Leavitt v. Beers , 1 Hill & Den. 221 ( 1843 )

By the Court,

Nelson, Ch. J.

After the best consideration I have been able to bestow upon this case, I am satisfied the report ought not to be disturbed, unless the referees erred in rejecting the payments- made by the defendant in pursuance of the arrangement entered into 27th January, 1841, with the company. All of the other questions discussed on the argument depend very much upon matters of fact fairly open, upon the testimony, for the exercise of the discretion and. judgment of the referees, and upon which their conclusions should be regarded as final.

Among these, the Taylor notes are the most important in amount, and, perhaps, the decision in respect to them the most questionable. But, looking at the whole case, and the evidence more especially bearing upon this item of the account, I am -inclined to think the fair inference is that they had been passed to the company by the defendant previously to the assignment to Griffen, not in payment of so much indebtedness, but as collateral only; and that the subsequent transfer to Griffen -was simply made in pursuance of such previous understanding and in fulfillment of the same.

I admit the recitals in that assignment alone are not evidence against the defendant; but the subsequent transfer of the securities to Griffen might have been regarded by the referees as a virtual recognition of the interest of the company in the same; and the terms of the receipt taken on the delivery to Griffen afford pretty satisfactory evidence that the defendant himself did not understand that they were to be received absolutely as so much money paid.

These notes have not yet been paid by Taylor, or by any one in his behalf, and while remaining thus outstanding and 'dishonored, I think the defendant w’as bound to furnish more satisfactory proof that they were taken absolutely in discharge of so much indebtedness, than appeared, before he can claim to have them thus applied.

As respects the salary; as the amount was not fixed by agreement between him and the institution, it depended upon a quantum meruit, to be determined by the referees. They have allowed him $6,000 per annum without interest. They, doubtless, believed he had the benefit of it as it accrued and was therefore entitled to none.

They were also right in rejecting the claim for commissions. There was no agreement to allow them, nor evidence under the circumstances attending the several guaranties, from which one could be properly inhered. Before any person holding the official connection of the defendant with the bank, or any one standing in that relation to an institution of the kind, can be allowed to set up a claim for super adding his own private responsibility to the responsibilities of the institution in such cases, he must first establish a most clear and explicit contract to that effect with the proper authorities ; otherwise, the practice might lead to intolerable mischief and abuses.

It is unnecessaiy, however, to pursue these and other objections that were taken on the argument to the report and discussed by the counsel, as I have come to the conclusion that it must be set aside on the ground that the referees erred in rejecting the evidence of the tender of the certificates of deposit issued by the company to the fund commissioners of the state of Indiana; and also of the notes or certificates issued to W. Vyse, guarantied by the defendant, which stand on the same footing.

The production and tender of these, when taken in connection with the previous understanding and agreement with the company made on the 27th January, 1841, within the time there limited, amounted to proof of complete payment and satisfaction of the whole of the defendant’s indebtedness.

That agreement entered into between the parties is, virtually, an order upon the debtor, directing him to pay the money due, or to become due, to a third person, which, when acted upon and the money paid, extinguishes the debt. (Chitty on Cont., 751, ed. 1842.)

The only answer that can possibly be given to this view is, that the certificates and notes of the company, which the defendant was authorized to take up in discharge of his own indebtedness, were issued in violation of the charter and contrary to law; for the payment and discharge of which the institution was not legally liable, and hence the advance of the money upon this illegal and void paper, though at the instance and request of the creditors, should not be allowed to operate as a discharge of his obligation.

If any authority was wanted to overthrow a proposition so inequitable and unjust, involving also as it does a most scandalous fraud upon the debtor, it may be found in Armstrong v. Toler (11 Wheat., 258,) and in the class of cases upon which the decision was there founded.

The case shows that if Beers (not being a debtor) had advanced this money at the request of the company, an action for money paid to their use would have been sustained for the amount, even conceding the securities to have been illegal, so that no recovery could have been had against the company upon them. If so, much more will it operate as a valid payment of a debt, due to the party at -whose instance the money is advanced.

If the plaintiff in the suit to recover the money paid in such cases is a party to the illegal act, and the money is advanced in aid and in furtherance of the same, the law leaves the parties where it found them, both being in pari delicto, and no action will be sustained. But even in tnao case and in the application of that principle, if the money was paid, as in this, towards the extinguishment of an indebtedness, such payment, would still have the effect to discharge it. The creditor would not be allowed to say, “ true, I have requested you to pay this money to a third person to whom I wrns indebted at the time, but I have ascertained the contract out of which that debt arose was illegal and void, and I shall expect that you will therefore still pay me my debt.” Such a proposition would be monstrous and revolting to every principle of right and justice.

The true answer to all this is, the creditor himself has in judgment of law already received the money on his debt by the advance made at his request to the third person, without regard to the nature of the contract existing between him and the latter. The case stands upon the same footing as if the money had passed through the hands of the creditor !o such third person; had been received and paid over by limself. There is no longer any debt remaining; it has -..eon extinguished, or what is the same thing paid to a third party at the instance and request of the creditor.

Report set aside.