New England Trust Co. v. New York Belting & Packing Co.

• Decision Date: 05 May 1896
• Citation: 166 Mass. 42,43 N.E. 928
• Parties: NEW ENGLAND TRUST CO. v. NEW YORK BELTING & PACKING CO.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

166 Mass. 42

43 N.E. 928

NEW ENGLAND TRUST CO. v. NEW YORK BELTING & PACKING CO.

Supreme Judicial Court of Massachusetts, Suffolk.

May 5, 1896

COUNSEL

J.L. Stackpole, for appellant.

J.J Myers, for appellee.

OPINION

ALLEN, J.

The Potter-Lovell Company could not have enforced the notes now in suit against the defendant, but the plaintiff, as pledgee took them for value, without notice, before maturity; and therefore it can now recover upon them to the extent of its interest, if any, and no more. Ordinarily, in such a case the pledgee can recover only to the amount of his claim for which the notes were pledged; and, if that claim has been reduced by partial payments, he can recover only to the amount of the unpaid balance. Bank v. Chapin, 8 Metc. (Mass.) 40; Stoddard v. Kimball, 6 Cush. 469; Fisher v. Fisher, 98 Mass. 303. The same rule is applied where a purchaser of a negotiable note has paid only in part for the same when he learns of its invalidity as between the original parties. If he afterwards makes further payments, he cannot recover for the same against the maker. Hubbard v. Chapin, 2 Allen, 328; Dresser v Construction Co., 93 U.S. 92. He can recover only to the amount for which he is a bona fide holder.

In the present case the claims of the plaintiff for which the notes were pledged have been paid in full, and in fact the plaintiff already holds a surplus in its hands; and therefore, in its own right, the plaintiff is not entitled to recover anything against the defendant. But it seeks to maintain its action upon the notes in a representative capacity,--not for the benefit of the Potter-Lovell Company because that company has no claim to the proceeds, but for the benefit of the makers of other similar notes, which the plaintiff held in pledge, and which have been paid to the plaintiff. It is contended by the plaintiff that the makers of those notes are entitled to contribution from the defendant, and that, therefore, the plaintiff is entitled to collect the full amount of the notes in suit, and add it to the surplus already in its hands, and then to make distribution, in just proportion, to all who are entitled to share in the surplus thus augmented. The answer to this view is twofold: In the first place, it does not appear that any of the makers of other similar notes asked the plaintiff to bring this action, or now wish it to prosecute the same, or even that it was brought or is prosecuted with their consent or knowledge. Under our decisions, a holder of a negotiable note, who has no interest therein, may maintain an action thereon, with the consent and for the benefit of the real owner, but not otherwise. Beekman v. Wilson, 9 Metc. (Mass.) 434; Whitten v. Hayden, 9 Allen, 408; Spofford v. Norton, 126 Mass. 533; Bank v. Thompson, 129 Mass. 438. Under these circumstances, the plaintiff would discharge its full duty towards the makers of other similar notes if it should give them notice that it holds the notes against the defendant, and intends to surrender them to the maker, or to the Potter-Lovell Company, unless objection should be made. But, besides, the proper remedy for the parties in interest is by a bill in equity for contribution, and not by an action, in the name of the plaintiff, on the notes. The plaintiff asserts that notes which it held in pledge, and which stood like the notes now in suit, to the amount of $60,000, have been paid to it; and it would seem that the plaintiff holds other notes, not yet paid, which amount to over $8,000, and which, we presume, it means to collect, if it can. The surplus already in the plaintiff's hands above its own claims is nearly $9,000; so that if the plaintiff should collect the $15,000 on the notes now in suit, and the $8,000 on the notes signed by other makers, it will have in its hands the sum of $32,000 to administer by way of distribution to those entitled to share therein. The defendant, of course, would be entitled to share in that distribution; and, as the facts are in dispute, it would have to be ascertained whether all of the makers of the notes, amounting to $60,000 and to $8,000, stand in the same position as the defendant, or not,--that is, whether their...