Scranton v. Clark

By the Court,

The note upon which this action is brought was never, at any time, in the possession of W. W. Leland, to whom the defendant alleges that he paid it. Whether it was in the possession of Jerome, from whom Leland claims to have received it at the time when the transaction occurred, in 1858, in which the defendant insists that Jerome transferred the note to Leland, and whether Jerome then owned the note, are questions upon which there was, to some extent at least, a conflict of evidence at the trial. The note was made October 16th, 1855, by the defendant, Clark, payable to the order of E. B. Litchfield, one year after date, and it has been indorsed by the payee in blank without recourse. E. B. Litchfield, the payee, it is admitted transferred the note to Jerome before its maturity. In 1858, in the latter part of the year, but at what particular time is not stated, Jerome made an agreement with W. W. Leland to exchange certain promissory notes for some lands in Iowa. This agreement was carried into effect, Jerome receiving a conveyance of the land from Leland, and Leland a transfer of the notes from Jerome. This transfer imported or included a delivery of whatever notes were exhibited at the time; for since these notes were, so far as appears, indorsed in blank, or otherwise transferable by delivery, and were produced to Leland, and by him left with Jerome as his agent *279or depository, they were in law and in fact delivered to Leland.

The judge charged the jury that if Jerome was the owner of the note in question, in 1858, when he sold it to Leland, and he did so sell it but did not deliver it, yet the payments subsequently made by the defendant to Leland were good, and extinguished the note. As a proposition of law, upon the facts stated, this instruction is perfectly correct, but I am at a loss to see how, upon the evidence in the case, a jury could cerne to the conclusion that J eróme in 1858 was the owner of the note and sold it to Leland, but did not deliver it. The statement of the transaction by Leland, as I have already said, imports and includes a complete and effectual transfer of the note by J eróme. It is a cardinal feature of his story that the note in question was exhibited to him by Jerome during the negotiation. The evidence of Jerome and Litchfield, on the other hand, denies not only the sale of the note to Leland but the possession of the note by Jerome in January, 1858. The jury might have believed Leland and have come to the conclusion that Jerome sold and'delivered the note to him, although he was not the owner, but they could hardly have believed Leland’s story of the transfer without believing that the note was at the time in the possession of Jerome, whoever was its owner. On the other hand, if they credited .the evidence of J eróme and Litchfield, then the note was not only not owned by Jerome in December, 1857, and January, 1858, but was not in his possession. It seems to me that the whole transaction between Jerome and Leland was completed one way or the other, either with or without the transfer of the defendant’s note. Jerome in effect delivered to Leland whatever notes he sold him, and the question is, whether this note was included in the transaction or not.

There was another view taken, however, of the case at the trial, which was material no doubt in producing the result at which the jury arrived, under the instructions which they re*280ceived from the court. This was that Jerome sold the note in question to Leland in exchange for the Iowa lands, but that he neither owned it nor delivered it, at the time. This is in effect the third of thrée possible or supposed states of the facts consistent with the theory that Leland purchased the note or agreed for its purchase of Jerome. Either Jerome owned the note in December, 1858, and sold and delivered it to Leland, retaining its possession simply as agent of the latter; or he transferred and delivered it to Leland, retaining its possession in like manner, but not being its owner at the time of the sale, or he sold it, that is received a consideration for it, and agreed to transfer and deliver but did not transfer it, and was not the owner of it at the time. The last supposition involves also, as the evidence and the instructions of the court to the jury based upon such a theory of the case were understood, that Jerome was not only not the owner, but was not in possession of the note at the time of his transaction with Leland. Assuming that Jerome sold Leland the note of the defendant in 1858, but did not own it at the time, and did not have it in his possession, then the question is presented upon which the last instruction of the learned judge at the trial was given to the jury. There is another fact now to be mentioned which becomes important in this connection. In August or September, 1860, Edwin 0. Litchfield, who had acquired the possession and at least an apparent title to the note at some previous time, retransferred the note to Jerome. Jeróme continued the owner until it was transferred to the present plaintiffs. The testimony of Litchfield and of Jerome is positive to the effect that the note was not in the possession or under the control of the latter from December, 1857, or January, 1858, when they say he transferred it to E. 0. Litchfield, to August, I860, when he received it back from Litchfield and again became its owner. The defendant however contends that if Jerome was not the owner nor in possession of the note when he spld it to Leland in 1858, and did not deliver it to the purchaser at that time, yet that as *281he afterwards unquestionably acquired the title this enured to the benefit of Leland, and made the defendant’s payment to him good and effectual,"because upon such a sale Jerome must be deemed to have warranted the title to the note, by implication of law.

It must be considered as settled, in the jurisprudence of this state, that the rule of caveat emptor which obtains in the common law is subject to the exception that a warranty of title in the vendor is implied in a contract of sale. (1 John. 274. 20 id. 196.) But this exception is limited to cases where the vendor is at the time in the possession of the thing sold. This is the rule given by Ch. Kent, (2 Comm. 478,) and which is to be deduced from the authorities, although perhaps the question of a sale by a vendor not in possession was never distinctly discussed in the courts of this state until the case of McCoy v. Artcher, (3 Barb. S. C. R. 323.) In that case the authorities were examined, and the question discussed in a well considered opinion delivered by Mr. Justice A. J. Parker. The conclusion at which he arrived, and which no doubt received the sanction of the court, was that when the vendor had not possession at the time of the sale, no warranty of title would be implied. Ths contrary view expressed by Mr. W-. W. Story in his treatise on Contracts, § 535, and on Bales, § 367, was disapproved and was shown to be at variance with the current authorities. A similar opinion to that stated in McCoy v. Artcher was expressed in Edick v. Crim, (10 Barb. 445,) and in Hopkins v. Grinnell, (28 id. 533.) The possession of the vendor is in truth the foundation of the implied warranty. Possession is as high evidence as a purchaser can have of the title to chattels. The vendor having the goods sells them as his own; and it may fairly be implied from his selling them under such circumstances that 6 he represents and undertakes that they are his own. In the case of Morley v. Attenborough, (3 Wels. Hurls & Gor. 499,) it was held in .the English court of exchequer that a pawnbroker who sold goods which had been pledged to him and *282not redeemed, was bound by an implied warranty of title, because although the goods were in his possession, they were understood to be held by him not "as his own property, but simply as pledges unredeemed. The character of his possession was such as to imply only that the goods had been pledged to him, and had not been redeemed, and not that he had title, and therefore he was held to have warranted no more. The opinion of the court was delivered by Baron Parke, and is very elaborate. Whatever may be thought of the main point decided, the case contains a strong sanction of the view that the implied warranty of a vendor’s title admitted by our law, results from his possession and consequent apparent ownership, and depends upon the character of that possession.

If therefore Jerome made a contract to sell the note of the. defendant to Leland when he was not its owner, and it was not in his possession, the purchase was at the risk of Leland, and the law implied no warranty by Jeróme that he had the. title to the note. The estoppel which the defendant invoked, therefore, failed. The extinguishment of the note which he asserted, in consequence of the subsequent acquisition of title by Jerome, could not have been effected. The instruction of the learned judge at the trial, upon this point, and which, upon the admitted facts of the case, amounted in effect to a direction to find in favor of the defendant, was erroneous.

It is said that if Jerome had brought an action upon this note after its retransfer to him, he must have been defeated by the payment to Leland. I am not prepared to admit this. When Clark paid Leland he knew that Leland did not have possession of the note, and he took the risk of the validity and effect of his payment. Leland could not have compelled payment without producing and canceling or accounting for the note. Ho doubt Leland could have recovered of Jerome the consideration which he paid for the note, and Clark could have recovered of Leland what he paid him. But neither payment, upon the state of facts shown here, amounted to *283the face of the note, and if there would have heen any equities between Jerome and Clark in the case supposed, they would not have effected the extinguishment of the note. I see no reason why Jerome should have been defeated in a suit against Clark because the latter had paid the note to Leland to whom Jerome had sold the note without having or delivering the possession, and without warranting the title. The whole question turns upon the warranty of title by Jerome, and when that does not exist, there is no foundation for such a defense.

Brown, Emott, Scrugham and Lott, Justices.]

There might be a distinction shown between such a case and that before us, however, and.we are called upon at present to adjudicate upon the rights of these parties only.

The judgment must be reversed and a new trial ordered, with costs to abide the event.