
    RICHARD S. GRANT, Survivor of OLIVER DE FOREST GRANT, Plaintiff, v. ROBERT L. TAYLOR, Defendant.
    
    General liens of a banker or broker for a balance of account are not favored (2 Kent's Qommmtwries, 634, 636).
    If there be a usage giving to persons engaged in discounting, buying, advancing on, or selling bills or notes, a lien for a general balance against their customer, such usage should be proved. It will not be presumed to exist in the absence of an express agreement. Courts have taken notice, judicially, of the lien of bankers who are strictly such, and who are dealers in money; bnt even the lien of a hanker does not exist in any case, if there be circumstances existing that are inconsistent therewith (3 Mainning, Granger, and Scott).
    
    The circumstances in the case at bar are entirely inconsistent with the lien of the plaintiff upon the drafts in suit for a general balance, and plaintiffs cannot hold nor recover these drafts for a general balance of account after the specific advances made upon them have been paid.
    When there is no existing right to detain the possession of the collateral after a specific loan upon it has been paid, no lien can exist upon it after-payment. The right of a debtor to pay the advance, and take up a collateral before its maturity, is not reconcilable with the existence of a right in the creditor to hold on, and keep the collateral, after the payment of such advance, for any general balance due him from the debtor for other-indebtedness.
    This action having been brought upon the acceptances, and no allegations nor any issue made therein claiming to recover them, because of this lien, for a general balance against the person who pledged them, the plaintiff cannot recover on any such ground, and the judgment must be reversed.
    Before Morell, Sedgwick, and Var Vorst, JJ.
    
      Decided March 1, 1873.
    Appeal from a judgment entered upon the report of a referee by both parties.
    The firm of Grant & Son, of whom the plaintiff is the survivor, as the holders of eight separate bills of exchange, for ten thousand dollars each, drawn by Henry W. Hubbell upon and accepted by the defendant, commenced three separate suits against the defendant, the acceptor—the first action upon one, the second upon three, and the third upon the other form of the acceptances, the plaintiffs demanding judgment against the defendant in the three actions for $80,000, besides interest and protest fees.
    By an order made by the court, after the actions were severally at issue, they were consolidated into and tried as one action. The bills are dated respectively, August 19th and 28th, and September 4th, 6th, 9th, 11th, 13th, and 19th, 1867. They are all at three months, except the second, which was at ninety days, and the eighth, which was at four months from date. Grant & Son obtained the bills from Hubbell, the drawer, to whose order they were severally made payable, and by whom they were endorsed. Hubbell, the drawer and endorser, is not sued.
    The defendant, before accepting the eight bills in suit, had been engaged in certain joint adventures with Hub-bell, in importing goods from the East Indies, under credits from bankers in Hew York, and against these credits drafts had been drawn by Hubbell and accepted by defendant to pay for the merchandise. The merchandise had been received and sold by Hubbell, and their proceeds were received by him.
    Acceptances of the defendant had been obtained by Hubbell in a form similar to the ones in suit, for several years previous to the year 1867, under statements made by Hubbell to defendant, that it was necessary to raise money to pay drafts under the credits as they became due, and before the proceeds of the shipments of merchandise were realized.
    The eight drafts in suit were accepted by the defendant and delivered to Hubbell at his request, to meet the payment of drafts drawn against the credits given. The acceptances were made for no other purpose or consideration. The acceptances were to be used at the banks where Hubbell kept his accounts ; such was the defendant’s understanding at the time he made the acceptance. The City Bank was the only bank known to the defendant in which Hubbell kept his account.
    Grant & Son, whom plaintiff survives, were bankers and brokers in the city of Hew York, and as such purchased, discounted, and sold bills and notes. With the firm of Grant & Son, Hubbell had had many transactions for several years. They had been his brokers for the purchase and sale of gold. He had exchanged checks with them. He had a currency account with them, and they were interested with him in a steamer called the “ Shining Fairy,” in which they had a part interest.
    On the 19th day of September, Hubbell delivered to Grant & Son five of the bills accepted by defendant, bearing date respectively on the 4th, 6th, 9th, 11th, and 13th September, for the purpose of raising money thereon by their sale. Grant & Son were to sell the paper, and in anticipation of their sale they advanced him thereon on the same day, and within an hour of the receipt of the bills by them, the sum of forty-five thousand dollars. On the 20th September, Hubbell in like manner, and for a like purpose, delivered to Grant & Son a sixth acceptance, being the one dated the 19th day of August, and obtained an advance or loan thereon, in anticipation of its sale, of five thousand dollars. On the 28th day of September Hubbell in like manner, and for a like purpose, delivered to Grant & Son a seventh acceptance, being the one dated the 28th August, 1867, and obtained an advance or loan thereon, in anticipation of its sale, of the sum of ten thousand dollars. On the 17th day of October, 1867, Hubbell obtained from Grant & Son two loans—one of twelve thousand dollars, and the other of six thousand dollars, in all eighteen thousand dollars, upon no express terms. On the same day Hubbell paid back, on account of the same, six thousand five hundred dollars, leaving a balance due Grant & Son, on the transactions of that day, of eleven thousand five hundred dollars. Afterwards, on the same day Grant & Son called upon Hubbell for collateral security for the payment of the balance of the loans of that day, and he delivered to and left with them for that purpose, the eighth of said acceptances, being the one bearing date the 19th day of September, and which last acceptance Grant & Son were also authorized by Hubbell to sell.
    
      Both Hubbell and defendant failed, and made an assignment for the benefit of their creditors on the 23d of October, 1867. The defendant did not know, until after the failure, that the eight acceptances had been placed with, or were in the hands of, Grant & Son.
    Of the sum of forty-five thousand dollars, loaned and advanced by Grant & Son on the five acceptances delivered to them by Hubbell on the 19th September, Hub-bell used thirty-five thousand dollars in taking up and retiring other outstanding paper previously made and used for the joint business of himself and Taylor.
    It does not appear what particular application was made of the balance of the advance of that day, or of the other moneys obtained from Grant & Son, by Hub-bell, above specified. The referee before whom the action was tried has, however, found “that all the intervening and subsequent advances and cash charges were used in the general business in which the said Hubbell was then engaged,” and to which he adds : “which it is fairly to be inferred, and I therefore find, “was the said joint business of himself and the said “Taylor, as there was no proof that the said Hubbell “ was engaged in any other business.”
    Heither the inference nor finding of the referee is justified by the evidence, for the case shows that Hubbell was engaged in other business not necessarily connected with the adventures in which he was jointly concerned with defendant. There were transactions of his in gold and currency. He was a large borrower of money from Grant & Son, other than on the drafts in question. The presumption would, be, as there was no general copartnership formed between Hubbell and defendant, that these other operations were on his individual account. If they were connected with the special joint adventures in the importation of merchandise from the East, evidence of this should have been affirmatively given.
    The moneys advanced by the plaintiffs’ firm on the, drafts in question were not charged on their books to Taylor and Hnbbell, bnt to Hnbbell individually, as were also the other sums loaned by them to him from time to time, to large amounts. The name of defendant does not appear on their books as a debtor to them.
    Nor is there any evidence that Grant & Son regarded the defendant as liable to them for the moneys advanced on the drafts, in any other light than as the acceptor of the drafts upon which they had advanced the moneys. The loans were made to Hubbell on the strength of defendant’s name being on the drafts as acceptor.
    The referee has also found that Grant & Son were authorized, from the business relations and course of dealings between themselves and Hubbell, to sell the drafts in question, on which they had advanced the moneys, “on the street, or to become the purchasers “thereof themselves, at the value of such paper, hav“ing reference to the business standing of the parties “to it and the current rates of money, and to apply “the proceeds to the credit of said loans; and said “paper was left as collateral for said advances made “upon it, subject to such disposition of it by Grant & “ Son ; and if not so sold or discounted, was to remain “in the hands of Grant & Son as collateral security for “such advances, and for any general balance of ac- “ count.”
    On the 26th September, 1867, John W. Thompson, of the National Bank at Ballston Spa, N. Y., wrote to Grant & Son, proposing to buy paper from them in these words: “We want to buy 10, 20, 25 thousand “dollars fire-proof paper, three or four months to run “ or less. Have yon any that yon know is good beyond “question?”
    On the 28th September Grant & Son enclosed to Thompson, by letter, a list of paper which they proposed to sell, amounting to over $50,000, made by Hoyt, Tillinghast & Co., and other parties, amongst which were two of the acceptances of the defendant for $10,000 each, which they had taken from Hnbbell on the 19th September ; and they offered to sell some to him at the rate of 8 per cent, per annum discount. In their letter they advised Thompson that they considered Taylor’s paper as good as either of the others.
    On the 30th September Thompson enclosed the money to Grant & Son for the purchase of the acceptance of Taylor for $10,000, which fell due on the 12th December, being one of the five acceptances first received by them from Hubbell; and on the 2d October, Grant & Son sent to Thompson the acceptance in question, with a check for the discount allowed him.
    The referee has found “That on the second day of October, 1867, the said Grant & Son elected to become the purchasers of the said five drafts (the five received by them on the 19th September), and did actually discount the same “at the rate of twelve per cent, per an“num interest, and one-fourth of one per cent, com- “ mission, which was allowing all that said paper was “ worth at the time ; and on said second day of October “said Grant & Son so entered said transaction in the “statement book, being the book in which such transactions were originally entered, and afterwards carried “ the same into several other of their books ; by which “entries they credited the said Hubbell with the “amount of the said drafts, less said sums advanced, “and said interest and commission.”
    On the 4th October, 1867, the advances made on the first seven acceptances were carried by Grant & Son into the general account of Hubbell on their books.
    The referee further finds that Grant & Son never rendered any account of said transaction, so entered on their books, of the discount by them of the five drafts on the second of October to Hubbell. That they made out a statement to be sent him, but on the nineteenth of October following, fromfacts and circumstances which came to their knowledge, their confidence in the "business standing and responsibility of Taylor and Hubbell became so impaired as to lead them to apprehend their speedy failure; in consequence of which Grant & Son, on the 19th day of October, caused entry to be made in their statement-book, and in their other books, reversing the entries of the second of October, intending thereby to cancel the same.
    The referee has found as a conclusion of law, 4 4 That the entries in the book of Grant & Son made on the 2d October, 1867, stating the discounting of the five acceptances, and the sale of one of them to John W. Thompson,and the other circumstances attending the transaction, are evidences of an agreement on the part of the said Grant & Son with the said Hubbell to purchase and discount the said five acceptances at the rate of twelve per cent, per annum, for the time they had to run, and one-fourth of one per cent, commission, and that the same was a usurious and unlawful agreement, and rendered the acceptances void in the hands of Grant & Son, and that they are not entitled to recover on the same, but should surrender them to Taylor; and that the entries made by Grant & Son in their books on the 19th day of October, by which they attempted to cancel the said transaction, were without legal effect in purging the same of usury.”
    But the referee further finds, as conclusion of law, “that the illegal transaction in the purchase and discounting of the five acceptances did not taint with usury, or render illegal the loan of forty-five thousand dollars previously advanced upon tire collateral security of the five acceptances, but that the same remained good and valid.”
    So much of the referee’s report as finds the five acceptances void in the hands of Grant & Son for usury on the grounds stated by him, are excepted to by the plaintiff; the portion which finds the original loan of forty-five thousand dollars to be untainted by usury, and that the same remains good and valid, has been excepted .to by the defendant.
    
      George H. Foster, for plaintiff.
    
      Joseph H. Choate, for defendant.
   By the Court.—Van Vorst, J.

As both parties have appealed, this subject requires examination. The conclusion of the referee must be considered in connection with his fourth finding of fact, in which among other things he finds in these words : ‘1 The said Grant & Son “ had been the bankers and brokers of the said Hubbell “ in his prosecution of the said joint business during the “whole time that the said firm of Grant & Son had been “in existence, dating from some time in the year 1861 ; “ and prior to the year 1869, they had frequently sold “the paper of the said Hubbell and Taylor for the ac- “ count of said Hubbell, in conducting the said joint £ £ business at the current market rates. During the year “ 1867, such paper was unsalable, but from the business “ relations and course of dealings between the parties, “ the said Grant & Son were authorized to sell the said “ collaterals on the street, or to become the purchasers “ thereof themselves at the value of such paper, having “ reference to the business standing of the parties to it “ and the current rates for money, and to apply the pro- “ ceeds to the credit of said loans, and said paper was “ left as collateral for said advances made upon it, subject to such disposition of it by Grant & Son.”

It was acting under this understanding and course of dealing, without doubt, that the plaintiff on the 28th of September offered to John W. Thompson $20,000 of the paper at a discount, in excess of the legal rate of interest. Thompson took one note at that rate. There is no evidence that the plaintiff at the time reported that transaction to Hubbell. But on the 2d October, the day on which they sent the draft to Thompson, they expressed their election in writing in their own "books, to take to themselves all the five acceptances, at the rate of 12 per cent, per annum, including the one already disposed of to Thompson at 8 per cent. They could not have properly taken to themselves this difference of four per cent, on the sale of this acceptance, unless they were justified in the act of crediting Hubbell with the avails of the five acceptances on that day, at the rate of 12 per cent., and charging the same to themselves. Grant & Son had fixed the market value of the paper in then-letter to Thompson, and had pronounced the paper good. The findings by the referee, and the facts and circumstances above alluded to, seem to justify the conclusion to which he came, that these five acceptances were void in the hands of Grant & Son, on account of usury.

But it is difficult to perceive upon what principle the referee can make a discrimination in favor of the moneys loaned, and exempt them from the taint which he fastened upon the drafts The acceptances were placed in the hands of Grant & Son, and the money was loaned and advanced by them on the faith of the paper left with them. When they advanced the money, they did so with the expectation of reaping all the advantages which the possession of the acceptances under the understanding and agreement, which the referee has pronounced usurious, would give them.

This advantage was to accrue to them on account of the loan and forbearance of the money. As far as appears, that was the only consideration for the advances.

If instead of advancing forty-five thousand dollars, they had advanced the whole amount of the first acceptances, less twelve per cent., under an understanding or agreement, that they could take to themselves the paper at an usurious rate of interest, they could no more recover the moneys advance as a loan, than they could successfully maintain an action upon the papers upon which the money was loaned. The referee has found as facts that Hubbell had made payments to Grant & Son, and was entitled to money credits against them, subsequent to the 19th of September, which in the aggregate exceeds the sum of sixty thousand dollars, the amount of the specific advances made by Grant & Son on the first seven drafts; on the eighth acceptance no specific advance was made. The referee applies these payments and credits to the extinguishment of these specific advances made on the seven acceptances, and he finds as conclusion of law, that by the payments which were made on general accounts by Hubbell to Grant & Son, and the credits in his favor, between the 19th of September and the 26th of October, all the specific loans or advances of money on account of which the said seven acceptances were delivered to Grant & Son by Hubbell as collateral security, were paid.

To the findings of the referee in these respects, the plaintiff has excepted ; but we can discover no error in principle in the application of the payments made by the referee. There having been no application made by the parties at the time the law would apply them, which the referee has done, and there is no good reason assigned to disturb the application and findings made by him in this respect.

But the referee, after applying the payments and credits of Hubbell to the extinguishment of the specific advances made by Grant & Son on the seven acceptances, finds that there is a balance against Hubbell, on “ all the accounts and transactions” between the parties, of $40,937.96, and for which general balances both Hubbell and the defendant are jointly liable, and are jointly legally chargeable therewith. And he also finds as conclusions of law, that Grant & Son as bankers, both by agreement and in law, had a general lien upon the said drafts for any balance of account which -there might at any time be in the course of the dealings in their favor against Hubhell; and that the last three drafts, exclusive of the five which he finds to be tainted with usury, are good and valid securities in the hands of the plaintiff for such balances, and that he is entitled to recover on such three drafts, against the defendant, the principal and interest of such balance of $40,937.96 ; and he reports accordingly, that the plaintiff is entitled to judgment against the defendant for the. balances. The evidence in the case, upon which the referee bases his findings, of any agreement between Grant & Son and Hubbell, that they should retain the drafts for any general balance of account in their favor against Hubbell, is far from satisfactory, and is based upon some general statements of Hubbell, who was a witness on the trial when such agreement was made, and upon what consideration and under what circumstances does not appear.

The weight of evidence rather tends to show that the first seven drafts were left as collateral security for the specific advances, amounting in the aggregate" to sixty thousand dollars, made thereon, and that they were to be sold by Grant & Son as Hubbell’s brokers, and the advances retained thereout; or, as the referee has found, Grant & Son had themselves an election to take them at the market rate. It does not appear that any such right to detain for a general balance had ever been claimed or set up by Grant & Son on any previous occasion ; but that, when acceptances had been theretofore paid to Grant & Son by Hubbell, they were delivered up.

In his fifth finding of fact the referee expressly finds, that in all similar prior transactions in the year 1867, the loans made by Grant & Son on the collateral security left with them by Hubbell were either paid by Hubbell and the collaterals talcen up by him before their maturity, or such loans were extinguished by the collection of the amount thereof "by Grant & Son from the collateral securities at maturity.” Such previous dealing is entirely inconsistent with any right to detain the securities for a general balance. When there is no right to detain the possession of the collateral, after a specific loan upon it is paid, there can be no lien upon it after payment of the loan. The right of the debtor to pay the advance and take up a collateral before maturity, is not reconcilable with a right in the creditor to hold on after payment for any general balance. A right of possession is an essential ingredient to a lien upon personal property.

On the days when these particular drafts were left with plaintiff, there is no evidence that anything was said or agreed that they were to be detained for any general balance of account, and there is nothing in the previous dealings of the parties, as already urged, which tends to show that any such right was set up or supposed to exist.

Besides, the conduct of Grant & Son, in offering for sale two of the drafts to John W. Thompson, in September, shows conclusively that they had no idea of any right to hold on the paper after its payment; for by such disposition they would put it out of their power to do so. •

But there is another objection to impressing these acceptances with a lien for a general balance of account in favor of plaintiff.

The eight drafts were accepted by defendant for a specific purpose, to meet the payment of drafts drawn against credits given on the purchase of merchandise, and to be used at the bank where Hubbell kept his account, which was proved to be the City Bank.

At the time they were taken to Grant & Son, no consideration had as yet been received by either maker or acceptor. They were in no true sense, as the referee supposed, and has found, “ business paper. ’ ’

Hubbell could not pledge them for any previous indebtedness from himself to Grant & Son, nor could he leave them properly as security for any moneys other than such as he might specifically obtain upon them.

General liens for a balance of account are not favored (Kent’s Com., Vol. 2, pp. 634, 636).

If there be a usage giving to persons engaged in discounting, buying, advancing on, or selling, bills or notes, a lien for a general balance against their customer, such usage should be proved. It will not be presumed to exist in the absence of an express agreement. Courts have judicially taken notice of the lien of “ bankers,” who are strictly such, and who are dealers in money. But even the lien of a banker does not exist if there be circumstances in any case inconsistent therewith (Bradnas v. Barnett, 3 Manning, Granger & Scott).

There are circumstances in this case above alluded to which are entirely inconsistent with a right to detain the drafts for a general balance.

It is obvious from these considerations that Grant & Son cannot hold nor recover on these acceptances for a general balance of account after the specific advances made upon them have been paid.

Besides, this action is brought upon the acceptances. There is no allegation in the complaint seeking to charge defendant jointly with Hubbell for this balance, and no opportunity has been given to the defendant by way of answer to deny his liability, express or implied, for any such balance of account. There was no issue on this subject raised by the pleadings.

If Taylor was at all liable for such balance, he was so jointly with Hubbell, and should be sued with Hub-bell therefor. A joint debtor cannot be separately prosecuted by such. indirection, especially when his joint liability is disputed.

In addition, it also appears by the evidence that long after these actions were commenced, and in the month of January, 1869, the plaintiff commenced an action in this court against the defendant Hubbell individually, in which he demands judgment against him for moneys advanced and lent to him subsequent to the 19th September, 1867, and in which he demands judgment for $40,937.96, the precise balance for which the referee has found that plaintiff has a general lien on the drafts in question, and for which judgment has been rendered upon the referee’s report against the defendant in this action. It also appears by the evidence that Hubbell has consented in the above-mentioned action of the plaintiff against him individually, that judgment be entered against him therein for such balance.

In the form in which the defendant is sued, he has had no opportunity to set up by answer the effect of this subsequent action brought by plaintiff, and the offer of Hubbell therein. But in any aspect, the assertion of the plaintiff in such formal way by action of a claim against Hubbell individually for this balance, would appear to be inconsistent with a claim of a joint liability against Taylor and Hubbell for the same cause of action.

For these reasons the judgment founded upon the report of the referee is erroneous, and should be reversed. Having come to this conclusion, it is not necessary to pass upon the other grounds of reversal urged by the defendants, growing out of the execution of the compromise agreement of the 21st November, 1867.

The judgment appealed from should be reversed, the order of reference set aside, and a new trial ordered, with costs to the appellant to abide the event.

Monell and Sedgwick, JJ., concurred.

Noth.—The following case (Taylor v. Grant) relates to the same securities, and was decided upon nearly the same points.—Reporters.  