26 Wend. 425 | N.Y. Sup. Ct. | 1841
Lead Opinion
After advisement, the following opinions were delivered:
The testator in .this case, by a sepa.rate.and distinct instrument, which contained no words 0f negotiability, and was not endorsed or written upon the note, guarantied the payment of a note at sixty days, .drawn by W. A. Biackney and E. ,0. Biackney, payable to the order of W. Watson.of New-Milford, W- Watson of Pearl-street, and D. S. Tuthill, for $300: which guaranty, as .the plaintiff alleges, was executed for the purpose of enabling one of the endorsers of the note to raise money thereon from D. M. Frye. Frye, who held the note and guaranty when the note became due and payable, or rather the guaranty and a note not correctly .described in such guaranty, finding that the validity of his title to the note would be disputed, transferred the note and the guaranty to the plaintiff McLaren, who .sued the personal representatives of the guarantor, in his own name, to enable him to use Frye as a witness to disprove the .defence which ft was anticipated would be .set -up.
Several questions were raised upon the argument, which I have not thought necessary to notice, as I am perfectly well satisfied that the objection that this separate guaranty Was not negotiable, so as to authorize the assignee to bring a suit thereon in his own name, is well taken. A guaranty endorsed upon a negotiable .note, whereby the guarantor agrees with the holder of the note that he will .be answerable .that the note shall be paid to him or to his.order, or the bearer thereof, when it becomes due, is probably negotiable by the transfer of the note upon which it is written; -for it .is in fact a special endorsement of the note, or more properly a negotiable .note in itself. But to make a guaranty negotiable as a part of the note to which it relates, it must be on the note itself, or at le.ast it must be annexed to it: in.the nature of ,un.allonge qr ekeing out of the-paper upon which the note is written.
There is a mercantile guaranty, recognized by the codes of commerce, both of France and Spain, called an aval, by which the payment, of a bill of exchange may be guaran
There is nothing in the particular circumstances of this case, which can justify the court in overturning the established principles of law relative to the negotiability of written instruments, for the purpose of enabling the real party to the litigation to sell his iriterest to a third person, and to become a witness to support the claim. And as I have ho doubt as to the correctness of the decision of the court below, upon the question I have thus examined, I ¿hall vote to affirm the judgment.
Concurrence Opinion
Concurring with the Supreme court in their view of the other points of this case, (such
The first of these, is as to the operation and effect of the .statute of 1818, “to prevent abuses in the practice of the law.” This, it is contended, renders void the note and guaranty in the hands of a subsequent holder, in consequence of their having been purchased by Frye, a practising attorney, from whom, and with knowledge of whose disputed title, the plaintiff received the paper. The statute, as it then stood, (before the revision,) inhibits any attorney at law, 1st. From buying any negotiable paper; and 2d. From lending or advancing money “ in consideration of, or as an inducement to the placing in the hands of such attorney, or in the hands of any other person, any debt, demand, or chose in action, for collection.” It is further enacted, that whenever it shall appear on examination “ that any such chose in action hath been bought or procured, contrary to the true intent and meaning of this act, the plaintiff shall be non-suited.” The act, however, expressly excepts from its operation the receiving such paper “in payment of a debt antecedently contracted.” Moreover, it contains no words to inhibit an attorney from a bona fide loan .of money, receiving therefor as collateral security, any endorsed negotiable paper made for the purpose of such security, provided it be a loan made in good faith, and not as an inducement or cover for placing such paper in his hands for ■ collection. This is the fair construction of the statute, according to its avowed and obvious intent, “ the preventing abuses in the practice of law.” Nor shall we arrive at any different result if we apply the rule of a strict and literal interpretation.
Now, in this case, there was evidence of a prior debt of one hundred dollars, and also of a new actual loan of two hundred more, for all which a note of $300 with guaranty was received as collateral security; the borrower stating
II. The next point is one, the decision of which must materially affect and regulate daily commercial usage in respect to loans and discounts. The original defendant guaranties the payment of an endorsed note, made for accommodation. The guaranty is written on a separate paper, and describes the note, with which it bears contemporaneous date. It is general in its terms; not being a stipulation with any named person, but is in the broad and
ft is now maintained that such a guaranty being a promise in writing, naming no promisee, can take effect only as a special contract with the first person who on the faith of it becomes the holder of the note; and as no contract or mere chose in action is negotiable, except such as fall within the definition of promissory notes or bills of exchange, this guaranty, it is argued, is strictly a personal contract between the guarantor and the acceptor of the guaranty only, and it therefore cannot be transferred so as to be enforced in the name of any subsequent party. The special contract of warranty, therefore, between Watson and Frye, did not accompany the note as appurtenant to it and negotiable with it, when it was endorsed to the plaintiff. The supreme court, on this point, intimate the opinion that had the guaranty been written on the note it might have been treated as a mere endorsement, by striking out the special words and leaving barely the endorsed name; but they hold that a separate guaranty of a negotiable note or bill does not, like an acceptance or endorsement, run with its principal, but must end where it began, like a bond or other chose in action. This intimation of the distinction between the effect of an endorsed guaranty, which may be converted into an ordinary endorsement by striking out words, and that of a stipulation of guaranty written on a separate paper, seems to be in contradiction to the decision of the same court in a former case. In L' Amoureaux v. Hewitt, 5 Wendell 307, they are expressly placed on the same ground. It was there held that an endorsed guaranty could not be stricken out and converted into a bare endorsement, but that every guaranty is a special contract with the person first receiving it, and can be enforced only in his name. ££ The defendant,” said Chief Justice Savage,££ was liable upon his guaranty, not as an endorser, but as the party to a special contract, which might have been written on a separate piece of paper as
A guaranty, according to its derivative and essential meaning, is the warranty of some act or debt of another. It is an undertaking that the engagement or promise of some other person shall be performed. In its legal and commercial sense, it is an undertaking to be answerable for the payment of some debt, or the due performance of some contract or duty by another person, who himself remains liable for his own default. Such a warranty may be either of a prior debt, or previously subsisting contract, or it may be for the due discharge of some future debt Or contract, between the orignal party and some other person, who may give him credit. In the first case, our law, which enforces no contract not supported by some consideration, requires that there be some good consideration received by the guarantor. In the other case, where the guarantor holds out his engagement of secondary liability as an inducement to any one who may, upon the faith of that promise, give credit in any way to a third person, if there be no special consideration of benefit received and acknowledged by the guarantor, as there often is, yet the same consideration of debt or damage which supports the claim against the principal in default, equally applies to, and supports the right of action against the guarantor. This rests upon the familiar principle that a sufficient consideration for any contract, may be either an actual benefit
With whom, then, may such a contract be madel Of course it may, as in other contracts, be made with a specifically named or described individual, to whom the promise and undertaking to become answerable for a third person is addressed. Such an offer or promise to any specified individual to become liable for the debt or acts of another, when it is accepted, by giving the credit or trust thus guarantied, is complete, and it can only be enforced by, or in the name of the original party giving credit on such guaranty. When the default occurs, the promise to make good that default becomes binding, and like other choses in action, except notes and bills, it is confessedly not negotiable or transferrable in law, so as to give a right of action, in his own name, to the new holder.
But such a contract of warranty may be also offered and perfected without any individual being named in the stipulation or promise of guaranty. It may be made as many other contracts are made, by a general offer to any one who may accept the terms, and in such case the offer, when accepted, binds the promissor. Such is the ordinary case of a contract made by effect of an advertisement or public notice, as to pay a certain price for materials, wheat, wood, See. delivered at a specific place or time. So too, as was said by the Chancellor, Cobham v. Upcott, 5 Viner Abr. 527, cited in Fell on Guaranties, 44. u If a man make offers of a bargain, and then write down and sign them, and another person take them up and prefer his bill, that will be a sufficient agreement to take the case out of the statute.” The validity and obligation of such a promise or undertaking, proffered to all the world, and accepted by
What distinction then, exists between the ordinary commercial guaranty, as of a credit for goods purchased, and a guaranty of a negotiable bill or note 1 There is a clear and
The consideration may be either some specific payment, security or benefit to the guarantor, or it may he merely the value of the note paid at his request, and on his credit, to the person for whose benefit the guaranty is made and intended. In the present case, the consideration is the value of the note, acknowledged in the guaranty itself to have been received, and shown in evidence to have been paid in cash at the request of the guarantor, to Tut-hill, the last endorser at the date of the guaranty. The whole contract, and transaction, when analyzed, is briefly this: Watson, as an inducement to and in consideration of Frye’s advancing at his request, to Tuthill, the value of a certain note, upon the security of that endorsed note and his guaranty, undertakes and promises for the benefit of Frye, to any person who shall afterwards take and hold the note, to he liable for the payment of the same, if not duly paid at maturity. Now it seems plain to me, upon the common principles of the law of contracts, applied to the nature of this transaction, and of its terms, and the obvious understanding of the stipulation itself, that such a guaranty of negotiable paper can he enforced by and in the name of any subsequent holder of such pa
j must add, that as between the present parties, the statutory requisition of the consideration being expressed in the written guaranty, does not in my view apply, as it is a transaction with a person taking the note after the tender of guaranty and on its faith. This is not a collateral but an independent contract. It is a new contract, upon which McLaren took the note, and his injury or exposure to loss is a good and sufficient consideration, in addition to and independently of any past and received consideration.
Whilst the general principles of the law of contracts and the analogy of the decisions as to other mercantile guaranties, proffered generally to whomsoever might accept them and give the required credit, support this conclusion, I find no authority really in opposition except that of L\dmoureuax v. Hewitt, before cited. Most of the cases apparently adverse are those where the guaranty was, in fact and in terms, a special agreement with an individual to secure the payment of a debt or a note to him specifically, as in the case of Barrington and others, 2 Schoales & Lefroy 113, before Lord Chancellor Redesdale, where the contract is strictly with the first parties, and confined to them; and it was of course held not to pass with the endorsed paper by endorsement.
The statement of an analogous case of admitted legal effect, and governed by the same principles, may place the present question in a clearer light. Suppose that some individuals interested in the stock of a chartered bank of doubtful credit, should induce some well-known great capitalist, in consideration of ample security and a commission, to guaranty the circulating bills of the bank by public advertisement. His undertaking and contract then would simply be this: “ In consideration.of certain payments and securities, I promise to any one who shall on the faith of this guaranty, receive as money the bills of the-bank,
The opinion I have expressed as to its legal character and effect, is, moreover, corroborated by another view of the law of the case according to general commercial usage and authority, which I think correct, though I do not rest my decision mainly upon it; but as it results in the same conclusion with the reasons already given, I shall briefly
The same custom, and the same legal rule, prevail also in Scotland, where the Law Merchant as to negotiable paper is so closely assimilated to that prevailing in England, that the decisions of Westminster Hall on that subject are familiarly cited as authority in the courts and the books. Mr. Bell, in his Commentaries on the Law of Scotland, 1 Comm. 376, after stating the question, “ whether the indorsation of a bill which has been guarantied by a separate letter, accompanied by delivery of the letter of guaranty, will give the same right as if the letter itself were a negotiable instrument,” adds, that “ it is generally held by bankers, that when they thus acquire a right to the guar
I will notice briefly one other point of the argument. It has been maintained that Watson was a mere surety, and that there being no proof of demand and notice to the endorsers, previous to the guaranty, no recovery could be had against the surety. Judge Cowen’s reply to this, is conclusive. The objection was not raised at the trial. Had it been, demand and notice might have been shown, or it might have been proved that the defendant received
I have just seen, since preparing this opinion, in the volume of Wendell’s reports, published since the argument of this cause, a decision of the supreme court on a case nearly analagous to the present, with which I entirely concur, for the same reasons which induce me to dissent from their decision here; and I think it supports and fortifies the conclusions I have above stated. It is the case of Kitchell v. Burns, 24 Wendell 456, on a guaranty endorsed on a note which was payable to S. or bearer, the guaranty being of payment to S. or bearer. This was held good in the hands of a subsequent bearer, and negotiable in itself, not as a mere endorsement, striking out the guaranty. The chief justice considered it as “ an absolute promise to pay the note, if the maker fail. It is a new note for the payment of the money upon full consideration, and as it is made payable to S. or bearer, it is negotiable.” Now, a promise of guaranty to the future bearer of a note, payable to bearer, differs nothing, to my understanding, from the same promise made to the future holder of a note payable to order but endorsed in blank, and so passing by delivery. If the contract end with the first taker and cannot be enforced by a subsequent one, as to the note payable to
The affirming the decision now under review, would, I fear, leave the law on this interesting point of constant occurrence, unsettled and contradictory. On the other hand, a reversal establishing the general rule that a guaranty of negotiable paper, in any form, may be enforced by any one who takes such paper on its faith, would simplify and harmonize the whole law, in conformity with the usages and convenience of business, and the spirit and intent of all similar transactions.
Although several points of minor importance have been made in the progress of this case, the main question presented for the consideration and decision of this court, is whether a separate guaranty of the payment of a promissory note can be made so negotiable as to run along with the note, and be available, in his own name, in the hands of any holder of the note, other than the party to whom the guaranty was originally given I This question, although of considerable general importance, is of peculiar interest to a commercial community. The transfer, from hand to hand, of negotiable paper, with their various collateral guaranties, enters so constantly into the hourly transactions of commerce, that it is of great importance that the law determining the precise character and effect of these, should be well settled and well known. Indeed, in no department of human affairs are fixedness, uniformity, and general knowledge of the laws, so important and necessary, as in the various operations of trade and commerce. Merchants contract with reference to the laws. Their rights and their obliga
In all ages of the world it has been the policy of all civilized nations to treat commerce with great favor and regard. Its advancement and protection have been the object of public treaties; while its usages have constituted no inconsiderable part of municipal and international law. So great has been the deference paid to the custom of merchants, that it has not only been received as law in itself, but has even been permitted materially to modify the common law of the land. In England so early as the reign of James I. Chief Justice Hobart declared the custom of merchants to be a part of the common law, of which the judges ought to take notice, Vanheath v. Turner, Winch. 24; and Lord Coke, in his 2 Institutes, p. 404, speaking of the Lex Mercatoria, says, u which, as hath been said, is part of the laws of this realm.”
It is a general rule of the common law, that choses in action are not negotiable. But so early as the fourteenth century, in conformity with the custom of merchants, and for the benefit of trade, an exception was made to this general rule in favor of foreign bills of exchange; and in the seventeenth century a similar exception was made in favor of inland bills. Promissory notes, from the same influence and with the same view, to the encouragement of trade, came very soon to enjoy the same favor, and be invested with the same general characteristics. They continued to be so considered and so treated until their character was drawn in question by Lord Chief Justice Holt, in the case of Clerk v. Martin, in 1702, 2 Lord Raymond, 757, and 1 Salk. 129. He denied that a promissory note, by the custom of merchants, had the character of an inland bill of
The question here arises, whether this guaranty, written on a separate piece of paper, can be brought within the provisions of this statute, so as to make it negotiable and enable the holder of the note and guaranty to bring an action on the latter in his own name % It is certain that the guaranty is not in terms.embraced within the statute; and it would, in my judgment, be most dangerous to extend the equity of the statute so far as to include this case within its undefinable limits. Waiving then, as before, the question whether the statute be the enactment of new, or merely the declaring of the old law; and even admitting the latter, let us inquire whether that custom of merchants, which, for the benefit of trade, made the promissory note negotiable, can, for the same purpose, be made
Our courts have recognized as good, endorsements on negotiable paper in the form of a guaranty and in terms, negotiable, being to order or bearer, but on the ground that these were in effect new bills, and, therefore, valid as such, and not merely as guaranties of the original paper so endorsed. This was the recent case of Ketchell v. Burns, 24 Wend. 456, and of other previous cases.
It is true our statutes do, as the law did before, authorize a separate acceptance of a bill of exchange. If in this provision of the statute, and in the interests of commerce, a reason is supposed to exist equally applicable to a separate endorsement or guaranty of the payment of negotiable paper, let the aid of the legislature be invoked to give that provision such extension. This court has no power to do so, even if it were universally admitted to be desirable. What would be wise or desirable law is one thing; what is actually the law may be another and a very different thing. While the former regards exclusively the legislature, the judiciary can be governed only by the latter.
In this case, therefore, concurring fully in the judgment of the supreme court, and in the satisfactory reasons given
On the question being put, Shall this judgment be reserved 1 three members of the court answered in the affirmative; and twelve in the negative. Whereupon the judgment of the supreme court was Affirmed.