Hunt v. Standart

Wokden, J.

Suit by Standart and others as indorsees, against a part of the appellants as makers, and against the others as indorsers, of a promissory note, set out as follows, viz:

“ $2,000. Indianapolis, March, 23, 1858.

Two months after date we promise to pay to the order of M. Wolf \ at the Mercantile BanTc, N. Y., two thousand dollars, value received, without any relief whatever from valuation or appraisement laws.

(Signed,) Hunt & Andersons.

(Indorsed,) M. Wolf. John F. Hill?

Pleadings were filed, issues formed, and the cause tried by the Court; resulting in a finding and judgment for the plaintiffs against all the defendants for the amount of the note, and interest.

The note, it appears, was made and indorsed in Indiana ; and the question is raised upon the pleadings and otherwise, by Wolf and Hill, the indorsers, whether their liability as such, is to be determined by the law of Indiana, where their indorsement was made, or by the law of New Yorlt where the note was payable. If by the law of New York, the judgment is right, as the proper steps seem to have been taken to hold the indorsers liable according to that law; such notes ^eing there governed by the Jaw merchant: but if, on the Other hand, the law of Indiana is to determine the liability of the indorsers, they can not be held liable upon the facts shown; “due diligence” not having been used to collect the note of the makers, as required by our law, and no excuse appearing for the want of such diligence. In this State, promissory notes payable in a bank in this State, only, are placed upon the footing of bills of exchange, and governed by the law merchant.

We suppose it to be clear, that the liability of an indorser of a note, payable generally, withorit any place of payment being specified, is to be determined by the law of the State, or place, where the indorsement is made. Yeatman v. Cullen, 5 Blackf. 240; Edwards on Bills, &c., 186. But the question, whether this be the case in relation to a note made payable in another State than that in which it is indorsed, requires some further examination.

In the case of a note made in one State and payable in another, it is clear, by all the authorities, that the maker will be held liable according to the law of the place where it is payable; as that is the place where his contract is to be performed, and he is presumed to have contracted with reference to the law of that place. Cox & Dick v. The United States, 6 Peters, 112; Story on Prom. Notes, §165. It does not follow, however, because the contract of the maker would be governed by the law of the place of payment, that the contract of the indorser would be governed by the same law. The maker binds himself to pay at the place named in the note for payment, and there his contract is to be performed. The indorser promises, upon certain conditions, which are not expressed in the contract of indorsement, but which are implied by law, that he will pay the note; but not that he will pay it at the place named in the note for payment. His promise is general, for the payment of the note upon the implied conditions; and such general promise, not specially to be performed -elsewhere, is governed by the lex loci con• tractus, which must determine the conditions upon which he is to be held liable.

The authorities establishing the proposition, that the contract of indorsement in such case, is governed by the law of ,, , • , , , the place where made, and not by that of the place where the note is payable, are clear, and to our minds, satisfactory. Some of them will be noted. In Aymer v. Sheldon, 12 Wend. 439, a bill of exchange was drawn at St. Pierre, Martinique, on a person at Bordeaux, in France, and indorsed by the payees, at the city of Fc-w Yorle. It was held, that the contract of indorsement was governed by the law of Few York, where the indorsement was made, and not by that of France, where the bill was payable.

The same doctrine was held in the case of Allen v. The Merchant’s Bank, &c., 22 Wend. 215, 239. Again, in Everett v. Vandryes, 19 N. Y. (Ct. Ap.) 436, a bill had been drawn in Few Granada, payable in Few York, to one Jimenes, who had indorsed it in Few Granada. The suit was by the holder against the drawer. The Court say, that the indorsement “is considered to be a separate contract, and the obligations of the parties to it are to be determined according to the law of the country where it was made; so that if this was a question between indorser and indorsee, we should have to resort to the laws of Few Granada, to determine what obligations Jimenes assumed by indorsing the bill to the plaintiff.”

In Holbrook v. Vibbard, 2 Scam. 465, a note was made in Few York, payable in Chicago, and indorsed by the payees in Few York. It was held that the liability of the indorsers must be determined by the law of Few York, and not by that of Illinois. In Lowry’s adm’r v. The Western Bank of Georgia, 7 Ala. R. N. S. 120, a note was made payable at the Western Bank of Georgia, and indorsed in Alabama. The contract of indorsement was held to be governed by the law of Alabama, and not that of Georgia. The Court say, “ every indorser of a bill drawn in this State upon another, or upon a foreign country, enters into the contract with a view to the negotiation and payment of the bill there; but this does not,, in any manner, bring his indorsement within the influence of the laws which are local to the place where the bill is payable.” In Dundas v. Bowler, 3 McLean, 397, the same doctrine is maintained. There the Court quote with approbation, the following passage from Story’s Conflict of Laws. “ A bill of exchange was drawn in Massachusetts on EnglandÍ, and indorsed in New York ; and again it was indorsed by the first indorsee in Pennsylvania, and by the second in Maryland. The bill was dishonored, and a question was made for what amount of damages the respective indorsers were liable. In Massachusetts, the damages on a protested foreign bill were ten per cent.; in New York, twenty, and in Maryland, fifteen ; and it was held that each indorser was liable under the law of the place where the indorsement was made. Each indorsement was considered a new contract, governed by the lex loci ; and each indorser bound himself to pay, should the bill be dishonored, the damages given by that law.”

There are many other cases scattered through the books, to the same effect, but it is unnecessary to collect them here. There seems to be no distinction recognized, in respect to the liability of the indorser of a note or bill, between those payable in, and those payable out of the State or country where they are indorsed; and we think no distinction exists in principle. Here we might, and probably should, drop this branch of the case, were it not that there is a decision in our own reports, holding a contrary doctrine. The case alluded to is Shanklin v. Cooper, 8 Blackf. 41. There, a promissory note, payable in New York, had been indorsed in Indiana, as in the case at bar; and a question arose whether the contract of indorsement was governed by the law of New York, or by that of Indiana, as in the case at bar. The Court say in that case, “We consider the indorsement to be a contract which must be governed by the law of the place where the note is payable, without regard to the place where the indorsement was actually made. The maker, of the note before us, bound himself to pay it in New York, to the payee ór order, and the payee, by the indorsement, directed him to pay it at the same place, to the indorsee. The indorser is, indeed, the drawer of a bill of exchange, in which the maker of the note is the acceptor, and the indorsee the payee ; and it is payable where the note is payable. The indorsement in the present case, therefore, if made in this State, stands on the same ground with a bill of exchange drawn here, and payable in New York / and there can be no doubt but that the contract of the drawer of such bill would be governed by the law of New Yor7c.” This reasoning, with great deference to the learning and ability of the distinguished Judge who delivered the opinion in that case, seems quite unsatisfactory and inconclusive. The proposition thus advanced, that the indorser of a note, “is, indeed,, the drawer of a bill of• exchange,” is quite in harmony with the authorities, and commends itself to our judgment; but the position is useless in the argument, indeed it is suicidal, unless the proposition last advanced can be maintained, viz.: that the contract of the drawer of such bill would be governed by the law of New Yor7e. If this proposition can not be maintained, but if, on the contrary, the contract of the drawer of a bill, is governed by the law of the place where it is drawn, rather than by that of the place where it is payable, the argument advanced proves conclusively that the case was wrongly decided. The authorities must test this question. Story says (Conflict of Laws, § 360): “ By the common law, the protest must be made at the time, in the manner, and by the persons prescribed in the place where the bill is payable. But as to the necessity of making a demand and protest, the circumstances under which notice may be required or dispensed with, these are incidents of the original contract, which are governed by the laws of the place where the bill is drawn. They constitute implied conditions upon which the liability of the drawer is to attach according to the lex loci contractus, and, if the bill is negotiated, the responsibility attaches upon each successive indoi’ser according to the law of the place of his indorsement; for each indorser is treated as a new drawer.”

Again: the same author, (Bills of Ex., § 131,) says: “In respect to foreign bills of exchange, they are generally, as to their validity, nature, interpretation and effect, governed by the law of the State or country, where the contract between the particular parties had its origin. The contract of the drawer is, as to the form, the nature, the obligation and the effect thereof, governed by the law of the place where the bill is drawn, in regard to the payee and any subsequent holder. The contract of the indorser is governed by the law of the P^ace whe1’6 the indorsement is made, as to his indorsee and every subsequent holder.” The same doctrine is laid down in Edwards on Bills, 185. In Aymar v. Sheldon, supra, the Court say: “That the nature and extent of the liabilities of the drawer or indorser are to be determined according to the law of the place whore the bill is drawn or indorsement made, has been adjudged both here and in EnglandP

These, and numerous other authorities that might be cited, were it necessary, clearly establish the proposition that the contract of the drawer of a bill is, as to its construction and legal effect, to be governed by the law of the place where the bill is drawn, and not by that of the place where it is payable. Indeed, it can not be held otherwise consistently with legal principles which are thoroughly established. A contract to be performed at the place where it is executed, or generally, without naming another place for performance, is undoubtedly to be governed by the law of the place where made. Such is the character of the contract of the drawer of a bill, or the indorser of a note. The drawer of a bill here, payable in New EorJc, promises, that upon the dishonor of the bill and notice to him, he will pay it, not at New Torle, but here, or generally. His contract is to be performed here. A little confusion has crept into some of the books, because of a failure to note the distinction between the contract of the drawer of a bill or the indorser of a note, and that of the acceptor of a bill or the maker of a note. The contract of the acceptor of a bill binds him to pay at the place of acceptance or place named for payment; and his contract, like that of the maker of a promissory note, is, therefore, governed by the law of the place of payment, that being the place where his contract is to be performed. Rot so, however, with the drawer or indorser. Says Mr. Justice Story: “ The accejDtor agrees to pay in the place of acceptance or place fixed for payment; but upon his default, the drawer and indorser do not agree upon due protest and notice, to pay the like amount in the same place, but agree to pay the like amount in the place where the bill was drawn or indorsed by them respectively. Hence it is, that the notice to be given to each of them must, and ought to be, given to each of them according to the law of the place where he draws or indorses the bill, as part of the obligations thereof. The drawer and indorser, in effect, contract in the place where the bill is drawn or indorsed, a conditional obligation, that is, if the bill is dishonored, and due notice is given to them of its dishonor, according to the law of the place of their contract, they will respectively pay the amount of the bill at that place. The law of the place of acceptance or payment of the bill has nothing to do with their contract.” Story on Prom. Notes, § 339, note 3; Story on Bills, § 154. The proposition in Shanklin v. Cooper, that the contract of the drawer of a bill, drawn here, and payable in New Yorh, is governed by the law of New Yorh, was, as we think, assumed without sufficient consideration; and without observing the distinction between the contract of the drawer of a bill, and that of the acceptor thereof or the maker of a promissory note, in respect to the place where the contract of each is to be performed. The maker of a note, and the acceptor of a bill, as before observed, contract with reference to the law of the place of payment; and as that is the place where their contract is to be performed, the law of that place governs it.

If the contract of the drawer of a bill, or the indorser of a bill or note, be construed to bind him to pay the money, conditionally, at the place named in the instrument for payment, then, of course, his contract would be governed by the law of the place of payment, because his contract would require performance there. But this would overturn the whole current of authorities, which hold that the law of the place where a bill is drawn, or a note or bill is indorsed, governs the respective contracts. But if, as is laid down by Judge Story, and correctly as we think, the contract of the drawer or indorser of a bill, or the indorser of a note, binds him conditionally, to pay at the place where the bill is drawn or the indorsement made, or generally, and not specially at the place named in the instrument for payment; then the authorities are reconcilable, and in entire harmony with those'that hold' that the law of the place where a contract is to he performed governs it. And here we may observe that, as we think, Denio, J., in delivering the opinion of the Court, in the case of Everett v. Vendryes, supra, inadvertently fell into an error, in a dictum found in the opinion. The suit, we have seen, was by the holder against the drawer of a bill which had been drawn in New Granada. It is said in the opinion r. “ The principal contract, the bill of exchange sued on, though made in New Granada, was addressed to a corporation, legally resident in New Yorh, and was consequently payable there; and upon general principles, the laws of this State are to be resorted to in ascertaining its nature and interpretation,, and the duties and liabilities which it created. This is too well established to require a reference to the books.” Row, if the learned Judge had referred to the books, he would have seen that, upon general principles, the laws of New YorJc had nothing to do in determining the nature and interpretation, the duties and liabilities, created by the contract of the drawer, who was sued in that case. Had the suit been against an acceptor of the bill, or the maker of a note payable in New YorJc, the remark would have been strictly correct. The authority referred to in the opinion, upon another point, (Aymar v. Sheldon,) establishes clearly, that the contract of the drawer is to be governed by the law of the place where the bill is drawn.

The case of Rothschild v. Currie, which was relied upon in Shanklin v. Cooper, is probably not now regarded as authority in England; though we are not aware that it has been expressly overruled. In Gibbs v. Freemont, 20 Eng. Law and Eq. R. 555, it was referred toby Alderson B., as of questionable authority, and the decision in that ease would seem to be at variance with it. It was there held that a bill of exchange, drawn in California and payable in Washington, upon being dishonored, was entitled to draw interest at the rate of 25 per cent., the rate fixed by the laws of California, and not 6 per cent, merely, the rate at WasJiington.

The case of Mix et al. v. The State Bank, 13 Ind. R. 521, was like the present, and the decision therein is utterly inconsistent with Shanklin v. Cooper, and virtually overrules it, though the attention of the Court does not appear to have been called to it.

H. B. Taylor for appellants.

The Court below, in deciding the cáse at bar, was governed, undoubtedly, by that of Shanklin v. Cooper; but we are of opinion that it can not be reconciled with principle, or the general current of authorities, and that it should no longer be regarded as the law of this State.

The contract of indorsement, in the case at bar,'being governed by the law of this State, it follows, from what has already been said, that the recovery against the indorsers can not be sustained.

The makers of the note complain, also, that the judgment against them is erroneous : First, because there was no joint cause of action shown against them, and Wolf and Hill, the indorsers. There was a good cause of action against the makers, and it was not necessary that the plaintiffs should have made out a good case as to all the defendants, in order to entitle them to recover against those as to whom they made out a good cause. Mix v. The State Bank, supra.—Hubble et al. v. Wolf et al., at the present term.

Second. That the note produced does not sustain the allegations in the complaint as to the place of payment. We perceive no force in this objection.

Third. That the laws authorizing a judgment to he rendered without benefit of appraisement laws, according, to the terms of the note, are unconstitutional and void. This question was considered at the last term, and decided against the ground taken by the appellants, and we do not feel called upon to examine the question again. See Smith v. Doggett, at the last term. 14 Ind. 442.

Per Curiam.

The judgment as to Wolf and Hill, the indorsers, is reversed, with costs made against them; and as to the other defendants, it is affirmed, with costs.

Case Details

Case Name: Hunt v. Standart

Court Name: Indiana Supreme Court

Date Published: Nov 27, 1860

Citation: 1860 Ind. LEXIS 276

Court Abbreviation: Ind.