Teaz v. Chrystie , 2 E.D. Smith 621 ( 1855 )

Woodeuff, J.

In this case, the plaintiff furnished work and materials in pursuance of an agreement with the contractor, and in conformity with a contract between the owner and contractor for the erection of a building. During the progress of the work, and after its completion, the plaintiff received the contractor’s promissory notes for the full amount of the work, which notes he endorsed over to third parties, who paid him the amount thereof, and who brought suits thereon, and recovered judgments against the contractor, which remain unsatisfied, executions having beeli returned.

After the protest of the notes, the .plaintiff filed a notice to create a lien, which lien he now seeks to foreclose in his own name, and he produces the notes in court to be cancelled.

By what means he became possessed of the notes, it does not appear; whether he has paid the judgments recovered against the contractor, does not appear. No proofs in the case show that he is the owner of the claim, except the mere fact that he produces the notes.

The result is, that for aught that appeared on the trial, if this lien should be enforced, and the money claimed be paid to the plaintiff, the defendant (Chrystie), will still remain bound by the judgments rendered against him, and the third persons,' not parties to this suit, who are, by the record, owners of the claim, and entitled to the very moneys sought to be recovered, may yet enforce their judgments against the contractor. Under these circumstances, I think the court below were right in dismissing the suit.

It is questionable, whether a payee can recover of the maker of a note, when it appears in evidence that he has endorsed the note to a third party, who has recovered judgment against the maker thereon, without showing that he has himself paid the note to such third person in satisfaction of his endorsement, or at least has received a re-transfer thereof, with intent, to vest in him the demand. (See Mendy v. Carreroon, 1 Ld. Paym., 742).

The endorsement of a note is regarded as equivalent to drawing a bill on the maker to the order of such third person, the endorsee. (See such a case in Parliament; Parminter v. Symons., 4 Bro. P. C., 604; Lowrene v. Lawbray, 10 Mod., 36).

The present is like an action for the consideration of a note, and laying out of view for the present the peculiar form of the proceeding, let us suppose, for the purpose of testing the plaintiff’s title to recover, that he had brought his action in the common form against the contractor for the work and materials.

The case would stand thus: the plaintiff furnished to the contractor work and materials, and received therefor such contractor’s negotiable note. By this, it is true, the debt is not paid, the only effect is to suspend the right of action until the note comes to maturity. But the plaintiff transfers the note to a third person ; by that transfer, he loses his right of action ; the title is now vested in the third person, who, alone, while all things remain in that condition, is entitled to the money due. Upon that title, such third person recovers a judgment against the contractor; by that judgment, the right of action before vested in such third person, is merged, and that right of action cannot be transferred to the plaintiff by delivery of the note. It is true, that if the plaintiff pays the debt to such third person, and takes up the note in discharge of his own liability as endorser, he has his resort to the maker for the original consideration, or for money paid to his use, and he may, perhaps, proceed on the note itself; but he must, before he can avoid the legal effect of his own transfer of the right of action, and the recovery of a judgment by a third person thereon, show that he has become re-invested with a title to the unpaid debt, in such a manner, that if the maker of the note pay him the money, it will operate to discharge him from a liability to pay the same amount again upon such judgment. . The possession and production of the note does not prove this, for the possession of the note ceased to be material to the third person for the purpose of enforcing his claim against the maker the moment he recovered judgment thereon, and, therefore, no presumption that the plaintiff had paid the amount to such third person in discharge of the maker’s liability, arises from the fact, that the plaintiff afterwards obtained the possession of the note.

The maker of a negotiable instrument is entitled to protection, and will be protected against a liability to pay the debt to more than one person. And, although it is true that it is ordinarily sufficient in an action on a note that is endorsed in blank, for the holder to produce the note on the trial, and that it is deemed •prima facie evidence of title, notwithstanding there appear thereon endorsements to other parties indicating that it had been transferred, and such holder is permitted to strike out such subsequent endorsements, and rely on his possession as evidence of title, — yet, this is upon the ground, that as the previous endorsements are adapted to give him title, and as the subsequent endorsees cannot recover on the note without producing it, the inference is legitimate, that such subsequent endorsees, when they parted with the possession, authorized him to strike out such subsequent endorsements, and parted with the title; as they could not recover without the possession, — so their restoring to him the possession is presumptive evidence that they restore to him the title.

But if either of such subsequent endorsees has recovered judgment against the maker thereon, the reason ceases. Mere possession of the note no longer indicates that the party producing it is invested with a title to the judgment or the judgment debt, or that payment of the note to him will •satisfy such judgment. Something more is necessary; and until the plaintiff in such case can give, and does give, proof which furnishes to the maker a full assurance, that if he pay the note to the plaintiff, he cannot be required also to pay such judgment, the plaintiff can neither recover for the consideration of the note, nor upon any other ground.

Again, it is settled, that -when the plaintiff sues for goods sold or money lent, and it appears by way of defence that he has taken the defendant’s negotiable note therefor, he must produce such note on the trial to be cancelled or returned to the defendant, or be cannot recover for the consideration thereof, and if he do produce and cancel the note, he may recover. This is precisely what was attempted in the present case. Upon what principle does this rule proceed ? Obviously upon the principle above suggested — that, although the giving one’s own note is not payment of a debt, yet it is a suspension of the right to recover for the debt, so long as such negotiable note is outstanding, and until the plaintiff, who claims remission to his original claim, also restores the defendant to a condition of immunity from prosecution on such note by producing it to be cancelled or returned to the defendant. But such production, after it appears that it has been before transferred to a third person, and judgment recovered thereon, furnishes no such immunity. And that this is so, appears by answering another inquiry. Suppose, on such trial, the note is restored to the defendant, and afterwards an action is brought upon the outstanding judgment so recovered by the third person, would the production of the original note in the hands of the defendant be sufficient to defeat such action? Would such production be sufficient evidence that the judgment is satisfied ? Plainly not, and for the reason that the note being merged in the higher security, is as betw'een those parties mere waste paper, of no value to the judgment creditor, and therefore its loss, or his suffering it to go out of his possession, does not of itself alone show that his judgment is paid.

These views are not only consistent with the decision of this court in Gridley v. Rowland, (1 E. D. Smith’s C. P. R., 670, and Miller v. Moore, Ib., 740), but may be regarded as in affirmance of those cases. The defect in the plaintiff’s case is, that he does not show title in himself, exclusive of the title which is apparently vested in the judgment creditors, to have from the defendant the very money, to recover which, the plaintiff now claims, and that too when such judgment creditors have title as transferees of the plaintiff himself.

The respondent’s counsel further insists, that his objection to the jurisdiction of the Marine Court was well taken ; but it is not necessary to consider that question, since the judgment of non-suit or dismissal must, we think, be sustained upon the other ground.