32 Vt. 125 | Vt. | 1859
I. The first ground of defence which the defendant Nye sets up to the three notes is, that the members of the firm of Colvin, Allen & Company had no authority to bind the firm by signing the partnership name to negotiable promissory
II. This brings us to the consideration of the important point involved in the case. Are the plaintiffs, upon the finding and report of the referee, bona fide holders of these notes against the defendant Nye ?
Much of the difficulty which has arisen in determining this case, has been occasioned by the peculiar character and language of the referee’s report, and the different constructions placed upon it by counsel, and different members of the court.
He reports that Comstock transferred the notes to the plaintiffs while they were current, receiving from them a full consideration for them, the plaintiffs supposing them to be business notes, but making no inquiry as to their origin or consideration, or whether they were accommodation notes, or their execution authorized by the defendant Nye.
After detailing all the circumstances in relation to the condition of the various parties, which are relied upon by the defendant as affecting the plaintiffs with notice that the notes were not authorized by or binding upon him, the referee sums up in the following language: “ The referee is of opinion from the facts here found and submitted, that the plaintiffs ought, in good faith towards Nye, to ha-ve inquired before faking said notes of said Comstock,
The counsel for the plaintiffs insist that this is not to be understood as a finding or conclusion of fact by the referee, but that it is merely the expression of a legal opinion upon the effect of the facts before recited, and that the court are left to apply the law to those facts, without reference to any adjudication by the referee. But the questions, whether the holder of current negotiable paper has taken it with or without notice of defences between prior parties, whether he has exercised good faith in the transaction, or has been guilty of negligence or a want of proper caution, are always questions of fact to be submitted to and determined by the jury. All the circumstances attending the transaction, the condition of the several other parties, and all other facts that bear upon such an issue, are only evidence for the jury to weigh in deciding it.
In this case the referee stood in the place of a jury, and it was his duty to weigh all evidence bearing upon that subject, and draw the proper conclusion of fact therefrom. We are of opinion that such was the purpose of the referee, and when he says “the referee is of opinion,” it is to be understood the same as if he had said the referee finds, or decides, or adjudges, etc. Taking the whole report together, what is the fair result of the referee’s finding as to the taking of these notes by the plaintiffs from Com-stock, and their knowledge or want of knowledge of their true character, and their diligence or negligence in obtaining information on that subject?
He finds they received the notes while current, and paid full value for them, and had no knowledge in fact that they were executed by Allen in fraud of, or without authority from the defendant Nye, but that at the same time, from their knowledge of the condition of Comstock and his business with them, and their knowledge of the business of Colvin, Allen & Company, and the nature of the defendant Nye’s connection with them, and the circumstances of this transaction itself, they must, as men of ordinary prudence and sagacity, have suspected that these notes
The large amount of these notes, the fact that they were executed so nearly at the same time, and that they were all for round sums, of five hundred, and one thousand dollars, had a tendency to excite suspicion that they did not arise out of ordinary business dealings. This, taken in connection with the knowledge of the plaintiffs that the business of the firm was done by Allen and Colvin at Port Kent, and that Nye lived at Burlington and had no participation in the management of the business, had a tendency to excite doubt and suspicion whether these notes were executed with his knowledge and approbation.
Without taking further time to comment upon these facts, it is sufficient to say that the evidence reported, in our judgment, legally tended to support the finding of the referee, and if so we cannot disturb it, as the same has the conclusive effect of a verdict.
It is not claimed by the plaintiffs’ counsel that absolute or positive knowledge is necessary to be- proved, but they insist that notice of such facts must be proved as to make it a case of fraud or bad faith in him to become the purchaser; while the defendant’s counsel claim that notice of such facts as create any fair ground of suspicion on that subject, and such as would put a careful and prudent man on inquiry, is all that is neceesary, if the party omits to make reasonable and prudent investigation to learn the truth. Both claim to be supported by authority, and cases are cited which do support each of these rules.
Previous to the case of Gill v. Cubit, 3 B. & C. 466, (10 E. C. L. 154.) the rule-does not appear to have been very definitely settled in the English courts. The language of judges in different cases seems to vibrate between the two ; but in that case the rule was distinctly laid down by the court of King’s Bench in very strong and clear terms, that the purchaser of negotiable paper must exercise reasonable prudence and caution, and that if the circumstances were such as ought to have excited the suspicion of a prudent and careful man, and he made no inquiry, he did not stand in the legal position of a bona fide holder. This case seemed to have established the rule in the English courts, and was fully adopted, and substantially the same rule was laid down in a large number of reported cases, many of which have beeü cited by the defence. The rule was put forth by all the writers upon mercantile law as the rule governing the transfer of negotiable paper. The same rule was adopted by the courts of this country generally, and seemed to have become a fixed rule
This was decided in the case of Goodman v. Harvey, 4 A. & E. 870, (31 E. C. L. 212,) and in several other cases in England, and may now probably be regarded as the settled rule in the English courts. Since these latter decisions have been made, Judge Story, Professor Greenleae and other writers have quoted them as changing the rule of law on the subject. As before stated, the rule laid down in Gill v. Cubit Was generally adopted by the American courts and seemed to have become the settled law of this country, until the later decisions in England, and the promulgation of them by Judge Story and Professor Greenleae in their legal treatises. We have been referred to but one American case which can properly be regarded as an adoption of the later English rule ;' that is the case of Worcester County Bank v. Dorchester & Milton Bank,, 10 Cushing 488. That case, however, was an action to recover the amount of a bank bill which had been stolen, and the court strongly intimated that there may be a difference between bank bills which pass in community from hand to hand as money, and ordinary negotiable paper. Still, the court treat the case of Goodman v. Harvey and the cases following it, as having settled the rule of law according to those decisions. But the subject does not appear to have been very thoroughly examined, and the several cases in Massachusetts which followed the earlier rule are not even alluded to. We have also been referred to a case in the 11th Conn. 338, Brush v. Scribner, where the court speak of Gill v. Cubit as having been overruled by subsequent cases in England. But: this question was not before the court. The question in that case was, whether one could be a bona fide holder of a bill or note
The whole subject is there most ably examined by Duer, J., and all the cases, both English and American, are carefully and ably reviewed. That court upon the fullest consideration, both upon authority and reason, establish the rule as laid down in Gill v. Cubit. It is but just to say that the decisions of no tribunal in the country upon questions of commercial law are entitled to more consideration than those of the superior court of New York at the date of that decision. The only case in our own reports that we are aware of where this question has been discussed at all, is that of Sandford v. Norton, 14 Vt. 228. The precise question was not before the court in that case, but came up incidentally. The question appears however to have been examined, and the English cases are cited, and the fact that Gill v. Cubit had been departed from by the English courts is alluded to, but the court express a decided opinion in favor of the doctrine held in that case.
In our judgment that doctrine is best sustained by authority. But if the question were wholly new, and we were now called upon to establish a rule for the first time, we should feel no hesitation in saying that such should be the rule to govern the purchase and transfer of negotiable securities. / It is the rule which is applied to all other cases of business dealings when the rights of third persons may be thereby affected, both in relation to real and personal property. In the case of sales of personal property by one who obtained it by such a fraud as entitles the original owner to reclaim it from the fraudulent vendee, but not from one who had honestly purchased it from him, this rule has heen repeatedly applied. So in case of the sale of real estate by one holding the apparent title, when another is the real owner by an unrecorded deed, the same rule is established. Why should not the same rule apply in case of the sale and transfer of negotiable securities, and thus render the law uniform upon the •whole subject ? j The reason given by the English judges for a different rule as to mercantile paper is, that such a rule operates as a clog
It is now a settled rule of law that the purchaser of negotiable paper overdue, takes it subject to all defences which exist between prior parties, and though he pay full value for the paper, and have no knowledge of such defence, or any cause to suspect any except from the papers being overdue, the case is not altered, the' rule is inflexible.
The only ground of this rule is, that the fact of the paper not being paid at maturity furnishes ground of suspicion that there is some reason why it should not be paid, and this is enough to put the purchaser on inquiry to ascertain the truth, before making the purchase. If he neglect this he incurs the hazard of all defences which may exist, and his entire honesty and good faith in the transaction will not avail him at all.
The existence of this rule and the reason on which it is founded, seem to be entirely at war with what we think may properly be called Lord Denman’s doctrine in the later English cases. We are therefore of opinion that the plaintiffs, upon the referee’s report, are not entitled to recover the amount of the three notes.
' IV. The plaintiffs do not Claim that the receipt for lumber is a negotiable instrument that could be transferred to them, so that they can recover upon it as such. This part of the case is put upon the ground that the transfer of the receipt to them was equivalent to a purchase by them of the lumber in the hands of Colvin^ Allen & Company, aud that they became thereby the owners of it, aud that if Colviu, Allen & Company converted the luuiber into money they could recover the money under the general counts.
Conceding that the transfer of the receipt made the plaintiffs the owners of the lumber, in order to enable the plaintiffs to recover of the defendants, they must show that the defendants have actually received the money for it.
The ease fails to show any such fact; the referee reports that there was no evidence what became of it. The judgment of the county court is therefore reversed, and judgment rendered for the defendant.