Helfer v. Alden, Cutter & Hull

| Minn. | Dec 15, 1859

By the Gowrl

— Emmett, C. J.

A careful review of the authorities leads to the conviction that the rule on the subject of the negotiability of notes and other contracts, is correctly stated in the case of Burkhead vs. Brown, 5 Hill, 635-616, where it is held that in this country no instruments are negotiable but regular promissory notes and bills of exchange. An instrument under seal, though in the form of a promissory note, is not a negotiable instrument, and has never been held to be negotiable except in those States where the rule has been changed by statute. Our State, however, has not altered the rule. The language of our statute is, so far as it goes, in the precise words of the 3 <& 4 and 7 Anne, and the English statute has always been construed not to extend to notes under seal, which are more properly bonds or single bills.

But although a note may not be negotiable, yet if it be indorsed by the payee, the indorsement, as between him and his immediate indorsee, ordinarily creates the same liabilities and obligations on the part of the payee as the indorsement of a negotiable note, but not as to subsequent holders, unless the indorsement makes it payable to the indorsee or his order, or the indorser expressly promises to pay the note to the holder in consideration of the indorsement. Story on Promissory Potes, See. 128, a/nd authorities cited in note (1). Such subsequent holder, however, always had a remedy against the payee and maker, for he might use the name of the payee, even without his consent, in an action against the maker, and that of the indorsee of the payee in an action against the payee— the great difference being, that he took the note subject to the equities existing between the original parties, and could not sue in his own name. Ohitty on Bills, 142. But in equity he could maintain a suit in his own name against any or all the parties, and in this State he not only may, but is expressly required to bring the action in his own name, he being the real party in interest. Story on Promissory Potes, Sec. 129; 3 Watts & Sargeant, 410; 1 American Leading Oases, 323; Com. Statutes of Min., 534, Sec. 27.

The reason of this doctrine, as given by Judge Story, is very satisfactory, and applies as well to notes under seal as to any other non-negotiable note: “Every indorsement,” says that learned writer, “ operates, in legal contemplation, between the parties thereto, as the drawing of a bill of exchange, by the indorser in favor of the immediate indorsee. It is, in fact, a request of the indorser, that the maker (who stands in this respect very much in the situation of an acceptor) would pay the amount to the indorsee or other holder, if the indorsement is not restrictive. Indeed, it may be treated with strict propriety as an authority given to the indorsee to receive the money due on the note, and also as an undertaking that it shall be paid to him upon due presentment, and therefore as involving, in case of dishonor, and due notice thereof, the ordinary responsibility of an indorser of negotiable paper. But the same considerations do not apply to a subsequent indorsee, under the immediate indorsee of the payee of a non-negotiable note; for the like privity does not necessarily exist.” Story on Promissory Notes, Sec. 129; 2 Dall. 249; 6 Cranch, 222-4.

A person endorsing a note not negotiable, certainly intends to make himself liable in some capacity. Yery frequently the indorsement alone is what gives credit to the instrument, and consequently is the only inducement for taking it. If therefore, the endorser in sueh cases is not responsible on his indorsement, it amounts to a denial of justice.

In some of the States, as Connecticut, the indorser of such paper is held as a surety, and liable’only when due .diligence has been used to collect the note of the maker. 4 Conn. 125, 5 Conn. 175. In others, as in New York, he is regarded as a maker or guarrantor and liable at all events, without being-entitled to the usual privileges of an indorser of negotiable paper. 8 Wend. 421-2, 12 Johns. P. 159, 17 do 326. But in whichsoever he may be held, it is essentially necessary, and especially so, under our system of pleading, that the complaint should state the facts as they actually exist.

In the present case, the instrument as declared upon, and set forth in the complaint, is in all respects a negotiable promissory note. The answer does not deny the making- of such a note, but it distinctly puts in issue one of the alleged indorsements as well as the presentment, demand, protest and notice alleged in the complaint. It devolved upon the Plaintiff therefore to establish all these issues affirmatively, or fail in his action. The only evidence, however, which he offered was the production of an instrument, indorsed it is true, as alleged in the complaint, and in all other respects like the instrument therein described, save that it was under the corporate seal of the makers, the Regents of the University of Minnesota. To this instrument, was attached a certificate also offered in evidence, of a notary public to the effect that the note attached had been presented when due; and payment demanded and refused, and that he had thereupon protested the same for nonpayment, and had on the same day notified the several indorsers of such presentment, demand, refusal and protest.

Now all this was no doubt true, but still it was no evidence of either the indorsement, demand, protest or notice averred in the complaint and put in issue by the denials of the answer. The instrument produced in evidence, and to which alone the certificate of the notary applied, was not the one declared on. The one was a negotiable promissory note, while the other, although in form a promissory note, yet being under seal was not a negotiable instrument. If the Plaintiff by his averments intended really to refer to the instrument offered in evidence, he did not describe the instrument according to its legal effect, j The learned Judge held, and we think correctly, that there was a substantial variance between the allegations and the proofs, and that the evidence offered did not tend to sustain the issues on the part of the Plaintiff. The Plaintiff did not ask to amend according to the fact, but excepted to the ruling of the Court, and moved for a new trial on the ground of alleged error in the ruling of the Judge. The motion for a new trial was on the hearing denied, and the Plaintiff sued out a writ of error from this Court.

¥e see no error in the record or proceedings before ns, and must therefore affirm the judgment of the District Court.

Justice Atwater being Secretary of the Board of Begents who were the makers of the note, took no part in this decision.