John Joyce v. Auten

• Decision Date: 24 December 1900
• Docket Number: No. 83,83
• Citation: 21 S.Ct. 227,179 U.S. 591,45 L.Ed. 332
• Parties: JOHN JOYCE, Piff. in Err. , v. H. F. AUTEN, Successor of Sterling R. Cockrill, as Receiver of the First National
• Court: U.S. Supreme Court

179 U.S. 591

21 S.Ct. 227

45 L.Ed. 332

JOHN JOYCE, Piff. in Err.,

v H. F. AUTEN, Successor of Sterling R. Cockrill, as Receiver of the First National

No. 83.

Argued November 7, 1900.

Decided December 24, 1900.

On March 20, 1893, the plaintiff in error, as a surety, executed with his principal the following note:

Three years after date, we, or either of us, promise to pay to the order of C. H. Whittemore, as receiver of the McCarthy & Joyce Company, the sum of nine thousand ($9,000.00) dollars, with interest at six per cent per annum from date till paid. This is one of the three notes executed for purchase money of the assets of the McCarthy-Joyce Company, this day sold to James, E. Joyce & Company.

James E. Joyce & Co.

John Joyce.

Little Rock, Arkansas, March 20, 1893.

This note was transferred before due for value to the First National Bank of Little Rock, which aftereards went into the hands of a receiver. Such receivership was changed, and the defendant in error is the present receiver. The note not having been paid at maturity, this action was brought in the circuit court of the United States for the southern district of Ohio. The defendant answered, pleading two defenses, as follows: First, that the McCarthy & Joyce Company, a corporation, of Little Rock, Arkansas, became involved, and on or about January 16, 1893, assigned its property to one C. H. Whittemore, as assignee, for the benefit of creditors; that such assignment was confirmed by the chancery court of the county, and the assignee appointed receiver; that thereafter the receiver was directed by said court to sell all the property belonging to the insolvent company; that such sale was made on April 20, 1893, to James E. Joyce & Company, the principal in this note, for $38,200, all of which has been paid by the purchaser, except this note and another of like date and amount, signed by another party as surety. The answer then proceeds as follows:

'Defendant further says that at the time the order for the sale of said real and personal property was made it was expressly provided and ordered by the court that the said receiver was, in addition to obtaining indorsers or sureties upon the notes given for the deferred payments, to retain and reserve a lien, under the statutes of the state of Arkansas, upon all the real and personal property so ordered to be sold, and this defendant, knowing that said property was more than sufficient in value to pay all the deferred payments as provided for in said sale, and relying upon the faithful execution of said order by said receiver, became surety upon said note described in the petition herein. Defendant further says that said receiver, after having received said note, in violation of the order of the court, and in violation of the rights of this defendant, negligently and wrongfully failed to retain or reserve a lien upon said property, real and personal, and improperly conveyed all of said real and personal property to the said James E. Joyce & Company, free and clear of any lien whatsoever. The defendant further says that said James E. Joyce & Company, after so receiving said property, have sold and conveyed all the personal property and nearly all the real estate to third persons, who were ignorant of said order of court, made for said sale; whereby the lien which ought to have been retained and reserved has been lost; and the said defendant further says that said property was sufficient in value to have fully paid said note, as well as the other note given for the deferred payments, and the said First National Bank of Little Rock, Arkansas, as well as its receiver, having received the said note with notice of the foregoing facts, this defendant is discharged and released from the said note, he asks that the plaintiff be compelled to surrender said note and that the same be canceled by order of this court.'

The second defense was that, when the McCarthy & Joyce Company made its assignment, a part of the property assigned consisted of certain promissory notes, the dates, amounts, and payers of which were specifically described; that such notes at the time of the assignment were in the possession of the First National Bank of Little Rock for collection; that such bank was a preferred creditor to a large amount; that all the property of said McCarthy & Joyce Company, including such notes, was ordered sold, and that the sale was made for $38,200, as heretofore stated; that thereafter the First National Bank and its receivers declined to surrender the notes, or the proceeds of such as had been collected; that the purchaser, James Joyce & Company, paid to the receiver of the McCarthy & Joyce Company $20,200, and that the notes retained by the bank and its receiver were of sufficient value to pay the unpaid purchase price, both this note and the other note heretofore described. A demurrer to such answer was sustained, and judgment entered in favor of the plaintiff, which judgment was affirmed by the court of appeals of the sixth circuit (35 C. C. A. 38, 92 Fed. Rep. 838), and thereafter this writ of error was sued out.

Messrs. Thos. E. Powell and Thos. B. Minahan for plaintiff in error.

Messrs. T. P. Linn and Joseph H. Outhwaite for defendant in error.

Mr. Justice Brewer delivered the opinion of the court:

The surety, defendant below, now plaintiff in error, did not in his answer aver that the note was not given for value, or that either he or his principal had paid it. His defenses were that he was discharged from liability, first, by the conduct of the payee; and, second, by that of the plaintiff.

With regard to the first defense, we may put the plaintiff out of consideration, and inquire whether the defense would have been good if the payee had not transferred the note, but had himself brought the action. For the plaintiff, though charged to have had knowledge of the facts, is, if in no better, certainly in no worse, position than the payee would have been.

That defense was, in substance, that the receiver was directed in making a sale to retain a lien, as well as to take personal security. The surety knew that such order had been made, expected that it would be complied with, and signed as surety, relying upon compliance; but there is no allegation that he ever notified either his principal or the receiver that he...