Johnson v. Crane

| Superior Court of New Hampshire | Jul 15, 1844

Woods, J.

George Raynes made his note for eight hundred dollars, payable to the defendant or his order in. six months. Grace was therefore to be added, the last day of which falling upon the Sunday, the note became due on the day preceding.

The note having been indorsed by the defendant and. the plaintiff in succession, was at the time of its maturity held by' the Rockingham Bank, to whose counter these parties repaired at that time, and paid each one half of it. This transaction rendered it wholly unnecessary and nugatory for the bank to make a demand upon the maker of the note, and to give notice of its dishonor to either of these indorsers. The only object the bank could possibly have in so doing, was to charge the indorsers; and fix upon them the liability to do an act which they had already performed. The payment of the note by these parties was in the strongest sense a waiver of their several rights to require of the bank to make a demand upon the maker, and to give notice to the indorsers of its dishonor; and indeed rendered it impossible' for that body or its agents to perform those acts with any legal effect, being no longer entitled as holders of the note, to receive payment of the maker upon such supposed demand, or otherwise.

According to several authorities a partial payment of the note would have had the same effect, since it would have admitted the liability of the party, and would have signified in plain terms his intention to dispense with a condition instituted for his own benefit; and, moreover, that he already was possessed of the knowledge that the maker had not paid the note, and was content to act upon that knowledge, however derived, without insisting upon its being communicated by the parties whose particular interest and duty required them to make that communication. The case of Vaughan v. Fuller, Strange 1246, is directly to the point, that such partial payment is sufficient to dispense with .proving a demand upon the maker of the note. So that if this action had been brought by the bank instead of the present plaintiff, the deféndant would by his partial payment be concluded to have waived the proof of a demand upon the maker. So, also, Hosford v. Wilson, 1 Taunt. 12.

The note then having been paid in equal parts by plaintiff and defendant, was taken by the former, and in an action brought by him upon it, the question arises, whether the facts to which we have adverted are evidence in his favor, as they would have been in favor of the bank in the supposed case of a suit brought by it against the same party, of his waiver of the demand and notice.

• It is an elementary principle of the law relating to negotiable paper, that demand and notice by the holder of a note or bill, will avail and enure to the benefit of all the prior parties to it, whose rights depend upon a demand and notice; and the maker and each indorser are held thereby, as in favor of any subsequent party, the same as if such subsequent party had himself held the paper, and made the requisite demand. A party to a note is conditionally liable upon it to all subsequent parties; and the condition is, a seasonable demand and notice by the party holding it at the time it falls due. That condition being complied with, the liability of all the prior parties attaches, and having once attached and become absolute, nothing more is requisite for its continuance. And it would seem, that it can make no difference whether that liability has become fixed by an actual compliance with the conditions on the part of the holder of the paper, or by a waiver of them by the party for whose benefit they are designed, and who is sought to be charged.

Upon the face of the instrument, and disregarding for the present the argument that is urged from the fact that the parties were accommodating indorsers, they were liable in succession as their names appeared upon the back of the note. Being so liable, the defendant paid one half of the note, and the plaintiff paid the other half, and thereby succeeded to the position and the rights of the party who could have required him to do so. Whatever inference could justly have been derived from the part payment made by the defendant, whether of law or of fact, was as available to one of these parties as to the other, and it is impossible to distinguish the positions of the two in that respect.

The question-then occurs, are they, as the form of the instrument imports, to be regarded as successive indorsers; or is the fact, that they were indorsers for the mere accommodation of the makers, to be considered as evidence that they were joint indorsers and to be liable as co-sureties only, in the event of the default of the maker of the note ? The import of the writing itself is, as has been suggested, plain; and by the ordinary rule of evidence, is not to be contradicted by verbal explanations of the intentions and meaning of the parties upon becoming parties to it. And the authorities justify the application of that rule of evidence to this particular case.

Church v. Barlow, 9 Pick. 547, was an action by a subsequent against a prior indorser; and the defence here suggested was set up. But the court were of the opinion that such was an entirely incorrect view of the transaction, and that if-it prevailed, would greatly tend to impair the credit and cheek the circulation of indorsed negotiable instruments.

“ The general rule of law,” the courts say, “ is, that in regard to negotiable instruments, a consideration is implied in law, not only as between the promisor and promisee, but also as between each indorser and indorsee. Another rule familiar to every lawyer and merchant, and of universal application, is, that any indorser who may be called upon to pay, may look to his immediate indorser, or to either of the prior parties, for an indemnity for the whole amount thus paid; and that every indorser is conditionally liable to pay, in case of the failure of the maker or acceptor ; that is, upon the conditions that the bill or note is presented to the acceptor or maker when due, and if not paid, that such indorser shall be seasonably notified of its non-payment. By the fact of indorsement, the indorser admits a consideration equal to the value of the bill; an admission by which he is bound. He takes upon himself the conditional obligation of the indorser, and that only. It follows of course, that he is entitled to all the privileges and immunities of an indorser, one of which is, to have a remedy over for the whole amount, against either of the prior parties. To this, each and every one, by the fact of indorsement, is by the law considered as assenting. The consequence therefore is, that the rights and duties of the several parties to an accommodation note or bill of exchange are the same as upon those which are denominated business notes; such being the legal effect of the contract into which they respectively enter, by becoming such parties.”

This doctrine is fully sustained by the case of McDonald v. Magruder, 3 Peters S. C. 470. In the opinion of the court, Chief Justice Marshall says, “ The first indorser undertakes that the maker shall pay the note, or that he, if due diligence be used, will pay it for him. This undertaking makes him responsible to every holder whose name is on the note subsequent to his own, who has been compelled to pay it.” This was an attempt of a prior indorser to recover of a subsequent one an aliquot part of a sum which he had paid on a note, which the parties had indorsed at the request of the drawer. Neither of them received any consideration for so doing, and each indorsing without any communication with the other.

Brown v. Mott, 7 Johns. 361" court="N.Y. Sup. Ct." date_filed="1811-02-15" href="https://app.midpage.ai/document/brown-v-mott-5472752?utm_source=webapp" opinion_id="5472752">7 Johns. 361, is a case to the same effect.

Prom all the authorities which touch the question, it is clear that this defendant stands in the position of a prior indorser with respect to the plaintiff, and subject to all the liabilities, as well as entitled to all the exemptions pertaining to parties so situated in ordinary cases; and it makes no difference that they were accommodating indorsers.

The defendant, therefore, having waived his right to insist upon demand and notice, by paying part of the note, and the plaintiff having, as bound by his undertaking as indorser, paid the part left by the defendant unpaid, the question which now presents itself is, whether the plaintiff can recover upon either of the counts in his writ. He has declared as indorser and added the usual money counts.

It is a perfectly well settled rule of law, that an indorser of a negotiable paper, by paying and taking it up, becomes the holder of it for all purposes, and the proprietor of it. He is restored to the original right under which he held it before he indorsed it, and is of course entitled to declare upon it as indorsee or payee, if he at first received it as such.

And it is well settled, that an indorsee may recover against an indorser, in ail action for money had and received. As between each party to a negotiable instrument, and every other party, there is sufficient privity, and such a contract is presumed to be a cash transaction, and money is presumed to have passed at the making of it, and at each indorsement; and each party liable to pay, is held responsible accordingly for money had and received, to any party, who is for the time being the holder of the note, and entitled to recover. Ellsworth v. Brewer, 11 Pick. 816, and cases there cited.

Nor is it necessary for the subsequent indorser, in order to entitle himself to recover of any prior party to the note, either as indorsee or for money had and received, to prove more than a payment of the amount to the holder, and the liability of such indorser to the holder, by reason of a demand and notice or a waiver thereof. By such payment or taking up of the note, he is restored, as has been remarked, to his former condition as indorsee, and subrogated to the rights of his indorsee of whom he has taken the note.

Such being the unquestionable rights and liabilities of the parties to notes and bills of exchange growing out of their mutual relations, it is entirely clear that in the ease under consideration, the plaintiff is entitled to recover of the defendant the half of the note which he paid, and is consequently entitled to

Judgment on the verdict.