Bank, with its own indorsement, to the Merchants’ National Bank of Baltimore, for collection. On the 22d of March it was indorsed by the Merchants’ National, and, on presentation, paid by the First National in due course of business, both parties supposing the name of Orndorff was genuine. When the payment was made, the amount was charged in account by the First National against the United States, and the draft forwarded with the next weekly statement to the treasurer, for credit, which was allowed without objection. Ten years afterwards, the United States having become satisfied that the indorsement of Orndorff was forged, sued the First National Bank to recover the amount of this credit. The Merchants’ National Bank having been notified of the suit, employed counsel to assist the First National in making a defence. Upon the trial, the forgery was proven, and judgment rendered against the First National for the amount claimed. The First National paid the judgment, and then brought this suit against the Merchants’ National to recover what was so paid, "on the ground that the latter bank, by its indorsement of the draft, and receipt of the money thereon, became responsible for the genuineness of Orndorff’s signature. To this suit the Merchants’ National pleaded the Maryland Statute * of Limitations, and the question presented was, whether the statute began to run when the draft was paid, or when the judgment in favor of the United States, against the First National, was rendered. The court held that the statute only began to run when the judgment in favor of the United States was rendered. The decision is based upon the authority of Cowper v. Godward, 9 Bing. T88, (23 E. C. L. 452,) where it was held, in an action for money had and received, to recover the consideration money of a void annuity, (where the annuity was granted more than six years before the action brought, but was treated by the grantor as a subsisting annuity within that period, although subsequently avoided at his instance,) that the Statute of Limitations did not begin to run until the annuity had been avoided.' In that case, Tindal, Ch. J., in speaking of the question when the statute began to run, said: “That question depends upon another: At what time did the cause of action arise ? The cause of action comprises two steps. The first is the original advance of the money by the grantee; the second is the grantor’s election to avail himself of the defect in the memorial of annuity. The cause of action, therefore, was not, complete till the last step was taken, in Michaelmas term, 1830. If we were to decide otherwise, the grantor of a defective annuity might, in every case, defraud the annuitant by paying the annuity for six years, and then having set aside the securities by pleading the Statutes of Limitations. ” Ch. J. Wait, in Merchants’ National Bank v. First National Bank, supra, having quoted from this reasoning of Tindal, Ch. J., adds: “In the present case, also, the warranty contemplated two things: First, the giving of credit by the United States; and second, its continuance. As the first requirement of this undertaking was complied with, no right of action could arise until the second was broken. * That certainly did not occur until the United States elected to take back the credit .it had given. * * * Here the consideration was paid to get a credit with the United States, and the failure was not complete until the credit which had once been given was withdrawn. ” In the present case, if the United States land officers, on the first presentation of the scrip to them, had treated it as valid, and issued patents for lands accordingly, and the forgery of the scrip had only been discovered afterwards, and proceedings had then been instituted declaring the patents invalid on that account, the analogy to those eases, though not complete, would have been much greater than it is, and there would have been plausibility in claiming the rule announced in those cases is applicable here. But the United States land officers discovered the forgery of this scrip, and repudiated it, upon presentation. No one was lulled into a moment’s inaction by the conduct of those officers in regard to the scrip. It never accomplished any purpose, either temporary or otherwise, and no impediment lay in the way of bringing the suit, from, at least, the time it is admitted appellants knew of the forgery and worthlessness of the scrip. We perceive no cause to disturb the judgment below, and it is therefore affirmed. Judgment affirmed.