Livermore v. Blood

Holmes, Judge, delivered tlie opinion of the court. The defendants were sued as endorsers upon certain notes of which plaintiff claims to be the holder as a purchaser for value. There was evidence on their part tending strongly to show that the notes had been endorsed for accommodation of the maker, and delivered to the firm of Livermore, Sweet & Co., to be held by them as collateral security to cover advances to be made by them on castor oil, to be delivered to them for sale on account of the maker. There was distinct proof of this arrangement. A member of this firm was called on behalf of the defendants, and stated, on cross-examination, that the notes were not deposited as collateral security, but left with his firm to be negotiated for the purpose of raising money to be advanced by them for the use of the maker in the purchase of castor beans for his manufactory; that the firm had sold the notes before due for this purpose, and that when the notes became due, protest and notice being waived by consent of the parties, he had taken them up with money of the plaintiff, for whom he was acting as agent. So far as his firm was concerned, these statements were not necessarily inconsistent with the fact, which was admitted in writing in an account rendered by the firm, that they held these notes as collateral merely; for whether they advanced their own moneys, or the money raised by a negotiation of these notes, they are still to be considered as having advanced the money to the maker under the arrangement made. There was evidence that oil had been delivered to them for sale, in pursuance of the agreement, to an amount sufficient to cover the whole or the greater part of the sums advanced, and that no account had been rendered. This member of the firm, who was also the agent of the plaintiff in this transaction, appears to have known all the facts at the time when he took up the notes, or bought them (as he says) with money belonging to the plaintiff after they became due. In taking up the notes, he did no more than he was bound to do, as a member of the firm, under an arrangement with the maker. The notes do not appear to have been [52] assigned by endorsement to the plaintiff. The petition alleges only that the plaintiff became the owner. If this member of the firm, being himself insolvent, could sell these notes to the plaintiff in this manner, so as to enable him to recover against the defendants and the maker, he would clearly accomplish a fraud upon them. If he applied the money of his principal to take up notes which he was himself liable to pay as a member of the firm, with a full knowledge of all the facts, he may be reponsible to him for such a misapplication of his funds. But the principal is affected with notice of all the facts known to his agent in the transaction, and he must be considered as having taken the notes after due, subject to the equities existing between the parties and the firm of which his agent was a member—Sto. on Notes, § 178 ; Sto. on Ag. §§ 140 & 451. We think the defence, if established, would be good against the plaintiff; and the defendants’ instructions should have been given. Judgment reversed and the'cause remanded. The other judges concur.