Trotter v. Crockett

By Mr. Justice Thornton :

This was an action on the case, brought by the defendant in error, in the Circuit Court of Lawrence county; the declaration in which, contained various counts, and among them, one on a special assumpsit-in writing, whereby Trotter & McGonegal. a mercantile firm, of which Trotter is survivor, promised to pay to Crockett, the sum of three thousand five hundred and sixty five dollars and fourteen cents, in cash notes, on solvent men in Lawrence county, Alabama, on or before the 1st of January, 1822, for value received. During the progress of the trial, a bill of exceptions was taken, on which the assignment *407 of errors is made in this Court, which relates to the rejection of testimony offered by Trotter'; to the refusal to give instructions which were prayed for by him; as also to the charge given. We think there is no good objection to allowing the first assignment to be made. The bill of exceptions shews, that the rejected testimony was offered; and excluded on the motion of Crockett’s counsel; and though the words lC to which opinions the defendant excepts,” are at the close of the bill of exceptions, we think they- embrace every matter of opinion contained in it. With regard to the language in which this matter is set forth in the bill, it is that usually adopted; and I think it necessarily implies, (the record not shewing the contrary) that the means of making the proof offered were present, and instantly available.

It appears that, when the note described, as above stated, in the count, became due; by endorsement in the name of the said firm, promissory notes were transferred to Crockett, to the amount of the said note; and that it was surrendered by him to the makers. Among the notes so transferred, were two of the following description: one made by James Perine to William Green, due 4th April, 1821, and assigned by him to plaintiff in error ; the other made by Joel D. Harris, due 15.th January, 1822.

The evidence offered by Trotter which was rejected, was, that the maker of this last note, Harris, was solvent, at the time of its endorsement to Crockett, and afterwards.

The assignment of error presents but two questions for our consideration. The first is, whether, according to the true intent and meaning of the writteii contract of Trotter, irrespective of any agreement at the time of endorsing these notes, the note of Harris *408 did not, to the extent due upon it, constitute a payment and satisfaction of the original note or contract sued upon.

The second question is, whether if laches have been committed by Crockett with regard to the other note, whereby the liability of any party, who was on it, was lost to Trotter, he would not also be entitled to a credit to that extent. The first point above stated, is embraced by the assignment relating to the rejection of the proof, that Harris, the maker of one of the endorsed notes, was solvent at the time of the endorsement, and subsequent thereto. A just construction of the original contract or note, will determine the propriety of the rejection of this testimony. The contract was to pay in cash notes on solvent men, &c. The exclusion of the evidence was, I apprehend, on the ground, that by the contract, solvency at the date of the endorsement was immaterial. The Court did not decide, that no proof could be.adduced, to prove solvency, at the date of the' return of nulla bona to a fi.fa. which had been issued to the sheriff of Lawrence county, on the judgment in favor of Crockett on the, endorsed note. No such proof was offered with sufficient distinctness to be regarded; for the term “ afterwards,” though it may extend to any indefinite future period, yet on the principles of construction applicable to bills of exception, is not to be so understood-; and it may well consist with total insolvency at the date of the sheriff’s return, that after the endorsement, Harris was perfectly solvent. If, however, it was intended to be decided, by the Court, that the return of nulla bona in that judgment, was conclusive against Trotter, it was, to my mind clearly erroneous ; for at most, all that a return of nulla bona can be evidence of, is no visible effects within *409 the county, of which tho sheriff making the return, is the ministerial officer; and is perfectly consistent with the possession of ample estate, just beyond its bound uy: which would be a sufficient defence, unless the words of tire contract, “ solvent men, in Law-, renco county,” mean not only that the men must be solvent, but that their property, and residence must both be, in that county: which I do not consider to be a fair interpretation of them. The Court, however, did decido, and the counsel for Crockett now insist, that solvent men, in the meaning of the contract, are such only as shall have effects to satisfy an execution, which shall issue upon a judgment in favor of Crockett, on the cosh notes to be paid. This would clearly imply an obligation on Crockett to bring a suit on the note. Eat the doctrine is well settled, that without, an express contrast, the holder of pa-pen as a conditional payment of, oras collateral security to, a pre-oxirting debt, is not bound to sue upon it at all; a and if these notes were not transferred one or tho other of those ways, Ire cannot sustain his action at all on tire original consideration. It cannot bo adopted as a proper construction of the contract sued 0:1, that any suit was to be brought by Crocked on the notes to be transferred, before he could, re-coAror in an action for its broac! 1 in the particular of tho solvency of the makérsof those notes. Suppose that those note;-! were transferred without any knowledge by either party of the pecuniary condition of the makers, and that upon enquiry it _ were ascertained, that one or more of them, though never sued in their lives, were upon the parish as paupers at the time of tho transfer, would it be necessary to sue in such case in order to recover of Trotter for a breach of his contrast ? E apprehend that it would not. Now, if' *410 oil the one hand, it can be alleged and proven, that the maker was insolvent, without any suit against him; as a necessary consequence his solvency can be established on the other hand, by the kind of proof here offered and refused. It is argued that the true construction of this contract is, that there is a warranty not only of present solvency, but a prospective warranty of continuing solvency, until by the due prosecution of the means afforded by the laws of the country, the fact of solvency, vel non, is in that manner ascertained. To sustain this construction, reference is-made to the decisions of the Courts of Yirginia, regulating the recovery by assignees against assignors, of such instruments as by the laws of that State are-authorised to be assigned.- It is true, that upon an indorsement in blank, or in the common form, the-Courts in that State have said, that a recovery may be had, as for a consideration which has happened to-fail, notwithstanding the use of the means of the law, as far as a fi. fa. returned nulla Iona, to render it available. But even there a special indorsement would vary the implied rule of liability, and if indorsed so as to raise the implication, that the liability wras to be more restricted, than the implied responsibility, the special understanding would control. But even if the word solvent, is construed to mean-ability to pay according to law, I would maintain that all the means which the law supplies, must be exhausted, before insolvency could be affirmed. Now, a fi. fa. is not the final test: in this State, at least, It is not the ultimatum which is afforded. The law gives a ca. sa. to reach the secret treasures of the debtor, as a fi. fa. does, his property, subject to levy. A judicial insolvency then, I think, is only established fully, by this final process of execution. For the er- *411 y or in tlie Court below, in rejecting the testimony offered, the cause would have to he reversed, but as it must be remanded for a new trial, it is thought proper to consider the law, -which from the proof exhibited in the bill of exceptions, will be most probably applicable to the state of facts that will again' be established. The notes in this case, must, of necessity, have been endorsed over, either in .absolute discharge ■of the original contract, or as a conditional payment of it; or as a collateral security to it; and the question .as to the precise manner intended, is one, which-from all the circumstances of the case, must be determined by the jury, If the transfer were intended as an .absolute payment, then there can be no resort to the original note, nor to the original consideration, of that note. The note to pay in cash notes, &c. had extinguished the open account; and the transfer, if in payment, had extinguished that note; leaving the only recourse of the party so accepting them, on the transferred notes, unless indeed, they be forged, or a fraud has been practised ; as by falsely representing the parties to the said securities to be solvent, when they were not. If the transfer were intended as a conditional payment, or as a collateral security, then the successful pursuit of the debtor on the original consideration, which in such case, is the only subsisting ground of action, will depend on the fact, whether or not, any laches has been committed with regard to the transferred security, whereby any party whose liability could have been retained, or secured to the party transferring the note, or bill, is lost. If such laches has occurred, it will operate to that extent as an an absolute payment. a And it would seem-by last decision of this Court, above cited, that in such case the insolvency of a party whose liability had *412 been omitted, to be fixed, would not vary the case. For although insolvent, as far as legal coercion is concerned, yet a demand of the money might have resulted in its payment. I do not find the doctrine to be, that where a bill or note is transferred by endorsement, as conditional payment, or collateral security, and afterwards suit be brought on the original consideration, that successful resistance can be made to a recovery, by shewing that all the diligence has not been used, which would be necessary, to enable'the indorsee of such transferred bill or note to recover against the indorser as such, if it had been received in absolute discharge of the original debt. The extent of the doctrine, I apprehend is, that the recourse of the person from whom the bill or note is received against any prior party must not be lost, nor such delay occur in giving notice to the person from whom it was received, of the refusal to pay, as in the estimation of the jury would be unreasonable. As to the return of a bill or note, which may have been transferred as a conditional payment, or collateral security, I do. not consider that its return, or an offer to do so, is necessary, to authorise the institution of an action on the original demand.

A creditor may lawfully take and hold several securities for the same debt, and ought not to be compelled to yield up either, until the debt is paid. a It is true that a double satisfaction cannot be had; but on principle, it seems to me, that all collateral securities, honestly acquired, are to be allowed to be retained until their object is accomplished.

It is laid down in 1st Cranch, 181, th'at it is not necessary to return a note received as a conditional payment, prior to the institution of a suit on the original contract; for the reason, that it is not an extinguish *413 ment of that contract. The utmost that justice would require is, that the plaintiff should shew that he has not derived benefit from it. If it has been transferred, no that in presumption of law, he has derived such benefit, by which means loo, the defendant might l)e subjected to its payment, then unless it be regained, so that he have it in his power to return it to the defendant, he should not be permitted to recover. In the case of a collateral security, I feel confident that the plaintiff ought not to be compelled to return it, until the debt is actually paid. But, in regard to paper, transferred as conditional payment, though not necessary to he returned before commencement of suit, it would seem perfectly correct, that it should be deliverer! up, or at least satisfactorily accounted for, before the rendition of judgment.

This doctrine of diligence, on the part of one who accepts negotiable paper, as collateral security, or conditional payment, is not peculiar to this class of cases. It is applicable alike, the diligence varying according' to the nature of the thing, whether paper security, or property of any other kind, be received in the samo way.

The necessary care and attention should be bestowed to preserve the value of whatever is thus voluntarily, and with a view to one’s own interest, taken under his control.

If the diligence which is necessary to preserve its value bo onerous or hazardous, its assumption may be declined altogether, or it may be regulated by express stipulation.

In the absence of any special contract, I think the purposes of justice can only be accomplished, and the decisions in former cases in this Court, and elsewhere, only reconcilable, by adopting the principles *414 above laid down, as it respects the mutual rights and liabilities of parties standing in the relation of trans-ferors and transferees of. notes, or bills, by endorsement. or otherwise, as conditional.payment, or collateral security, of an original demand or duty.

Let the case be reversed and remanded, 1Cranch isi.

1 Wash. C. C. Rep 156-1st Porter's Rep. 1st ed. 260.

2 Wheat. 390 .