67 N.W. 293 | N.D. | 1896
The only serious question before us on this appeal is whether the indorsement by the payee of a negotiable note, upon such note of a contract of guaranty of payment at the time he negotiates it for value, destroys its negotiability, and thus renders it, in the hands of the purchaser, subject to all defenses. The notes in question were executed and delivered by defendants to A. H. Laughlin; and, before their maturity, they were transferred by him to the plaintiff. The consideration for the transfer was a credit by plaintiff upon a note held by him against Laughlin of the amount of these notes so transferred to him. At the time
We are therefore brought to the question whether plaintiff’s standing as an indorsee of these notes is destroyed by the form of the indorsement. Such indorsement was in the following words: “For value received, I hereby guaranty the within note, waiving notice of protest and demand.” Beneath this guaranty the payee, Laughlin, signed his name. In determining whether, under the facts of this case, plaintiff is an indorsee of these notes, we must fall back upon elementary principles, and especially must we keep in mind the foundation of the rule which exempted negotiable paper in the hands of a bona fide purchasar from equities existing against it in the hands of the payee. The assignee of an ordinary chose in action took it subject to all defenses. The reason for this rule was the defect in his title. The assignment did not transfer to him the legal title. It was only in equity that he was regarded as the owner. In a court of law he was obliged to sue in the name of the assignor, and on this account the assignment was without prejudice to defenses against the chose in action in the hands of the assignor. But a different rule has long prevailed with respect to negotiable paper. The necessities of commercial life impelled the courts to resort to the fiction that, when such an instrument was transferred, the legal title to
The only argument against the proposition that such an indorsement constitutes an indorsement according to the law merchant is that, by expressing the contract of transfer which is always implied from the mere fact of indorsement, the negotiator of the paper has manifested a purpose to destroy the negotiable character of such paper. But the courts, with the two exceptions above noted, have refused to draw such an inference from the fact that an assignment in terms is written above the indorsement. On what principle, then, can it be said that the fact that a guaranty is written above the indorsement discloses a purpose to affect the negotiable character of the paper. Such a contract is an indorsement, and it is more. It is, indeed, under our statute, exactly equivalent to an indorsement with waiver of demand and notice. An indorser who is not entitled to insist upon
In view of the fact that it has long been the usage in this state of persons and corporations engaged in the business of purchasing and discounting 'commercial paper to have the indorser sign a guaranty of payment, and in view of the further fact that the legal effect of such an indorsement is precisely the same as that of a simple indorsement with waiver of demand and notice, we would regard it as a very unwise and entirely unjustifiable decision to hold that such a negotiation of such paper was not an indorsement of it within the law merchant. That a guaranty indorsed by a payee on the paper itself is equivalent to an indorsement with waiver is clear under our statutes, and also independently of them, upon common-law principles. Said the court in Brown v. Curtiss, 2 N. Y. 225, at page 230: “The direct engagement of the indorser of a negotiable note, and of the guarantor of the payment of a note, whether negotiable or not, is the same. Both undertake that the maker will pay the amount when it shall become due. If there is a failure in such payment, both contracts are broken. Ordinarily, upon the breach of a contract, the party bound for its performance immediately becomes liable for the consequent damages. In the case of the indorser of a negotiable promissory note, however, the liability does not become absolute, unless due notice of nonpayment is given to the party whom it is intended to charge. This is not because the indorser has thus stipulated in terms, but it is a condition annexed by the rules of the commercial law. In the case of a guarantor there is nothing to exempt him from the ordinary liability of parties who have broken their contracts, which is direct, and not conditional. No condition requiring notice of nonpayment is inserted in the contract, nor is any inferred by any rule of law.” In our judgment, this mooted question, whether the fact that, in addition to indorsing the paper, the person who negotiates it writes above his indorsement a special contract, takes from the act of indorsing the legal character of an indorse
For this error, the judgment is reversed, and a new trial is ordered.