Lyman v. Bank of the United States
53 U.S. 225 (1851)

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U.S. Supreme Court

Lyman v. Bank of the United States, 53 U.S. 12 How. 225 225 (1851)

Lyman v. Bank of the United States

53 U.S. (12 How.) 225

Syllabus

Where persons were indebted to a bank and gave their promissory notes for the amount of the debt, the mere acceptance of the notes by the bank did not necessarily operate as a satisfaction, and whether or not there was an agreement at the time to receive them in satisfaction, or whether the circumstances attending the transaction warranted such an inference were questions for the jury.

All the notes having been paid except the last, and the action not being brought upon the note but upon the original consideration, the bank was not bound to bring the prior notes into court; the presumption of law was they had been given up by the holder at the time of payment. If the fact was not so, the burden lay upon the defendants to show it.

So also, a part of the consideration being the purchase of real estate, the bank was not bound to prove the execution and delivery of proper conveyances to the defendants. Having given their notes for the purchase money, the court was bound to presume that they were satisfied with the conveyances. If not, it was their duty to show it.

Where the bank had become insolvent and had made an assignment of its effects to trustees for the benefit of its creditors, the bank was allowed to sue in its own name at the instance, and for the benefit of creditors, and the case was the same as if the law permitted the suit to be brought, and the same had been brought, in the name of such trustees.

Although the bank had endorsed a note amongst its other assets to its trustees, yet under the circumstances it could maintain a suit upon the note, because where a party who is the holder of a note has transferred it for purposes of collection, and it is not paid but is found in the possession of the original holder, he can recover, as he is remitted to his original rights, notwithstanding the endorsement, and if the note is not paid, the plaintiff may give it up and recover upon the original consideration.

Before the defendants became indebted to the bank, the bank had made a compromise of certain claims, which, amongst others, were the subject of the sale by the bank and purchase by the defendants. Two of the defendants had knowledge of the conditions of this compromise, and their knowledge must be considered as extending to the other defendants. It was a question for the jury to determine what the defendants purchased.

Page 53 U. S. 226

This was a suit brought by the Bank of the United States, under the following circumstances:

During the existence of the charter granted by Congress to the Bank of the United States, it had established a branch of that institution at Burlington, in the State of Vermont. The Bank, when chartered by Pennsylvania, became the owner of the property and effects of the former corporation, and of course of the property and effects of the branch at Burlington. Being about to close and withdraw that branch, the board in Philadelphia received the following offer:

"To the President and Directors of the Bank of the United States."

"John Peck and Lyman and Marsh and others, propose to purchase of the Bank of the United States the property of the office at Burlington, Vt., as it was upon 2 March, 1836, upon the following terms, viz.:"

Bills discounted, 2d March, 1836 . . $70,121.01

Bills receivable, same date. . . . . 2,133.46

---------- $ 72,254.47

With average of interest

[At the face]

McIntire & Burdick's debt. . . . . . $24,128.12

McIntire & Blood's debt. . . . . . . 2,000.00

Blood & Burdick's debt . . . . . . . 1,600.00

McIntire & Bean & Rolfe's debt . . . 3,000.00

Gates & Co.'s debts. . . . . . . . . 23,795.28

---------- 54,523.40

Suspended debt . . . . . . . . . . . 5,000.00

Banking house and appurtenances, and house and

lot in Vergennes . . . . . . . . . 10,000.00

-----------

$141,777.87

===========

"To be paid in four or five annual installments, with 5 percent interest, and such security given as shall be satisfactory."

"JOHN PECK, for himself and others"

"Philadelphia, 10 March, 1836"

The offer was accepted, and the plaintiffs in error signed four joint and several notes, dated 1 of April, 1836, payable to the order of Mr. Jaudon, cashier, at the Union Bank, in the City of New York. Each note was for $35,500 dollars, and they were payable one, two, three, and four years after date. Separate notes were given for the interest payable at intervals of six months, and the small balance remaining being paid in cash.

When the first note was becoming due, Peck & Co. were not prepared to pay it, and requested the bank to discount other paper for them to the amount of $15,000 to place them in funds,

Page 53 U. S. 227

and amongst this other paper was a note by Lyman & Cole for $5,000, which was endorsed over to the bank by Peck & Co. The bank having acceded to this proposition, the first note was given up as paid, as was also the second and third when they became due. The note by Lyman & Cole, however, was not paid, and constituted one of the items of this suit.

By reference to the above list of assets, it will be perceived that the "suspended debt" is valued at $5,000. Two of these items were brought forward in the bill of exceptions, and are noticed in the opinion of the Court. It is proper, therefore, to give the following explanation of the matter, copied from the brief of Mr. Phelps:

Among the items of the suspended debt sold to the defendants for the sum of $5,000, the nominal amount being over $26,000, were two sums standing upon the books of the bank in the list of suspended debts, as due from one Burrows, and from the firm of Truesdell & Co. The debt of Truesdell & Co. had been compromised by the payment of fifty percent, so that the balance of 50 percent, which stood upon the books of the bank at the time of the sale to the defendants, was not due. The amount paid by Truesdell & Co. had been deducted from the original debt, so that the sum apparently due was only the remaining half.

The Burrows debt had also been compromised, and was in a similar condition, except that the sum to be paid by him under the compromise had not been paid.

The compromise of the debts against Truesdell & Co. was made by the directors of the branch, with the approbation and concurrence of the parent board. At the time when this was done, two of the defendants were directors of the branch, and acted in the matter.

The directors of the branch were directed by the parent board to make semiannual returns showing the condition of the branch, the suspended debts &c. Two of these returns, signed by two of the defendants as directors, show the precise condition of these debts. They being marked with the letter D, signifying desperate, and a note being appended showing that the apparent balances were not due. These transactions took place long before the sale to the defendants. The defendants claim that they should be indemnified for the amount of these apparent debts not really due.

In October, 1849, the bank brought suit against Peck & Co. in the Circuit Court of the United States for the District of Vermont. The declaration contained the usual money counts, an account stated, and also counts for the original consideration of the notes. The defendants pleaded the general issue and statute of

Page 53 U. S. 228

limitations. At the trial, the jury found a verdict for the plaintiff at $21,621.47 and costs.

In the course of the trial, several exceptions were taken to the admissibility of evidence, and upwards of one hundred pages of printed matter were incorporated into and made part of the bill. It is obvious, therefore, that the whole of it cannot be inserted.

"To sustain the issue on the part of the plaintiffs, the counsel for the plaintiffs offered in evidence the testimony of Lloyd Mifflin, John Ramsey, Samuel Jaudon, and Thomas B. Taylor, with the several papers and exhibits thereto attached, and referred to in their testimony, which testimony was taken under a commission issued from this Court, and which testimony, papers, and exhibits are on file in said suit, and are hereby referred to, and incorporated with, and made part of, this bill of exceptions, together with the promissory note, dated April 1, 1836, for thirty-five thousand five hundred dollars, payable to 'Samuel Jaudon, Esq., cashier,' or order, four years from date, at the Union Bank, in the City of New York, signed by the defendants; and the note for five thousand dollars, dated March 25, 1837, signed by Lyman & Cole, payable to defendants or order on the first day of June, 1837, at the Union Bank, City of New York, which promissory notes are also annexed to said testimony on file, as aforesaid, and are referred to and made part of this bill of exceptions."

"To the reading of which testimony, exhibits, and notes, the counsel for the defendants made the following objections: "

"1. To the reading of the said thirty-five thousand five hundred dollar note upon the ground that it was not payable to the plaintiffs but to Samuel Jaudon, and not endorsed by said Jaudon."

"2. Objected to the 'explanatory memorandum' upon exhibit B, referred to in, and annexed to, the deposition aforesaid of said Mifflin, on the ground that the defendants were not, nor either of them, parties to, nor in any way connected therewith."

"3. To the testimony of said Mifflin, under the fifth interrogatory, tending to prove that the consideration of said thirty-five thousand five hundred dollar note moved from the plaintiffs, and the practice of the plaintiffs, in taking notes payable to the cashier; and to the testimony of said Jaudon, under the 7th, 8th, and 9th interrogatories, tending to prove that the plaintiffs advanced the consideration of the said thirty-five thousand five hundred dollar note, shown to said witness Jaudon, and the other notes referred to by him, given by the defendants at the same time, and that it was the property of the plaintiffs, and tending to prove the practice of the plaintiffs in taking notes thus payable, and also to all the evidence tending to prove the same facts, on the ground that the legal effect of the note could not be varied or controlled by parol evidence. "

Page 53 U. S. 229

"4. To the testimony of said Mifflin, under the 7th interrogatory, on the ground that neither parol evidence nor a copy of the instructions was the best evidence, and that the original should be produced, and objected to the evidence of said Mifflin, under the 8th interrogatory, on the ground that the original paper, sent to the Branch Bank at Burlington, should be produced."

"5. The defendants objected to the testimony of said Mifflin, under the 10th interrogatory, tending to prove the signature of Wyllys Lyman to paper or exhibit marked E, on the ground that neither the acts of Lyman, done by him in his official capacity as director of the Branch Bank at Burlington, nor any knowledge derived by him in the performance of his duties as such director, could affect the other defendants, or in any way affect the rights of the defendants in this action, and also claimed that, if admissible, it would be evidence only against Lyman. But the court overruled the objections and admitted the evidence generally, so as to affect all the defendants."

"6. The defendants objected to the evidence of said Ramsey, under the 6th interrogatory on the direct examination, relating to the ability of Silas E. Burrows, on the ground that the solvency or insolvency of said Burrows was immaterial, and also on the ground that the testimony of the witness, as given in his answer, is not legal evidence, tending to prove the inability or insolvency of said Burrows; the witness as defendants insisted stating no facts, but inferences merely."

"7. The defendants objected to the testimony of Samuel Jaudon, under the third interrogatory, on the ground that the doings of the corporation, parties to the sale, could not be proved of parol."

"8. The defendants objected to the evidence of said Samuel Jaudon, under the 10th, 11th, 12th, and 13th interrogatories, on the ground that the same is irrelevant and immaterial, and on the ground that the power to negotiate the note or transfer the legal interest therein, is matter of law, and not a subject matter of proof."

"9. The defendants objected to the testimony of said Jaudon, under the 17th interrogatory on the direct examination, on the ground that the contract was in writing, and that parol evidence was not admissible. The court overruled all the objections, and the evidence was read to the jury."

"All the depositions and schedules, exhibits and papers, thereto annexed, above mentioned, were read in evidence to the jury. The plaintiffs also introduced as a witness, Morton Cole, one of the signers of the five thousand dollar note aforesaid, whose testimony proved that said note last aforesaid was executed by himself and Lyman, the other maker, as an accommodation note, that is, without consideration, and for the accommodation of the payees in said note. "

Page 53 U. S. 230

"The plaintiffs also introduced a copy of the charter of the Bank of the United States, by the State of Pennsylvania, which is referred to as part of the case, and also introduced a letter from John Peck dated May 30, 1844, which is also referred to as part of the case."

"The defendants introduced the paper hereto annexed, and made part of the case, marked X, together with the testimony of Charles F. Warner, whose testimony proved that said paper was in the handwriting of Thomas Hockley, who is mentioned in the depositions introduced by the plaintiffs, and that said Hockley died in November, 1836, and continued to act as the agent for the plaintiffs, in the matters relative to the Branch Bank at Burlington aforesaid, up to the time of his death; and the defendants claimed that this paper was furnished to them, at the time of the sale by plaintiffs to defendants, by said Hockley, as agent of the plaintiffs, as a list of the debts embraced in said sale, and that they bought, relying on that and the paper (marked 'O') annexed to the deposition of John Ramsey, and referred to in his answer to the third and fourth and fifth interrogatories by defendants, as furnished to defendants by said Ramsey, on behalf of plaintiffs, at the time of said sale, and on the faith of which they made the purchase, as defendants claimed."

"The plaintiffs also introduced evidence tending to prove that this suit was prosecuted by the consent and by direction of Robertson and others, trustees."

"No other evidence was introduced on either side."

"The plaintiffs claimed to recover the amount of the balance of the account annexed to the deposition of Thomas B. Taylor, marked W, and interest thereon, from the first of January, 1846, to the time of trial; that is, $17,638.87, and interest thereon from January 1, 1846, to the time of trial."

"The defendants' counsel insisted, and asked the court to instruct the jury -- "

"1. That upon this evidence the plaintiffs were not entitled to recover."

"2. That the $35,500 notes, given for the original purchase, were payable to Samuel Jaudon and not to the plaintiffs, and that as the notes were not endorsed by Jaudon, there could be no recovery in this action, in respect of the notes upon any of the counts in the declaration; and that there was no evidence in the case tending to prove an account stated between plaintiffs and defendants."

"3. That the notes given by defendants to Samuel Jaudon, as aforesaid, are prima facie given in payment of the original purchase, and that, therefore, this action cannot be sustained in the

Page 53 U. S. 231

name of the plaintiffs, either upon the notes, or the consideration as evidenced by the notes, or upon the original contract of sale."

"4. That if the notes were not to be treated as payment as matter of law, yet as the proof shows that the notes were given in payment, that the plaintiffs could not recover, and if the court would not so instruct the jury, then to instruct them that if they should find that the notes were given and received in payment, then the plaintiffs could not recover."

"5. That if the notes were not given in payment, yet, as it appears from the evidence that they were assigned to Robertson and others, before the commencement of the action, and are still the property of said Robertson and others, that the notes thereby operate as payment or an extinguishment or suspension of the original cause of action, and that such would be the effect if the jury so found the facts, and that in that event the plaintiffs could not recover."

"6. That the plaintiffs cannot recover on the original contract or consideration, without bringing into court all the notes or showing that such as are not brought into court have been given up to defendants, more especially as it appears that the notes were given payable to a third person, and have been assigned."

"7. That there can be no recovery for the real estate without showing a conveyance to defendants by deed, or some conveyance of the real estate, and that as the plaintiffs had alleged a conveyance, the proof without evidence of such conveyance did not support the declaration, and that the payments made must be applied to the items of plaintiff's account, legally proved, and not to the items for real estate, unless found by the jury to have been specially made upon the items for real estate."

"8. That the plaintiffs cannot recover upon the $5,000 note while it appears to have passed by assignment by plaintiffs to Robertson and others, endorsed in blank by defendants and Robertson and others, still the owners, and also for the reason that it appears to be endorsed to M. Robertson, and the legal title still in him and out of the plaintiffs."

"9. The defendants counsel also insisted and claimed that if the plaintiff was entitled to recover, that the amount of the three securities or debts against J. Truesdell & Son, amounting to $4,884.48, and two securities or debts against Silas E. Burrows and J. Truesdell & Son, amounting to $2,536.86, contained in schedule as exhibit 'O' referred to in the testimony of John Ramsey, should be deducted from the plaintiffs' claim, which securities or debts the plaintiffs claimed were purchased by defendants as subsisting and valid debts, and that they had been compromised and discharged by the plaintiffs; and asked the court to instruct the jury that if they should

Page 53 U. S. 232

so find the facts, to deduct the amount of such debts, or such or so much of them as they should find were so purchased by defendants, and compromised and discharged by plaintiffs, from the amount of the plaintiffs' claim, and if the court did not so instruct them, then to instruct them to deduct so much as they should estimate the debts to have been worth at the time of such purchase, which were discharged by the plaintiffs, and that at all events the defendants were entitled to have deducted the amount or value of the note taken by plaintiffs in the compromise of the Burrows debt."

"10. The defendants further insisted and asked the court to instruct the jury that it was a question of fact for them to find whether the defendants, or either of them, had knowledge of the condition of these debts, or whether, at the time of the purchase, said debts, or either of them, had been compromised and discharged, and that if they should find that Wyllys Lyman and John Peck or either of them, had knowledge of the condition of said debts, and that they had been compromised and discharged, or either of them, at the time of the purchase, and that they derived such knowledge by and while acting in their official capacity as directors, or as committee of said Branch Bank at Burlington, that such knowledge would not affect the other defendants, or defeat or affect the right of the defendants to have a deduction from the plaintiffs' claim on account of said debts as aforesaid."

"The court refused to instruct the jury agreeably to the defendants' first request, to which the defendants tendered their exceptions, which are allowed and sealed by the court."

"Upon the points raised in the second request by the defendants, the court charged the jury that the action was not brought, nor did the plaintiffs seek to recover upon the $35,500 notes, and that there could be no recovery upon said notes, as the same were payable to Samuel Jaudon, and had not been endorsed by him, and that the evidence did not tend to prove an account stated with the plaintiffs, but with Robertson and others, trustees, to whom the debt had been assigned, and who were the owners thereof at the time."

"In answer to the third request of the defendants, the court refused to charge as requested, and charged the jury that the notes given at the time of the purchase were not prima facie payment; that as the notes were given to Samuel Jaudon as agent of the plaintiffs, they were in judgment of law the property of the bank, and for this purpose the same as if given payable to the plaintiffs. That the note in one sense may be considered as prima facie payment, until it reaches maturity. It suspends the remedy till then. To which refusal of the court to charge as requested the defendants tendered their bill of exceptions, which is allowed, and signed and sealed by the court. "

Page 53 U. S. 233

"In answer to the fourth request the court refused to charge as requested by defendants, and charged the jury, that it was a question of fact for them to find, whether the notes were given and received in payment and satisfaction of the debt or original consideration, and that if so the plaintiffs could not recover. That in order to operate as a satisfaction, they must have been given and received as actual payment; that if goods are sold and bills receipted by the vendor 'received payment by note,' that is no payment; that means payment when the note is paid, and is not payment or satisfaction until such note is paid. That the rule is that the giving of a note is no satisfaction of the original debt or consideration, unless there is an agreement that the note shall be in payment, and that the question in this case is whether at the time of the purchase the parties superadded an agreement that the notes should be in satisfaction; if not, then they would not operate as a satisfaction. To which refusal of the court to charge the jury as requested, and to the charge as given, the defendants tender their bill of exceptions, which is allowed, and signed and sealed by the court."

"The court refused to charge the jury as requested in the defendant's fifth request, and charged the jury that Robertson and others were assignees and trustees for the benefit of creditors, and held the debt for the benefit of creditors of the bank, and that the suit was instituted by the plaintiffs the bank, at the instance and for the benefit of creditors, and the case is the same as if the law permitted the suit to be brought, and the same had been brought, in the name of such trustees. To which refusal of the court to charge the jury as requested, and to the charge as given to the jury, the defendants tender their bill of exceptions, and the same is allowed, and signed and sealed by the court."

"The court refused to charge the jury as requested in the defendants' sixth request, and did instruct the jury, that although the two intermediate notes given at the time of the purchase were not accounted for, yet as the plaintiff conceded that they had been paid by the defendants, the legal presumption was that they had been given up to the defendants; that the law obliges a party to give up a note when paid, and that the burden lay on the defendants to show that the notes were outstanding and endorsed before due under such circumstances; that the holders were bona fide holders before the defendants could claim that the notes are outstanding, or object that the notes are not brought into court. To this refusal of the court to instruct the jury as requested, and to this instruction of the court, the defendants tender their bill of exceptions, and the same is allowed, and signed and sealed by the court. "

Page 53 U. S. 234

"The court refused to charge the jury agreeably to the seventh request, and charged the jury that it was objected by the defendants that the plaintiffs could not recover the items for real estate without showing a conveyance of the real estate; that this objection would be well founded if the contract was executory, but that this contract was executed, and, therefore, the plaintiffs might recover without showing a conveyance of the real estate; and that, without showing such conveyance, the proof supported the declaration in this respect. To the refusal of the court to instruct the jury as requested, and to the instructions as given, the defendants tender their bill of exceptions, which is allowed, and signed and sealed by the court."

"The court refused to charge the jury agreeably to the eighth request, and charged the jury that where a party who is the holder of a note has transferred it for purposes of collection, and it is not paid, but is found in the possession of the original holder, he can recover, as he is remitted to his original rights, notwithstanding the endorsement, whether stricken out or not, and that another answer to defendant's objection was that if not paid the plaintiffs may give it up, and recover upon the original consideration. To this refusal of the court to instruct the jury as requested, and to the instructions as given, the defendants tender their bill of exceptions, and the same is allowed, and signed and sealed by the court."

"The court refused to instruct the jury agreeably to the ninth and tenth request of the defendants, and instructed them that it was a question whether the plaintiffs sold the debt of Truesdell & Son, as it stood upon the books, and the same as to the debt of Silas E. Burrows, or whether defendants bought these debts with a full knowledge of the circumstances of these debts; that it appeared that, in pursuance of instructions of the parent bank to the branch bank, that it was the duty of the branch bank to make semiannual returns, showing what debts were good, and what bad, and what were considered desperate; that in June, 1836, and in November, 1835, returns were made, and in that of June, 1835, there is a memorandum opposite the Truesdell debt: 'This balance due after compromise,' and opposite the Burrows debt is put down 'compromised at the New York office,' and a similar entry in the return of November, that it is claimed by defendants that, as those debts are put in at the original amount in the list, it is a representation that the debts are due; but that the answer to this is that Lyman and Peck were directors at the Burlington branch, and are to be presumed to have been cognizant of the condition of these debts; and further instructed the jury that, as it appeared that Lyman and Peck knew the fact of the compromise and condition of these debts at the time

Page 53 U. S. 235

of the purchase, although the defendants' objections would be well founded if notice to Lyman and Peck was not notice to the other defendants, yet notice to Lyman and Peck was in law notice to all the defendants, and their knowledge was to be in law imputed to the other defendants; and inasmuch as the purchasers knew at the time of the purchase that these debts had been compromised, the bank was not bound to make any deduction on account of these debts, and that if the plaintiffs recovered, they were entitled to recover the amount of the balance of $17,638.87, as by the account annexed to the deposition of Thomas B. Taylor, marked W, and interest thereon, from January 1, 1846, to time of trial. To which refusal of the court to charge agreeably to the ninth and tenth requests, and to the charge of the court as given, the defendants tender their bill of exceptions, which exceptions are allowed, and signed and sealed by the court. The jury returned a verdict for the plaintiffs, for amount of said account last mentioned and interest, amounting to $21,621.47. To all which several decisions of the court, and refusal to instruct the jury as requested, and to the instructions of the court as given to the jury, the defendants tendered exceptions and prayed that the same be allowed, and which were severally allowed, and signed and sealed by the court."

"S. NELSON [SEAL]"

"ASAHEL PECK"

"Attorney and Counsel for defendants"

Upon these exceptions the cause came up to this Court.

Page 53 U. S. 243

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