Wiggin v. Flower

5 Rob. 406 | La. | 1843

Lead Opinion

Martin, J.^*

This case presents two questions of law :

First. Whether an endorser who pays a bill of exchange before maturity, acquires a legal subrogation 1

Second,. Whether, if he has not paid the full amount of the bill, or if he has paid it in depreciated notes, he may require from the acceptor, more than he has paid, or more than the value of the depreciated notes ?

The plaintiffs are appellants from a judgment, by which thedefendants have recovered, in reconvention, the whole amount of a bill of exchange accepted by them, discounted in Bank, and, before maturity, paid by the endorser, or his agents, the defendants.

The appellants’ counsel has relied on the case of Holland v. Peirce, 2 Mart. N. S. 499, in which this court held, that the maker of a note was discharged by the payment of it by an endorser, a short time before the closing of the bank, on the day of maturity. The plaintiff’s counsel, in that case, did not urge the legal subrogation his client obtained by the payment, nor was the right of subrogation attended to by the court. The defendant’s counsel, in that case, was an able and experienced one. When a case is argued by persons of that character, this court often contents itself with noticing the defence they make, without loosing much time in seeking whether there are not other points than those raised, on which a different judgment ought to be given. We did so in that case. It is contended, that the payment by an endorser, before maturity, gives him no legal subrogation, because, till then, demand, protest and notice, he is not bound,. Our Civil Code treats of the different kinds of obligations, and among them, of conditional ones. These are, therefore, obligations known to the law. They are susceptible of being released, transferred, and of passing to heirs before maturity. But the counsel for the plaintiffs urges, that the obligation of an endorser and a surety are conditional obligations, which the law classes among obligations contracted on a suspensive condition, because they depend on a future and uncertain event, or on an event which has actually taken place without its being yet known to the parlies ; that in the former case, it cannot be executed till after the event; in the latter, it has its effect from the day on which it was contracted, but it cannot be enforced until the event be known, Civil Code, art. 20,38 ; that the declaration, in the second case, that the obligation has its effect frprn the day it is contracted, is an affirmative pregnant with a negative ; that, in the first case, the obligation has not its effect in the same manner. It is true, the obligation of an endorser, or a surety, cannot be executed, until after the event on which it becomes absolute. It, however, exists, for it may be the object of a compromise, or transaction. The rights of the endorser, or surety, against the maker or principal, exist, however, before the obligation of the former becomes absolute. The Code provides, that “ an obligation may be discharged by any person concerned in it, such as a co-obligor or a security,” art,. 2130. It is clear, from the words used by the Legislator, that he recognized the right of paying before the obligation of the co-obligor or surety became absolute ; for then, the obligation is something more than one in which the co-obligor or surety are concerned — it is their own. There was no necessity of our being informed that one may pay his own obligation. The co-obligor spoken of in the above article must be a conditional one ; -for, if his obligation was absolute, it would be equally useless to'tell us he mo,y discharge it. There is an evident error of the press in this article, the word co-obligee, being used instead of co-obligor, as the sense, and the corresponding article in the French text, manifestly show. The Code places the endorser and the surety on the same line ; both are conditional obligors, of the creditor of the maker and principal, and at the same time, conditional creditors of the latter. The Code, in the paragraph before us, impliedly, but virtually says, that the payment by a co-obligor, surety, or any person, like them, concerned in the obligation, acquires a legal subrogation, for it immediately after informs us, that payment by a person, no way concerned in the obligation, does not give rise to subrogation. The endorser and surety being, as we have seen, conditional creditors, may perform all acts conservatory of their respective rights, before their own obligation has become absolute, Civil Code, art. 2037. Although the obligation of the conditional debtor, by endorsement, has no effect against him, until he becomes an absolute one, and no conservatory acts can till then be exercised against him, he has, however, rights which he may exercise, as that of paying the debt, and resorting to conservatory measures. Indeed, payment may be for him a conservatory measure, for it may enable him to arrest the person, or property of the maker in another State. He may secure himself by selling the note or bill, to a debtor of the maker or acceptor, who may avail himself of it by a plea of compensation or reconvention. Although the endorser be not expressly named in the Code, in the parts of it which speaks of legal subrogation, payment, or cautionary measures, which I have quoted, I think that he is included in art. 2157, No. 3, as a person bound with, or for the maker or acceptor ; for the obligations the Code speaks of, are all obligations — whether absolute, conditional, several, joint and several, divisible, or indivisible, without any exceptions ; and that he is also included in art. 2130, which speaks of any person concerned in the obligation, such as a co-obligor or surety, who are only named exempli gratia.

I conclude, that a legal subrogation results from the payment before maturity, of a bill of exchange, or note, by the endorser.

II. As to the second question, to wit, whether the party thus subrogated may require of the acceptor or maker, more than he has actually paid ? The counsel for the appellants contends, that the first Judge erred, in condemning them to pay the whole amount of the bill, instead of reducing the endorser’s pretentions to the value of the depreciated notes he gave in payment. He has referred us to a number of French authorities, which establish that the surety can claim nothing but indemnification. This is certainly true, and there was no necessity for his crossing the Atlantic to seek the means of establishing his proposition. Nolté et al. v. Their Creditors, 7 Mart. N. S. 9. He has invoked Toullier, vol. 7, p. 199, who says that, “subrogation is founded on the grand principle, that it operates to no person’s prejudice, or, at least, that it does not affect the condition of the debtor and his other creditors. So far as these are concerned, it is necessary that things remain after the payment, in the same state in which they were previously.” The rights of a surety, subrogated to those of a creditor, whether the payment has been made before the surety’s obligation became absolute or after, result from the original contract between him and the principal, and are restrained by it. Those of the endorser, in the same situation, are under no restraint from his original contract with the maker, or acceptor, to wit, that the whole amount of the bill should be paid to him, or his order. The plaintiffs, by the defendants’ discount of the bill, the subsequent stoppage of specie payment by the Bank, and the consequent depreciation of its notes, did not acquire ipsis factis any more than an inchoate and incomplete right to pay in its depreciated notes, for they were not parties to any act, or contract, from which this right might result, and no obligation or right can result to any one from an act, or contract to which he was not a party, until he manifests his intention to avail himself of such a right. Invito heneficium non datur. Pothier on Obligations.

Thus, if my vendee, selling the estate, binds his vendee to pay to me the price which remains unpaid, no absolute right will accrue to me, until I accept the obligation the last vendee incurred ; and, at any time before this acceptance, the parties to the second sale may cancel it, and also my inchoate right. The plaintiffs having never manifested any intention to avail themselves of the advantage which the depreciation of the Bank notes offered, until, by the payment of the note, the defendants acquired the right of the Bank thereto, were exactly in the same situation as they would have been, if, at any time after the discount, the Bank had transferred the note. In the case of Nolté et al.v. Their Creditors, above cited, the accommodation endorser, who was bound with, and for the insolvents, and, as such, had been subrogated to the rights of the holder of the bill by payment, was restrained in his recovery from the syndics, to the sum which he had actually paid to the holder, because his original contract with the insolvents was only to indemnify him from the consequences of his endorsement. In the case before us, the plaintiffs, by their acceptance, bound themselves to pay to the order of the payee, the whole .amount of the bill; the endorser became entitled thereto by the transfer of the bill; the Bank acquired his right by the discount; and the defendants, a legal subrogation to the rights of the Bank, by the payment of the bill. It is not pretended, that the defendants were accommodation endorsers. If they were, the plaintiffs might rightly invoke the law, which restrains the claim of a surety to a full, but bare indemnification. Ordinary endorsers are not placed, in this respect, on the same line as sureties, neither can they, like the latter, claim the benefit of discussion.

Upon the whole, though on different grounds than those which have led the Commercial Court to the conclusion it has arrived at, I am of opinion that its judgment should be affirmed, with costs.

* Bullard, J. was absent, by leave of the Court.

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Dissenting Opinion

Garland, J.,

dissenting. A. L. Gaines & Brother, held an accepted bill of the plaintiffs. Sometime before its maturity, the holders endorsed it, and had it discounted in the Union Bank of Louisiana. About a month before the bill was due, the Bank having then suspended specie payments, and their notes being at a heavy discount, the endorsers went to the Bank, and took up the bill with its depreciated notes, and then placed it in the hands of the defendants, as their agents, who deposited it in the Bank of Louisiana, where specie was demanded for it. The clerk to whom the noce was paid says, it was understood, “ that the payment was made by, or for account of the acceptors, though no inquiry was made on the part of the Bank.*’ He further says, that the bill could not have been obtained except by a payment, as the Bank never transferred or negotiated the notes or bills it held.

The plaintiffs contend, that this was a payment made for their benefit, and that the bill has been discharged, and they sue to have it surrendered to them. The defendants deny, that the payment was for the use of the plaintiffs, and by a demand in reconvention, claim judgment for the amount of the bill. The defendants had a judgment on their demand in reconvention, and the plaintiffs have appealed. Thp reason given by Gaines & Brother, for taking up the draft was, that they were about to leave the city for the summer, and did not wish to have their endorsements out in their absence, and that it was not to speculate by paying the draft in depreciated notes, that they paid it. They have not shown, that the credit of the plaintiffs was at all doubtful, or that there was the slightest probability of the bill’s being dishonored ; on the contrary, they placed it in the hands of their agents, relying upon its payment to meet engagements of their own.

When I first examined this case, I thought it a stronger one for the plaintiffs, than that of Holland v. Peirce, 2 Mart. N. S. 499. Subsequent reflection has satisfied me of the correctness of my first impressions. In that case, which was a payment made by an endorser before maturity, but within the last hour previous to a protest, the court said, that the payment enured to the benefit of the maker, and that no matter from what motives it was made, the note could not afterwards be protested. In that case it was held, that the plaintiff could not recover, and in this, I do not see how the plaintiffs in reconvention can be entitled to a judgment, unless the decision in Holland v. Peirce, be overruled. The most favorable point of view in which I can put this case for Gaines & Brother, is, that they, in taking up the bill at the Bank, acted as the agents of the plaintiffs, and that they are entitled to indemnity from them, that is, for the value of what they paid. But if they contend, that they paid the bill, in my opinion they cannot recover at all. The simple inquiry is, was the bill paid, or was it purchased. That it was not purchased, is clearly established by the evidence of the Clerk of the Union Bank, who says, that it was not the intention to negotiate or transfer the bill, and that had he not supposed the payment was made for, and on account of the acceptors, it would not have been given up. Had it been intended to sell the bill, the assent of the Bank was necessary, and that assent could not be given by the Clerk who received the payment. I, therefore, take it for granted that it was a payment, and being so, the obligation was discharged: what obligation the payment created between the parlies after-wards, is another question.

Chitty tells us, that payment may be made by any one for the honor of the drawer, or any of the endorsers ; but that it is always made after protest, and that no person should pay in honor of another, before the bill has been protested. The simple reason is, that neither the credit nor honor of any person is at stake, until there is a protest. Pothier, Traité du Contrat 'de Change, No. 114, says : “ Celui qui acquitte une lettre de change pour Vhonneur du tireur, ou de quelqiVun des endosseurs, doit, pour obliger envers lui, actione negotiorum gestorum, celui pour Vhonneur de qui il Vacquitte, la laisser protester par le porteur avant que de la payer" These principles are, I believe, recognized by every writer on bills of exchange.

I am perfectly aware, that there are a great variety of obligations, in which parties may be bound in different modes; but I do not understand the responsibility of an endorser, previous to protest, as being similar to that of a co-obligor or security. The latter are directly bound ; the former only contingently ; and he may never be, if he lets the acceptor of a bill or the drawer of the note alone to pay it. A security has no right to recover from his principal more than he pays, nor can he make the obligation more onerous than it was in the hands of the creditor. Such, I understand, to be the law, as relates to co-obligors also.

The 2130th article, of the Civil Code, says, that “ an obligation may be discharged by any person connected in it, such as a coobligor or a security.” At the time when the payment was made in this case, what interest or concern had Gaines & Brother in the bill ? They had parted with their ownership of it by having it discounted. Their names were on it to be sure; but they were not bound for its amount in any way, until after maturity and protest, and this last event might never occur.

The plaintiffs in reconvention contend, that under article 2157, of the Civil Code, they are subrogated, of right, to all the rights of the Union Bank against Wiggin & Davenport. That article says, that “ subrogation takes place of right for the benefit of him who, being bound with others, or for others, for the payment of the debt, had an interest in discharging it.” The mere fact of the name of Gaines & Brother being on the bill, did not, in my opinion, create an interest previous to maturity. They were in no manner responsible. They could not be sued, or called on to give security for the amount of the bill; nor had the Bank a right to take any step towards them. If there was any other interest, than that arising from the endorsement, it ought to have been shown by testimony, which has not been offered. I give no credit to the reason stated for paying the bill. I have no doubt it was a speculation, and being such, I cannot give it my assent. This court have said, that an accommodation endorser cannot recover more of the drawer than he actually pays. He is entitled to indemnity only. 7 Mart. N. S. 12, 499. I now ask, what would be said of such an endorser, who, if the note his name was on was held by one of those banks whose notes are at a heavy discount, should go into the market, and purchase them, and a day or two before the maturity of the note pay it, and then claim the full amount from his principal ? I do not believe any court would give him a judgment under such circumstances ; yet the accommodation endorser has as much interest in discharging the note as any other endorser, and towards the Bank, or the holder of the note or bill, stands precisely in the same situation.

The most equitable and lenient view I can take of this case is, that the judgment should be reversed, and the case remanded, for the purpose of ascertaining what was the actual depreciation of the notes in which the bill was paid, and of allowing the reconvenors the value of them.

Judgment affirmed.

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Concurrence Opinion

Morphy, J.

I concur in the opinion delivered by Judge Martin.

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Concurrence Opinion

Simon, J.

I concur also in opinion with Judge Martin.

Case Details

Case Name: Wiggin v. Flower

Court Name: Supreme Court of Louisiana

Date Published: Jul 15, 1843

Citation: 5 Rob. 406

Court Abbreviation: La.