23 Barb. 534 | N.Y. Sup. Ct. | 1857
It is an error as it seems to me to say that this is a suit by a payee, as payee, against an indorser. Stated nakedly in that form the proposition involves at first view the absurdity of a principal suing his own surety. The plaintiff in this case, although in fact payee of the notes, does not sue as payee but as indorsee and holder. Ordinarily, no doubt, a prior party cannot sue a subsequent party to a note. But the reason on which the rule is founded will show that the rule is not applicable to a case like the present. Where a subsequent indorser pays a note he is usually entitled to a remedy over against the prior parties as for moneys paid to their use. And to prevent circuity of action, therefore, they are not allowed to sue him when the very recovery would constitute in turn the basis of an action for precisely the same amount against them.
In this case, however, if Cross, the indorser, should be made to pay Moore, the payee, would he have a claim against Moore to be reimbursed? Clearly he would not. He would only have paid to Moore a debt which he justly owed to Moore ; and as to which, as between him and Moore, on the facts proved, he was as much a principal as MeGrervey, the maker of the note.
The referee, whose decision is appealed from by the defendants, reports that previous to the making and indorsing of the
It was the clear intention of the parties, that Cross, if he paid the note as indorser, was to -have recourse to McGervey, the maker, and not to Moore the payee; and that Moore, if he afterwards, for form’s sake indorsed it also, might add to his indorsement the words “ without recourse.” That such an indorsement would have been regular, and matter of right, was expressly held by the chancellor, in Hall v. Newcomb, (7 Hill, 419.) And it was further held, that the effect of such special indorsement would be to leave the second indorser liable to a bona fide holder, and without any remedy over against the payee.
Something has been said about the statute requiring certain contracts to be in writing, and among them “ every special promise to answer for the debt, default or miscarriage of another person.” And is not Cross’s contract in writing? By the terms of the note it will be recollected McGervey promised for value received to pay Moore eight hundred dollars, and Cross, who himself wrote the notes, at the same time and before delivery to Moore, and before and without any previous indorsement by Moore, put his name on the back of them knowing that the coal would only be sold on his credit. Did not Cross by such an indorsement promise in writing, under the terms “value received,” to pay Moore for the coal about to be delivered to McGervey ? Was there any other condition, express or implied, in his engagement, except the usual condition attached to all cases of general indorsement? Was not the whole instrument,
A further answer, however, to the objection is, that Cross’s agreement was to pay not “ the debt of another,” as the statute expresses it, but his own debt. The whole transaction was simultaneous. The sale was on the credit of Cross. It was not a case of pre-existing indebtedness of McGervey, which Cross engaged to discharge. Cross in effect said to Moore, “ if you will sell and deliver to McGervey a cargo of coal on three and four months’ credit, I will pay you for it, provided you shall first make your demand of him and give me immediate notice of his neglect or refusal.” In the case of Spies v. Gilmore, (1 Comst. 321,) the court of appeals held that where a party without any special words of guaranty, puts his name on the back of a note as first indorser, he not being the payee, but intending to be surety to the payee, the effect of the transaction is to charge him, not as an absolute guarantor, it is true, but as an ordinary indorser, entitled like other indorsers to notice of protest.
The whole reasoning of the court in that case assumes that had there been a regular demand of the maker, and due notice of protest to the indorser, no question could have been made as to the liability of the indorser. A mere blank indorsement not strictly in form according to commercial usage creates, it was held, (and such no doubt is the intention of the parties in such
In the case of Hall v. Farmer, (2 Comst. 553,) the note was not indorsed in blank but was specially guaranteed. It was also for an existing debt of the maker, a balance of account. The agreement of guaranty was written out both in form and substance as a guaranty, and that too before and not after it was signed by the surety. It was therefore, in all its parts, an express written contract excluding all implication and all room for parol proof to add to or vary its terms. No consideration was stated in it, and no new credit either in value or time was given upon the strength of it. The body of the note was a mere promise, fixing no period of payment and of course giving no indulgence, on the back of which was indorsed the words, “ we the undersigned guaranty the payment of the within. John Farmer, H. W. Doolittle.” No value received was admitted in writing, and none existed in fact. The engagement, as respected all the parties, was purely gratuitous, and purported to be nothing else. Such an engagement every body knows, however binding in honor, cannot be enforced in law. The decision, therefore, “as might ham been expected” was in favor of the defendants, but as the reporter’s note says, it settled no general principle. Whether the judgment Was founded on the want of consideration in fact for the promise, or on the want of consideration “expressed,” (both of which objections existed,) does not appear. The judges were divided, three to four, and one (Judge Bronson) gave no opinion. The majority also, as to the grounds of decision were divided among themselves. The reasons of the majority were not given at length, except by a reference to the previous case of Durham v. Manrow at page 533 of the same volume, which was a case also of express written guaranty, in the words, “ we guaranty the payment of the within note.” This guaranty, however, unlike the other, was given in payment for a horse. “ It was part of the bargain for the horse and, with the consent of Moulthrop, [the surety.] The two engaged
The plaintiff’s complaint in the present action, as originally framed, was merely on the notes, averring demand and protest, and due notice to Cross as indorser, no part of which statement was denied. Cross in his answer defended himself on the ground that Moore was the payee, and that he had indorsed the paper for Moore’s accommodation and not McGervey’s, which, if true, would have been a perfect defense. But, as we have seen, it was not true. He indorsed the notes to accommodate McGervey and secure Moore, and not to accommodate Moore and secure the bank. Cross’s account of the transaction on this point, as set up in his answer, is shown by the proof and found by the verdict to have been at variance with the fact. Had it been sustained by the evidence it would have been not only a legal but a just defense. Being unsustained it was of course no defense, either just or otherwise. Failing in that attempt, Cross then placed himself on the supposed general rule of law that the payee of a note cannot sue an indorser. To meet this objection, and bring the case within the exceptions to the rule, the plaintiff by permission of the general term amended his complaint, by adding a special statement of the whole transaction. On that complaint, and not on the complaint as originally framed,
Viewing the case in this light, the whole case and not a mere fragment, it is perfectly clear, (as it seems to me, to use the language of the referee,) that when Cross wrote, indorsed and delivered the notes, he intended one of two things, either to bind himself to pay Moore the amount of them, or else to defraud him out of the coal which he knew was sold on the strength of his indorsement. The court must now determine which of these intentions it will carry into effect. A decision in favor of the latter of the two would, in my judgment, be something new and much to be deplored in the history of the administration of justice. The judgment for the plaintiff should be affirmed with costs.
Mitchell, P. J., concurred.
Davies, J., dissented, for the reasons stated in the following opinion, delivered by Justice Clerke, on the first hearing, which opinion was adopted by Justice Davies, as expressing his views.
This is an action on a promissory note, by
the payee against McGrervey as maker, and Cross, whose name appears as indorser. The defendant Cross is liable, if at all, either as indorser or as guarantor.
As the complaint now stands, it appears that the promissory note in question was made by McGervey, payable to the order of Moore, (the plaintiff,) and was indorsed by Cross, in blank,
I. The defendant Cross cannot be made chargeable as indorser. (Herrick v. Carman, 10 John. 224. S. C. 12 id. 159. Ellis v. Brown. 6 Barb. 282.) It would be inconsistent with the principles which have always prevailed in commercial law, relating to negotiable paper, if a subsequent indorser, as such, could be liable to a previous indorser. This seems to me inseparable from the nature and form of the instrument, and from the qualities which the law impresses upon it. It is negotiable and transferable, by indorsement in blank; and as each holder tranfers and indorses it to the next, he makes himself liable, from the terms of the contract, only to such, or any subsequent holder, to whom it is successively transferred, unless, by indorsing it “ without recourse” he exempts himself from all liability connected with it; so that it would be at variance with the essential properties of negotiable paper, and would be reversing the established order of liability, to make a subsequent indorser liable to a preceding one. In short, a subsequent indorser cannot be responsible to a previous indorser, any more than such previous indorser can be made responsible to the maker.
In Hall v. Newcomb, (7 Hill, 416,) the marginal note of the reporter contains an erroneous statement of the decision of the court, and of the import of the chancellor’s opinion. It is stated in the note, that on an indorsement, analogous to that under consideration in this case, the indorser could not be made liable to the payee as guarantor or maker, “ but only as indorser.” There is nothing in the decision, or in any of the opinions delivered by other members of the court, to warrant the assertion that an action can be maintained against him as indorser by the payee. The only question before the court was whether he could be sued as guarantor or general surety. No notice of non-payment had been served upon the defendant; and
II. Neither is the defendant (Cross) liable as guarantor. The question involved in this part of the subject, is now set at rest in this state. In the case above referred to. Hall v. Newcomb, (7 Hill, 416,) it was expressly decided, in the court for the correction of errors, that “ where a man writes his name in blank upon the back of a negotiable promissory note, he only agrees that he will pay the note to the holder, on receiving due notice that the maker, upon demand made at the proper time, has neglected to pay it. Mere proof that he indorsed the paper to enable the maker to raise money on it, does not change the nature of his legal liability as indorser, where the note is in the hands of a bona fide holder for a good consideration. For the courts to allow parol proof to charge a mere surety, beyond the legal effect of his written blank indorsement on such paper, would bring them in direct conflict with the provisions of the statute of frauds.” (2 R. S. 135. § 2, subd. 2.) The doctrine of this case is fully recognized by the court of appeals in Spies v. Gilmore, (1 Com. 321.) The subsequent cases of Durham and Moulthrop v. Manrow, (2 id. 533 ;) Hall v. Farmer, [Id. 553,) and Brewster v. Silence, (4 Seld. 207,) relate to the effect of a guaranty in express terms upon the back of the note, without stating the consideration, as “ we guaranty the payment of the within note.” In the first of these cases, it was proved that Durham, (one of the defendants below,) was the payee of the note; that he had purchased a house of the plaintiff on the day the guaranty was da,ted, and, in part payment therefor, transferred to him the note with the guaranty indorsed thereon. Moulthrop, the other defendant, signing the guaranty at the request of, and as surety for Durham. The court decided that it was valid, on the ground that an original consideration, in fact, was proved;
It is plain, therefore, that the plaintiff cannot recover, while any respect is to be shown to established principles, and to a current of authority in the highest court of appellate jurisdiction. Something was said about the right of the plaintiff to reform this contract, so as to place the name of the defendant Cross on the note as a previous indorser, ana, I suppose, also to substitute his name as payee, instead of that of the plaintiff. I need scarcely say, that if this can be done at all it cannot be done in this action. The action has not been brought for any such purpose; and of course, the defendant has had no opportunity of adducing evidence, or of being heard, upon such a suggestion. Although we have abolished the old forms of action, we have not abolished allegations and proofs. In other words, we have not abolished the right of defense in courts of justice.
The judgment should be for the defendant with costs.
"Judgment affirmed.
Mitchell, Roosevelt and Davies, Justices.]