Lowery v. Steward — 16 N.Y. Super. Ct. 505

Majority

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Archibald H. Lowery, Plaintiff and Respondent, v. John Steward and Lycurgus Edgerton, Defendants and Appellants.

Headnote

1. An instrument in the following form, viz.:

“§500. “ Columbus, March 1st, 1853. “ Messrs. John Steward, Jr., & Co.: Please pay to the order of Archibald H. Lowery the sum of five hundred dollars, on account of 24 bales cotton, shipped to you as per bill lading by steamer Colorado, inclosed to you in letter. Strippleman & Boyce.” is a bill of exchange.

2. An unconditional order upon A to pay a sum certain to the order of a person therein named is none the less a bill of exchange because it specifies the account which forms the consideration of the order.

3. In the State of New York the drawee of such an order is not liable as acceptor of a bill of exchange if he have not accepted the same in writing.

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4. A letter written to the drawers of the draft above described assuring them that such draft shall be honored from the proceeds of the cotton, does not make the drawees liable as acceptors of a bill of exchange to the payee to whom it was subsequently remitted in payment of a debt due by the drawers to him.

5. But where a shipment of cotton is made to J. S. & Co., and the bill of lading is forwarded to them in a letter advising them of the shipment and also advising them that a draft has been drawn on them for $500 in favor of A. H. L., payable when the cotton is sold; and thereupon the drawees and consignees by letter promise the drawers that the draft shall be paid out of the proceeds of the cotton, and on application of A. H. L., the same promise is verbally made to him, and such cotton is sold and the proceeds exceed the amount of the draft, the drawees are liable, without any formal acceptance, for the amount of the draft, to A. H. L.

6. Although the drawees in such case may have a right to require the production and presentation of the draft by A. H. L., yet mere delay in its presentation will not justify them in appropriating the proceeds of the cotton to other uses, even with the consent of the consignors by whom the draft is drawn.

7. By accepting the consignment and promising to apply its proceeds to the payment of the draft they became trustees in respect to such proceeds and bound to account to A. H. L., and the consent of the drawers will not justify a different appropriation of the fund.

8. Although evidence is received by a referee on a trial before him which is in legal strictness inadmissible; yet if the Court can see that by no possibility it could have affected the result of the trial the judgment will not be reversed for the error committed.

(Before Woodruff and Pierrepont, J. J.)

Heard, March 2d;

decided, October 30th, 1858.

This action came on to be heard on appeal from a judgment for the plaintiff on the report of Abraham Underhill, Esq., as referee.

The statement of the case is as follows:

In the year 1853, the defendants, as partners, composed the firm of John Steward, Jr., & Go., in the city of Hew York. The plaintiff, Archibald H. Lowery, was also a merchant doing business in the said city. The firm of Strippleman & Boyce of Columbus in Texas, had dealings with the defendants and were also indebted to the plaintiff.

On or before the 28th day of March, 1853, the defendants received from Messrs. Strippleman & Boyce a letter dated March 1st, 1853, inclosing a bill of lading of twenty-four bales of

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cotton, in which letter they say “inclosed, please find bill of lading of twenty-four bales cotton shipped to you, which you will please dispose of to the best advantage. We have written to Messrs. Archibald H. Lowery & Go., 121 Front street, New York, inclosing a draft on your house for $500, payable when the above cotton is sold.”

To this letter the clerk of the defendants who “had charge of their correspondence” and having “a general authority to write letters” without any conversation with either of the defendants, his principals, replied by letter signed in the name of their firm, thus:—

“Messes. Steippleman & Boyce :

“ Dear Sirs — We are in receipt of your est’d favor of the 1st inst. with bill of lading for twenty-four bales of cotton, which shall have our best attention when it reaches us.

“Your draft in favor of A. H. Lowrey & Co., shall be honored from the proceeds of the cotton.” . .

A copy of this letter was retained by the defendants’ firm according to the usual course of business.

On the next day (the 29th March,) the plaintiff received a letter from Strippleman & Boyce also dated March 1st, 1853, and addressed “Messrs. Gentry & Lowery, 121 Front street, New York,” ordering goods and saying “we also inclose draft on J. Steward, Jr., & Co., for $500 which you please credit on our note,” but no draft was in fact found in the letter.

On the same day the plaintiff’s bookkeeper and confidential clerk, took this letter to the defendants’ store and handed it to the defendants’ bookkeeper Mills in the counting-room, in the presence of one of the defendants Mr. Edgerton. The bookkeeper handed the letter to Mr. Edgerton and he read it, and handed it again to the bookkeeper who also read it. The plaintiff’s clerk then stated to the latter “that when we opened the letter the draft was not in it, and that we supposed the draft might have been sent to them by mistake inclosed in their letter; Mr. Mills said they had not received the draft, but that they had received a letter from Strippleman & Boyce, with a bill of lading for twenty-four bales of cotton, and stating that they had drawn

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on them for that amount; he then said, it was all right, and that ' the draft would be paid out of the proceeds of the cotton when sold.”

The cotton was received by the defendants, and sold. The proceeds were over eight hundred dollars after all charges, &c., were deducted.

Ho farther application was made to the defendants on the subject until the 10th of January, 1854, when the plaintiff’s bookkeeper presented to the defendants the draft in the form following:

“ $500.00. “ Columbus, March 1st, 1853.

“ Messrs. John Steward, Jr., & Co.:

“ Please pay to the order of Archibald H. Lowery the sum of , five hundred dollars, on account of 24 bales cotton, shipped to you as per bill of lading, by steamer Colorado, inclosed to you in letter.

“ Strippleman- & Botce.”

This delay was accounted for by sufficient proof, that the omisJ sion to send it forward in the letter, which purported to inclose it was an oversight, and the draft does not appear to have been found until about the time it was so presented, when Mr. Gentry, (who was in the plaintiff’s employ) called on Strippleman & Boyce, at their store in Texas, and after a search for it, the draft was found in a book in their safe, and was forwarded to the plaintiff in Hew York. The plaintiff’s witness, however, testified that on the 29th of March, 1853, he wrote to Strippleman & Boyce, notifying them that the draft was not inclosed in their letter received on that day.

On its being presented on the tenth of January,, the defendants’ bookkeeper refused to pay it, stating that the defendants had parted with the proceeds of the cotton. The facts proved on that subject were, that in or about the month of August, 1853, the defendants accepted the draft of Strippleman & Boyce, for $353xfx at 8 months, upon an express understanding with them, that the proceeds of the cotton were to go to pay that acceptance; and at about the same time by their direction, applied $45 of the proceeds to the payment of a premium of insurance for their benefit. The balance of the proceeds of the cotton, $423xVo, was credited by the defendants to Strippleman

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& Boyce, in general account, they being indebted to the defendants in a much larger sum (about $4,000). An account was rendered to Strippleman & Boyce of the sales, and of the application made of the proceeds, and the witness testifies that no objection was made by them to the account.

After the refusal of the defendants to pay the draft so presented, this action was brought to recover the amount with interest. It was referred to Abraham Underhill, Esq., as sole referee, who by his report found that the defendants had notice of the draft on or about the 28th of March, 1853, and promised and agreed with the drawers and also with the plaintiff, that they would pay the same out of the proceeds of the cotton.

That the defendants sold the cotton, and on the 27th September, 1853, received for the same the net sum of $825TVo-

That on the 10th of January, 1854, the plaintiff presented the order to the defendants for payment, which payment the defendants refused.

He therefore found for the plaintiff the amount of the draft, $500, with interest from the 10th day of January, 1854.

Erom the judgment entered on this report, the defendants appealed.

Walcfo Hutchins, for the defendants (appellants).

I. The instrument in suit is not a bill of exchange, but a mere order for the payment of money out of a particular fund.

1. Not being a bill of exchange it operates, if at all, only as an equitable assignment of the fund in the hands of the drawee. ( 1 Hill, 583 ; 7 id., 577.)

2. And it is not negotiable. It only passes by assignment, and for an adequate consideration which must be proven; and of which it is not 'prima fade evidence. (Chitty on Bills, 11 Am. Ed., p. 9, and cases there cited; 3 Caines, 287; 9 Cow., p. 778.)

H. There is no evidence in the case that any consideration was paid for the draft by the plaintiff to the drawers. The letter of Strippleman & Boyce, is no evidence. It is not under oath, and is therefore no proof of any fact which may be stated therein, and should not have been received in evidence. Admitting, however, that the plaintiff held the note of Strippleman &

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Boyce, this even between the parties to the instrument, is but presumptive evidence of a debt, and so far as third parties are affected thereby cannot avail, unless the consideration is proven aliunde. (2 Kern., 215.)

III. The fact that Strippleman & Boyce subsequently directed a specific appropriation of the fund, otherwise than to the payment of the $500 order, and to such an amount as not to leave sufficient in the hands of the defendants to pay such order, is a strong circumstance to show that Strippleman & Boyce had not received any consideration for the order, and considered themselves as the owners of the proceeds of the cotton against which this draft is alleged to have been drawn. As also the fact that the balance of the fund was carried to their credit in their general account with the defendants, without any objection on their part.

IV. The instrument in suit is not the draft of which the defendants received notice, if they received any notice at all. That draft was drawn in favor of “A. H. Lowery & Go.” The draft in suit is drawn to the order of “A. H. Lowery.”

This is a material variance. ( 8 Cow., 71 ; 23 Barb., 590 .)

John Sessions, for the plaintiff (respondent).

I. The instrument in question is doubtless to be taken, not as a bill of exchange, but rather as an order operating as an assignment of a portion of the funds, when realized out of the proceeds of the sale of the 24 bales of cotton. (Morton v. Naylor, 1 Hill, 583 ; Banbury v. Lisset, 2 Strange, 1211.) Precisely such an instrument as was the subject of the case of Banbury v. Lisset, was held to be a bill of exchange. They were both on account of freight; the one to be paid, the other to be earned, by the drawer. It turned upon the situation of the parties, and the intent of the drawer, not derivable from the instrument. (Pierson v. Dunlop, Cowp., 571.)

II. The instrument being an assignment of so much of the fund, it was only necessary, in order to charge the drawer with a liability to pay to the party holding the draft, that he should have notice of the fact that the title had passed. And notice or knowledge of facts to put him on inquiry, was sufficient. It was not necessary the instrument should be exhibited to him, nor any

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other evidence of the transfer. (Meghan v. Mills, 9 Johns., 64 ; Anderson v. Van Alen, 12 id., 343; Willard Eq. Jur., 460, and cases cited.) The defendants had notice (1) from the drawers, (2) from the payee. And they promised absolutely to pay.

III. Indeed the letter to the plaintiff, purporting to inclose draft, and presented to the defendants, on the 19th of March, was sufficient to assign the fund and transfer the title to the plaintiff. It was a clear declaration of intention to complete such a transfer, and was entirely competent to bind the parties, even if the draft itself had never come to light. It operated as a delivery of the draft, whoever might have the actual possession. (D oe v Knight, 5 B. & C., 671; 12 E. C. L. R., 351.)

TV". The prior indebtedness was sufficient consideration to support the transfer. To affirm the contrary of this, is to place an obstruction in the way—not of collecting, but of paying debts, to which the law affords every facility. Not only so, the defendants have affirmed the transfer. They were parties to the change of title, whereby new and additional rights accrued to the owner; and it would be contrary to all good faith, to equity and conscience, to suffer them—now that the plaintiff has acted upon the faith of their promise until the drawers have failed—to escape from liability. (Vide 12 Johns., 277 ; 12 Mass., 193 , 195, 281; 14 id., 291 ; 1 Johns. Ca., 205.)

By the Court.

—The draft in question was in form a bill of exchange. It was an unconditional order upon the. defendants, to pay a sum certain therein named to the order of the payee.

Although the account to which it should be charged was mentioned, it was not, by its terms, directed to be paid out of a particular fund. Had it been accepted, it was due immediately, whether the cotton to account of which it was to be charged had been sold or not. Its terms contemplate an advance upon the shipment of cotton, or are a mere designation of the account which should form the consideration of the acceptance and payment as between the drawers and the drawees; and had the defendants accepted it unconditionally, they must have paid it whether the cotton was sold or not, and whether the proceeds of the cotton were more or less than the amount of the draft.

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The draft is therefore, on its face, within the express provisions of our statute, which declares that: “ § 6. Ho person shall be charged as acceptor on a bill of exchange, unless his acceptance shall be in writing. § 7. If such acceptance be written on a paper other than the bill, it shall not bind the acceptor, except in favor of a person to whom such acceptance shall have been shown, and who, on the faith thereof, shall have received the bill for a valuable consideration. § 8. An unconditional promise in writing to accept a bill before it is drawn, shall be deemed an actual acceptance in favor of every person who,' upon the faith thereof, shall have received the bill for a valuable consideration.” (1 Revised Statutes, 768.)

It has been held that, under the seventh section, it is not necessary that he who takes a bill on the faith of a written acceptance on another paper should actually see such acceptance, it is enough that he .has knowledge of such acceptance, and receives the bill on the faith thereof. (Bank of Michigan v. Ely, 17 Wend., 508 .)

The plaintiff was not shown to have had any knowledge of the defendants’ letter to Strippleman & Boyce prior to January, 1854. He cannot, therefore, claim that prior to that time he received the bill with knowledge of any written acceptance, and on the faith thereof.

He cannot claim to hold the defendants as acceptors of a bill of exchange upon a title, to the bill, acquired on the 10th of January, 1854, because the proceeds of the cotton, out of which the defendants promised to honor the draft, had already been appropriated to other purposes by direction of Strippleman & Boyce.

There never was an unconditional promise in writing to accept the bill, either before it was drawn or afterwards. The promise made by the defendants’ clerk, both by the written letter and the verbal assurance, was that the draft would be paid out of the proceeds of the cotton.

If, therefore, the plaintiff is in no other position than that of payee of a bill of exchange, relying upon the defendants’ promise to pay it, he is not entitled to recover. He has no acceptance, valid as such, under our statute, and the mere drawing and delivery of the draft gave him no title to maintain an

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action against the defendants, not only because before the bill was delivered to him, the funds were otherwise appropriated, with the drawer’s assent, but also because the drawing and delivery of a bill of exchange is no assignment or appropriation of the funds in the hands of the drawee, entitling the payee to maintain an action against him therefor. (11 Paige, 612; 5 Hill, 413 , affirmed, 7 id., 577; 3 Comst., 251; id., 115; 1 Seld., 530; 2 id., 417.)

But we think that the judgment must be sustained upon another view of the relation of the parties to the transaction.

And, preliminarily, it is proper to observe that the evidence was sufficient to establish, prima fade, the authority of the defendants’ clerk and bookkeeper to do and write what they did.

First, as to the letter to Strippleman & Boyce. The clerk by whom it was written had charge of the defendants’ correspondence, and had a general authority to write letters, and a copy of the letter was retained. It may be reasonably presumed that the copy would and did fall under the observation of the defendants, and that it was not disapproved.

Proof of such general authority was, we think, sufficient to devolve on the defendants the duty of showing that the letter was not within the scope of the powers of the clerk. And, not having shown this, the proof in this respect is such that it was rightly held that that letter should have the same operation as if written by one of the defendants in person.

Second, as to the oral promise to the plaintiff. The conversation was in the defendants’ counting-room; one of the defendants was present; the letter of Strippleman & Boyce to the plaintiff, was shown to that defendant and he read it and handed it to Mr. Mills. He may be reasonably understood by this act to refer the subject to Mr. Mills to make a reply. Hay more. He was present during the interview and may be taken to have heard the conversation—both the application made and Mr. Mills’ reply thereto—and expressed no dissent. The promise of Mr.. Milk on that occasion must therefore we think be taken as the defendant’s promise.

And this view both of the written letter and of the oral promise involving the question of authority as a mere question of fact, may properly be regarded as strengthened by the circum

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stance that the defendant Edgerton though examined as a witness does not deny the authority of his clerk to write the letter, nor deny that he was present, heard the conversation and. sanctioned the oral promise made by the bookkeeper Mr. Mills to the plaintiff’s clerk.

The case then stands thus, Strippleman & Boyce sent to the defendants cotton to be sold, with notice that $500 was to be paid when the cotton was sold, to the plaintiff on their draft. The defendants wrote to Strippleman & Boyce promising that their draft in favor of the plaintiff “shall be honored from the proceeds of the cotton.”

Strippleman & Boyce at the same time notify the plaintiff that they inclose a draft on the defendants, for $500 to be credited on their note and upon the exhibition of that letter and with knowledge of the omission to inclose the draft, the defendants promise to pay the draft out of the proceeds of the cotton when sold.

After all this has transpired, the defendants receive the cotton and sell it, and it produces a net amount more than sufficient to pay the draft.

We think that the moment the cotton came to the defendants’ hands and was by them received, under the instructions of the consignors, it was held by them under an express obligation to sell it, and hold $500 of the proceeds for the use of the plaintiff. The fund had, impressed upon it, while it consisted of cotton itself and from the moment the bill of lading was forwarded by Strippleman & Boyce, a trust in favor of the plaintiff which the defendants when they accepted the consignment undertook to execute and promised both Strippleman & Boyce and the plaintiff they would execute.

The shipment of the cotton and remittance of the bill of lading were a sufficient consideration for their promise to pay $500 of the proceeds to the plaintiff. The plaintiff being a creditor of Strippleman & Boyce, had an interest in that promise from the moment he received notice and consented to the provision thus made for his benefit; and the defendants promised him that those proceeds should to the extent of that $500, be applied to his benefit So that both Strippleman & Boyce and the plaintiff had an interest that the cotton should be sold, and $500 of the

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proceeds be paid on account of the indebtedness of Strippleman & Boyce to the plaintiff. The cotton was appropriated by the consignors and received by the defendants for that special designated purpose. The promise of the defendants and their receipt and sale of the cotton, completed the transaction and gave the plaintiff a cause of action which was not subject to be defeated or released by any subsequent acts of Strippleman & Boyce. (Neilson v. Blight, 1 John. Ca., 205.)

It is doubtless true that before the plaintiff could recover the money he must produce the draft, or show that it was drawn according to the intention of the parties, and lost in the transmission or otherwise. The draft was intended as a voucher between the parties, and the defendants’ promise was not that they would pay whether there was such a draft drawn by Strippleman & Boyce or not. Had it turned out that Strippleman & Boyce had drawn no draft, the case would have been quite different.

But we think that the circumstances that, through oversight the drawers neglected to inclose the draft in the letter, and that some months elapsed before it was found and forwarded, did not warrant the defendants in appropriating the proceeds of the cotton, without notice to the plaintiff to other purposes, in contravention of their agreement. These views are, we think, sustained by Morton v. Naylor ( 1 Hill, 583 ), and the cases cited.

There is some variance in the description of the plaintiff in the various letters. Once he is described as A. H. Lowery & Co., once as Gentry & Lowery, and again as A. H. Lowery. There was no such firm as A. H. Lowery & Go., nor Gentry & Lowery (Gentry being merely a clerk of the plaintiff.) The plaintiff was in fact the creditor of Strippleman & Boyce, for whom they intended to provide. No one was misled or deceived by the misdescription, and no one can be prejudiced by disregarding it. It has no effect upon the rights of the parties.

The referee erred in receiving in evidence a letter written by Strippleman & Boyce to the plaintiff without date but proved to have been signed by Strippleman. It is marked Exhibit D. That letter was not competent evidence against the defendants for any purpose. It is the mere statement of Strippleman out of Court, without oath. It was no part of the res gestee, and was

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never the basis of any act of the defendants. It should have been rejected, and if we could see that its reception by the referee could possibly have affected the result, we should be compelled to reverse the judgment and grant a new trial. But if we can say it is clear that by legal necessity it could do no injury, the error committed does not require us to grant a new trial.

In the letter it is stated that the draft is inclosed; that it was mislaid, and by the exertions of Mr. Gentry found; the hope is expressed that the defendants will forthwith pay the amount “ as they have the proceeds of the 24 bales of cotton in their hands.”

If we are right in our views of the defendants’ liability, it was wholly immaterial whether the proceeds still remained in their hands or not; if they were there the defendants were liable; if they had been appropriated to some other purpose, still they are liable. We cannot therefore discover that any, even the least possible injury could have been caused by this error of the referee. (Forrest v. Forrest, 6 Duer, 145 ; 1 Comst., 519; 13 Barb., 42 ; 9 id., 625; 6 Hill, 292 ; 19 Wend,, 232 ; 3 Hill, 194 ; 16 J. R., 90; 3 Cow., 612 .)

Our conclusion is that the judgment should be affirmed.

Judgment affirmed, with costs.