Blood v. Northup

1 Kan. 28

• Court: Supreme Court of Kansas
• Decided: February 15, 1862
• Status: Published

Opinion

By the Court,

Bailey, J.

Petition in error to reverse the judgment of the United States District Court for the Second Judicial District of Kansas Territory, sitting in ,the county of Douglas for the trial of causes arising under the laws of said Territory, at the October term, 1859.

The original action was brought by the defendants in. error in the Court below upon the following certificate or memorandum in writing, viz.:

“$649.79. Received, Lawrence, May 29, 1857, of Wilson Bennett, six hundred and forty-nine and seventy-nine one hundredth dollars, payable to his order, on return of this certificate, in current funds. J. Blood.”

On the back of which was the following indorsement, viz.:

“ Pay Northup & Chick.

Wilson Bennett.”

The petition of plaintiffs (defendants in error), in the Court below, is in common form, setting forth the execution and delivery of the writing declared’on, on the day of its date, by defendant to the payee, Wilson Bennett, and its subsequent indorsement and delivery by said Bennett on the same day to the plaintiffs, for the consideration expressed on its face, presentation and demand of payment by plaintiffs and refusal by defendant.

In their answer, the defendant (plaintiff in error) sets up two pleas as a defense to the action, to wit:

First. That defendant Blood purchased of a person calling himself Wilson Bennett a draft, drawn by A. A. Tucker & Co,, of Chicago, upon J. J. Anderson & Co., of St. Louis, payable to one Nathaniel Miller or order, for nine hundred dollars, and paid to said Bennett two hundred and fifty dollars and twenty-one cents in cash, and gave him the writing declared on for the balance.

That the draft so purchased of Bennett by defendant was an altered or forged draft, having been altered from a draft for one hundred dollars to a draft for nine hundred dollars, and that said draft was refused payment by the drawers, on the ground of forgery. That the writing declared on by plaintiffs is not negotiable, and that defendant can avail himself of the same defense against plaintiffs that he would have had as against Bennett.

The second plea denies the indorsement and delivery of the writing or certificate declared on, by said Bennett to plaintiffs, alleged in plaintiffs’ petition.

To the first plea, the plaintiffs below demurred and the Court sustained the demurrer.

The issue joined on the second plea was submitted to a jury, who returned a verdict for the plaintiffs, assessing the damages at seven hundred and forty-eight dollars and eighty-nine cents, for which the Court rendered judgment.

The errors complained of are two, viz.:

First. That the Court erred in refusing the instructions to the jury prayed for by defendant’s counsel.

Second. That tbe Court erred in sustaining the demurrer.

With regard to the first assignment of error, it is only necessary to remark that the record does not show that any instructions to the jury were requested to be given on-the trial.

Tbe only question to be considered, therefore, would seem to he the ruling of the Court below, in sustaining the demurrer.

In considering this question, it may be proper first to determine the legal character of the writing declared on, and we find no difficulty in reaching the conclusion that it is to be regarded as a promissory note.

“A promissory note, or, as it is frequently called, a note of hand, is an absolute promise in writing, signed but not sealed, to pay a specified sum at a time therein limited, or on demand or at sight, to a person therein named, or to his order, or to the bearer.” (Byles on Bills, p. 4.)

“An acknowledgment of indebtedness in writing, in a specific sum, for a valuable consideration, raises a promise to pay, and is, in law, a note.” (Finney vs. Shirley et. al., 7 Mo. 42.)

The writing declared on is, in its terms, payable to Wilson Bennett or his order, in “ current funds;” and it may well be questioned whether such a note can be deemed negotiable. On this point the authorities are numerous and somewhat conflicting. In England, it has been held that, to be negotiable, a note must be for money in specie, and therefore a promise to pay in “Bank of England notes” is not a promissory note. (Byles on Bills, 171 [70] and cases cited.)

So a note, payable in current funds or “New York” funds, held not negotiable. (Hasbrouck vs. Palmer, 2 McLean 10.)

So, in Missouri, a bill drawn, payable in currency, was held to be not a bill of exchange. (Farwell et. al. vs. Kennet et. al. 7 Mo. 595.)

So a note for a sum certain, ’payable to A. or order in “ foreign bills” (meaning, thereby, bills of country banks), held not to be a good promissory note within the statute, and not negotiable. (Jones vs. Fales, 4 Mass. 245.)

So in New York a note, payable in New York or Pennsylvania paper currency, to be current in the State of Pennsylvania or New York, is not a promissory note within the statute. (Leiber vs. Goodrich, 5 Bowen 186.)

So in Pennsylvania it was held that a promissory' note, payable to A. B. or order, in notes of the chartered banks of Pennsylvania, vfas not a negotiable note, on which an indorsee could sue in his own name. (McCormick vs. Trotter, 10 Serg. & R. 94; Cook vs. Satterlee, 6 Cowen 108.)

So in South Carolina it was held that a paper, medium was not money, and therefore a note, payable in a paper medium, is not assignable. (Lungo vs. Kahne, 1 McCord 115; McClasen vs. Nesbitt, 2 Nutt & McCord 519.)

So a draft, payable in “Arkansas money,” was held not to be negotiable. (Hawkins vs. Watkins, 5 Pike 481, cited in Byles on Bills—note.) ,

On the other hand a bill, payable in “funds current in the city of New York,” was held to be payable in gold or silver or their equivalent, and therefore good as a bill of exchange. (Lacy vs. Holbrook, 4 Ala. 88.)

So in Mississippi, a note for a sum certain, payable in cotton at a fixed price, a good promissory note, and may be declared on as such. (Rankin vs. Sanders, 6 How. Miss. 52, cited in Byles on Bills ut supra.)

So it was formerly decided in New York that a note, payable to A. or bearer, in New York State bills or specie, was a negotiable note within the statute,, upon the ground that the bills mentioned meant bank paper which, in conformity to general usage and understanding, are regarded as cash, and, therefore, that the meaning was the same as if payable in the lawful current money of the State. (Keith vs. Jones, 9 Johns. 120.)

So a promissory note, payable at a particular place in “bank notes, current in the city of New York,” was held to be negotiable. (Judah vs. Harris, 19 Johns. R. 144.)

So, likewise, in Ohio, a note, payable in current funds of the State of Ohio, was held to be a note payable in money and negotiable. (Swetland vs. Craigh, 15 Ohio R. 118. See, also, Morris vs. Edwards, 1 Ohio 189, and White vs. Richmond, 16 Ohio 5.)

But without determining the relative weight or preponderance of the conflicting authorities Upon this point, we proceed to an examination of the Kansas statutes of 1855, the provisions of which we apprehend must be deemed conclusive in this case.

The “Act concerning bills of exchange and negotiable promissory notes,” statutes of Kansas, 1855, page 189 — after fourteen sections exclusively applicable to bills of exchange— provides as follows, viz.:

“Sec. it. The payees and indorsees of every such negotiable note, payable to them or order, and the holder of every such note, payable to bearer, may maintain actions for the sums of money therein mentioned, against the makers and indorsers of them respectively, in like manner as in cases of inland bills of exchange, and not otherwise.”

It was agreed in the argument at bar that this statute is a literal transcript from the Missouri act of the same title, except that the fifteenth section of the original Missouri act was entirely omitted from the Kansas act.

The omitted section provided that certain notes herein described, which must contain the words “for value received,” and negotiable and payable without defalcation, shall be due and payable as therein expressed, and shall have the same effect and be negotiable in like manner as inland bills of exchange.

It was claimed in the argument for defendants in error that, as by the omission of the original fifteenth section the word “such,” in the fifteenth section of the Kansas act — which was the sixteenth section of the Missouri act from which it was copied — is left without an antecedent; that the section is to be construed without the word such. This would place all negotiable notes on the footing of inland bills.

In the absence of all other statutory provisions, this construction might be admissable.

But the “Act concerning bonds and notes,” Kansas statutes of 1855, pages 155-6, provides:

“ Section 1. That all notes in writing, made and signed by any person or his agent, whereby he shall promise to pay to any other person or his order or unto bearer, any sum of money or property therein mentioned, shall import a consideration and be due and payable as therein specified.

“Sec. 2. That all bonds and promissory notes, for money or property, shall be assignable by an indorsement on such bonds or promissory notes, and the assignee may maintain an action thereon in his own name, against the obligor or maker, for the recovery of the money or' property, specified in such bonds or notes, or so much thereof as shall appear to have been due at the time of the assignment.

“ Sec. 3. The nature of the defense of the obligor or maker shall not be changed by the assignment, but he may make the same defense against the bond or note in the hands of the assignee that he might have made against the assignor.”

The first section of this act declares that all written promises therein described shall be subject to thé provisions -of the act.

Section two make's them assignable by indorsement, and gives the assignee the same property in them the assignor had before indorsement, with the right to maintain an action in his own name; while section three expressly provides that the maker or obligor may interpose the same defense against the assignee as he might have done against the assignor.

The first section plainly includes in its provisions negotiable promissory notes. Hence, were the Court to adopt the suggestion to construe the fifteenth section of the “Act'relating to promissory notes and bills of exchange” without the word such, it would, in effect, declare the existence and validity of two statutory enactments, relating to the same subject matter (to wit, negotiable promissory notes), utterly conflicting and repugnant in their provisions.

While the one provision would place “ every negotiable note ” upon the footing of inland bills, the other still more positively declares that ail. such shall be assignable and liable to the same defense in the hands of indorsees as of payees. Such a construction must be deemed inadmissable, and we are forced to conclude that the defendants in error, by the indorsement of Wilson Bennett, take the writing declared on, subject to the provisions of section three of the “Act concerning bonds and notes.”

It w'as claimed that the plaintiff in error, by the act of signing the writing declared on and delivering it to the payee, was estopped from pleading a failure of consideration, inasmuch as said writing contains an express acknowledgment of the receipt of so much money. But it is too well settled for argument that, as between the original parties, the consideration of a note may b.e inquired into, and a failure of consideration, if proved, will be fatal to its validity. And in this case the plaintiffs must be considered as occupying the same status in Court that Wilson Bennett would have had if he had brought an action on the note in his own name.

But it is further objected that, by interposing the plea of failure of consideration to the plaintiffs’ demand, the defendant is, in effect, seeking to rescind the original contract without restoring what he has received under it, namely, the forged draft. The objection is not valid.

The defendant is not seeking to rescind his contract. He is not seeking to recover back the two hundred and fifty dollaz'S he has already paid under it. In such a ease it is not necessary that he should restore or offer to restore. He has performed a part of his contract, while his adversary is discovered to have pezfformed nothing on his part. To such a case, the rule contended, for does not apply. (Lewis vs. McMillen, 31 Barbour 395.)

The case of Withers vs. Greene (9 Howard 213) is not only conclusive on this point, but the whole case, in all its leading features, bears a striking analogy to the one at bar.

That was an action brought upon a sealed note or “single bill,” negotiable in its terms, made in Alabama by the defendant, and indorsed by the payee to the plaintiff, before due. By the laws of Alabama, such notes were placed upon substantially the same footing as bonds and notes by the third section of the statute of Kansas above cited. The note was given in part payment for two fillies, sold to defendant by the payee of the note, and represented to have been sound and of high pedigree. They proved to be unsound, and not of as high a pedigree as represented; and both died about one year after the purchase, before action brought.

The case came up to the Supreme Court of the United States on appeal from the United States District Court for the Middle District of Alabama, and received, the fullest consideration from the ablest counsel and from the Court. It was held that the defendant might plead the failure of consideration against the note in the hands of the assignee, without rescinding the contract or returning or offering to return the property he received under it.

Mr. Justice-Daniel delivered the opinion of the Court, and after examining, at great length, the numerous cases cited, both English and American, he say's: “We cannot doubt, therefore, after a full examination of the questions on this record, that, under the provisions of the statute of Alabama pleaded in this case, [similar to the Kansas act of 1855, “ concerning bonds and notes,”] the plaintiff in error had the right to rely in his defense either upon a fraud practiced on him in the formation of his contract, or on a false or fraudulent warranty, or on a total or partial failure of the consideration on which the contract was entered into by him, or on any payments, discounts or set-offs, in the language of thb statute, ‘made, had or possessed by him,’ provided that the last three grounds of defense shall have come into existence, and been justly belonging to the plaintiff in error, before he had notice of the assignment of his obligation.” (Withers vs. Green, 9 Howard 231.)

It is ordered by the Court that the judgment, entered by the District Court in this cause, be vacated, and that a mandate issue to said Court to overrule the demurrer, and proceed with the cause.