Phelan v. Moss

• Decision Date: 03 January 1871
• Citation: 67 Pa. 59
• Parties: Phelan <I>versus</I> Moss.
• Court: Pennsylvania Supreme Court

67 Pa. 59

Phelan versus Moss.

Supreme Court of Pennsylvania.

November 15, 1870.

January 3, 1871.

November 15th 1870.

Before THOMPSON, C. J., READ, AGNEW, SHARSWOOD and WILLIAMS, JJ.

Error to the Court of Common Pleas of Greene county: Of October and November Term 1870, No. 205.

COPYRIGHT MATERIAL OMITTED

A. A. Purman, for plaintiff in error.—The evidence did not show constructive notice to the plaintiff, and Goff's innocence would protect him: Story on Prom. Notes, § 197, and notes; Goodman v. Stephens, 4 Ad. & E. 870. The facts were not suspicious: Belmont State Bank v. Hoge, 6 Am. Law Reg. N. S. 230. In such case as this there is no question as to diligence, &c.: Raphael v. Bank of England, 33 Eng. Law & Eq. 276; Worcester Bank v. Dorcester Bank, 10 Cush. 488; Goodman v. Simonds, 20 How. 843; Bay v. Caddington, 5 Johns. 54; Ellicott v. Martin, 6 Md. 509; Matthews v. Poythress, 4 Ga. 287; Magee v. Badger, 30 Barb. 246. Goff's possession was primâ facie evidence that he was a holder for value: Snyder v. Riley, 6 Barr 168; Hutchinson v. Boggs & Kirk, 4 Casey 294; Milner v. Dawson, 5 Exch. 948. Having purchased in good faith, he had a right to sue: Allaire v. Hartshore, 1 N. J. 665; Chicopee Bank v. Chaquin, 8 Met. 40; Youngs v. Lee, 18 Barb. 187; Simpson v. Clark, 2 Cromp., M. & R. 342; Brown v. Mott, 7 Johns. 361; Edwards v. Jones, 7 Car. & P. 633. One who advances money bonâ fide in the purchase of negotiable paper, is a holder for value: Swift v. Tyson, 16 Peters 15; Bosanquet v. Dudmon, 1 Stark. R. 1; Ex parte Bloxham, 8 Ves. 531; Haywood v. Watson, 4 Bing. R. 496; Braman v. Roberts, 1 Bing. New Cases 469; Brush v. Scribner, 11 Conn. 388; 3 Kent's Com. 81; Beltzhoover v. Blackstock, 3 Watts 24; Besbing v. Graham, 2 Harris 14; Bullock v. Wilcox, 7 Watts 328; Harrisburg Bank v. Meyer, 6 S. & R. 537; Knight v. Pugh, 4 W. & S. 445. It is not a defence that there was no original consideration: Whittaker v. Edmonds, 1 Moody & R. 366; or the consideration was illegal: Morris v. Langley, 19 N. H. 423; or the note obtained by fraud or stolen: Power v. Ball, 27 Vt. 662. The same principle is in Lord v. Ocean Bank, 8 Harris 384; Callen v. Fawcett, 8 P. F. Smith 113; Story on Prom. Notes, § 191; Edwards on Bills and Notes 294; Haly v. Lane, 2 Atk. 182; Chalmers v. Lanior, 1 Cowp. R. 383; Robison v. Reynolds, 2 Ad. & E. N. S. 196.

E. M. Sayers, for defendant in error, cited 3 Kent's Com. 82; Snyder v. Riley, supra; Bay v. Coddington, 5 Johns. Ch. R. 56; Ayer v. Hutchins, 4 Mass. 370.

The opinion of the court was delivered, January 3d 1871, by READ, J.

The law of bills of exchange owes much of its scientific and liberal character to the wisdom of the great jurist of his age, Lord Mansfield, who was sometimes in advance of his contemporaries in attempting to introduce equitable principles in suits at common law. What was then disapproved would now be approved; and Lord Penzance in the House of Lords supported the proposition, that when law and equity conflicted, the equitable principle should prevail.

Sixteen years before the American Revolution, Lord Mansfield held, in Miller v. Race, 1 Burrow 452, that bank notes, though stolen, became the property of the person to whom they are bonâ fide delivered for value, without knowledge of the larceny. Forty-three years afterwards, in Lawson v. Weston, 4 Esp. 56, Lord Kenyon held, that if a bill has been lost, and the loser has advertised it in the newspapers, and it is discounted for the person who found it, and so came fraudulently by it, this entitles the person discounting it to recover the amount, if done bonâ fide, and without notice of the way in which the holder became possessed of it. Lord Kenyon said: "I think the point in this case has been settled by the case of Miller v. Race, in Burrow. If there was any fraud in the transaction, or if a bonâ fide consideration had not been paid for the bill by the plaintiffs, to be sure they could not recover; but to adopt the principle of the defence to the full extent stated, would be at once to paralyze the circulation of all the paper in the country, and with it all its commerce."

The principle established by these decisions remained the undoubted law of England for sixty-six years, until Lord Chief Justice Abbott, in Gill v. Cubitt, 3 B. & C. 466, propounded the novel and dangerous doctrine, that although the holder had given full value for the bill, if he took it under circumstances which ought to have excited the suspicion of a prudent and careful man, he could not recover. The Lord Chief Justice said, "for these reasons, notwithstanding the unfeigned reverence I feel for everything that fell from Lord Kenyon, by whom Lawson v. Weston was decided, I cannot think the view taken by that learned lord at that time was the correct one." This cautious ruling, although carped at and quarrelled with, remained the law for ten years, when the discredit of the Bank of England bills on the continent, and the complaints of the commercial community, brought the matter before the King's Bench — which had been remodelled — for consideration: Crook v. Jadis, 5 Barn. & Ad. 909; and Backhouse v. Harrison, Id. 1098, were followed by Goodman v. Harvey, 4 Ad. & E. 870, in which Lord Denman said, "we have shaken off the last remnant of the contrary doctrine. Where the bill has passed to the plaintiff without any proof of bad faith in him, there is no objection to his title."

In the ninth edition of Chitty on Bills, by Chitty and Hulme, published in 1848, it is said, "and the case of Goodman v. Harvey has since finally decided, that even gross negligence is not alone enough to destroy the title of a holder for value; but that a case of mala fides on the part of such holder must be made out in order to defeat his claim. So that the doctrine of Lord Tenterden is now completely exploded, and the old rule of law, `that the holder of bills of exchange endorsed in blank, or other negotiable securities transferable by delivery, can give a title which he does not himself possess to a person taking them bonâ fide for value,' `is again re-established in its fullest extent.'"

The same doctrine is repeated in the tenth edition by Russell and MacLachlan, of 1859, p. 179; and also in Byles on Bills, fifth American, from the ninth London, edition, with notes by my brother Sharswood, p. 280.

The rule therefore adopted by the English courts one hundred and twelve years ago, and which has stood the test of the practice and experience of the greatest commercial country of modern times, is now the undisputed and settled law of England.

In Brush v. Scribner, 11 Conn. 388, Chief Justice Williams, in 1836, in the course of a long and learned opinion, asserted the same doctrine, quoting Miller v. Race, Crook v. Jadis, and Backhouse v. Harrison, in support of it. In Worcester County Bank v. Dorchester and Milton Bank, 10 Cush. 488, in 1852, the Supreme Court of Massachusetts, quoting Goodman v. Harvey and kindred cases, held, that if he took the bill in good faith he is entitled to recover on it. "The burden of proving good faith is all the burden which the law imposes on him."

In Hall v. Wilson, 16 Barb. 548, in 1853, Judge Allen, citing Crook v. Jadis and the subsequent cases, says, "the doctrine of the cases last cited has been adopted and approved by the courts of some of the states of the Union, and I have met with no case in our own courts in conflict with it." This case is recognised in Magee v. Badger, 30 Barb. 246.

In Swift v. Tyson, 16 Peters 1, it was held that a bonâ fide holder of a negotiable instrument for a valuable consideration, without any notice of the facts which impeach its validity as between the antecedent parties, if he takes under an endorsement made before the same becomes due, holds the title unaffected by these facts, and may recover thereon, although as between the antecedent parties, the transaction may be without any legal validity; and it was also held that the holder of negotiable paper before it is due is not bound to prove that he is a bonâ fide holder for a consideration, without notice; for the law will presume that, in the absence of all rebutting proof, and therefore it is incumbent on the defendant to establish, by way of defence, satisfactory proof of the contrary, and thus to overcome the primâ facie title of the plaintiff.

In Goodman v. Symonds, 20 How. 343, these principles were again affirmed, by the unanimous opinion of the Supreme Court of the United States recognising the decision of Goodman v. Harvey in its fullest extent.

This doctrine is approved in Story on Bills of Exchange, § 416; Edwards on Bills 506; 2 Parsons on Bills 277, 278, 279; and in the 6th edition of Story on Prom. Notes, 1868, § 382. The statements in Judge Story's works on bills of exchange and promissory notes, we know, by Swift v. Tyson, to have been his deliberately formed opinions.

There are no reported cases in Pennsylvania on bills of exchange and promissory notes prior to the Revolution, and but nine in 1 Dallas, twenty-one in the three other volumes, and fourteen in the four volumes of Yeates. In The Bank of North America v. McKnight, 2 Dallas 158, in 1792, Chief Justice McKean said, "before the Revolution it was not usual to give notice to the endorser as soon as a note became due; it would have been considered as harsh and unreasonable. But since the establishment of the bank, a rule has been introduced; and as these notes lodged in the bank were often accommodation-notes, it was highly reasonable that notice should be given in a short time. What that time ought to be has not been determined. Two or three months would certainly be too long, and a day may be too short. I would not singly lay down a rule, but leave it to the jury as a question of fact." The notice given in this case was four or five days after the note became due, which was in 1786, and the verdict was for the plaintiff.

The seat of the general government,...