Bishop v. Dexter

| Conn. | Jun 15, 1818

Swift, Ch. J.

It appears, that Dexter, the defendant, indorsed to Converse a negotiable note against Whittlesey, after it was due, and had been put in suit; that Converse indorsed it to Judd, and Judd to Bishop the plaintiff; that after the indorsement by the defendant, no demand was ever made of Wrhittlesey the maker of the note, and no notice ever given to the defendant. The plaintiff claims, that he has a right to recover of the defendant on his indorsement, the note never having been paid by Whittlesey.

The indorsement of a bill or note after due is equivalent tr drawing a new bill payable at sight; and demand must be made by the indorsee of the drawer of the bill, or maker of the note, and notice given to the indorser, as iu cases of bills payable at sight. It appears, that no demand was ever made of -Whittlesey, by any of the indorsees of the note, and no notice ever given to the defendant of the non-payment : of course, he became discharged from any liability on his in-dorsement.

It lias been contended for the plaintiff, that when a note is indorsed by the payee after due, a subsequent indorsee, without knowledge that the first indorsement was made after the note was due, has a right to presume that a proper demand had been made, and notice given, when it fell due : and is not bound to make demand or give notice, to enable him to recover of the first indorser. But this is not onh repugnant to the principle that flic indorsement after due is equivalent to drawing n new bill, and must he proceeded with as such ; but would lead to the practice of the grossest frauds ; for the first indorsee might neglect to make demand* and give notice* by which the liability of his indorser would be discharged, and then, by a subsequent indorsement, he might create a new rigid, in bis indorsee to recover against the first indorser, after the note had been lost by his negligence.

It has been contended, that this note having been put in suit by the defendant, this was equivalent to a demand and notice ; for he knew the note would not be paid. But the indorsement put an end to the suit, as the property of the note vested in the indorsee. He was bound to proceed with it, in the same manner, as if it had not been sued. The circumstance, that the note had been put in suit, was not stronger evidence that it would not have been paid by the maker, if presented, than insolvency; and it is agreed, that this would not excuse demand and notice.

As this point is in favour of the defendant, and he is entitled to judgment, it is unnecessary to consider the other question.

Hosmee, J.

The charge to the jury, was entirely correct. It is not necessary, however, to enquire, whether the parol testimony offered to shew that Converse received the note to collect at his own risk, ought to have been admitted. But, as this question arises in the case, I will express my opinion upon it.

It is unquestionably clear, that if a person take a bill or negotiate a note, after it is due, he receives it on the credit of his indorser, subject to all the equities with which they are encumbered. Chitty 114. Swift’s Ev, 30. Brown v. Davies, 3 Term Rep. 81. Tinson v. Francis, 1 Campb. 19. Callaghan v. Sawyer, 5 Johns. Rep. 118. Boehm v. Sterling, 7 Term Rep. 423. Gold v. Eddy, 1 Mass. Term Rep. 1. Ayer v. Hutchins & al. 4 Mass. Term Rep. 370. Herrick v. Carman, 10 Johns. Rep. 224. But, this principle has no bearing on the point relative to the rejection of the parol testimony. Whittlesey had given a negotiable note to Deleter after it had become due ; Dexter having indorsed it in blank, transferred it to Converse ; and Converse, as the defendant offered to prove, received it to collect at his own risk. Posterior to this, the note was indorsed by Converse to Judd, and by Judd to the plaintiff, without any intimation, that the contract of Dexter was different from what it appeared to bo on the note itself. A blank indorsement is an absolute transfer. Swift's Ev. 542. It is an agreement: in writing, that if the indorsee, by the use of legal measures, cannot collect the note of the maker, the indorser, on reasonable notice, will pay it. As between the indorser and indorsee, parol testimony to contradict or vary this written engage - ment, cannot he admitted, 9, Swift’s Syst. 158. And if this be correct, it will not be contended, that it is admissible against those who derive a subsequent title. Even a written contract given to the indorser, separate from the note, is valid only between the parties. 2 Swift’s Syst. 158. Now, in the case before us, the. evidence rejected was not offered to evince an equity, but to contravene a contract in writing, In my judgment, it was inadmissible in every view. The case of Wilkinson & al. v. Nicklin & al. 2 Dall. 396. I consider as in point. The defendants offered to shew, that a bill indorsed by them in blank, and remitted to Cram~ moud k. Co., indorsed to the plaintiffs, was directed by them to be credited to their account. From its having been noted for non-acceptance, and other circumstances, they proposed to contend, that: the plaintiffs knew* the bill was their property. The defence was not admitted, “ 'Hiere is” (said Chase, J.) ‘too rule more perfectly established, there is none which ought to be held more sacred in commercial transactions, than that the blank indorsement of a bill of exchange passes all the interest in the bill, to every indorsee in succession, discharged from any obligation which might subsist between the original parties, but which does not appear upon the face ol the instrument itself.”

With respect to the necessity of demand on the maker by the indorsee, and reasonable notice to the indorser, there can exist no serious question. A bill may be negotiated after it has become due. Chi tty 113. The indorsement of it afterwards, is equivalent to the act of drawing a bill payable at sight. Chitty lis. The indorser isa new drawer, and has right to insist, that the same steps should be resorted to for the collection of it, as if he had been the drawer of ⅜⅛ bill originally. By drawing, he incurs the same legal obligation. Lloyd v. Keach, 2 Conn. Rep. 189. et vid. the cases there cited.

In the adjoining states at Massachusetts and Mew-Fork,, it has recently been determined, that a note indorsed after due, must be demanded of the maker, and notice of his neglect or refusal to pay, given to the indorserin a reasonable time. Field v. Nickerson, 13 Mass. Term Rep. 137. Berry v. Robinson, 9 Johns. Rep. 121. Agan v. M‘Manus, 11 Johns. Rep. 180. These decisions, conformed to undoubted principle, arc conclusive on the question,

Gouid, J.

Admitting, what, under the particular circumstances of the case, happens tobe of no importance, in the result — that the plaintiff, though he received the note, when it was over-due, might have entitled himself to a recovery against the defendant, notwithstanding the agreement, alleged to have been made by Converse ; yet the omission of a demand upon the maker, and of notice to the defendant, forms a fatal objection to the action. It may be observed, in the first place, that the understanding of the several indorsers and indorsees, as inferable from the nature of the transaction, must have been, that, to create a right of action, upon either of the indorsements, such demand should be made, and notice given, by the indorsee. For otherwise, the liability of each indorser would be primary and unconditional; and an action would lie against him, upon his indorsement, instantly upon its being made, without any act whatever, to be done by the indorsee, to consummate his right of recovery. And the defendant’s liability would, upon this supposition, be precisely the same, as if, instead of indorsing another’s note, lie had given his own, payable on demand.

Now, such a result, as this, would be evidently inconsistent with the views and intention of all parties ; and equally so with the nature, and legal effect, of the transaction. The indorsing of a note, is, in substance, the same thing, as the drawing of a bill of exchange : and there is nothing to take the present case out of the general rule ; which, as the note had already become payable, required the plaintiff to make demand of the maker, within a reasonable time. For though the, latter had suffered himself to be sued, it does not follow, that he would have refused payment, if demand had been duly made by the plaintiff. And as the maker was, in fact, as well as in form, the original debtor, and so regarded by all parties: the plaintiff must be taken to have purchased the note, with the understanding, (and so far as respects the liability of the indorsees,) upon the tacit condition, that lie was to resort, in the first instance, to the maker; and of muirse, to conform to the general rule, in relation to demand and notice. Besides, the manifest inexpediency of multiplying exceptions to established general rules, in the mercantile law, furnishes, in my judgment, a distinct, and strong objection to the motion. Such exceptions should be admitted only for the dearest and most decisive reasons : in as much, as they tend to complicate a class of transactions, in which all practicable simplicity is eminently important; and to create uncertainty, in a branch of the law, in which ft would be more mischievous, than in almost any other.

The other Judges were or the same opinion, except Chapman, J. who gave no opinion, having been absent when the case was argued.

New trial not to be granted.