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BUCHANAN v. SMITH.

December 1, 1872

BUCHANAN
v.
SMITH.



APPEAL from the Circuit Court for the Northern District of New York, where the proofs, as conceived by the reporter, made a case essentially thus:

The Cascade Paper Manufacturing Company of Penn Yan, New York, had for a long time purchased things used in the manufacture of paper, of Buchanan & Co., merchants in the city of New York, and had habitually given notes in payment. Its dealings with them were considerable, and its credit so good that it was not limited as to time; that when extensions were asked they were given, and that up to March 3d, 1869, its notes had never lain over or been protested for nonpayment. The notes of the company were indorsed by its officers individually, except in one instance, when accident prevented. On the 3d of March, 1869, however, the company were unable to meet a note to Buchanan & Co., which came due on that day, and telegraphed the fact to these last, adding that they had sent that day a draft for half the amount, and a new note at thirty days for the balance. Buchanan & Co. replied (apparently by telegraph on the same day), that they would protect the note; but in a letter of March 4th, reciting these facts (apparently not having received the promised half remittance and new note), they say:

'We are much disappointed at not receiving anything from you to-day. What does it mean? We had used the note, and it was not at all convenient for us to take care of it at so short notice. We shall certainly expect to hear from you by next mail.'

On the 21st of March, 1869, the company's mills were destroyed by fire. The loss was about $80,000; the insurance $45,000 or $47,000. From that time the company did no more business; and, as it afterwards appeared, it was from that time insolvent. At the time of the fire Buchanan & Co. held six notes of the company, to wit:

One for $1000, due March 25th, 1869.

One for $2501, due April 2d, 1869.

One for $1141, due April 6th, 1869.

One for $2293.19, due May 4th, 1869.

One for $2305.94, due June 4th, 1869.

One for $2318.69, due July 3d, 1869.

Two days after the fire the company wrote to Buchanan & Co., informing them of the fact, and, apparently, of the magnitude of their loss. These last replied March 23d, expressing sympathy, and 'a trust that when you get things more settled they may not turn out as bad as you now expect.' They promised in the same letter to take care of the note of the company due the 25th, and to advise in a few days about the other coming due April 2d.

Just before this fire, Mr. Goodwin, one of the firm of Buchanan & Co., had set off on a tour of business, westward. He reached Penn Yan immediately after the fire, and had an interview with the officers of the company, who informed him of the amount of their loss and insurance, and spoke of the notes, and said, 'On account of our misfortune of burning, we shan't be able to meet those notes. Of course we can't get the insurance-money in, and you will have to be easy with us, and wait; but will get your pay in full.' They said that all they wanted was their insurance-money to pay all they owed, and as soon as they got that they would commence to pay. They asked to have the notes renewed, which was afterwards done. They said the concern would be solvent if they got their insurance-money, and expressed their expectation of getting it. No statement was made of the company's debts, and Buchanan & Co., according to their own positive testimony, had no knowledge of any particulars, or of the fact of their debts beyond supposition.

The following letters from Buchanan & Co. now were written. What replies, if any came back, did not appear.

NEW YORK, March 29th, 1869.

THE CASCADE PAPER COMPANY.

GENTLEMEN: In relation to renewal of notes, we shall do everything we reasonably can, though we cannot really afford to renew a single one. You must take into consideration that our Mr. Buchanan has recently met with a greater loss by fire, with less than half the amount of insurance you have, and we really need all the money we can command. We have taken care of the $1000 note due 25th, and you will please send us now note with your individual indorsements, and at as short time as possible. Can't you possibly take care of the one due April 2d and 6th? You see our position, and we trust you will meet the matter accordingly.

Yours truly,

BUCHANAN & CO.

NEW YORK, April 2d, 1869.

THE CASCADE PAPER COMPANY.

GENTLEMEN: Your note for $2501 is payable to-day, and up to this time (2 P.M.) we hear nothing from you in regard to it. We shall be obliged to have it protested if we do not hear from you in time. You have not sent us new indorsed note for the $1000 payable March 25th. We trust in these matters you will only rely upon us, as a question of necessity, and not of convenience. Money is very tight, and we need all that is due us.

Yours truly,

BUCHANAN & CO.

NEW YORK, April 30th, 1869.

THE CASCADE PAPER COMPANY.

GENTLEMEN: Yours of 29th instant, with inclosure, at hand. We are surprised that you should request us to extend your note due May 4th, for your superintendent, Mr. Joy, gave the writer to understand most distinctly that should be paid when due. This he said to him when at your place in March. Mr. Joy then said if we would renew some notes due about that time (which we did) everything would be met promptly after that. We have been obliged to use that note due the 4th proximo, and we are not in a position to take it up. Our payments about this time are exceedingly large, much greater than usual, and we have need of every dollar we can raise to pay our own liabilities. We cannot, therefore, renew your note. You certainly can in some way, with your connections, raise the money, and, if necessary, you ought to be willing to make any sacrifice to do it. If in no other way, we should suppose you could get an advance for the amount you need on your insurance policies. At any rate, gentlemen, you must in some way contrive to pay the note, for we are not in a position to renew it for you.

Yours truly,

BUCHANAN & CO.

NEW YORK, June 5th, 1869.

MR. W. C. JOY,

Superintendent of the Cascade Paper Company.

DEAR SIR: We were very much surprised and very greatly incommoded by getting notice this morning of protest of your note due yesterday, 4th instant, for $2305.94. Have telegraphed you for explanation, and up to this time, 2 1/2 o'clock, have received no reply. This note had been discounted, and as we had heard nothing from you to the contrary, we supposed, of course, it would be paid. You promised us when we had to take up the last one, that after that all your notes would be promptly met. Please attend to it at once, and send funds. What are we to expect in regard to your note due us next week, the 7th instant, for $4701.42? We assure you we are not in a position to take care of that. You must provide the funds to pay that. You have no idea how short we are just at this time, and what a disappointment and trouble it has been for us to-day to take care of your note due yesterday. Let us hear from you at once.

Yours truly,

BUCHANAN & CO.

NEW YORK, June 9th, 1869.

MR. W. C. JOY,

Superintendent of the Cascade Paper Company.

DEAR SIR: Since writing you yesterday we learn the Manhattan Insurance Company paid you some time since about $5000. Under the circumstances, think you should have paid us something on account.

As we understand the matter, there is, beside the Buffalo company, unpaid as follows:

Home, N. H., $10,000

Columbia, N. Y., 3,000

Market, N. Y., 3,000

Atlantic, 3,000

On which there is due about $18,500.

We do not know how serious the difficulties in the way of collecting from these companies may be, but from such information as we have been able to obtain, fear you may underrate them. Under the circumstances we think you should assign your claims against these companies to us, or at least enough of them to cover our claim, which, in round figures, is about $12,000.

The chances of collection in our hands will be quite as good as in yours, and probably a good deal better. If you are correct in assuming that their refusal to pay is the result of Woodruff's interference and management, the assignment to us would be the very best means you can adopt to avoid litigation and loss. We suppose you have a board of trustees, and that in case you make the assignment it will be proper to have a meeting and authorize some officers of the company to execute the assignment. Please let us hear from you by first mail.

Yours truly,

BUCHANAN & CO.

NEW YORK, June 12th, 1869.

G. R. YOUNG, ESQ.,

President of the Cascade Paper Company.

DEAR SIR: We hold the following notes of the Cascade Paper Company, payable to the order of yourself and Mr. W. C. Joy, ...


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