
    Des Arts and another v. Leggett & Leggett.
    A. bought goods of B., to be paid for in the note of 0., whom both parties supposed to be solvent. The goods were delivered, and immediately thereafter the note was tendered; but rumors, affecting the credit of C., having in the meantime arisen, B. refused to receive it. A. kept the note in his possession till it was destroyed by fire, treating it as the property of B. and professing to hold it for his benefit, though having made a qualified and conditional sale of the note to a fourth party, who had notice of all the facts, subject to revocation if A. should require it for any purpose in the anticipated litigation with B. Held, that B. could at any time accept the note in payment for the goods, and maintain an action thereon against the maker, after its destruction, without indicating the acceptance by any other act than that of commencing the action.
    An action may be maintained upon a promissory note which has been accidentally destroyed, without the plaintiff’s giving the indemnity required in an action upon a lost note.
    Upon a valid tender of a chattel or the promissory note of a third person in performance of a contract, the title is changed and the law applies the property in satisfaction of the debt. If. the tender is refused, the party making it may, if he so elect, continue in possession, and thereupon becomes a bailee for the creditor.
    But it seems the party making the tender may, if he so elect, upon its refusal by the other party, acquiesce therein and treat the property as his own, remaining liable, not as bailee, but upon the original contract, per Selden, Roosevelt, Harris and Pratt, Js.
    Appeal from the Superior Court of New-York city. Action on a promissory note made by the defendants, dated October 29th, 1853, for the payment of $943.13, six months from date. The complaint stated that the note was indorsed by the payees thereof to James H. Benedict So Co., who indorsed and transferred it to the plaintiffs, and that on or about March 5th, 1854, while the note was owned by the plaintiffs, it was accidentally destroyed and consumed by fire. At the trial, before Mr. Justice Slosson and a jury, the plaintiffs proved that on the 28th of October, 1853, James H. Benedict & Co. bought of the plaintiffs ninety-five bales of rags, for which they were to give their own note, or the note of Leggett Brothers (the defendants), at six months, without recourse to Benedict & Co., as the plaintiffs might elect. On the next day, which was Satur day, the plaintiffs elected to take the note of Leggett Brothers, and the rags were delivered. On Monday or Tuesday following, Benedict & Co. tendered the note of Leggett Brothers, described in the complaint, corresponding in amount with the price of the rags, and the plaintiffs refused to receive it. There were then rumors affecting the credit of Leggett Brothers, and on Thursday following they failed. There was no evidence that Benedict & Co. knew or had heard anything injurious to the credit of Leggett Brothers until after they were notified by the plaintiffs of their election to take the note.
    The note remained in the possession of Benedict & Co., and on the 4th of March, 1854, they made a conditional and qualified sale of it to one William H. Leggett (the father of the defendants), for thirty cents on the dollar. William H. Leggett was told of all the facts in relation to the purchase of the rags and the tender of the note. The transfer thereof to him was by a written instrument, which, after reciting that the note might be necessary to Benedict & Co. in an anticipated litigation with the plaintiffs, expressly stipulated that the instrument should not operate as such an assignment or transfer of the interest of Benedict & Co. in the note as might in any event interfere with any such disposition or appropriation of the note by them as might be necessary or advisable; and further provided that, in case Benedict & Co. should appropriate the note, they would repay the consideration received on such qualified sale to William H. Leggett. The note was retained by Benedict & Co. in their desk, and on the night between the 4th and 5th of March, 1854, was consumed in a fire which destroyed their store. Some months after the fire the plaintiffs applied to Benedict & Co. for payment for the rags, which they refused, and upon the plaintiffs inquiring where the note in question was, informed them of its destruction by the fire. Shortly afterwards the plaintiffs brought this action. The defendants’ counsel requested the judge to charge that the plaintiffs could not recover without indemnifying the defendants as in an action upon a lost note, which they had not done nor offered to do; and that the plaintiffs acquired no title to the note by the tender, which they did not accept and were not bound to accept. The judge refused so to charge, and the jury, under his instruction, the defendants excepting, found a verdict for the plaintiffs, subject to the opinion of the court at general term. The court at general term ordered judgment upon the verdict for the plaintiffs, and the defendants appealed to this court.
    
      David D. Field, for the appellants.
    
      Mortimer Porter, for the respondents.
   Johnson, Ch. J.

As in this case the plaintiffs, if they can maintain their suit at all, must rely upon title to the note, acquired through the tender made to them by Benedict Sc Co., it is unnecessary to consider whether they were bound to accept the note when tendered. Their present position is, that they have accepted and acquired the title to the note. That the tender made by Benedict & Co. was sufficient in form is not denied; and as the plaintiffs must in this action assume that the note tendered was all that the contract gave them a right to require, it is clear that Benedict Sc Co., immediately upon making the tender, were in no default. They had done everything which they were bound to do in performance of the contract, and all that could possibly be done on their side. The cases in this state are uniformly to the effect that, after such a tender, the contract, under which it has been duly made, can afford no ground of remedy to the party who has refused to accept, but that he must seek his relief by taking the property tendered, or against the party in possession thereof, who is regarded as his bailee. (Coit v. Houston, 3 John. Cas., 243, 258; Sheldon v. Skinner, 4 Wend., 525; Slingerland v. Morse, 8 John., 474; Lamb v. Lathrop, 13 Wend., 95; Bement v. Smith, 15 id., 493.)

The debtor may abandon the goods so tendered, but if lie elects to retain possession of the goods it is in the character of bailee to the creditor, and at his risk and ex pense. (2 Kent Com., 508, 509.)

The principle applies likewise to cases where the con tract remains executory, both as to payment and delivery of the articles tendered; for it has been settled that where goods have been bargained and sold, and the buyer, upon a tender of them, refuses to accept and pay the-price, the vendor may treat the goods as belonging to the vendee and sue him for the whole price, or may sell them on his account and recover the difference between the agreed price and that obtained on the sale. (Sands v. Taylor, 5 John., 395.)

Where, however, the consideration has been received on one side, and all that remains to be done on the other is to deliver specific articles; if they are refused on a tender, and they are not such as entail expenses in keeping or are subject to perish from their natural inherent tendency to decay, the bailee, as the tenderer on refusal will become, by operation of law, if he retain the articles tendered, will not have authority to dispose of them. His whole authority, as well as his character of bailee, proceeds on the ground of a necessary fiction of law, to attain justice, and his authority is not to be extended beyond the necessity in which it takes its rise. Benedict & Co. had, therefore, no authority to sell the note of Leggett & Co. to Wm. H. Leggett; and although he agreed for the purchase and paid the price of it before it became due, it was with full knowledge of the facts relating to it. His title is, there* fore, defective; and as Benedict & Co. held the note as mere bailees for the present plaintiffs, no demand of them for" the note was necessary. It already belonged to the plaintiffs by .the tender, and they might rightfully sue upon it. The case shows that the note was accidentally destroyed by the fire which consumed the store of Benedict & Co. The statute (2 R. S., 406, §§ 75, 76) applies only to lost notes. Upon a note accidentally destroyed an action may be maintained without indemnity. (Hinsdale v Bank of Orange, 6 Wend., 378; Blade v. Noland, 12 id. 173.)

The judgment must be affirmed.

Strong, J.

It does not appear to be necessary on this appeal to.determine whether the plaintiffs were under a legal obligation to accept the note in question, when, tendered by Benedict & Co. in payment for the rags; or assuming that they were, in whom was the title to the note after the tender ? The fact is manifest upon the evidence, that Benedict & Co. thereafter considered and treated the note as the plaintiffs’, and professed to hold it for the plaintiffs’ benefit down to the time of their agreement of sale of the note, with other notes, to William H. Leggett; claiming that by the tender of it to the plaintiffs, in pursuance of their agreement with them, it became the plaintiffs’ property, and that the demand for the rags was satisfied j and there is nothing in the agreement of sale to Leggett showing an intention of Benedict & Co. to take any different position in regard to the note. That agreement, in terms, provides that nothing contained in it “shall in any way be construed into or in any manner operate as such an absolute assignment or transfer of our interest in the said notes as may in any event interfere with or prevent any disposition or appropriation of the same by us as may be necessary or advisablé for the purpose above specifiedand that in case it should be necessary for Benedict & Co., or for their interest, to make the appropriation or application of the notes, the consideration received from Leggett should be returned to him. The consideration received was thirty cents on a dollar; and Benedict & Co. expressly refused to sell the note absolutely for that, stating, as the reason that the note was the property of the plaintiffs, and if they sold for thirty cents they should thereby assume seventy cents, the amount of the discount. This agreement plainly reserves the right of disposition and appropriation of the note, as might be necessary or advisable in reference to past transactions with the plaintiffs; that is, if the plaintiffs would accept the note, to deliver it to them, and if not, to insist upon it, in connection with the tender, as a bar to the claim for the rags. There is no evidence that since this agreement Benedict & Co. have taken any different ground in relation to the note; on the contrary, five or six months afterwards, James H. Benedict, one of the firm, on being applied to by Heuser, one of the plaintiffs, in reference to the claim for rags, told him the plaintiffs had no claim against the firm, and they had nothing to do with it, obviously referring to the tender of the note as a satisfaction of the claim. It is a fair conclusion, from all the evidence, that Benedict & Co. were at all times willing that the plaintiffs should have the benefit of the note and control the same according to their pleasure, and that the former intended to and carefully did avoid doing anything which would interfere with any use of the note by the plaintiffs. They have always intended to insist upon the tender as a defence to the demand for the rags, and to hold the note before it was burned, and the right to it since, subject tc the order and direction of the plaintiffs. Whether, therefore, the plaintiffs acquired a legal right to the note by the tender or not, as Benedict Sc Co. subsequently treated the note and the claim upon it as the plaintiffs’, they might accept it in payment for the rags, and enforce it; and the note having been destroyed by fire, no act was necessary thereafter to indicate such acceptance prior to the commencement of the action. Benedict & Co., by their acts and declarations, have treated the plaintiffs as the owners of the note; and the plaintiffs, by them action, recognize that view as correct, and assert their right. At the least, the defendants cannot complain of the plaintiffs’ title while Benedict & Co. do not. I see no ground of defence in reference to this point, or as to the liability of the defendants to the plaintiffs for the full amount of the note.

The proof of the destruction of the note, by burning, is clear; the statute (2 R. S., 406, §§ 75, 76) giving an action on a lost negotiable note.or bill, upon security to the adverse party, is not applicable where the instrument is destroyed ; and I think in the latter case a recovery may be had without giving security. A destroyed note cannot be in the hands of a bona fide holder, or be subsequently transferred to the prejudice of, or hazard of loss by, the defendant. (Hinsdale v. The Bank of Orange, 6 Wend., 379; Rowley v. Ball, 3 Cow., 303.)

I am of opinion that the judgment should be affirmed.

Comstock, J.

On the twenty-ninth of October the plaintiffs agreed to sell goods to Benedict & Co., and to take in payment the note of Leggett Brothers, the defendants. lío other time being specified, the delivery of the goods and the delivery of the note were to be simultaneous, and either party had a right to call on the other to perform immediately. The goods were delivered on the same day, but, for some cause not explained, the note, which was to be accepted in payment, was not asked for at the time, and was not delivered. About three days afterwards the note was tendered, and was refused in consequence of a rumor which the plaintiffs had heard after the sale affecting the solvency of the makers. A day or two still later the makers failed. Both parties to the contract; so far as appears, had equal knowledge of the circumstances of the makers of the note, and neither had any suspicion that they were not a solvent firm.

If the note had been delivered at the same time with the goods, as the plaintiffs had a right to require, the transaction would belong to a very ordinary class of dealings, in which a commodity is exchanged for the note or obligation of some person other than the purchaser. In such a case, there being no fraud or concealment on the part of the purchaser, the seller takes all the risk of the goodness of the note. If the maker afterwards becomes insolvent, or if it subsequently appear that he was insolvent at the time of the sale, it is nevertheless true that the seller has received for his goods precisely the article he bargained for, and he therefore cannot demand payment over again in any other manner. In the present case the note was not delivered, but that difference in circumstance does not change the principles of the dealing. The goods were delivered without qualification, so that not only did the title pass, but the vendor’s lien for the price in cases of sale for present payment was not retained. The simple result of the transaction was that the purchasers became indebted for the price, the debt being payable immediately, or whenever requested, but payable only in the note of Leggett Brothers according to the terms of the agreement. Their liability to the vendors was the same as though they had given their own note for the goods, payable in the obligations of Leggett Brothers on demand. They had purchased the goods to be paid for in that manner, and, until they should make default in so paying, no circumstances existing in this case could place them under obligation to pay in any other manner. To hold that they must pay in money in consequence of the insolvency of Leggett Brothers, whether existing at the time of the sale or occurring after wards, would be merely making for them a new contract which cannot be done.

Where goods are sold in this manner, the seller, supposing that the third parties, in whose obligations he has received or has agreed to receive the price, are solvent, and after delivery it is discovered that those parties were insolvent at the time, the sale being in all respects a fair one, a question might arise whether a court of equity could be appealed to for the purpose of rescinding .the contract on the ground that it was entered into and performed, on his part, under a mistake of fact. That question need not be examined in the present case. The plaintiffs have never in any manner suggested a rescission of the contract. When they refused the note tendered to them they did not claim their goods. They afterwards, as the case shows, requested payment in another manner, that is, in the notes of the purchasers. That was an affirmation of the sale. They waited about a year without calling in question the validity of the sale, and then they more conclusively confirmed it by“bringing this suit/ upon the note which had been tendered to them in payment.

From what has been said it follows that the purchasers of the goods rightfully tendered to the plaintiffs in payment therefor the note of Leggett Brothers, and the material question now to be examined is whether such tender, notwithstanding the refusal, vested in the plaintiffs a title to the note, so that they can maintain the action upon it.

The effect of a tender, in such cases, upon the contract, upon the title to the thing tendered, and upon the subsequent relations of the parties, has been the subject of considerable discussion in the courts and of some conflict of opinion. In the Supreme Court of New Hampshire it has been held, upon the most elaborate consideration, that an unaccepted tender of specific articles, upon a contract payable in such articles, does not vest a title "n the creditor. (Weld v. Hadley, 1 N. Hamp., 295.) In the same case it was also held that the tender, made according to the contract in all the circumstances of time, place, &c., absolutely and forever discharged the obligation, so that the debtor might use or dispose of the goods tendered as his own and without accountability

■It is very generally agreed that the tender in such cases, if properly made, discharges the contract, The decision in New Hampshire, as we have seen, affirms this doctrine, and it would seem to be clear in principle. A debtor bound to deliver specific articles has done all in his power when he has tendered them at the time and place required by the contract. If the other party is not there to receive them, or if he refuses to accept them, the fault is not in the one who makes the tender. Having done precisely what he agreed to do the law imposes on him no further duty or obligation. He may, therefore, abandon the goods if he chooses so to do, and he is not bound to be at the expense and trouble of keeping them any longer. If, however, he chooses to keep them, he voluntarily assumes a new and different obligation, of which I shall presently speak.

But while the decision referred to stands upon unquestionable ground, so far as a discharge of the contract is concerned, there is, I think, no other case holding that a good tender of chattels or specific things due upon a contract does not vest the title in the creditor, although such tender is not accepted. Chancellor Kent (2 Com., 509) says: “ This [the case of Weld v. Hadley] was contrary to the doctrine declared in other cases; and the weight of argument if not of authority, and the analogies of the law, would appear to lead to the conclusion that on a valid tender of specific articles the debtor is not only discharged from his contract, but the right of property in the articles tendered passes to the creditor.” The adjudged cases go very far to sustain the doctrine thus laid down if they do not absolutely settle it. (Rix v. Strong, 1 Root, 55; Smith v. Loomis, 7 Conn., 110; Curtis v. Greenbanks, 24 Verm., 536; Tin v. Rawley, 4 Barr., 169 ; Case v. Green, 5 Watts., 262; Coit v. Houston, 3 John. C., 243; Slingerland v. Morse, 8 John., 474; Lamb v. Lathrop, 13 Wend., 95; 2 Greenl. Ev., § 610 Parsons on Contracts, 164, 165.) A rule which has been sanctioned on so many occasions and by so many courts ought to be followed, unless it can clearly be shown to be unsound in principle or inconvenient in practice.

If the question were a new one, I should incline to follow the doctrine deducible from the cases which I have referred to. As before observed, the debtor who has contracted to deliver specific articles in payment of his debt, and who makes a valid tender, has done all in his power to perform his engagement. If the transaction is incomplete in conse quence of the' creditor’s neglect or refusal to receive th articles, this is not the debtor’s fault. As to him there is full performance, and he ought not to be burdened with th • contract any longer. To say that he must abandon th articles in order to enable himself at all times to insist that he is freed from the obligation of the contract, is to expose not only the property to waste or destruction, but the debtor to consequences of needless severity, if he happen to have made an insufficient tender, and to have judged erroneously on that point. In that event he remains liable on his contract, while his property may become lost to him. If we say that he must not abandon the articles, but must keep them in readiness whenever called upon to deliver them on the contract, then we merely assert in another form that the agreement is still in force against him, and that he remains indefinitely subject to its obligation, although he has once fully performed it if the tender was good. These results are avoided if we hold that on a valid tender being made the title is changed and the law applies the property in complete satisfaction of the debt. Then the debtor may abandon, if he elects so to do and to incur the hazard. If he does not so elect, but continues in possession, then he voluntarily assumes a new relation, that of bailee and trastee for the creditor, who has become the owner. That relation henceforth becomes the rule and the measure of ills responsibility. If the property is burned or lost, or perishes c?n his hands without his gross neglect, the loss will fall where in justice it ought to fall, on the creditor who is in fault. If he consumes it, or disposes of it to avoid the expense or inconvenience of its preservation, the contract does vot thereby spring into a new existence, but he is responsible to the owner on the principles which govern the new relation he has assumed.

Looking, on the -other hand, to the rights of the creditor, if he erroneously rejects the tender, and the articles are abandoned, he loses, indeed, his remedy in the contract, and he incurs the hazard of losing the property also. This result cannot be avoided, and the rights of the debtor who is not in fault at the same rime be preserved. But the debtor himself will rarely assum-j the hazard of abandoning the property, because he can, with safety to himself, keep it in the character which the iaw imputes to him, of bailee or trustee. According to thv New Hampshire case (supra), that relation does not arise, and the debtor can keep or dispose of the goods as his own. But while this is unjust to the creditor, it does more thu-n justice to the debtor. The debtor should certainly be no worse off because the other party has refused a tender properly made, but there is neither reason nor equity in saying that he is in a better condition than he would be if his tender had been accepted. It is unjust to the creditor, because, if he has judged erroneously in regard to the tender, he has not only lost his debt, but the property also which the law adjudges has satisfied such debt. Now, the question whether a tender has been well made in all the circumstances of time and place, of manner, quantity and quality, is often one difficult of determination even by the courts. If, therefore, a party misjudges in any of these particulars, the consequences to him should not be more serious than the rights of the other party necessarily require. His error should impose no burden, not even the slightest, on the person who is not in fault, but, on the other hand, it should not yield to him a positive benefit.

It is a suggestion not destitute of plausibility that the creditor in refusing the tender rejects the title which is offered to him, and therefore that it must of necessity remain in the original owner. But this is placing upon his conduct a construction somewhat too literal and exact. In such cases the circumstances of the tender, as before observed, are generally open to question and dispute. The creditor, therefore, in refusing to accept it, simply alleges, in substance, that it is defective in some of the particulars required by the contract. This allegation he can only make effectually by the act of refusing. The law will therefore qualify the act by considering it subject to the result of an inquiry into the validity of the tender, • and will not impute it to him as an absolute and. unqualified rejection of the title if the tender be adjudged valid. Looking through forms to substance, the controversy-in all such cases is essentially this: The debtor alleges that the contract is performed, the debt satisfied and the title to the things tendered changed to the creditor. The creditor denies the truth of these allegations. The party against whom they are found is the legal owner. If found against the debtor, he must pay the debt in money, but he has not lost his goods. If found against the creditor, his debt is paid, but the property is his.

From the principles which have been stated it follows that the plaintiffs became the owners of the note in suit when it was tendered to them in payment of the goods. Sometime after the tender and refusal, the purchasers of the goods made a qualified sale of the note to one William H. Leggett. But W. H. Leggett had full notice of the facts which, as we have seen, vested the title in the plaintiffs, and, moreover, the sale to him was made subject to their rights. The proof being direct and positive that the note, after it became the property of the plaintiffs by the tender, was destroyed by fire, they are entitled to recover upon it, and the judgment must he affirmed.

All the judges concurred in the opinion delivered by Strong, J. All concurred in the other opinions, except, first, that Dbnio, J., dissented from the application to the case, where the thing tendered is a promissory note, of the doctrine in which he concurred in relation to a chattel; and Strong, J., expressed doubt on the same ground; second, that Selden, Roosevelt, Harris and Pratt, Js., qualified their concurrence in the opinions delivered by Johnson, Ch. J., and Comstock, J., holding that the party making the tender may, if he thinks proper, acquiesce in its refusal by the other party, and thereafter treat the property as his own, remaining liable, not as bailee but upon the original contract.

Judgment affirmed.  