Opinion
(December Term, 1846.)
An implied warranty cannot extend to defects which are visible, and alike within the knowledge of the vendee and the vendor, or when the sources of information are alike open and accessible to each party.
APPEAL from PERQUIMANS Spring Term, 1846; Bailey, J.
This was a special action on the case. The facts are as follows:
One Stephen Elliott, being indebted to James C. Skinner by bond, (103) proposed to pay it by a bond or note which he held on the defendant. To this arrangement Skinner assented, so far as to agree to wait for his money until Elliott could recover the amount due him from Perry. The latter, not wishing to be sued, proposed to Elliott and Skinner to furnish Elliott with a note upon which suit might be brought to the use of Skinner. To this both Skinner and Elliott agreed, but the note of no particular person was mentioned. Subsequently, Perry brought to Elliott a note given by Joseph Gordon and payable to Exum Elliott Co., upon which Stephen Elliott caused a writ to issue in the name of the payees, and it was by his direction endorsed "To the use of James C. Skinner." Gordon's note was not endorsed by the payees, and when judgment was obtained and the money collected, it was paid to Skinner. The latter was not present when S. Elliott received the Gordon note from Perry, and, when informed by Elliott of what had been done, refused to receive it in payment of Elliott's note to him, but agreed, if the money upon it was collected, he would receive it and credit the note in his hands. The parties, Elliott and Skinner, did not exchange notes, but the note due by Perry was retained by Elliott, who, after Skinner's refusal to receive absolutely the Gordon note, transferred Perry's note for a valuable consideration to the plaintiff in this action. The defendant, in discharge of his note, passed to the plaintiff the receipt which had been given by an attorney in whose hands the Gordon note was, and who was to prosecute the claim to judgment. The attorney's receipt is in the following words: "Received 11 August, 1843, of Josiah Perry, Esq., one note, executed by Joseph Gordon, payable to Exum Elliott Co. for $101, upon which suit is brought in Perquimans County Court, which I am to prosecuted to judgment." This transaction took place between the plaintiff and the defendant while the suit was pending on Gordon's note, and at the same (104) time the plaintiff surrendered up to the defendant his note. The action is brought to recover from the defendant the amount of the judgment against Gordon and which had been received by James C. Skinner. Upon an intimation from the presiding judge that the action could not be sustained, the plaintiff submitted to a nonsuit and appealed to this Court.
Jordon and Heath for plaintiff.
A. Moore for defendant.
We concur with his Honor, that the action cannot be sustained. If the defendant had received the Gordon money, it would have been received by him to the use of the plaintiff, and the equitable interest conveyed by him to the plaintiff would have been a sufficient consideration to support the implied promise to pay. But here the money has been received by Skinner to his own use, though wrongfully. The plaintiff's declaration contains two counts, the first upon a warranty of title and a right to transfer, the second upon a mere contract that the claim thereby transferred was good and collectible, and should be collected for the use of said Hudgins. The breach assigned in the first count is that the said Perry had not then good right "to pass to said Hudgins said receipt and note and to authorize him to receive the amount when collected, for that previous to said contract said Perry, the defendant, had duly passed said note to one James C. Skinner, and authorized him to receive the money, when collected, to his own use." The breach assigned in the second count is the same. The answer to the breach in each count is the same, as each count and each breach is substantially the same. An implied warranty cannot extend to defects which are visible, and alike within the knowledge of the vendee and the (105) vendor, or when the sources of information are alike open and accessible to each party. Here, from the receipt of the attorney, it was obvious that Perry, the holder, had no legal title to the Gordon note. The note was payable to Exum Elliott Co., not assigned by them, and the suit was in the name of the firm. Perry, therefore, upon the face of the instrument, had no legal right to it, nor could he so transfer it as to clothe his assignee with any legal interest. The implied warranty, therefore, did not arise, for there is no pretense of any fraud on the part of the defendant Perry. It is evident all the parties mistook the nature of their rights. The legal title to the Gordon note never passed out of Exum Elliott Co., and they were the only persons who had in law a right to receive the money upon it. When Mr. Skinner received it, he received it to their use at law, and at law is answerable to them. It is very plain how the difficulty has arisen. The contracts or agreements between Perry and Stephen Elliott and between the latter and Skinner were inchoate and never executed. S. Elliott accepted the Gordon note only upon condition that it should serve to discharge his debt to Skinner, and Perry transferred only with the view to pay his debt to Elliott. When the latter apprised Skinner that the Gordon note was received and put in suit for his benefit, he refused to receive it in payment of his claim against Elliott, who thereupon returned it, doubtless, to Perry; for the attorney's receipt is given to Perry, the note being received from him. Considering the contract between him and Skinner at an end, Elliott, who still retained his note on Perry, for a valuable consideration sold or assigned it to the plaintiff, and Perry, upon the payment of it being demanded by Hudgins, might well consider his inchoate contract with Elliott at an end, as it certainly was. No legal title to the Gordon bond had ever passed to Elliott, and the purpose for which it had been delivered to him having failed, and it having been returned to him by Elliott, and his note assigned to Hudgins, he, (106) the defendant, was entirely at liberty to make what use of it he could in meeting the demand upon his note against himself. For that purpose it had doubtless been transferred to him by the original owners. He, therefore, had full right to transfer his equitable interest to the plaintiff. But that did not in law authorize the plaintiff to receive the money when collected, nor had Perry such right. When Skinner received it, he received it to the use of Exum Elliott Co., who were the legal owners. As, however, Exum Elliott Co. lay no claim to the money, there cannot be a doubt but that before another tribunal the rights of the plaintiff to the money would be recognized and enforced.
The declaration contains three counts. The first is for money had and received, and the other two are upon special promises. The second is, in substance, that the defendant was indebted to the plaintiff by bond, and in consideration of the acceptance of the same by the plaintiff in payment of the bond and canceling the bond, the defendant passed and assigned to the plaintiff a promissory note made by Joseph Gordon and payable to Exum Elliott Co. for $101, which said note was then in the hands of A. M. Esquire, an attorney at law, who had before undertaken to bring suit on the note and obtain judgment thereon; and that the defendant, upon the consideration aforesaid, undertook and promised that, notwithstanding any act or thing done or suffered by the defendant, he had good right to pass and assign to the plaintiff the said note, and that the plaintiff might and should receive to his own use the sum for which the said note was given. It then lays a breach that the defendant had not the right to transfer the debt to the plaintiff, and could not authorize him to receive the money due thereon, for that, before that time, the defendant had only passed the note to James C. Skinner and authorized him to receive to his own use the same money, and that Skinner by means thereof became entitled to the money when recovered, and did afterwards receive it and prevent the (107) plaintiff from receiving any part thereof.
The next count lays that in payment of the bond to the plaintiff, the defendant gave him an order on A. M. Esquire, an attorney at law, to pay to the plaintiff the sum due on Gordon's note, when the same should be collected by him, and then undertook that the note was good, and that the money mentioned therein should be collected and paid by the said A. M. to the plaintiff for his own use in a reasonable time. It then lays a breach, as before, that the defendant had before passed the debt to Skinner and authorized him to receive and hold the money.
There is no evidence tending to support the count for money had and received, nor the second special count. There was no order given on the attorney, who was not to collect the money, but only get a judgment. The case, therefore, turns on the second count, which is founded on a transfer of Gordon's debt in payment of the debt of the defendant to the plaintiff.
It will be perceived that the defendant's liability is not placed upon the ground that the note belonged to Exum Elliott Co., the payees, and not to the defendant; nor upon the ground that Gordon did not owe the money, or was insolvent; nor upon any other ground depending upon a general guaranty. But this count puts the case upon the single point that the defendant undertook that he had done no act whereby the plaintiff should be prevented from receiving the money due from Gordon on the note, and that, notwithstanding any act by the defendant, the plaintiff might and should receive the money to his own use. The decision of the point is not necessary in this case; but it may be admitted that the legal effect of the immediate transaction between these parties amounted to such an undertaking as is laid in the count, (108) upon the ground that passing a debt to another for a valuable consideration imports an engagement, at least, that the assignor has done nothing and will do nothing rendering the transfer ineffectual. For example, that it is to be implied that a person stipulates that he has not collected the money, and that he will not take it. Of course, the engagement must include also the acts of other persons under his authority or a title derived from him. But if it be yielded that such an undertaking may be inferred in this case, still it remains for the plaintiff to show a breach on the part of the defendant. Here a breach is stated, that the defendant had previously transferred Gordon's note to Skinner and authorized him to receive the money due on it to his own use, and that he has done so. Now, that is not true. The declaration imports that there was an absolute assignment to Skinner. That was never true. There was, at most, a conditional agreement, at one time, that Skinner should have the money that should be recovered from Gordon. But in the events that occurred, Skinner had no right to it. There was no agreement between Skinner and the defendant, by themselves. All three, Skinner, S. Elliott, and the defendant, were parties to the agreement that was made; and an essential part of it was that the money that should be recovered on any bond furnished by the defendant should be applied, in the first place, to the credit of the defendant's debt to S. Elliott. In truth, that was the only part of the agreement between the three which was beneficial to this defendant. There was no assignment to Skinner in the nature of an indorsement of a negotiable instrument, so as to vest the legal right in him, but only a verbal agreement conferring an authority on Skinner to receive the money for certain purposes — one, and the first of which was, that if S. Elliott would forbear to sue Perry on his bond until judgment could be obtained on Gordon's note and the money collected, the money should be applied in payment of Perry's debt to S. Elliott, and then in payment of Elliott's debt to (109) Skinner. That was clearly the understanding between those persons, and it could have been no other. It was, plainly, conditional, as just mentioned; for the present defendant had no motive for agreeing to transfer the claim but to pay his own debt. From the nature of the agreement, then, Skinner's right to this money was dependent upon the act of S. Elliott, namely, in giving or denying a credit therefor on Perry's debt to him; and, therefore, when S. Elliott parted from the defendant's bond, the whole arrangement fell through. It cannot be supposed that the defendant meant to transfer Gordon's note in payment of S.E.lliott's debt to Skinner, and not in payment of his own debt to Elliott. When Elliott disable himself from giving the defendant the credit for which he had stipulated with the other two, Skinner had no longer any right to touch the money; and his receiving it subsequently was wrongful as against the defendant and not by his authority. For this reason the judgment ought to be
PER CURIAM. Affirmed.