West Boylston Manufacturing Co. v. Searle , 32 Mass. 225 ( 1834 )

Shaw C. J.

delivered the opinion of the Court. The opinion of the Court is, that the legal property in this note being in the factors as payees, at the time when they exe outed that assignment, the legal interest in the note was thereby extinguished and no property passed by the indorsement to the plaintiffs, to enable them to recover as indorsees. Claiming as indorsees, they must stand upon the title of the promisees, and the defendants being discharged by the release, the plaintiffs are not entitled to recover.

We are also of opinion, that the evidence offered to show the circumstances, under which the release was executed, and which would have tended to show, that the note now sued was not mean: thereby to be released, was • rightly rejected * because it appears by the report, that the factors were holders and promisees of the note at the time, and as such had power to release it, that the words of release extended to all de mands contained in a schedule annexed to the instrument at the time it was signed, and that the note w as included in that schedule.

There was then no latent ambiguity and nothing to be explained by paroi evidence. Such a reference to a schedule annexed, is of the same effect as if the notes therein specified were enumerated in the body of the instrument ; and paroi evidence to show that they were not intended to be included, is no more admissible, than it would be to show that a note specifically described and released in the body of the instrument, was not intended to be released. It would be to show that what is plainly done by the release, was not intended to be done ; and this is not admissible, except for the purpose of proving fraud ; to which purpose it was not offered. It is quite distinguishable from the case of Nichols v. Arnold, 8 Pick. 172. There it was left wholly doubtful, upon the instrument, whether the note in question was or was not included. The instrument was written in such terms, that it might or might not include it, and then, conformably to a well-known rule of law, paroi evidence is admissible to show what comes within the description.

Suppose a person should release all notes held by him, which had been given for domestic goods sold, or use any such similar terms of general description ; paroi evidence is admissible to show what was intended, that is, what comes within the description.

The note in the case cited was made by the promisor, payable to himself and by him indorsed in blank, so that it would pass by delivery, without the indorsement of the auctioneers. From the facts, it appears, that if the factors had guarantied the sales, the note would have been their own; if not, it was the property of the owner of the goods, and that without any indorsement. Whether it was included in the terms of the release or not, depended upon this fact, and therefore the proof of the fact was proper and necessary.

Here the factors were the acknowledged holders of the note at the time, had power as such to release it, and did include t in the terms of their release, and tnerefore evidence to show that it was not included, would be directly repugnant tí t^e p]ajn terms and legal effect of the instrument.

We think the question of the authority of the factors, does not arise here. The plaintiffs, by declaring on the note, affirm the note and.treat it as a subsisting note, and as such, it must operate as a payment and discharge of the original consideration. The plaintiffs treat the factors as the holders, set out their title as such holders, and claim title to the note through their indorsement. It is upon this ground they claim to recover the whole note, although the sale of their goods constituted the smaller part of the consideration. In this respect they stand upon the footing of indorsees merely, and it is difficult to perceive upon what ground they can stanf upon any different footing from any other indorsees, in declai ing upon the note.

When it is said, that the property in a note, given fat goods sold by a factor, is in his principal, where the facto; has taken the note in his own name, it is true only in the sense, that he has a beneficial interest in it. The legal interest is in the payee or his indorsee. If the principal is in a condition to declare on the contract for goods sold, treating the note as a nullity or as a mere collateral security, not amounting to payment, he might probably recover in his own name. But if he declares on the note in the name of the promisee, as being the cestui que trust and beneficially interested, or if he declares, as indorsee, through the indorsement of such payee, he must take subject to such matters of discharge and defence, as the promisors would be able to make against the original payee, through whom he would claim ; and if without notice of any assignment, the promisors have obtained a release or other discharge from the payee, such release must bind the assignee, or indorsee.

We think it makes no difference, that the defendants in the present case, knew that the plaintiffs were owners, in part, ' of the goods for which the note was given. By the law of this commonwealth, a promissory note is considered as payment of a simple contract debt. It is not contended that the factors had not sufficient authority to take the note, and therebv to discharge the debt for goods sold. It does not appear, that the factors had not advanced the whole or a considerable part of the amount. The factors having an unquestioned authority to take a negotiable note in their own name, and thereupon to cancel and discharge the simple contract debt, the note was rightly taken, and whether it was rightly held and retained by the factors as their own, or otherwise appropriated, was a question merely between them and their employers. The fact therefore, that the defendants knew, at the time of the sale, that the plaintiffs were the owners in part, of the goods sold, had no tendency to show that the factors were committing any breach of trust, when they included the note in question, being at the time payable to themselves, in their composition and release, and therefore has no tendency to prove fraud or collusion between the defendants and the factors, or in any respect to alter the relation in which the defendants stand to the plaintiffs and the factors respectively.

Plaintiffs nonsuit