Manning v. Mcclure

• Decision Date: 31 January 1865
• Citation: 1865 WL 2775,36 Ill. 490
• Parties: GILBERT S. MANNINGv.HENRY B. MCCLURE, and BENJAMIN NEWMAN.
• Court: Illinois Supreme Court

36 Ill. 490

1865 WL 2775 (Ill.)

GILBERT S. MANNING

v.HENRY B. MCCLURE, and BENJAMIN NEWMAN.

Supreme Court of Illinois.

January Term, 1865.

APPEAL from Circuit Court of Morgan County.

Bill in chancery filed in the court below by appellant against appellees, upon which a decree was entered pro forma dismissing the bill which is brought up for review upon an agreed case as follows:

“In 1856, or the early part of 1857, defendant Newman and seventeen others, who are still living, and whose names appear as such in the answers of defendants, and on the original articles in evidence in the case, entered into an association or company, under written articles of agreement signed by them, for purchasing and selling lands for profit, in the eastern portion of the state of Illinois. The stock of the company was $36,000. By their articles, and in fact, the company had the following officers to wit: a president, secretary, treasurer, and a commissioner. All the business of the company, including the purchasing and selling of the lands and the giving of notes for the same, was, by the articles of association, to be transacted, done, and made by the person filling the office of commissioner, as commissioner.

Defendant Newman, during the years 1857 and 1858, was the commissioner of said company, and as such, and in the course of his business for said company, purchased many tracts of land, many of which they still own, and executed notes for them, executing all papers by the name and style of ‘B. Newman, Commissioner.’

In 1858, and while said Newman was commissioner as aforesaid, and in the course of his business as such, said Newman purchased for said land company, and received a conveyance for them for the same, with general covenants of warranty and against all incumbrances, from one William Stevenson, who was also a member of said company, certain tracts of land, for which he gave notes signed by him as commissioner, and antedated to August 14, 1857. Among the notes thus given was the following:

‘ August 14, 1857. August 14, 1860, I promise to pay, to the order of Wm. Stevenson, the sum of twenty-one hundred eleven dollars, at the ____, value received.

+---------------------------------------+
                ¦$2,111.20.¦B. NEWMAN, Commissioner.  ”'¦
                +---------------------------------------+
                

“The land thus purchased of Stevenson had been bought by him on the 14th of August, 1857, of one Sandford, and Stevenson received a conveyance and gave his notes and a mortgage on the land to Sandford for the purchase money, bearing the same dates, for the same amounts, due at the same times and with the same interest as the notes which Newman afterwards, in 1858, gave Stevenson for the same land. Stevenson, who was an officer of the company, had purchased these lands, expecting that the company would take his purchase off his hands, and the above transaction with Newman was intended to effect this object.

After Stevenson became insolvent and failed in business, and on the 8th of August, 1860, he indorsed and delivered the above note, given him by Newman, to complainant Manning, as collateral security for a preëxisting demand of Manning against him, and for no other consideration whatever.

The mortgage given by Stevenson to Sandford in 1857, for the purchase money for the land, was foreclosed, no part of it having been paid, and the land bought in by Sandford for the debt, and an absolute title acquired by him some three years ago.

Defendant McClure, as trustee, has in his hands $860.52 (without any deductions for the costs, expenses, etc., of this suit), which is subject to distribution among the creditors of defendant Newman; and there are many of them whose claims, amounting to twenty-five hundred dollars or more, are now in the hands of said McClure, in anticipation of the distribution of the aforesaid sum. If there is any liability by McClure to complainant in this case, complainant is to share his fellowship proportion on his demand against Stevenson, with the other creditors, in said trust fund. Each party to pay half of the costs of the supreme court in this case--decree to be reviewed at the January term, 1865, supreme court, second grand division.

It is agreed that the following letter of complainant to defendant Newman and to John Mathers, a member of said land company and successor to Newman in the office of commissioner, shall be taken with the foregoing, and have such effect as it is entitled to as evidence:

‘SPRINGFIELD, March 13, 1861.

Mr. John Mathers and B. Newman: I hold a note as collateral security, given me by Rev. Wm. Stevenson, which note is signed by B. Newman, commissioner, dated August the 14, 1857, calling for $2,111.20. Now, if you will pay the note that Dr. Retter holds on me for $1,000, and the interest that has accrued thereon, and get Wm. Stevenson's consent in writing for to give up the note, I will postpone a suit at law at the March term of the circuit court in Morgan county, and give up my lien on B. Newman and company note, above described.

G. S. MANNING.”DD'

LAWRENCE, J.

This case comes before us upon an agreed state of facts, which is set forth in the statement of the reporter. The only question of any difficulty presented by it is one which has led to very considerable controversy in American jurisprudence, and is now to be decided by this court for the first time. That question is, Is the indorsee of a negotiable note, who has taken it, before its maturity, as collateral security for a preëxisting debt, to be regarded as having taken it upon a valuable consideration, and as holding it discharged of any latent equities existing between the maker and the payee? The fact that the various courts of this country are so arrayed against each other upon this question is the best possible evidence of its intrinsic difficulty.

We do not propose to review the numerous decisions. To do so would be but an unsatisfactory labor, because they are wholly irreconcilable, and it is therefore impossible to extract from them a general or guiding principle. We allude to some of them, for the purpose of showing to which side the tribunals of last resort, in many of our sister states, have given their authority.

The case of Bay v. Coddington is a leading one upon this subject, and was perhaps the first in which it received an elaborate discussion. It first came before Chancellor KENT, 5 Johns. Ch. 54, and was thence taken to the court of errors, the decision of which is reported in 20 Johns., 637. It was in the last named court that this question was chiefly discussed, and there was great diversity of opinion. There were other points in the case which helped to control the decision, but it has generally been quoted, and properly, as authority for the position that an indorsee who takes the note as either payment or security for a preëxisting debt, takes it subject to existing equities. The question afterwards came before the courts of that state, in Roosa v. Brotherson, 10 Wend., 85; Ontario Bank v. Worthington, 12 Wend., 593; Payne v. Cutler, 13 Wend., 605; Bank of Salina v. Babcock, 21 Wend., 499, and Bank of Sandusky v. Scoville, 24 Wend., 115. The last two cases are quoted by Mr. Justice STORY, in the well known case of Swift v. Tyson, 16 Pet., 1, as shaking, if not overthrowing, the authority of the previous decisions, which had followed the principle considered as established in Bay v. Coddington. However, in the more modern case of Stalker v. McDonald, 6 Hill, 93, Chancellor WALWORTH, after alluding to the remark of Mr. Justice STORY, very elaborately reviews all the decisions, and draws the conclusion that, in the courts of that state, the question is firmly settled against the indorsee, and he denies that this position has ever been shaken. In that state, moreover, the cases go to the length of holding that the indorsee who has received the note in payment of a preëxisting debt, occupies no better position than he who has received it as collateral security, on the ground that if the note prove worthless, on account of latent equities, it is no payment, and the indorsee may recover his original debt.

The case of Swift v. Tyson, 16 Pet., 1, already referred to, is a leading case upon the other side. The note, in that case, was taken as payment of a preëxisting debt, and not merely as collateral security, and therefore what was said, in the opinion, in regard to the particular point before us, can only be claimed as dicta. At the same time, the attention of the court was challenged to this point by the separate opinion of Mr. Justice CATRON, and therefore the language of Mr. Justice STORY cannot be considered as inadvertently used, and may be regarded as receiving the implied assent of the court, with the exception of the judge already named.

The case came before the court from the district of New York. The decisions in that state were reviewed, but the question being one of general commercial law, the court held these decisions not to be obligatory, and proceeded to consider the case by reference to the recognized principles which control the rights of parties to negotiable paper. On a question of this kind, the opinion of so eminent a commercial lawyer as Mr. Justice STORY, speaking as the organ of so illustrious a tribunal, carries deserved weight, even though the precise point as to which the opinion is uttered be not presented by the record. The case was argued at the bar by very able counsel, and very fully considered by the court. The authorities, both of this country and of England, were reviewed, and the opinion of the court very positively given as follows: “We have no hesitation in saying, that a preëxisting debt does not constitute a valuable consideration, in the sense of the general rule already stated, as applicable to negotiable instruments.” And farther on, the court remark: “We are prepared to say that receiving it” (a negotiable note) “in payment of, or as security...