Butters v. Haughwout

• Decision Date: 30 April 1866
• Citation: 42 Ill. 18,1866 WL 4634,89 Am.Dec. 401
• Parties: WILLIAM A. BUTTERSv.EDER V. HAUGHWOUT et al.
• Court: Illinois Supreme Court

42 Ill. 18

1866 WL 4634 (Ill.)

89 Am.Dec. 401

WILLIAM A. BUTTERS

v.EDER

v. HAUGHWOUT et al.

Supreme Court of Illinois.

April Term, 1866.

OPINION TEXT STARTS HERE

WRIT OF ERROR to the Circuit Court of Cook county; the Hon. ERASTUS S. WILLIAMS, Judge, presiding.

A sufficient statement of the case will be found in the opinion of the court.

The principal question presented in the case is, whether a pre-existing debt, in payment of which a party in possession of goods sold and delivered them to his creditor, is a sufficient consideration to protect such purchaser against the claims of a former owner from whom the intermediate holder purchased the goods by means of fraudulent representations, the last purchaser having no notice of the fraud of his vendor in obtaining the goods.

Messrs. HERVEY, ANTHONY & GALT, for the plaintiff in error.

The main question presented to the court for decision on this record, is the important and somewhat vexed one--whether a bona fide antecedent debt is a good consideration in this State for the transfer of personal property, if such transfer be made by the debtor to the creditor in good faith.

The court below followed the decisions of the courts of New York, holding a pre-existing debt not to be a sufficient consideration to protect the purchaser against the claims of a former owner from whom the second vendor had obtained them by fraud, although the second purchaser had no knowledge of such fraud in his vendor.

We insist such is not the correct rule, the great weight of authority in the United States holding the law to be as we contend for it--that a bona fide pre-existing debt is a good consideration for the transfer of personal property.

In support of our position, we state that the decisions of the New York courts on this point have been much shaken, even by subsequent decisions of that State, and are completely overthrown by the decision of the Supreme Court of the United States, in 16 Peters, 1, Swift v. Tyson, Judgment of STORY, J., on pages 16, 17, 19. See, also, Coolidge v. Payson, 2 Wheat. 66, 70, 73; Townsley v. Sumrall, 2 Pet. 170, 182, which are to same effect.

Chancellor KENT, in his Commentaries, treating of this subject, in a foot note, says: “This opinion (16 Peters, 1) lays down a better rule than New York cases.” And this case in Peters is confirmed and approved in 21 Howard U. S. Sup. Ct. Rep. 432, McCarty v. Roots. MCLEAN, J., on page 438, says: “Nor does the fact that the bills were assigned to the plaintiff as collateral security for a pre-existing debt impair the plaintiff's right to recover.”

In England, the same doctrine has been uniformly acted on, from the case of Pillans et al. v. Van Mierop et al., 3 Burr. 1664. See Bosanquet v. Dudman, 1 Starkie, 1; Ex parte Bloxham, 8 Vesey, 531, Lord ELDON, C; Haywood v. Watson, 4 Bing. 496; Bramah v. Roberts, 1 Bing. (N. C.) 469; Percival v. Frampton, 2 C. M. & R. 180.

In Brush v. Scribner, 11 Conn. 388, the Supreme Court of Connecticut, after an elaborate review of the English and New York cases, held, that a pre-existing debt was a valuable consideration. And the authorities in all the States we can find, except in New York, hold that a pre-existing debt is a valuable and valid consideration in other cases of contract, as well as in cases of the assignment of commercial paper. See, on this point, further, Covanhoven v. Hart, 21 Penn. 495; 29 Id. 389; York Co. Bank v. Carter, 38 Id. 446, is much in point, and, we think, settles the law in Pennsylvania.

The law is held to be the same, as far as we can trace it, in England, Massachusetts, Connecticut, Pennsylvania, Rhode Island, Georgia, Alabama, New Jersey, North Carolina and South Carolina. See 20 Eng. Law and Equity, 103; 2 Ellis & Black. 84; 8 Metc. 110; 2 Cush. 162; 1 Allen, 502; 8 Conn. 507; 5 Rhode Island, 523; 3 Geo. 47; 11 Rich. S. C. 657.

But, whatever may be the various decisions in other States on this point, although the great weight of authority is in favor of our position, the question, we respectfully submit, has been expressly decided in our Supreme Court, in the case of Manning v. McClure et al., 36 Ill. 490, in which Mr. Justice LAWRENCE, in delivering the judgment of the court, follows the ruling of the Supreme Court of the United States, in 16 Peters, and disapproves of the law on this subject as laid down by the New York courts.

And in the case of Gray v. St. John, 35 Ill. 222, the court have, in terms, decided that a pre-existing debt is a valuable and good consideration for the bona fide transfer of personal property. The same doctrine is held in Waggoner v. Cooley, 17 Ill. 245, in which case SCATES, Ch. J., in delivering the judgment of the court, says, “Had the fraud been perpetrated upon the vendor, a bona fide purchaser or bailee who receives the goods on a pre-existing debt may hold them against the defrauded vendor.” And in Ewing v. Runkle, 20 Ill. 457, Mr. Justice BREESE, on page 462, in delivering judgment, uses this most accurate and significant language, in defining the rights of a creditor to protect himself: “A vigilant creditor is entitled to all legal advantages, and can protect himself by a bona fide transaction.”

Messrs. GOOKINS & ROBERTS, for the defendants in error.

The authorities cited by the counsel for the plaintiff in error do not apply to the case at bar.

Taking the cases of Swift v. Tyson, 16 Pet. 1, and Brush v. Scribner, 11 Conn. 388, as types of all the rest, they all turn upon the principles of commercial law, holding that the bona fide holder of a bill of exchange, or other commercial paper, is not subject to have his title questioned, if it is taken in the regular course of business, and before due, for a valuable consideration. That a pre-existing debt is a valuable consideration, there is no doubt, at present, if it was ever doubted, whether in New York or elsewhere. But commercial paper, in the regular course of business, is not taken upon the title of the holder, but upon the credit given to it by the policy of the law, and, although stolen, a bona fide holder will not be affected, if he has no knowledge of the theft, and acts with due caution.

Not so with lands or chattels. They always pass, in this country (where the doctrine of sales in market overt has never been applied), upon the title of the vendor, and, we submit, there is neither reason nor authority for making a distinction between real and personal property, so far as this question is concerned. No such distinction is made in any of the cases referred to, so far as we have been able to discover. They rest upon the ground that the defrauded seller never parted with his title, as fraud vitiates all contracts. True, the transaction may ripen into a sale that will conclude the vendor, by his acquiescence, manifested by his bringing a suit for the purchase-money; by lapse of time with knowledge of the fraud; or by a sale to a bona fide purchaser. To be a bona fide purchaser he must have a better right to the property than the original owner. He must purchase in ignorance of the fraud, and must actually pay (and not merely secure) a new consideration, and a pre-existing debt is not such a new consideration (although it is, no doubt, a valuable consideration). We may admit, also, that there may be circumstances which would entitle the party claiming as a bona fide purchaser, to favorable consideration, where a previous indebtedness is used as the consideration, in whole or in part, for the new purchase; such as the surrender of securities, the cancellation of mortgages, and the like.

We refer to the following authorities: Powell v. Jeffries, 4 Scam. 387; Root v. French, 13 Wend. 570; Buffington v. Gerrish, 15 Mass. 156; Gilbert v. Hudson, 4 Greenleaf, 345; Thompson v. Rose, 16 Conn. 71; Johnson v. Peck, 1 Woodbury & Minot, 334; Mowrey v. Walsh, 8 Cowen, 238; Bradley v. Obeare, 10 N. H. 477; Rowan v. Adams, 1 Smedes & M. Ch. 45; Padgett v. Lawrence, 10 Paige, 170; Dickerson v. Tillinghast, 4 Id. 215; The Manhattan Co. v. Everston, 6 Id. 457; De La Chaumette v. The Bank of England,9 B. & C. 209; 17 E. C. L. 100; Jackson v. Myers, 11 Wend. 533; Met. Bank v. Godfrey, 23 Ill. 577.

The case of Manning v. McClure is referred to. We have not seen this opinion, as the case is not yet reported, and can, therefore, say nothing about it, further than to remark, that, as it is quoted as an authority to the effect that a pre-existing debt is a valuable consideration, and as we have no occasion to contest that proposition, we do not need to look into the case further. Mr. JUSTICE BREESE delivered the opinion of the Court:

This was an action of replevin, brought in the Cook Circuit Court by E. V. Haughwout and others, crockery and china ware merchants in the city of New York, against William A. Butters, an auctioneer in Chicago. The defendant is not a real party to the controversy. He stands in the attitude of a mere stakeholder James Duncan, of the dry-goods house of Ubsdell, Pearson & Co. of St. Louis, is the real defendant, who had sent the goods in controversy, with some others of his own, to Butters to be sold. After the action of replevin was commenced, it was agreed between the agent of the plaintiffs and Duncan, that all of the goods sent by Duncan to Butters, should be sold by him together, and the proceeds should be divided between the plaintiffs and Duncan, in proportion to their interests. The action was to recover the possession of twenty-three casks of French china ware, and their contents, of the value of two thousand five hundred dollars.

The pleas were non cepit, non detinet, and property in James Duncan. The controversy arises on the third plea.

The jury found a verdict for the plaintiffs. A motion for a new trial being overruled and exception taken, judgment was entered on the verdict, to reverse which the defendant prosecutes this writ of error. Some preliminary objections were made to certain interrogatories propounded to plaintiffs' witnesses, but as...