author: Oakley, J.

text:
    Charles Potter and Charles H. Russell versus Charles Everett and George B. Reese.
    It is a general principle, that if one person pays money to another, under a mistake of fact, without any legal obligation to do so, and without the means of ascertaining the tratli; or if he be induced to pay it under false representations, he may recover back the money thus paid, in an action of assumpsit.
    The defendants, merchants in England, and the correspondents of the plaintiffs, merchants in America, received orders from the latter to purchase a quantity of goods, on their account, and pay for them by drawing bills on S. Williams, (a banker in London, with whom the plaintiffs had placed funds for that purpose,) at 60 and 90 days’ date. The defendants purchase the goods, and drew upon Williams for the amount; but made one of the bills for 5001. payable at four months. Williams failed before this bill came to maturity, having considerable funds in his hands belonging to the plaintiffs. W. H. R., an agent of the plaintiffs in England, not knowing that the bill at four months was drawn contrary to orders, but believing that the plaintiffs were bound to provide for it, (the defendants having threatened to attach the goods, and funds of the plaintiffs, in England, if it were not paid,) took up the bill without the knowledge, orders, or consent of the plaintiffs. The plaintiffs, as soon as the facts of the case came to their knowledge, protested against the conduct of the defendants, and afterwards brought an action of assumpsit to recover back the amount of the bill. Held, that they were entitled to recover.
    Assumpsit to recover back a sum of money, paid by the plaintiffs to the defendants, under an alleged mistake. The declaration was in the common form, and contained the usual counts for money paid, money had and received, &c. Pleas, the general issue, and payment, with notice of set-off.
    The cause was tried before Mr. Justice Oakley, on the 14th of April, 1829 ; and, by consent of parties, a verdict was taken for the plaintiffs, subject to the opinion of the court, upon a case to be made.
    The evidence in the case was contained, principally, in a deposition given by William Henry Russell, a witness for the plaintiffs, (taken by consent, de bene esse,) and in the correspondence between,the parties. Mr. Russell testified, that in the month of July, 1828, he left this country, as the agent of the plaintiffs, for the purpose of purchasing goods for them in England. That on the 24th of October following, Samuel Williams, who was the banker of the plaintiffs in London, and with whom they had extensive dealings, stopped his payments and became bankrupt, having then in his hands funds belonging to the plaintiffs, to an amount exceeding ¿£2500. That the money in Williams’ hands, had been deposited there by the plaintiffs, for the purpose of enabling the deponent, and other correspondents of the plaintiffs, to draw bills upon that fund, to pay for goods purchased on their account, whenever the plaintiffs should give orders t() that effect.
    That, at the time of Williams’ failure, it was well known to him, (the witness,) that several of Potter and Russell’s correspondents had drawn bills upon Williams, payable at periods subsequent to the 24tli of October;—which bills had been accepted by him, but not being due, were unpaid at that time. That he, (the witness,) believing that all the bills accepted by Williams, on account of the plaintiffs, had been regularly and properly drawn, in conformity with their orders, but without any knowledge of the fact, and without the knowledge, or orders of Potter and Russell, withdrew all such bills as had been accepted by Williams on their ostensible account, and paid the same for the honor of the plaintiffs, with their funds-
    Among the bills so drawn upon, and accepted by Williams, and paid by the witness, was a bill for £500, drawn by the defendants, bearing date the 18th of July, 1825, and payable four months after its date.
    That on the 17th of November following, before the bill for ¿£500 became due, and before the bankruptcy of Williams was known to the plaintiffs, he, (the witness,) received a letter from Potter and Russell, informing him that the defendants had overdrawn their account, to the amount of ¿£134; and that the plaintiffs also had a claim upon them for the sum of" £15, for other matters; all which the witness was directed to adjust with the defendants.

      That he, (the witness,) supposing that the bill for £500 was correctly drawn by the defendants upon Williams, on the plaintiffs’ account, and by their orders, and having no means of ascertaining the contrary, addressed the following letter to Mr. Everett, one of the defendants, as it was not known to him, at the time, that Reese, the other defendant, was connected in business with him.
    “ Manchester, 17th November, 1825.
    “ Charles Everett, Esq.
    “ Sir,—I have a letter from my friends, Messrs. Potter, Russell “ & Co., per John Wells, which came to hand this day, in which “ they say you have overdrawn your account £130, and that they “ had made a claim on you for £30, for loss on cloths sent without “ orders; of which you had agreed to allow £15, making toge- “ ther £145, and ordering me to adjust it immediately.
    “ By referring to your books, you will see that a bill, drawn by you for account of my friends, £500, falls due 21st, accepted by Samuel Williams. This I have ordered Brown, Janson & “ Co. to pay for their account, on your paying them this balance, “ £145 ; but which, if you declined, to let the bill be noted for “ non-payment. My orders are to settle this; and as I am only “ an agent for the house, I must proceed in such a manner as to “ avoid their censure.
    (Signed) Wm. H. Russell.”
    In reply to this communication, the witness received a letter from the defendant, Everett, dated on the 19th of Nov., wherein he stated the balance due the plaintiffs to be £124. 17s. 8d.; and which he offered to pay, provided the witness would also pay the bill for £500 before mentioned. Everett also threatened the witness, that if this bill were not paid, he would attach the property of the plaintiffs, in England ; and he made inquiries after such property, in London, for the purpose of attaching it.
    Under these circumstances, the witness, supposing that the plaintiffs were liable to pay said bill, and fearing that the defendants would attach their funds in England, gave orders to Brown, Janson & Co. to pay the bill for £500, whenever the defendants should pay the said sum of £124 17s. 8d. This last mentioned sum was accordingly paid by the defendants, and Brown, Janson & Co. then paid the bill for £500, out of funds belonging to the plaintifis, then in their hands.
    The witness also testified, that, at the time said bill of £500 was paid, he had no knowledge of the orders or directions under which the same was drawn by the defendants, but supposed that it was drawn in conformity with the instructions of the plaintiffs; and that, had he known the actual orders, under which said bill was drawn, as they afterwards came to his knowledge, he would not, upon any consideration, haw paid it. That he paid the bill upon his own responsibility, under a misapprehension and mistake of facts, and under an impression that the bill was drawn in conformity with the instructions of the plaintiffs ; and that the bill was paid without their knowledge or approbation. That the plaintiffs had never directly sanctioned the conduct of the witness in any way; but they had passed his accounts, when rendered, without any intention, however, of allowing such accounts to bear upon the questions arising upon the payment of said bill. That the plaintiffs had taken the earliest means in their power to regain the amount which they supposed was improperly paid, and had persevered therein, without remission.
    The witness also testified, that the defendant, Everett, had dealings with Williams upon other accounts, besides those of the plaintiffs,—and that at the time of the bankruptcy of Williams, and for ten months thereafter, Everett was indebted to Williams, to an amount considerably exceeding that of the said bill. Upon his cross-examination, he stated, that the plaintiffs had, in the hands of Williams, at the time of his failure, funds to the amount of £2700 ; and that there had been two dividends paid on his estate; one of four shillings, and the other of one shilling on the pound. Those bills, which Williams accepted, and which, the deponent paid, were not proved against his estate, but were stricken from his accounts.
    The bill for £500 was drawn to "pay for goods, shipped by the defendants to the plaintifis.

      By this witness, the defendants also proved the letters which are hereinafter introduced on their part.
    The counsel for the defendants admitted that he had received a notice from the plaintiffs, to produce, at the trial, their letters to the defendants ; but stated that they were not in his possession. The plaintiffs then introduced copies of several letters from themselves to the defendants ; the first of which was dated the 23d of March, 1823. In this letter, after giving directions to the defendants to purchase certain goods for them, the plaintiffs proceeded as follows: “ In our next, we will advise you as to the source “ of payment for these orders.”
    On the 8th of April following, the plaintiffs informed the defendants, that they had “ lodged a credit of £1500 with Mr. Samuel Williams, on account of the preceding orders, and should remit them further very shortly, and probably with some further orders.”
    The third letter was unimportant; but the fourth, which bore date the 16th of May, 1825, was in the following words : “ Geu- “ tlemen,—We have lodged a further credit of £1500 with Mr; “ Samuel Williams, which you can draw for, on account of our “orders, already given, and make your bills at 30 and 60 days”

    Yours, &c., Potter, Russell & Co.”
    In their fifth letter, the plaintiffs wrote the defendants thus— “ As our orders for pins and plaids cannot be executed, we now “say to Mr. Williams, to accept your bills for about £1000, in- “ stead of £3000. This, we presume, will be about the amount “ of the gloves,, hosiery, &c., ordered on the 23d of March last; “ and you will be pleased to advise him accordingly, as we shall “ make other .disposition of the funds.”
    The sixth letter, (dated the 26th 'of Majr, 1825,) was as follows :—“ Since our last letter, of which a duplicate is above, we “ are in receipt of Mr. Everett’s letter of the 22d of April, from “ which we infer that he will find it difficult to purchase even all “ the articles ordered on the 23d March last. In order, however, “ that you may invest to the amount of £1000, (which sum is sub- “ ject to your order with Mr. Williams, as we before advised you,) we now authorise you, in case that sum cannot be expended in the articles named in the order of the 23d of March, to send us the . . balance m more hosiery,” &c. &c„
    The last letter from the plaintiffs to the defendants, was in the following words, viz:
    New-York, 15th Dec. 1825.
    Messrs. Everett & Reese, London.
    “ Gentlemen—We received by the Manchester your letter of the “ 28th of October, and we have received also a statement of Mr. “ Williams’ account with us, in which he charges the amount of “ your bill for <£500, drawn in July, atfour months date, and payable “ the 21st of November, 1825. In drawing on this gentlemen at “ this date, you have assumed a responsibility which you should not “ have done. We do not know what arrangements Mr. Wm. H. “ Russell may have made in regard to.retiring the acceptance of “ Mr. Williams on our account, due after his failure, or whether “ provision will be made for this bill of yoürs. We can only say “ at present, that we shall hold you responsible for any loss that “ may arise in consequence of this bill’s being drawn .at this long “ date; for our instructions to you, particularly were, to make “ your bills on Mr. Williams at 30 and 60 days, and you will so per- “ ceive, on referring to our letter of the 16th of May last. Had “ you followed our instructions, your bill would have become due “ long before Mr. Williams’ failure,, and have been paid. Any “ loss, therefore, arising from this deviation of our orders, we shall “ claim'on you for. (Signed) Potter, Russell & Co.”
    P. S. “ We wish a statement of acc’t current, as by our books “ there appears a balance of more than £100 overdrawn.”
    To the reading of this last letter, the counsel for the defendants Objected ; but the presiding Judge permitted it to be read, for the purpose of showing that the plaintiffs had not acquiesced in the accounts of the defendants, relative to the bill for £500, but had given notice of their objections as soon as the facts were known.
    The plaintiffs then proved the correctness of the copies of their letters, and that the originals were all forwarded at or about the times of their dates, by the regular course of conveyance. One of their clerks also testified, that the first intimation obtained by the plaintiffs, as to the length of time, at which the bill for ¿£500 was drawn, was derived from an abstract of the accounts of Williams, received about the beginning of December, 1825, at which time, also, the news of his failure reached New-Yorlc,
    The defendants, on their part, introduced a letter from the plaintiffs to the defendant, Charles Everett, bearing date the 15th of July, 1825, in the following words :—“ We b.eg leave to intro- “ duce to your acquaintance the bearer, Mr. W. H. Russell, (bro- “ ther of our C. H. R.,) who now visits England on commercial “ pursuits, and to attend particularly to the business of this house, “ and as our authorised agent. We shall feel particularly obliged “ by your rendering him such assistance, as he may need in his “ business in your city, &c.-
    (Signed) Potter, Russell & Co.”
    The defendants also introduced the original letter from William H. Russell, to them, dated November 19tb, 1825, which hasjbeen already set forth in his deposition, together with another letter from him, under date of November 21st, in the following terms, viz :—“ I have requested Messrs. Brown, Janson & Co. to receive “ from you the balance of ¿£124.17$. 8 d., if not already done, and “ settle the bill of ¿£500. (Signed) Wm. H. Russell.”
    The defendants also read in evidence a letter from C. Everett to W. H. Russell, bearing date the 19th of November, wherein, after recapitulating the facts of the case, he remarks that the plaintiffs’ order for hosieiy and gloves, bearing date the 31st of May, was received by the defendants on the 28th of June, and that the bill of ¿£500 was drawn on account of that order. The letter then concluded with the following words:—“ I think pro- “ per to state these facts, although I cannot but consider the terms “ in which the demand is made, as very extraordinary, considering, “ that I have been for years in advance to your house, and re- “ peatedly obliged to wait for funds, because Mr. Williams would “ not accept. The old account with P. & R. remained unsettled “ until their unjust demands for losses and short measure were “ arranged. The balance due them now, is - - “ The balance, if the bill for =£500 is paid, will be £45.10
    “on new acc’t, - - -- -- -- -- ' =£12417 8 79.7 8

      “ This I am ready to pay, if the bill for =£500 is paid on the “ 21st. But it cannot be expected that I shpuld pay, before I am “ certain that the ¿£500, accepted by a party that has failed, is “ paid.
    “ If the bill for ¿£500 is not paid, I shall, in this case, think myself “justified in attaching the property of Messrs. Potter, Russell fy Co., “ wherever it is to be found.

    “ I shall pay the bill for ¿£500 on the 21st, and present to “ Messrs. Brown, Janson & Co., and I have no doubt but they “ will perform their promise. (Signed) Charles Everett.”
    “Enclosed are the accounts current of C. Everett withPotter “ & Russell, and P. R. & Co., Everett & Reese with Potter, Rus- “ sell & Co.”
    The defendants’ counsel also introduced copies of the accounts referred to in the last letter, in one of which the bill for =£500 was charged under date of Nov. 21st, 1825, and the money received of Brown, Janson & Co. (£375.6s. Ad.,) credited under date of November 23d. Jill other bills, prior to that in question, were drawn at four months. These papers closed the evidence on the part of the defendants. The plaintiffs then called one of their clerks,, and proved by him that the defendants never were in advance for the plaintiffs, and that the latter never gave the former any or- ' ders for goods, without furnishing the means of payment at the same time. It was also proved that the defendants, at the time the bill for £500 was drawn, were merchants in company, under the name of Everett & Reese, and the plaintiffs were merchants in company, under the name of Potter, Russell & Co.
    The facts of the case being ascertained, the presiding Judge observed, that as the plaintiffs’ right of recovery depended upon questions of law, he would recommend that a verdict should be rendered for them, subject to the opinion of the court upon a case to be made, either party having leave to turn the same into a bill of exceptions.
    A verdict was accordingly taken in favour of the plaintiffs, for the sum of $2,500, it being understood, that if the judgment of the court should be for the plaintiffs, that the amount of their recovery should be =£375.6$. 4cl., (being the amount of the bill for $£500, after deducting the dividends received from Williams’ estate,) together with interest and exchange, if the court should deem them entitled to it.
    If the court, however, should be of opinion that the action was not well founded, then a judgment of non-suit was to be entered.
    The cause was now argued by Mr. Slosson for the defendants, and by J. Prescott Hall and Mr. Anthon for the plaintiffs.
    For the defendants it was contended,
    I. That no action would lie against the defendants on the ground of a failure of consideration, because the plaintiffs having received the goods for which the bill was drawn, received value to that amount, of course. That the only ground upon which the plaintiffs could pretend to rest their claim, was the supposed deviation of orders on the part of the defendants, in drawing the bill at four months instead of sixty days. This demand was founded strictly in misfeasance, and the action for money had, or money paid, would not lie. The defendants ought to have been apprised of the nature of the claim, and the action, therefore, should have been special. [Pal. on Agen. ch. 1, p. 8, 68.]
    II. The settlement made by the agent was a full discharge to the defendants of all liability. The defendants paid to the plaintiffs the balance of their account, and the plaintiffs took up the draft on Williams with their own funds. This was an end of the matter,—Wm. Henry Russell being the general agent, of the plaintiffs, and having full power to make the arrangement. [1 Peters’ R. 290.]

      III. As Everett and Reese were indebted to Williams to a greater amount than that of the bill, they would have had a right, in case it had not been taken up by the plaintiffs, to set off the amount of the bill against his claims. By this means they would not have been prejudiced by the bill, and might have claimed the value of the goods of the plaintiffs, to the extent of their present claim.
    IV. If the agent was ignorant of the original instructions given by the plaintiffs to the defendants, the latter did not know him to be so; and the letter of introduction recognized W. H. Russell as the unlimited agent of the plaintiffs, in their general business in England. The defendants, therefore, had a right to presume, that, as he acted with full powers, he acted with full knowledge also.
    V. The payment of the bill was voluntary, and no action lies to recover back the amount thus paid, even if the defendants had violated their instructions. But the evidence does not support such a position: the defendants were not restricted to any particular time of drawing, but had a right to exercise their discretion on the subject.
    For a part of the fund in Williams’ hands, there was an unlimited power to draw; and that part was not exhausted by the bill of £500. The extension of the credit was for the benefit of the plaintiffs; and as all the drafts, prior to the one in question, were at four months, the inference is, that the plaintiffs merely required their bills to be at less than four months, in case a credit for that time could not be obtained. But the whole scope of the case shows, not only an adherence to orders on the part of the defendants, but an acquiescence in their acts on the part of the plaintiffs.
    VI. The difference of exchange, at all events, is not to be allowed, and cannot be recovered.
    For the plaintiffs, it was urged,

      I. That the order given to the defendants, by the plaintiffs, for the purchase of goods, was coupled with a direction to pay for them in a particular manner, out of a specific fund provided by the plaintiffs for that purpose. The defendants, by accepting the order to'purchase, were bound to pay for the goods in the manmer pointed out hy the plaintiffs, and were bound to draw bills upon Williams for that purpose as directed. They could not accept one part of the order, reject the other, and thus leave the fund at the risk of the plaintiffs, without some satisfactory reason for so doing. [4 J. R. 103, 104. 3 East. 147. 1 Com. on Con. 246. 230. 238. Liv. on Agen. 17. 2 Kent’s Com. 484. 13 John. R. 332.]
    II. If the defendants were bound to draw bills upon Williams, to pay for the goods, then they were bound to draw them, in all respects, as directed by the plaintiffs. They were directed to draw at 30 and 60 days: they drew at four months, and were, therefore, answerable for all the consequences of disobeying and exceeding their instructions. Those consequences have been the loss of the money; and that loss must be borne by the defendants, who are the culpable party. [Liv. on Agen. 2, 3. 25. 1 Com. on Con. p. 6. 236-240. 2 J. R. 45. 3 Term. R. 757. 1 Esp. R. 111. 3 John. Cas. 36. Rundle v. Pollock.]
    III. The plaintiffs were not liable upon the bill for ¿£500, drawn by the defendants upon Williams, and were not bound to take it up. Their agent, under a mistake and misapprehension of facts, and without a full knowledge of the circumstances of the case, but in good faith to his principals, and without negligence, advanced their money to take up the bill. -It may be recovered by the plaintiffs of the defendants in this action. [Archer v. Bank of England, Doug. 637. Garland v. Salem Bank, 9 Mass. R. 408. Martin v. Morgan, 3 Moore’s Rep. 635. Clark v. Penney, 6 Cow. R. 301. Waite v. Leggett, 8 Ib. 195. Robinson v. Anderson, Peake’s Cas. 94. Cripps v. Reade, 6 T. R. 606. Com. on Con. Vol. 2. p. 35. 2 Bl. Rep. 825. 1 Salk. 22.]
   Oakley, J.

The plaintiffs, on the 23d of March, 1825, remitted to the defendants, merchants, in England, orders for the purchase of a quantity of goods, and informed them that, in their next letter, they would advise them as to the source of payment for the said orders.

On the 8th April, 1825, the plaintiffs wrote the defendants, that they had lodged a credit of ¿£1500 with S. Williams, a banker in Loudon, on account of their preceding orders. On the 16th May, 1825, they wrote the plaintiffs, that they had lodged a further credit with Williams, of ¿£1500, which they might draw for, on account of the orders already given, and directed the defendants to draw their bills at 30 and 60 days. On the 23d of May, 1825, the plaintiffs wrote to the defendants, that they had given directions to Williams, to accept their orders for about ¿£1000, instead of the ¿£3000, and on the 31st May, 1825, they also wrote to the defendants, to make purchases for them to the amount of ¿£1000, and that, that sum was in the hands of Williams, subject to their order, as they had been before advised.

After the receipt of these letters, and on or about the 18th of July, 1825, the defendants made certain purchases of goods for the plaintiffs, and on that day drew a bill, on the said Williams» for the sum of ¿£500, payable at four months, which was accepted by him. Before this bill became due, and on the 24th of October, 1825, Williams became a bankrupt. The agent of the plaintiffs, in England, being ignorant of the orders given by them to the defendants, as to the drawing of bills on Williams, and supposing that the bill in question, had been correctly drawn by the defendants, and the defendants threatening to attach the property of the plaintiffs, hr England, for the amount of the bill, agreed to pay the said bill, and accordingly did pay it to the defendants, after deducting a balance of account due from them to the plaintiffs. This action is brought to recover back the money, thus paid by the agent of the plaintiffs. The declaration is in assumpsit, and contains the common money counts.

The ground of the plaintiffs’ claim is, that the defendants drew the bill in question in violation of the instructions given them, in consequence of which, the funds placed in the hands of Williams, for the purpose of meeting the drafts of the defendants, were lost by his bankruptcy :—that their agent paid the bill in ignorance of the fact, that the defendants had violated the orders given them, and that the defendants thus receiving the money without right, and by mistake of the plaintiffs’ agent, cannot retain it.

It is well settled as a general principle, that where a man pays money without any legal obligation to do so, under a mistake of fact, and without the means of ascertaining the truth, or if he be induced to pay it under false representations, he may recover it back. (Garland v. The Salem Bank, 9 Mass. R. 389. Martin v. Morgan, 1 Brod. & Bing. 289.)

In the case of Martin v. Morgan, the action was for money had and received. The defendants obtained a check from the firm of B-& Co. on the plaintiffs, which was post dated. Having ascertained that B-& Co. were insolvent, the defendant presented the check to the plaintiff. The plaintiff paid it, having no funds of the drawer, but expecting to receive them in the course of the day. The plaintiff was ignorant of the insolvency of the drawer, and of the fact that the check had been post dated. The court held that the plaintiff had a right to recover the money thus paid, on the ground that the parties did not deal on equal terms, and that the defendants concealed the circumstances, which, if disclosed, would have prevented the plaintiff from paying the money, and that the plaintiff had thus paid it, without legal obligation, and in ignorance of the true state of facts, which were known to the other party.

The principle of that case, seems to me to apply fully to the one now before us. The defendants here, accepting and actingunder the order for the goods, and receiving special directions as to the mode of payment for the same, were bound to adhere strictly to their instructions. Instead of drawing on the fund provided by the plaintiffs, at 30 or 60 days, as directed, they thought proper to give a larger credit to Williams, by drawing at 4 months. In consequence of this departure from their instructions, the fund in the hands of Williams was lost. Under these circumstances, the plaintiffs were not bound to take up the bill drawn by the defendants, or to indemnify them for having drawn it. It was drawn on their own responsibility, and at their own risk. Having taken up the bill, and knowing they had drawn it without authority, they induced the agent of the plaintiffs to pay it, by concealing from him the fact, that it had been drawn contrary to their orders, and by threatening to attach their property. It is, therefore, clearly a case in which the parties did not deal on equal terms. The agent of the plaintiffs was kept in ignorance of a fact, which, if he had known it, (as he expressly testifies,) would have prevented his paying the bill. The defendants having obtained the money under such circumstances, and from a party under no legal obligation to pay it. have no right to retain it. The agent, in making payment of the bill, acted without the knowledge, or instructions of the plaintiffs, and the plaintiffs, themselves, were ignorant of the fact, that the bill had been drawn contrary to their orders, until after it was paid. If the payment had been made, under the circumstances, by the plaintiffs themselves, their right to recover the money would have been equally clear; and there must be judgment for the plaintiffs.

Judgment for the plaintiffs.

[David P. Hall, Att’y for the plffs. W. Slosson, Att'y for the defts.]


source: Caselaw Access Project

author: Per Curiam.

license: Public Domain

text:
    Samuel Gould, John D. Dyer and Thomas D. Dyer versus John E. Armstrong.
    Although a promise to pay a sum of money, founded upon the forbearing to prosecute a suit, which could not be maintained, is void, for want of consideration; yet, the defendant, in order to avail himself of such a defence, must show conclusively, that the suit, which was the foundation of the promise, could not have been prosecuted to effect.
    The plaintiffs, as the holders of certain notes or memorandums, payable to bearer, brought an action of assumpsit, to recover their amount. At the trial, the defendant offered to show, that the notes wore given for a consideration, made unlawful by an act of congress ; but he offered no evidence to prove that the plaintiffs were acquainted with the consideration for which the notes were given. Held, that as the act of congress did not make the notes void, the evidence offered by the defendant, to defeat the recovery, was inadmissible.
    Assumpsit to recover of the defendant the sum of 100 dollars. The declaration contained separate counts upon eight notes or memorandums, of the following tenor: “If James Harrison shall “ go on board such vessel as I shall provide, I promise to pay to “ him, security, or bearer, 15 dollars on receipt of the same, being “ delivered on board. New-York, September 9 th, 1828.
    (Signed) John E. Armstrong.”
    These eight notes were given by the defendant to eight different individuals, four of them being for the sum of fifteen dollars each, and the others for ten dollars each.
    The declaration also contained a count, setting forth that the plaintiffs had commenced an action against the defendant in the Marine Court, for the recovery of the sum of $ 100, due from the defendanttothe plaintiffs, which was pending at the time of the making of the promises therein set forth. That the defendant, afterwards, on the 1st day of November, 1828, in consideration that the plaintiffs would “ cease to prosecute the said action, and stay all further "proceedings therein, undertook and promised the plaintiffs, to pay them the said sum within one week, next following.” It then averred that the plaintiffs did cease to prosecute, &c., and that, although the stipulated time had elapsed, the defendant had not paid the said sum, nor any part thereof, &c. To these counts, there were also added counts for work and labor, goods sold, &c.
    To the first eight counts, the defendant filed a general demurrer, and to the remaining three counts, pleaded the general issue. The cfofeadifehereupon, entered a nolle prosequi upon the counts demurred to, and joined issue upon the others.
    At the trial, the plaintiffs proved, that they commenced a suit in the Marine Court, against the defendant, on the notes or memoranda above specified. That the defendant, while the suit was in progress, called on the attorney of the plaintiffs, who showed him the notes. The defendant admitted that they were signed by him, and promised, that if the plaintiffs would cease to prosecute said suit, he would pay them the 100 dollars in the course of the ensuing week. In consequence of this promise, the suit, in the Marine Court, was not further prosecuted.
    The counsel for the plaintiffs having rested his cause upon this proof, the defendant moved for a non-suit; but the Chief Justice, before whom the cause was tried, overruled the motion. The defendant then offered to prove, that the notes were given by him, in consideration that the persons named in them, (being American citizens,) should proceed to sea, as seamen, on board an armed vessel belonging to the government of Buenos Ayres: which government was, at the time the notes were given, a belligerent nation, at war with the emperor of Brazils. This evidence being objected to, a verdict was taken for the plaintiffs, subject to the opinion of the court, as to its admissibility, and upon the whole case, either party having leave to turn the same into a special verdict, or bill of exceptions.

      Mr. Cutting, for the defendant, now contended,
    I. That the plaintiffs ought to have been non-suited at the trial, there being no consideration to support the promise, contained in the special count, upon which the issue was joined. That promise was founded upon an agreement on the part of the plaintiffs, to surcease a suit, in which no recovery could have been had. The notes or memoranda were not negotiable, and were dependent on contingencies: bearer of the note was to go on board ; secondly, a vessel was to be procured; and, thirdly, the bearer was himself to be delivered on board. The suit in the Marine Court could not have been sustained, and the discontinuance of it, therefore, did not form any consideration for the defendant’s promise. [4 East. 463.]
    II. The evidence offered by the defendant, to show the illegality of the transaction, ought to have been admitted. It was material to the issue, and the facts, if proved, would have defeated the action. The very act of engaging the seamen was illegal. They themselves could not have maintained a suit on their notes, and the plaintiffs have no rights which the law can recognize. [Laws of the U. S. 20th April, 1818, Sec. 2.—4 Wheat. R. 298, 311.—9 Cranch. R. 365. 6 Wheat. 152. 162. 14 John R. 273. Gow. on Part. 168.]

      Mr. Geo. Sullivan, contra, for the plaintiffs, contended,
    that as the notes did not> upon their face, show or import any illegality, the holders were to be presumed innocent of their origin, and to have taken them bona fide, for a valuable consideration. If the defendants had intended to avail themselves of this ground of defence, they should have offered to show that the plaintiffs were acquainted with the purposes, objects, and considerations for which the notes were given. Not having done so, the fa’cts which the defendant offered to show, do not amount to a defence, if proved. The acts of Congress do not make the notes void, although they may punish the offenders: in the hands of an innocent holder, they would be perfectly valid.
    But the consideration stated in the special count, was proved at the trial, and it is entirely sufficient to sustain the action. The defendant had the power of judging of his own rights, and if he chose to make the promise, and abandon his defence in the court below, he had a right to do so. But as he has by that means interfered with the plaintiffs’ rights, he is bound by his promise.
   Per Curiam.

The motion for a non-suit, in this case, was properly overruled at the trial. It was made before the consideration, for which the notes or memoranda were given, was proved, and their illegality from that source, if they were in fact illegal, could not be known until it was proved by the defendant.

But it is contended, that the .plaintiffs are not entitled to recover at all, since the facts are disclosed,—because it is now shown, that the instes were given for an illegal consideration; or that there should be a new trial, at all events, since the defendant offered to prove the facts in relation to the consideration, but was refused permission to do so, by the presiding Judge.

The plaintiffs undoubtedly had a cause of action upon the notes which they held ; not in their own names, perhaps,—but, as the bearers or holders of the notes, they could sustain an action in some form or other, to recover their amount.

From the action brought by the plaintiffs, in the Marine Court, the defendant was protected by the agreement. "'"A promise to forbear from prosecuting a suit which could not be maintained, would, of course, be without consideration, and so not bindings But there is nothing to show that the suit in the Marine Court could not have been maintained. The plaintiffs, for all that appears, might have proved an express promise to themselves, which might have sustained their action to the fullest extent. At all events, the contrary is not proved; the defendant has not shown that the action in the Marine Court could not have been maintained, and, of course, there was a sufficient consideration to support his promise of payment, founded upon the forbearance to prosecute the suit in the Marine Court.

As to the illegality of the consideration, founded upon the alleged violation of the acts of congress, there is nothing shown which can connect the plaintiffs with those transactions. They are, apparently, innocent and bona fide holders of the notes, for a valuable consideration, and without notice. If this be so, the illegality of the original transaction, cannot affect the notes in their hands. As the acts of congress do not make the notes void, no defence, of this kind, can protect the defendant against the claims of an innocent and bona fide holder. If the defendant had proved that the plaintiffs were aware of the consideration upon which the notes were given, and had been warned not to trust to them, then defence, such as it is, might properly have been interposed. But without expressing any opinion upon the question, as to the legality or illegality of the notes, we are of opinion, that the evidence offered by the defendant, at the trial, was inadmissible, and that there must be judgment for the plaintiffs upon the case.

Judgment for the plaintiffs.

[F. B. Cutting, Atty. for the deft.]


author: Oakley J.

text:
    Michael Sullivan versus Duncan P. Campbell, James Renwick, Phillip Rhinelander, and others.
    The plaintiff, with one M’D., entered into an agreement under seal, with the N. Y. Hydraulic Manufacturing and Bridge Co., (a private association under that name,) to construct two bulk-heads, connected with a Canal, which the Company was about to make. This agreement was executed by the defendant, Campbell, as President of that Company, and by Rhinelander, as Treasurer; and was declared to have been entered into “ agreeably to their articles of associa- “ tion.” In addition to the work which was done, under the contract, the plaintiff by the direction of Campbell and Rhinelander, performed other labor in excavating the Cand, for which he brought an action of assumpsit against all the associates. The Company was formed under certain articles of association, which provided that persons having dealings with the Company, should not have recourse for their debts against the separate property of its members, but should be considered as giving credit to their joint funds solely; and that the trustees or agents of the Company should have no authority to bind it by any contract, unless it contained a restriction to the effect aforesaid.
    The defendants insisted, that the reference in the agreement to the aritcles of association, was sufficient to charge the plaintiff with notice of their articles, and that he could not, under any circumstances, recover a judgment against the defendants jointly, as they were not partners, and as Campbell and Rhinelander had no power to bind them.
    Held, that the plaintiff having performed labor for the benefit of the associates* might maintain an action upon a quantum meruit, either against the agents, as having tirade themselves personally liable, or against the individuals composing the association ; and the plaintiff had judgment against all the defendants.
    Assumpsit for work and labor performed for the defendants, in digging a certain Canal for them.
    The defendants had associated themselves together by certain articles of agreement, under the name of the “ New-York Hydraulic, Manufacturing and Bridge Company,” for the purpose of establishing and carrying on certain works at or near Kings-bridge. By the 13th section of the articles of association, it was, among other things stipulated, that “ the stock and property” of the Company should alone be responsible for their “ debts and “ engagements;” and that “ no person who should deal with the “ Company, or to whom they might become in any wise indebted, “ should, under any pretence whatever, have recourse against “ the separate property of any of the members of said Company, “ or against their persons, further than might be necessary to se- “ cure the faithful application of their funds to the purposes “ for which they were liable.” And it was further provided, that " any person accepting any bill, note, check, or other con- “ tract of the Company, signed by the President, and counter- “ signed by the Treasurer, or dealing with the Company in any other “ manner whatever, should be considered as thereby giving credit “ to their joint stock or property, and as disavowing the right to “ have recourse to the person or property of any member. And " all suits, to be brought against the Company, were to be brought “ against the President for the time being: it being expressly “ understood, that all persons dealing with the Company agreed “ to these terms, and were bound by them.”
    By the 18th article, it was provided, that “ for the full and “ perfect information of all persons, who might have dealings “ with the Company, every instrument or contract by which the “ Company might be charged or held liable, should declare plainly “ and specially,” “ that payment should be made out of the trust- “ estate of the Company, and not otherwise,—in such way as that “ all persons, having dealings with the Company, might be made “ to consent, that they would look for payment to the said trust- “ estate specially, and not to the individual property of the stock- “ holders.” And it was also, by the same article, further provided, “ that the directors and trustees should have no authority to “ make any contract or engagement which should bind or render “ the individual property of any stockholder in any way liable ; “ and no contract or engagement could be legally made with the “ directors or trustees, in the name of the Company, unless it con- “ tained a limitation, setting forth that payment was to be made “ in the manner before specified.”

      Of the Company so formed, the defendant, Campbell, was President, and Rhinelander, Treasurer. The plaintiff, together with one MfDermott, had entered into certain articles of agreement, under seal, with the Company, (executed by their said President and Treasurer,) “ to build, construct, and complete two abutments, “ or bulk-heads, at Kingsbridge, according to a certain survey or “ plan thereof, made by the defendant Renwick.” This contract recited that it was made “ agreeably to the articles of association,” and purported to be between “ The New-York Hydraulic Manu- “ facturing and Bridge Company,” of the one part, and the plaintiff and M'Dermott of the other part.
    The defendants had severally admitted that they were interested in the stock of this Company ; and Campbell and Rhinelander had also admitted that the plaintiff had been employed by them to make a Canal for the association ; and that after he had made some progress in his work, he was stopped by them, for the want of funds belonging to the Company. For the work thus performed upon the canal, this action was brought by the plaintiff.
    The cause was tried before Mr. Justice Oakley. At the trial, the plaintiff proved by parol, that the work performed upon the canal, had no connexion with the agreement as to the bulk-heads; and he also introduced evidence to support his bill of particulars.
    The defendants insisted, I. That the work was, in fact, executed under the written contract. IL That Campbell and Rhine-lander had no power to'bind their associates by any parol contract, as they were not partners. III. That the plaintiff had notice of the articles of association, having himself made reference to them in his written contract.
    As to this last point, there was no evidence, (except that furnished by the written contract,) to show that.the plaintiff had ever seen the articles of association, or was aware of their contents. On the contrary, M‘Dermott, who was examined as a witness, testified that he was wholly ignorant of the articles, and that they were not exhibited to him at the time the written contract was made.

      Upon this testimony, as the defence rested chiefly on questions of law, the plaintiff, by consent of parties, took a verdict for six hundred and fifty dollars, subject to the opinion of the court upon a case; and if the court should be of opinion that the action was well founded, then the items of the account were to be submitted to referees. If, however, the opinion of the court should be adverse to the plaintiff’s claim, in its present form, then a judgment of non-suit was to be entered.
    The cause was now argued by Mr. Thomas L. Wells, for the plaintiff, and by Mr. Scott and Mr. Anthon, for the defendants.
    For the plaintiff it was contended, I. That the evidence proved that it was not the intention of the parties, that the work upon the canal should form a part of the written agreement
    II. That the members of the Company were to be considered as partners, and as such had received the benefit of the plaintiff’s labor. That the articles of association were binding upon its members alone, and could not bind strangers, unless they had full notice of the articles of association,, and manifested a consent to be bound by them.
    III. That the defendants were bound to give full information to persons dealing with them, as to the extent of their responsibility, and to set it forth in their contracts in such way, that the contracting parties might, without misapprehension, assent to their terms.
    • The defendants, on the other hand, insisted, I. that they were not liable as partners, there being no agreement between them to share jointly in the profits or loss of their association. No one of the associates had the power of binding the others, or using his credit, or holding out a joint liability as the foundation of credit They were mere share-holders in a public Company, and as such could not be made personally liable for its debts.
    II. That the contract, under seal, between the plaintiffs and the defendants, remained in force and unrescinded at the time the work was done ; consequently no recovery could be had under the deduration in this cause.
    III. The contract was made by the New-York Hydraulic, Manufac taring and Bridge Company, acting according to their articles of association. The action, therefore, should have been brought against the President for the time being, the'plaintiff having had notice of the existence of the articles of association. [18 J. R. 363.]
    IV. M’Dermott should have been joined as plaintiff, the contract, under seal, having been originally made-w.itli him as well as Sullivan.
   Oakley J.

The plaintiff, with one M‘Dermott, entered into an article of agreement with the New-York Hydraulic, Manufacturing and Bridge Company, whereby they agreed to build, for the Company, two abutments, or bulk-heads, at Kingsbridge, connected with the canal, which the Company was about to make. This Company was a private association, under the above style, and the defendants were members of it. The contract with the plaintiff and McDermott was executed by Campbell, as President, and Rhinelander, as Treasurer, and is declared to have been entered into agreeably to the articles of association of the said Company. In addition to the work done under the contract, the plaintiff, by the direction of Campbell and Rhinelander, performed other labor in excavating the canal, and this action is brought to recover compensation for such labor.

The Company was formed under certain articles' of association. The 13th section of these articles provides, that no person dealing with the Company, shall have recourse, for any debt or demand, against the separate property of the members of the association, but shall be deemed to have given credit solely to the joint funds of the Company; and that all suits against the Company should be brought against the President for the time being.The 18th section provides, that for the information of all persons dealing with the Company, any contract made by them, shall distinctly declare, that payment is to be made out of the joint funds of the Company, and not otherwise ; and it was also expressly provided by the said section, that the trustees or agents of the Company should have no authority to bind it, by any contract, unless it contained a limitation or restriction that payment was to be made in the manner before specified. It is contended by the defendants, that by the reference in the agreement, entered into by the plaintiff and McDermott, to the articles of association, the plaintiff is charged with notice of the nature of these articles, and must be considered, in his subsequent contract, for excavating the canal, as acting in reference to them, and as waiving any right to resort for payment to the members of the Company, as individuals. This position is not well founded. The contract in question was by parol, and being attended by no restriction as to the right of the plaintiff to demand payment, is clearly not binding on the Company as such, nor could it be enforced against the joint stock of the Company, by a suit against, their.President, as directed by the articles of association. The President and Treasurer of the Company, were agents, acting under special and limited powers, as it respected their right to bind the Company, and were bound to conform strictly to them. Not having done so, their act is not binding on their principals.

The plaintiff, however, having performed labor for the benefit of the association, has a clear right to maintain his action, not upon the contract itself, but upon a quantum meruit, either against the agents of the Company, as having rendered themselves personally responsible, or against the individuals, composing the association, on the ground that they have received the benefit of the plaintiff’s labor. I think it may be maintained against the latter. The plaintiff must be considered as performing his labor without any reference to the nature of the association, and in pursuance of the directions of agents, whose limited or special authority was not known to him. Under such circumstances, the defendants, as members of the association, have reaped the benefit of the plaintiff’s labor, and are bound to pay for it.

There must, therefore, be judgment for the plaintiff, subject to a reference to ascertain the value of the labor performed on canal, as distinguished from that doiie, under the special contract, for the building of the bulk-heads.

Judgment for the plaintiff.

[Wells and Van Wagenen, Attys, for the plff. J. Hildreth, Atty. for the defts.]