Atlantic Fire & Marine Insurance v. Boies — 13 N.Y. Super. Ct. 583

Majority

p. 583

The Atlantic Fire and Marine Insurance Co. v. Ethan E. Boies, impleaded with John H. Washburn and Curtis L. North.

Headnote

The law presumes that the acceptor of a bill of exchange has funds of the drawer in his hands, and in an action against the acceptor, the burden of disproving the presumption rests upon him. When the presumption is not repelled, the drawer of the bill stands in the same relation to the acceptor as the indorser of a promissory note to the maker. The acceptor is the principal debtor, the drawer his surety merely.

In such a case, the extension to the drawer of the time of payment does not operate to discharge the acceptor.

The question whether a negotiable or other security was received by the holder of the bill as a payment, or merely as a collateral, when there is a conflict of evidence, is for the determination of the jury, and their verdict, when it cannot be set aside as contrary to evidence, is conclusive. When a promissory note, received by the holder of the bill as a collateral security, is not that of a third party, but of one already liable on the bill, it cannot be treated as a pledge, and hence the rules of law relative to the disposition of a pledge are not applicable,

(Before Hoffman, Slosson and Woodruff, J.J.)

Jan. 19;

March 21, 1857.

Case upon a verdict for plaintiff taken subject to the opinion of the court at General Term, upon questions of law. Judgment in the mean time suspended.

The action was upon a bill of exchange for $6000, against North as the drawer, and Washburn and Boies as the acceptors. Boies answered separately, and set up payment as a defence, and it was against him alone that the cause was tried.

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It was tried before Oakley, Ch. J., and a jury, in November, 1855.

The following are the material facts established by the evidence upon the trial, and raising the questions of law reserved for the determination of the court at General Term:—

The plaintiffs are an incorporated company in Providence, Rhode Island, and gave full value for the draft to North, from whom they received it.

Washburn and Boies were a firm in New York. The acceptance is in the handwriting of Boies. At the same time' Wash-burn and Boies had funds of North, and continued to pay them out until the latter ceased to supply them.

Whether they were actually in funds at the time of this acceptance does not appear. At the time it was given, nothing was said to the plaintiffs by North about his having funds in the hands of Washburn and Boies. Stevens, the secretary of the company, says, he supposed he would provide money to pay the draft, or he would not have let him have the advance.

When the draft fell due, it was not paid. The secretary of the plaintiffs, (Stevens,) went to Meriden, where North resided, taking with him the draft, to see North, and arrange it. Boies was there, and they arranged the matter by Boies transferring to Stevens, as collateral security for the debt, the note of North, with his own indorsement for the exact amount of the draft, with interest added for the time the note had to run, which was two months, and as collateral to the note North transferred shares in the .North Avery Sewing Machine Company, at the par value of $6000.

The plaintiffs never did any thing with this stock, and of course still hold it. The plaintiffs retained possession of the draft. When the note fell due it was not paid, and suit was immediately commenced upon it in the Superior Court. Boies put in an answer to the complaint, denying that his indorsement was for value, denying notice of protest, and claiming that the Avery Sewing Machine Company stock should be applied in extinguishment of the note.

About a month after the commencement of the suit, it was settled by the plaintiffs with North. The settlement was effected by North transferring to the plaintiffs the acceptance of one Wilbur, not then due, for, deducting interest, $2733.94; the ac

p. 585

ceptance of one Wilbur, not then due, for, deducting interest, $2785.75 ; the note of E. J. Collins, not then due, for, deducting interest, $685.31.

Interest and expenses were added to the amount of the $6060 note, and the aggregate was the exact amount of the above two acceptances and note. The $6060 note was then surrendered to North.

At this settlement neither Boies nor Washburn were present, nor had they any thing to do with it, nor were their names in the new paper.

Both these acceptances, and the Collins note, were turned over by plaintiffs in payment of losses for which they were liable, but the plaintiffs indorsed the paper.

The Wilbur acceptance, not being paid, was renewed by the plaintiffs drawing on North for the amount, with interest, at tw;o months, in favor of the party to whom it had been transferred in payment, but was not paid at maturity, and the plaintiffs took it up. The Wilbur acceptance was not paid at maturity, and the plaintiffs also took that up as indorsers. The Collins note was paid at maturity.

From this it appears that not only the note of $6060 but the two acceptances and the Collins notes were taken as collateral security for the original debt as sworn to by Stevens.

Since these transactions, it was proved Boies had frequently promised the plaintiffs, in conversation with Stevens, to pay the debt.

K Seeley, for the plaintiffs,

moved for judgment upon the verdict.

J. Sutherland, for the defendant.

He cited Wilson v. Little (2 Comst. 443); Nourse v. Borne (4 John. Ch. R. 490, and 7 John. Ch. R. 69); Stearns v. Marsh ( 4 Denio, 227 ); Dikers v. Alstyne ( 1 Hill, 497 ), and some other cases.

The only question of fact left to the jury was, whether the $6060 note was taken in payment of the original debt, (the one in suit,) and they were instructed, if they found it was not so taken, to give a verdict for the plaintiffs, which they did in the sum of $6056.62.

The presumption is that the acceptance in question was made upon funds of the drawer in the hands of Boies & Washburn, it being usual to draw upon funds in hand or their equivalent, and I find nothing in the evidence to disturb this presumption, but, on the contrary, much to support it. These defendants are, therefore, not only primarily liable according to the face of the contract, but are, in fact, the principal debtors as to all the parties. As a general rule, nothing will discharge an acceptor of a bill, but payment or a release.

The note of $6060 was not received in payment, but as collateral merely. The'finding of the jury settles this question.

The securities received in settlement of the suit on this note were also all received as collateral to the principal debt, and with the exception of the Collins note have realized nothing to the plaintiffs. Boies & Washburn have lost nothing by the use made of these collaterals by the plaintiffs. They were received from North, the drawer of the original bill, and who, as respects the other defendants, stands in the position of surety merely. Giving time to the surety does not discharge the principal.

Moreover, the plaintiffs had ultimately to take up these securities, having indorsed them when they used them in payment. It is true the $6060 note was given up to North on the receipt of these latter securities, but this of itself is not conclusive that they were received in payment of the debt. On the contrary, the evi dence of Stevens is explicit and not contradicted, that they were received as collateral merely. It was a substitution of one security for another for the same debt.

But the defendant contends that the note of $6060 was in the nature of a pledge in the hands of the plaintiffs, and that they had no right to give up the note to North except on its payment, and that having done so, without the knowledge or consent of Boies and Washburn, the note is, as respects the latter, to be treated as paid.

The general rule as to pledges, which are always collateral, is, that the creditor cannot sell the property without calling on the debtor to redeem or to pay the debt, and also giving him notice of the time and place of sale, unless in case of a special agreement to the contrary. If the pledge consist of commercial paper, the creditor must hold it until maturity, and collect and apply the

p. 587

proceeds in payment of the debt. (Garush v. James, 12 J. R. 146; Wilson v. Little, 2 Com. 443; Dykers v. Allen, 7 Hill, 497 ; Stearns v. Marsh, 5 Denio, 227 ; Brown v. Ward, 3 Duer, 660 .)

The objection to the theory of this being a pledge is, that the note in question is not that of a third party, but is made by the parties already liable for the original debt, and expressly as a means of extending the time of its payment.

If this note can be regarded as a pledge, so'may every note made by the same parties in renewal of another. We think there is nothing in this idea. Even if it were a pledge, the plaintiffs kept it until maturity, and were then obliged to sue it. They were certainly not bound to pursue the suit.

The Collins’ note having been paid, was allowed by the jury in the verdict. The sewing machine stock is still held by the plaintiffs, but they hold it in trust for the party, North or Boies, from whom they received it, as soon as their debt is paid. They have never made any disposition of it.

Judgment should be for the plaintiffs for the amount of the verdict, with costs.

Judgment accordingly.