Burrall v. Jones — 20 N.Y. Super. Ct. 404

Majority

p. 404

Charles Burrall, Plaintiff and Appellant v. Robert Jones, Defendant and Respondent

Headnote

1. In a suit against the accommodation payee and indorser of a promissoi-y note, it is prima facie a defense, that the plaintiff, at the request of the makers of the note, sold another note made by them, and also indorsed by the defendant for their accommodation, for the purpose of paying, and realized enough from such sale to pay the amount owing upon the note in suit.

2. It is no answer to such defense, that the defendant has been sued as indorser of such sepond note, by the purchaser thereof, and obtained a verdict, and that the plaintiff thereafter received back such note and refunded to the purchaser thereof, the amount paid by him therefor; there being nothing in the pleadings or proofs which estops the defendant from insisting that the plaintiff refunded such money voluntarily, and it not appearing that it was not voluntarily refunded.

(Before Woodruff, Moncrief and Robertson, J. J.)

Heard October 11,

decided November 17, 1860.

Appeal by the plaintiff from a judgment, and also from an order denying a motion made by him for a new trial.

The suit is against the defendant, as payee and indorser of a note, for $1,563.29, dated September 18, 1847, made by James Jones Co., payable three months after its.date.

The defenses set up in the answer, are : First. That the note, in suit, and three others made by the same makers, amounting in all to- about $8,690, were indorsed by the defendant for the accommodation of the makers. That one McMillen loaned to the makers thereon, about $6,000, at usurious rates ; that the plaintiff furnished the money so loaned, and knew of the usurious agreement with McMillen; that three of said four notes were paid at maturity, and more than enough was paid thereby to refund the loan of $6,000 and interest, and that nothing is due to the plaintiff • on the note in suit. Second. That before the note in suit was due, the plaintiff became possessed of another note for the sum of $1,500, dated December 11, 1847; also made by James Jones & Co., and indorsed by the defendant for

p. 405

their accommodation, payable three months after its date ; that plaintiff obtained possession of it from the makers, or from some one who held it for them, and sold it about four weeks before its maturity, and received the face of it less legal discount; that the moneys received on such sale belonged to James Jones & Co.; that he then held the note in suit, and did not pretend that there was due to him thereon more than between $1,100 and $1,200, and that he applied enough of such proceeds to pay, and in payment of the sum alleged to be due on the note in suit, whereby all liability on the note in suit, was satisfied and extinguished.

The plaintiff, in his reply, denied all the allegations stated in the answer and forming the first defense. He also states, that he advanced to McMillen $2,000, on a note for $819.43, and the note in suit; that the note for $819.43, was paid when due, leaving a balance owing to the plaiiftiff, of $1,180.57, and interest on the $2,000; that he received the $1,500 note from McMillen, and sold it to one R. Houghton, representing and believing it to be a valid note; that after it was due, Houghton sued said Robert Jones, as indorser thereof, in the New York Common Pleas, and he defended on the sole ground that the note had been sold to Houghton by the plaintiff, without any lawful right or authority, and that the same was not a valid and subsisting security when so transferred ; that the jury found such to be the facts, and on those grounds only rendered a verdict in favor of Jones; that in consequence of such verdict, the plaintiff, on the 5th of April, 1849, before this suit was brought, refunded to Houghton the money received from him, and took baók the $1,500 note ; and denies that any application of the money received from Houghton was made to pay the money due to- him from James Jones & Co., or due upon the note in suit, except as aforesaid.

On the trial of this action before Mr. Justice Woodruff and a jury, on the 21st of February, 1860, it was proved, that Charles Burrall was a witness on the trial, in the Common Pleas, of the suit brought by Houghton against Robert Jones, on the $1,500 note, and there testified that

p. 406

James Jones requested him to negotiate that note and take his pay out of it; that he. sold it to Houghton about six weeks before it was due, at seven per cent, discount. It was also proved, that'in that suit, the judge charged, that Houghton could not recover if Burrall obtained the note by fraud, or had no authority to receive it, unless Houghton had proved that he was a bona fide holder, as Jones was an accommodation indorser; and also charged that Burrall could not recover if he made the original loan of $6,000 on a usurious contract; or, if he made a usurious loan of the $2,000. It was also proved, that the jury in that suit, rendered a verdict for Jones, and that Burrall subsequently refunded to Houghton the money received from him, and took back the $1,500 note.

In the present action, after the testimony was closed, the judge ordered the jury to- find a verdict for the defendent, to which instruction the plaintiff excepted, and a verdict was rendered accordingly. The plaintiff moved, at special term, on a case and exceptions, for a new trial. From the order denying it, and from the judgment entered on the verdict, the plaintiff appealed to the general term.

E. H. Kimball, for Appellant.

I. The receiving and negotiating the promissory note of one thousand five hundred dollars by the plaintiff to Houghton, under the circumstance proved in this case, was no payment of the original loan made upon the note in suit. (1 Hill’s Rep. 516; 5 Id. 448.)

II. The defendant having set up as a defense to the fifteen hundred dollar note, that it was not a valid security in the plaintiff’s hands, and having succeeded in his defense, is estopped from alleging that the sale of said note was a payment of the note in suit, or was an available security for any purpose. (Johnson v. Johnson, 11 Mass. Rep. 359 .)

III. The testimony respecting the receipt and transfer of the fifteen hundred dollar note by plaintiff to Houghton, the, suit by Houghton against the defendant to recover the

p. 407

same, the defense set up by-the defendant, the decision of the court and jury thereon, and the payment by and the return of the note to plaintiff, constitute a full and perfect answer to the defense of payment set up in this case. The judge erred, therefore, in directing a verdict for the defendant; it should have been for the plaintiff. (Ramsdell v. Soule, 12 Pick. Rep. 126 ; Johnson v. Johnson, 11 Mass. Rep. 359 ; Swartwout v. Payne, 19 Johns. Rep. 294 ; Judge Bosworth’s opinion in this suit on demurrer; Delaware Bank v. Jarvis, Court of Appeals, not yet reported.)

, IV. The point of defense is, that the respondent obtained from James Jones & Co., or their broker, and sold (without recourse to himself and without guarantee) to Houghton, the fifteen hundred dollar note, and applied the same in payment of the amount due on the note in suit; and that the non-payment of the fifteen hundred dollar note, the defense set up to it by defendant, and the repayment of the same by Burrall to Houghton, furnish no answer to the allegation of payment. If this defense is available, then, it follows that, although the parties to the note have, in fact, paid nothing, yet the transaction proved in this case, has really paid the loan and both notes, and put three or four hundred dollars into the pocket of James Jones & Co. besides.

E. W. Stoughton, for Respondent.

I. The verdict in the action in the Common Pleas between Royal Houghton and Robert Jones, has no force or effect in determining this action.

1st. Because it was not between the same parties or their privies; nor was the action for the ^ame cause.

2d. Because the verdict might have passed, and probably did pass, upon grounds other than that mentioned in the reply. (Lawrence v. Hunt, 10 Wend. 81 ; Wood v. Jackson, 8 Wend. 36 .)

II. In this action, the defendant proved that the plaintiff, upon the trial of the suit of Houghton v. Jones, testified

p. 408

that he received the note for $1,500, from James Jones & Co., at their request, for the purpose of selling the same, and applying the proceeds upon the balance alleged to be due him. That he did sell it to Houghton without indorsing it, or guaranteeing, in any manner, its validity or its payment. That he did apply sufficient of the proceeds to pay the balance due him, and from $300 to $400 balance of such proceeds, is still in his hands, belonging to Jas. Jones & Co.

There is no evidence whatever tending to prove the contrary of the plaintiff’s sworn statement. He is, therefore, concluded by it, and the direction of the justice who tried the action was correct.

—Upon the trial of the issues in this action, (before Mr. Justice Woodruff and a jury,) it distinctly appeared by the testimony of the defendant (uncontradicted by the plaintiff, who supposed the fact to be so) that the note in suit was indorsed by him merely for the accommodation of James Jones & Co., and without any consideration.

It was also in evidence (by the testimony of the plaintiff himself) that James Jones authorized him to get the $1,500 note from McMillen, who held it merely for negotiation; that the plaintiff saw McMillen, and told him Mr. Jones had requested the plaintiff to get the note, that McMillen gave the note to him, saying he supposed it was all right, that he had been trying to negotiate it to take up this (plaintiff’s) loan; and that he kept the note until about a month before it became due, at which time James Jones told him to negotiate it; “ wanted me to negotiate it and take my pay out, of that” ; the plaintiff replying “ he did not know that he could negotiate it, wanted his money, &c.;” that the plaintiff did negotiate the note with Royal Houghton a month or six weeks before it became due; that the plaintiff, a few days before the note became due, told James Jones he had negotiated the note, (in reply to a demand that the note should be returned to him, Jones;) that Jones came again the day before the note became due and demanded

p. 409

it again; and the plaintiff says: “I told him he need not come to me, I had nothing to do with it;” and again, said the plaintiff: “Mr. Jones, you make yourself perfectly ridiculous, about this, you know, you authorized me to negotiate the note.” Jones said: “you can’t prove that;” the plaintiff saying: “I presume you won’t deny it;” Jones replied; “I won’t admit any thing.”

It also was in evidence that the plaintiff when a witness in the case of Houghton v. Jones, (6th and 7th March, 1847,) testified that: “ in receiving the money from Houghton on the §1,500 note, it left some §300 or $400 over what was due to him, (plaintiff,) that he had not paid over that balance; he had not been asked for it; he had always stood ready to pay the balance, and to give up the note for $1,563, (the mote in' the present action;) they had never been called for; that he was abundantly able to respond for that note (1,563), and the balance of the money.

And again, that Houghton did not ask the plaintiff to indorse the $1,500 note ; supposed Houghton knew defendant was rich, and did not ask plaintiff if he was a holder for value or any thing about the consideration of the note, and did not ask him to indorse it, and that the plaintiff did not intend, if it turned out that he had no right to sell the note, to pay Mr. Houghton the money again, or any part of it.”

It also appears that the judge’s charge to the jury in the case of Houghton v. Jones, in the court of Common Pleas, was as follows:

“ That if the note was obtained by Burrall by fraud, or if he had no authority to receive it, Houghton could not recover, unless he had proved that he was a bona fide holder without notice of matter of defense, Jones having proved that he was an accommodation indorser. Again, that if Mr. Burrall had loaned to James Jones & Co., the $6,000 on the four notes, and that loan was paid with lawful interest in the payment of three of the four notes, Houghton could not recover unless he proved himself a bona fide holder, Jones having proved himself an accommodation indorser. He also charged “ that if Mr. Burrall made the original

p. 410

loan of $6,000 on an usurious contract, plaintiff (Houghton) could not recover at all, or if Burrall had made an usurious loan of'the $2,000, Houghton could not recover.”

And under such charge the jury found a verdict in favor of the defendant, and judgment was entered for costs against the plaintiff Houghton.

The evidence was entirely undisputed; in fact almost wholly given by the plaintiff himself, and fully and completely disposed of every issue raised by the pleadings. There was no question to be submitted to the jury.

The decision of the court, or verdict in the action of the court of Common Pleas, has no force or -effect in determining this action:

First, Because the issue in respect thereto to be tried was, “whether or not said verdict wds rendered upon the sole ground that the $1,500 note had been transferred without authority, and was not a valid and subsisting security in his hands;” and it distinctly and without contradiction, appeared that the verdict of. the jury under the charge from the court may have proceeded from a view:

1. That Mr. Burrall had loaned to James Jones & Co.,. the $6,000 on the four notes, and that loan was paid with lawful interest in the payment of three of the four notes; or

2. ' That Mr. Burrall made the original loan of $6,000 on an usurious contract; or

3. That Mr. Burrall had made an usurious loan of the $2,000; and

Second, If the plaintiff claims that the suit in the court of Common Pleas, was defeated -on the ground that the original transaction (which includes the note in this action) was usurious, and claims the benefit of the judgment rendered therein, then it must follow that the fact is' assumed to be as by that judgment he says it was decided, and if so, then usury is established in this action as set up in the answer of the defendant.

The objection to the admission of evidence showing that the note in question was an accommodation note, is deafly untenable, and no point was made upon it at the argument.

p. 411

The question, “after the verdict in the case of Houghton v. Jones, were you (plaintiff) called upon to pay the note V’ was immaterial; it Was of no consequence unless he was liable to pay it when called upon, or actually did pay the amount.

The other question, “ after the verdict in the case of Houghton v. Jones, did you pay to Mr. Houghton the amount of the $1,500 note ? although at first ruled out, was permitted to be answered subsequently, and the exception to the ruling therefore is not well taken.

Finding no error in any ruling or decision of the court below, the judgment and order denying the motion for a new trial must be affirmed.

Woodruff J., concurred.

—Besides the defenses of usury and want of of notice of non-payment of the note sued upon, the answer sets up its payment by the makers, (James Jones & Co.)

Such defense of payment consists of the application, by the plaintiff of the proceeds of the sale of a note by him, to the satisfaction of the amount due on the note in suit; the answer avers that the note so sold was obtained by the plaintiff from the makers of the note in suit, or some one who held it for them, and that both notes were indorsed by the defendant merely for the accommodation of the makers, and that the proceeds of the note sold belonged to them. The sale of such note was admitted, in the reply, to have been made to one Houghton, but is therein averred to have been accompanied by a representation by the plaintiff, at the time of such sale, that such note was a valid and subsisting security. The uncontradicted evidence of the defendant, and established admissions of the plaintiff, prove the truth of the residue of the answer.

The reply, however, alleges as a further answer to the defense of payment, that the plaintiff repaid to Houghton the amount of the note sold to him, and received such note back from him in consequence of a verdict and judgment

p. 412

obtained by the present defendant against Houghton, in an action brought by the latter against the former upon such note. It further alleges that such action was brought in 1 the New York Common Pleas, and the defendant insisted on the trial of the issues therein, that the present plaintiff had no authority to transfer such note to Houghton, and that it was not a valid security in his hands, and gave evidence in support of such defense; that the questions of such authority and validity were alone submitted to the jury upon such trial, who thereupon rendered a verdict solely for want of such authority and such invalidity. The pleadings, or the nature of the issues made thereby in such action, are not stated in the reply, nor does it aver as a substantive fact that such note was sold without authority or was invalid.

The sole question raised by the reply is, whether a successful defense, by the present defendant in the action brought against him by Houghton, upon the grounds alleged, is an answer to the defense of a sale of the note in controversy, and application of the proceeds thereof. The mere payment of the money by the plaintiff to Houghton, not being a necessary or legal consequence of the verdict in that action, was voluntary and immaterial, unless there was a legal obligation to refund, to sustain which, there is no averment of any fact in the reply, except the action, trial and verdict in the Common Pleas. Even if the plaintiff became bound to refund the money due on such note in consequence of his alleged representation of its validity, and he was justified by his agency to sell in making such representation, or if he became a.warrantor of the title by, selling without disclosing the name of his principal, the truth of the representation in one case, and the fact of the concealment in the other, must necessarily have become the subject-of an issue. The admissions of the plaintiff on the trial, in fact, disprove any such representation at all. The result of the action in the Common Pleas, and the proceedings therein, are not claimed in the reply as an estoppel at all, and under such circumstances, by the rules

p. 413

of pleading established before the Code, the plaintiff would have had no right to have availed himself of them as such ; pleaded simply as facts, they were immaterial, as the plaintiff had a perfect right to open the estoppel. The reply is also imperfect, in not furnishing all the materials for determining what was adjudicated in such action, as the pleadings, the most essential part, are wanting.

Assuming, however, the estoppel to be properly claimed, and all the facts necessary to support it detailed, they would not create one in favor of the plaintiff against the defendant. Even Houghton could not have employed the verdict in the action in the Common Pleas against the present plaintiff, Maupin v. Compton, ( 8 Bibb. 214 ;) the latter was neither party nor privy to such action; whether he could have been made so by notice of it or otherwise, is immaterial, it appears that he was not; as the judgment in question could not bind the plaintiff as an estoppel, it clearly would not the defendant. (Jackson v. Vedder, 3 J. R. 8 ; Case v. Reeve, 14 J. R. 79.) Besides this, the reply does not truly set forth the nature of the controversy in the Common Pleas. The question of usury was also submitted to. the jury, besides those stated in such reply, and it is impossible to determine on which issue the verdict proceeded; if it were upon the ground of usury, the first branch of the defendant’s defense in this case- would be made out.

I therefore concur in the decision of the court affirming the judgment.