17 Iowa 240 | Iowa | 1864
There is no claim made in the petition against the defendants, based upon their parol guaranty of the Woodruff note. The finding of the court, therefore, “that the defendants, at the time of the exchange of notes, agreed orally to guaranty the payment of the said Woodruff note,” cannot be made the basis of a distinct liability, on the part of the defendants, even if it be conceded that it might have been the foundation of a legal liability, had
The authorities to this point are very numerous, and we
On the other hand, the plaintiff contends, that if he was negligent by not making presentment, and giving notice of non-payment, that the defendant has lost nothing by his
It is very difficult to ascertain from the authorities the exact state of the law, on these questions. This will be apparent by reference to some of the most approved text books, and the more leading authorities. Stoey (Notes, § 405), speaking of the precise point, says: “ But when the substituted note” (in this case, the Woodruff note) “ is received as conditional payment only ” (which is the case at bar, as found by the court), “it will amount-to an absolute satisfaction, and the creditor will be precluded from recovering on the original debt or note, if it appear that the substituted note, being the negotiable note of a third person, is not paid in consequence of the laches of the holder or creditor, or is lost by his neglect.”
According to the rule thus laid down, inasmuch as Woodruff was all the time insolvent, it cannot be said that the debt was not paid, or was lost in consequence of the laches or neglect of the plaintiff, and therefore the plaintiff is not precluded from recovering on his original debt. By this authority actual loss or damage is made the test or criterion of the right to fall back upon the original consideration. And see Clark v. Young, 1 Cranch, 181; Ward v. Evans, 2 Ld. Raym., 928; Chamberlain v. Delarine, 2 Wilson, 353, and authorities cited in note infra. In the American notes to Cumber v. Wane, 1 Smith’s Leading Cases, 388, the law is stated, to the same substantial effect, as follows: “A creditor accepting a negotiable note, either as collateral security or as a conditional payment, is bound to use due diligence in demanding payment, under penalty of being answerable for any loss incurred by his neglect; but he is not bound to sue upon it.” To same effect, 2 American Leading Cases, 184, 185. Under this rule, as there was no loss incurred by the plaintiff’s neglect, he might recover the original claim or cause of action. On the other hand, Mr.
Mr. Parsons, in his recent and most valuable treatise (Notes & Bills, vol. 2, page 154), says: “If the creditor receives money on the (substituted) instrument, or be guilty of laches, the bill or note operates as a complete satisfaction ” of the original consideration.
Under one class of authorities, as tbe Woodruff note was not presented in due time, it would seem to follow that tbe plaintiff’s right to recur to bis original claim or debt^vas extinguished, and that his only remedy was upon tbe note which he had thus received. We have given to this question great consideration. Upon the authorities it is difficult of determination. But upon reason and principle, it seems to us easy of solution. We therefore hold the better and true rule and criterion to be actual loss or prejudice, and consequently the creditor who has taken the note of a third person for a pre-existing debt is not debarred from resorting to the original consideration, although he has not presented the instrument or given notice of its dishonor, provided he can clearly and satisfactorily show that the debtor has not, in consequence of such omission, sustained any injury. But whatever doubt there may be as to the general question as to the effect of failing to protest, and give notice where the instrument is a note which is indorsed, and indorsed by the debtor alone, and no actual damage has ensued from want of notice, the other circumstances of the case at bar, as shown by the testimony (all of which is before us), place the plaintiff’s right to recover on clear and undoubted grounds. It appears from the defendant’s own testimony, that the original debt due the plaintiff was for money borrowed to buy machinery to build the mill. It was, what is styled in the testimony, a “ mill debt.” Tbe mill was completed, and Bedding, one of the defendants, at length obtained an interest in it. Both Bedding and Butcher, in August, 1858, sell the mill to Woodruff, for the sum of $2,500, who made a cash payment in November, 1858, of $500, and gave his four notes of $500 each, payable March 1st, 1859, September 1st, 1859,' March
Judgment affirmed.
Note. — To sustain his text, Mr. Parsons refers to the following authorities, all of which have been examined, and for the sake of illustration, we throw into the form of a note the points decided, so far as applicable: Hoar v. Clute, 15 Johns., 224. Order on third person was given for a prior debt; presented, -dishonored, and plaintiff was allowed to recover on the original demand. Gordon v. Price, 10 Ired., 385. If a MU of exchange be given for a prior debt, “it is incumbent on the plaintiff to show that he used proper diligence on the second bill, and could not obtain payment.” Per Ruffin, Ch. J. To the same effect, where a bill of exchange is given, see Dayton v. Trull, 23 Wend. 345, and the following cases, not cited by Mr. Parsons: Bridges v. Berny, 3 Taunt., 130; Jones & Mane v. Savage, 6 Wend., 658; Popley v. Ashley, 6 Mod., 147. Mr. Parsons cites also the following cases: Denniston v. Imbrie, 3 Wash. C. C. R., 396. Here the debtor indorsed a bill drawn by and upon third persons, and remitted to his creditor, who received it as payment; held that the debtor was only liable as indorser, and was discharged for want of notice whether drawee would have paid it or not. Woodcock v. Bennett, 1 Cow., 711. If a draft is accepted oh a debt, diligence must be used, or it will be p.ayment of the debt. Morgan v. Bitzenberger, 3 Grill, 350. Creditor surrendered note on receiving the debtor’s order on a third person, which was dishonored, and tendered back to debtor; held that creditor might recover on original consideration. In State v. Rosborough, 2 Rich. (Law), 241, it is said, that to have the note of a third person operate as payment, there must be proof of “loss through the negligence of the plaintiff
Thom this review of the eases, it would seem upon the authorities, that where the holder of a pre-existing debt takes a bill of exchange on a third person, it will operate as payment of the original debt, if due demand and notice be not given. And such is indeed the express provision of the statute of 3 and 4 Anne, oh. 9 (quoted 6 Mod., 147 note, and in 2 Parsons on N. & B., ubi sup.), in relation to bills of exchange, and this statute may have controlled the English decisions, without always being cited in the cases. But we have found no case where the creditor received for a prior debt, a note indorsed by the debtor alone, and where it was affirmatively shown that he had received no detriment from want of strict presentment and notice, where it has been held to extinguish the original demand. Where the vendee indorsed the note of a third person for goods received at the time, it is held in Pennsylvania, that he can only be -charged as an indorser. Shriner v. Keller, 25 Pa. St., 6; and see as to dirties, of holder, McLughan v. Bovard, 4 Watts, 308. Thatactual ioss is necessary to prevent creditor irom falling back on original consideration, see, also, Wright v. Crockery Ware Co., 1 N. H., 282; Clark v. Young, 1 Cranch, 181 (where there were other indorsers besides debtor), 6 Mod., 147; Ward v. Evans, 2 Ld. Raym., 928; Gallagher v. Roberts, 2 Wash., 191; Hamilton v. Cunningham, 2 Brock., 350, 2 Am. Lead. Cases, pages 184, 185; notes to Tobey v. Barber, and O'Kie v. Spencer, where this subject is very fully examined. It is there said “that no case seems to have gone so far as to decide that a defense, resting on the ground of a failure to present an instrument (note or bill) taken on account bf a debt, cannot be rebutted by clear evidence, showing that the parties primarily liable for its payment were insolvent at the period when it reached maturity, and that the default of the plaintiff has not been prejudicial to the interest of the defendant.” “It would be going very far thus to determine. The true rule, therefore, would seem to be, that the failure of the creditor to pursue the usual course of business, with reference to commercial instruments taken for a debt’is a prima facie bar to a suit for the debt itself, which may, notwithstanding, be removed by proving that the instrument was unavailing as a means of payment, and that the debtor has not been injured by the omission to (present-or to) give notice of its non-payment.” Tliese observations apply equally to the case whether the instrument taken is a note or bill. And .as an indorser of a note occupies, generally speaking, the position of the drawer of a bill, it is ’ difficult to see how any distinction in principle can be drawn between a case where the debtor draws Ms bill on another, and where he indorses the note of a third person not due, which amounts simply to an order on the maker, to pay it to the creditor.