Mattix v. Leach
Mattix v. Leach
Opinion of the Court
Appellant sued upon a promissory note executed to the decedent whose estate she represents. Judgment was rendered in favor of appellees upon a special verdict. The questions we are called upon to decide arise upon this verdict. The material facts are as follows:
April 2, 1877, E. W. Hinton and John M. Leach, partners, executed their firm note for $700 to the decedent, James Mattix, with appellees, Sumption and Charles Leach, as sureties. August 31,1878, said John M. Leach filed in the United States District Court his petition in bankruptcy asking to be discharged from all debts embraced within the bankruptcy law and including said note sued on. May 12, 1879, he was duly discharged from all debts provable under such law. Soon after its execution the other makers of said note also became insolvent and so remained for several years. “In view of the insolvency of said makers and the uncertainty of ever being able to collect anything upon said note, the said James Mattix entered into a verbal agreement with said Jphn M. Leach in the latter part of 1881, or early part of 1882,
In support of this first proposition appellant cites Cox v. Hodge, 7 Blackf. 146; Klippel v. Shields, 90 Ind. 81; Montgomery v. Vickery, 110 Ind. 211; Coleman v. Coleman, 78 Ind. 344. In each of these cases, however, the question under consideration, and that decided, was that one legally bound to pay a debt could not, by a form of purchase, keep it alive and enforce it against his co-obligors, although in the case last cited the court says: “That the sale and transfer of an obligation of a partnership to one of the members operates as a payment, under ordinary circumstances, results necessarily from the relation of the purchaser to his co-partners, and from the fact of his being himself a principal debtor. Under supposable circumstances, it may be that in equity the partner, who had taken assignments of the obligations of the firm to himself, would be permitted to keep them alive and enforce them against his copartners for their contributive share of the sums which he had paid for the assignment. This might be done for the purpose of giving him the benefit of securities incident to the debts, when necessary to the doing of justice between the partners, if it could be done without injury to any creditor of the firm.” (The italics are our own.)
Thus the court clearly recognizes that, as between the debtor and creditor, there may be a sale and transfer, and that, under exceptional circumstances, the instrument might be kept alive as between the
Appellees base their claim to judgment upon the proposition that by the contract of purchase the equitable title to the note passed from Mattix to John M. Leach who thereby became the absolute owner of it. Then, they assert, the decedent being no longer the owner, the action cannot be maintained. Numerous authorities are cited to sustain the position taken, most of them involving sales of goods and chattels of various kinds. These we do not deem it necessary to take up in detail, since, with whatever favor we might view the question, were it an open one, the Supreme Court has closed the door to our favorable consideration of it by its decision in Weader v. First National Bank, 126 Ind. 111.
In that case one Reiffel had executed her note to
In addition to the facts set forth by the court an examination of the record discloses that West had written his endorsement upon the note prior to Nov. 1. The court held first, that it was not requisite that Weader should then have been the legal owner of the note, but that it would suffice if he were the equitable owner. It further decided that he was not even the equitable owner. We quote from the opinion to show the full extent, of the holding. “In McCormick v. Eckland, 11 Ind. 293, this court held that an assignment of a promissory note is incomplete without delivery.
“The case above was approved and followed in Wulschner v. Sells, 87 Ind. 71.
“In Mendenhall v. Baylies, 47 Ind. 575, it is said that to pass the title to a promissory note, either from the maker to the payee, or from the payee to the endorsee, there must be a delivery, actual or constructive.
“Under the contract of purchase here in question no time was fixed within which the note was to be
“The appellant was not in a condition to maintain replevin for the note, had West, upon demand, refused to assign the note; the contract was but an executory contract for the purchase and sale of the note. Had West, after making the contract, brought suit against Mrs. Reiffel on the note, she could [not] have made a successful defense to the action on the ground that he was not the party in interest.”
The word “not” which we have enclosed in brackets is omitted from the printed report of the case in 126 Ind. on p. 113. It is in the original opinion, however, and in the 25 N. E. on p. 888. The context, even without the original opinion, shows that the omission is a mere clerical error. Again the court says: “When the appellant received notice that the appellee held his note he was not."in a position to maintain an action against Mrs. Reiffel on the note she executed to West.”
We are wholly unable to distinguish this case in hand from the one to which we have just referred. Whatever differences there may be in the facts, make the Weader case the stronger one to support a conclusion of an executed purchase. In both we have a finding of a “purchase” of the note. In both there is a partial present payment and further future payments, but never full payment. In neither is the note delivered at the time of the contract of purchase nor any time fixed for delivery. In the Weader case a reason is given for the nondelivery at the time. In this case there is none. The loss of the note is indeed presented as cause for nondelivery several years later.
We are, under this authority, constrained to hold that the purchase of the note in 1881 was executory merely, and that the title to the note did not pass.
This rule, however, is not inflexible. The circumstances of a case may be so peculiar as to create special equities which can only be protected by specific performance. Under such circumstances courts of chancery have often afforded relief either affirmatively, or, where the parties are on the defensive, by regarding that as done which should have been done. Story’s Eq., sections 618 to 622 inclusive; 3 Pomeroy’s Eq., section 1402; Fry on Sp. Perf., section 32. Very v. Levy, 13 How. (U. S.) 345; Cutting v. Dana, 25 N. J. Eq. 265; Wright v. Bell, 5 Price Exch. 325; Adderley v. Dixon, 1 Sim. and S. 607; Sup. Lodge K. of P. v. Sourwine, 15 Ind. App. 489.
The fact that if the sureties are compelled to pay this note they are, by reason of John M. Leach’s discharge, remediless, while if his contract is enforced, they are protected, would appear to create a strong equity in their favor. Since, however, the case is not presented to us upon facts bringing these propositions before us, we do not undertake to decide them authoritatively. Appellant claims that John M. Leach’s dis
In some of these cases the question was only incidentally involved. In that last cited, it appeared that the bankrupt did not mention the firm debt in his schedules nor ask to be discharged therefrom.
Other decisions of the same judges or others following in the line of these, but limiting the expressions used in them, declare that the discharge is effective, unless there were partnership assets at the time of the adjudication, and that the burden of showing assets rests upon the creditor. Crompton v. Conkling, 15 N. B. Reg. 417; In re Johnston, 17 Fed. 71; In re Plumb, 19 Fed. Cases, 886.
There are authorities, however, maintaining that the discharge does operate upon partnership as well as individual debts. . These we believe to be founded upon better principle. The discharge purports to relieve the bankrupt from all debts provable against him. Firm debts are undoubtedly provable against the individual estate. It is true they may not, under some circumstances, be permitted to share in the assets until the individual debts are paid, but that does not prevent their being proved and their holder’s exercising certain rights allowed creditors. It may be that a firm is abundantly solvent when the adjudication is made, so that there is no cause to bring it into bankruptcy, or it might be that the individual is
As it seems to ns the firm debts are fairly within the province of the statute and the discharge. Judge Lowell, in Wilkins v. Davis, 15 N. B. Reg. 61, discusses the question elaborately, collates the authorities and sustains his decision by sound logic.
The majority of the court is of the opinion that the ends of justice will be subserved by directing a new trial. The judgment is accordingly reversed with such direction.
Reference
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- Mattix, Administratrix v. Leach
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