Corbit v. President of the Bank of Smyrna

I have been unable to take the same view of the law applicable to this case, that the other members of this court have taken, for the following reasons —

This is an action of assumpsit for money had and received: an action which has been well compared to a suit in equity. It is founded on the principle that what a man cannot in equity and good conscience retain, he shall be compelled to refund: and consequently, where the plaintiff has no claim in equity and conscience to the funds in the hands of the defendant, he shall not be permitted to recover.

As to the facts of this case, the parties are agreed. It is admitted, that they were equally innocent of any knowledge of the failure of the Bank of Maryland, at the time the notes were deposited with the defendant. The question is, which of these innocent parties shall sustain the loss which has occurred.

"Upon principles of justice and honesty," in the language of chief justice Savage, in the case of Lightbody vs. The Ontario Bank, "it would seem that whoever parts with that which is valuable should receive value for it; and he who receives value should give value in return." At the precise time these notes were deposited with the defendant, the bank which issued them had failed; and they had ceased in fact and in law, to be any part of the circulating medium of the country. The conventional regulations of the commercial world only sustained them, as they do all other bank notes, so long as they could sustain themselves. The moment the bank failed, its notes, which were hut promises to pay, became valueless as a currency, from the inability of the bank to redeem its promises. For all practical purposes, as a circulating medium, they are now little better than so many spurious or forged bills. The time, therefore, of the failure of the bank, is the time which, upon principles of the soundest policy, fixes the character of its notes, and ascertains upon whom the loss consequent upon its failure shall fall. It is a period which can be readily ascertained, and which closes the door to a multitude of frauds. A distinction has been taken in the argument of this cause founded upon some adjudged cases, between a payment made on account of a pre-existing debt, and one made upon a present and cotemporaneous transaction. This, however, is a distinction without a difference. The principle has nothing to sustain it either in justice or sound policy; and, I apprehend, it is not to be relied on as the settled doctrine of the courts.

So far as I have been able to examine and understand the authorities cited in the argument of this cause, I think the most, if not the whole of them, may be reconciled on this point, upon the ground, that the agreement of the parties at the time of receiving the paper, or notes, whether on account of pre-existing debts, or for goods sold at the time, precluded them from looking beyond their contract. As if a party receiving promissory notes in payment of goods sold at the time, expressly agrees to accept them in satisfaction of those goods, he is bound by his agreement, although the notes may turn out to be valueless. It is admitted on all sides, that a payment of such notes, on account of a pre-existing debt, would not discharge that debt till the notes themselves have been paid. And yet it will not be denied, that if the creditor expressly undertook to accept those notes in satisfaction, and to run all risks, he could not afterwards escape from his agreement. In both classes of cases the agreement of the parties gives character to the transaction; and, in the absence of any express agreement, the law will not create an agreement by implication. (a.) In the absence of an express agreement on the subject, the transfer or payment of such notes could never operate as a bona fide consideration for value received; and it would be iniquitous for the party to retain a valuable commodity when he had given no value in exchange.

The case of Owenson vs. Morse, 7 Term Rep. 60, is full to this point. The principle there established in this: "If the seller of goods takes notes or bills for them, without agreeing to run the risk of the notes being paid, and the notes turn out to be worth nothing, this will not be considered as payment.". The whole court, who delivered their opinions seriatim, recognized and relied upon this sound and equitable principle. Lord Holt, in the case ofThe Bank of England vs. Newman, 1 Lord Raymond Rep. 442, (which has been, as to this point, mainly relied on by counsel for the plaintiff,) appears to have acted on this principle. He considered that transaction as a plain sale of the bill for a discount, and that the seller, from the nature of

(a.) Implied promises arise from this general intendment of law, "that every man hath engaged to perform what his duty or justice requires." 3 Blk. Com. 160, (Archb. ed.) Promises "will be implied under the following circumstances, 1st, where the consideration consists in the plaintiff's having been compelled to do that to which the defendant was legally compellable; and 2dly, where the defendant has adopted and enjoyed the benefit of the consideration." Smith's selection of leading cases, Law Lib. No. 55,p. 55, in note to Lampleigh vs. Brathwait. It would be difficult to apply these principles in favor of the plaintiff in this cause. the case, did not become a new security. But this case of The Bankof England vs. Newman has, I think, been too much relied on, and does not warrant the inferences and principles which appear, by some subsequent decisions, and by the counsel in this cause, to have been deducted from it. As this is the leading case on this subject, it requires examination to ascertain its precise signification, and the true point which was determined by it. The report of that case states, that "Bellamy signed a bill payable to Newman or bearer. Newman came to the Bank of England and asked how much money they would give him for this bill. They took the bill, and gave him so much money, allowing so much for discount. After that the bank received £10,000 of Bellamy, and afterwards they send a man to demand the money due upon this bill of Bellamy; and a demand was made of Bellamy's servant, who did not pay the money. And afterwards Bellamy fails, and the bank sue Newman for the money which he had received of them for this bill, as for so much money lent by them." Upon the general issue pleaded, the verdict was for the plaintiff against Lord Holt's opinion. And a new trial was granted, "because this was a plain sale of the bill." "For, per Holt, chief justice, if a man has a bill payable to him or bearer, and he delivers it over for money received, without indorsement of it, this is a plain sale of the bill; and he who sells it does not become a new security. But if he had indorsed it, he had become a new security, and then he had been liable upon the indorsement." But upon a new trial the jury found for the plaintiffs. Here was a plain sale by Newman to the Bank of England of a bill drawn by Bellamy, which bill at thetime of its sale was good, on which £10,000 were received afterward, but which subsequently became valueless by the failure of Bellamy. The question was not before the court as to what would have been Newman's responsibility if he had negotiated this bill subsequent to Bellamy's failure, of which failure the bank was ignorant at the time. Upon a fair construction of that case, we may safely deduce this general principle, that at the time of the negotiation or sale of the bill, the vendor undertook to warrant the present value thereof, but was not to be considered as becoming in any way responsible for any subsequent failure of the drawer of the bill. This principle is sustained by other decisions of Lord Holt; as in the case ofTassell Lee vs. Lewis, 1 Lord Raymond'sRep. 743-4, and of Ward vs. Evans, 2 ib. 928.

Such being the general principle of the case of The Bank of England vs. Newman, it would appear that any decision which has carried that case beyond its legitimate determination, is not to be relied on as an authority.

But the case of a deposite of money in a bank by one of its customers cannot, in my judgment, without the most forced and violent construction, and the most strained legal fiction, be considered as a sale of the money so deposited by the depositor. The very term itself, a deposite, contradicts any such conclusion. In point of fact, it is a loan made to the bank, to be repaid at the pleasure of the creditor. And the depositor is the creditor, and the bank the debtor in that transaction. A deposite of forged bills or notes, unless under peculiar circumstances, as in the case of the United States Bank vs. The Bank of Georgia, would not be such a loan as could be recovered by the depositor. Nor would a deposite of base, adulterated coin, create a liability upon the bank to pay, in exchange, in a sound currency.

I am aware that many of the authorities speak of payments made upon pre-existing debts, and of payments made for goods sold at the time; whence one might infer, that they recognized an essential distinction, in principle, between the two. But, as before remarked, I think the courts have considered in all the cases of payment for goods sold, that the parties agreed to receive the paper in payment at the time the goods were sold, or made it their own by the act of negotiating it.

In the case of Johnson vs. Weed, 9 Johns. Rep. 311, the court held, as the concurrent authority of the books, "that there must be a clear and special agreement, that the vendor shall take the paper absolutely as payment, or it will be no payment if it afterwards turns out to be of no value."

The only case that has been decided in this state, of which I have any knowledge, that bears upon the one now before the court, is that of Jefferson Jefferson vs. Holland, at the March Term, 1820, of the Court of Chancery in Sussex. That case has already been adverted to by Judge Black, and need not again be recited. It is true that case was to recover money paid on account of a pre-existing debt; but, in my judgment, a debt created upon a cotemporaneous transaction is as much a debt in equity and in law, and as binding on the conscience of the debtor, as though it were one of fifty years standing. And I cannot appreciate the justice, or the policy of creating a distinction between them. The consideration passing at the time of the transaction, ought to he a good and valuable consideration, whether it be in reference to a present or a precedent debt.

The case of the Bank of the United States vs. The Bank,of Georgia, 10 Wheat. Rep. 333, is not an authority in point, and does not affect this case. That was a case of the receipt of forged paper by the bank against whom the forgery had been committed; and the decision turned upon the point that the bank was bound to know its own paper; and also, that after the receipt of it, the Bank of Georgia had been guilty of a neglect of duty, and had not given due notice of the facts to the plaintiff.

Upon the general principles deducible from this case, and applicable to this form of action, I think the case of Lightbody vs.The Ontario Bank, 11 Wendall, 9, and 13 Wendall, 101, is in point. For, although that was a payment on account of a pre-existing debt, the reasons assigned, and the principles there decided, apply with great force to this case.

As to the allegation of a want of notice to the plaintiff, by the defendants in-this action, of the failure of the Bank of Maryland, and the charge of the defendants being guilty of laches, I think a full answer to that part of the argument, (and which, by the way, was pressed with much force, and discussed with great ability,) is to be found in the fact, that these matters form no part of the casestated. The only question presented for the consideration of this court in the case stated, is this, "the plaintiff submits it to the court, that by the cashier's act of receiving the said notes as cash as aforesaid, and in consequence of the entry to that effect on the books of the bank, the said bank had made the notes their own, and must bear the loss." There is not only no want of notice alledged, but, in my opinion, the whole case, upon a fair view of it, is a clear waiver of notice. The very terms of the case stated show that the plaintiff had notice, and took notice of the facts of the case, by the receipt of the letter from the cashier, under date of March 27, 1834, and in the conversation which, it is agreed, took place between the plaintiff and the said cashier, immediately upon the receipt of that letter. The plaintiff evidently considered this paper his own, and proposed to commence a suit against the person from whom he had received it, "if the bank should deem that course best." The case states, "The plaintiff then informed the cashier that he would goand see the man that had passed upon him this paper, and if he refusedto take it back, he (Corbit) would willingly commence suit against himif the bank should deem that course best." If he did not consider the paper as belonging to him, and virtually in his possession, how could he, without the greatest absurdity, speak of commencing a suit against the individual from whom he had received it? There was no difficulty or contest at the time about this matter, but the plaintiff appeared to consider himself bound to become an actor in the business in whatever way the bank should deem best.

The plea of a want of notice, therefore, is not sustained by, nor is it to be found in the case stated. It is an idea introduced into the cause, subsequently to the making out and submitting the case to the consideration of the court. It is a point, however, which from the great ingenuity and ability with which it was pressed, was well calculated to produce embarrassment; and which, if true in point of fact, would have been, I think, sufficient to carry the judgment of this court for the plaintiff. But on a more careful view of the case, I find it was only the argument of counsel, and not the facts as agreed upon by the parties themselves. The idea then, of laches on the part of the defendant, falls to the ground.

Such being my conviction of the law, and the facts of this case, I give it as my opinion, in answer to the question submitted by the parties, that "the said Bank of Smyrna had not made the said notes their own by the cashier's act of receiving the said notes as cash as aforesaid, and in consequence of the entry to that effect on the books of the bank;" and that the Bank of Smyrna ought not to "bear the loss of them." The parties, however, have agreed that, in. any event judgment may be rendered against the defendant, in favor of the plaintiff, "for the amount of the said notes of the said bank of J. J. Cohen, jr. Brothers, to wit: for the sum of one hundred and sixty dollars. My opinion, therefore, is that the plaintiff should recover, and judgment be entered in his favor against the defendant for that sum and no more.