New Blue Springs Milling Co. v. DeWitt

70 P. 647 | Kan. | 1902

The opinion of the court was delivered by

Burch, J. :

Plaintiff in error insists that, because it took the DeWitt note under a commercial indorsement in due form, Fields is bound to all the liabilities of an indorser of negotiable paper ; that he became subject to suit at once upon default of the maker, and that, being subject to such suit, he was a real party ■adverse in interest to the plaintiff. This contention, however, omits all consideration of the principal contract in writing executed contemporaneously with that written on the back of the note. It is elementary law that parties may, if they so desire, express their full intention in separate instruments, and in this case it was proper for them to limit the effect of the indorsement by a separate agreement, if they saw fit so to do.

In Davis v. Brown, 94 U. S. 423, 24 L. Ed. 204, an indorser of a promissory note sought to prove an agreement in writing made with its holder at the time of the indorsement that he should not be held liable thereon, and the court said :

“The objection that'the agreement was inadmissible because it tended to vary and destroy the legal effect of the indorsement is not tenable. The agreement, being in writing, is to be taken and considered in connection with the indorsement, and the two are to be construed together. So far as the bank was concerned, the agreement made the indorsement equivalent to one without recourse to the indorsers.”

It is necessary to determine, therefore, whether the agreement relating to the purposes of the transfer of the note qualified the agreement embodied in the indorsement; and in arriving at a solution of this question, according, to incontrovertible precedents, whatever may be fairly implied from the language of the writings employed is, in the judgment of the law, contained in them. (Lawler v. Murphy, 58 Conn. 294, 20 Atl. 457, 8 L. R. A. 113, and cases cited. It is only by the light of this rule that the full purport of the indorsement on the note can be apprehended. (Doolittle v. Ferry, 20 Kan. 230, 27 Am. Rep. 166.) It is not any the less applicable in searching for the true intent of a companion instrument. The obligation of the indorsement was that the maker of the note would pay at maturity, and if he defaulted that Fields should then pay.

In Daniel on Negotiable Instruments, volume 1, section 671, the rule is stated as follows:

“The indorser of a bill contracts to pay it at maturity, if, on presentment for acceptance, it is not accepted according to its purport, and he is duly notified of the dishonor. And the indorser of an accepted bill, or of a note, likewise contracts to pay it, if it be not duly paid by the acceptor or maker. It matters not what may be the cause of the drawer’s or maker’s refusal. The indorser contracts to pay on being duly notified that he refuses to pay. He therefore warrants the solvency of the parties — or, in short, warrants that it will be paid, either by them or by himself, on receiving notice of their failure.”

In Story on Promissory Notes, section 135, it is said:

“The indorsement of a note, in contemplation of law, amounts to a contract on the part of the indorser with and in favor of the indorsee and every subsequent holder to whom the note is transferred : . . . (4) That the maker is competent to bind himself to the payment, and will, upon due presentment of the note, pay.it at maturity, or when it is due. (5) That if, when duly presented, it is not paid by the maker, he, the indorser, will, upon due and reasonable notice given him of the dishonor, pay the same to the indorsee or other holder.” (See, also, 2 Rand. Com. Pap. §742; Wood’s Byles, Bills and N. *154; Chit. Bills, *241.)

The note fell due December 23,1899. The indorsement was made November 10 of the same year. Under the indorsement alone, it would be contemplated that in little more than a month after the paper changed hands DeWitt should pay $10,000, and that, upon his failure so to do, Fields would pay that sum to the plaintiff. Under the principal contract, nothing of the kind was either expected or required. The milling company was to collect the note ; it was to proceed to collect it upon its maturity; it was to do this with all reasonable speed; it was to institute prompt proceedings therefor. The proceedings in view were legal proceedings,.and, under the last clause of the contract, these legal proceedings were to result in a judgment. In all this the milling company was to be the moving party to enforce and compel payment, and was not to be the simple recipient of funds due to it. Apparently, nothing but the dishonor of the note was considered. It was not supposed that it would be paid according to its tenor at maturity, but it was to be collected by compulsory measures.

If Fields should pay under the indorsement, the provisions relating to collection by prompt legal proceedings on maturity of the paper would be nugatory, although they appear to be among the most essential provisions of the contract. The milling company would then no longer have a cause of action against either the maker or the indorser. The obligation to it would be fully satisfied, and it could not, if it would, reduce the debt to judgment; hence, Fields was not expected to pay. But there is certainly nothing to commend itself in the assertion that a full process of collection was elaborated against Fields when, should the indorsement control, it was his duty to pay at once without suit. Yet this view must be taken if the construction of plaintiff in error is to prevail. Candor, will scarcely suffer it to be said that Fields contracted' to have himself sued in order to goad himself by judgment and execution into performing his simple legal duty to pay, or that the milling company engaged- to embark upon such an anomalous undertaking. Nor' is it more reasonable to assume, as must be done if Fields were to be sued, that he reserved the privilege of receiving from the milling company $6000 for himself out of $10,000, which he was to be harrassed by litigation in paying to it. Therefore, the process of collection stipulated for was not to be directed against Fields.

From this it must follow as a necessary implication that the -note was to be collected from DeWitt alone. This construction of the contract is aided by the fact that the milling company withheld all benefits of the transaction from Fields until the result of the proceedings to collect should be ascertained. It was not necessary to do this beyond the maturity of the note if Fields were then required to pay, but so long as the milling company had assumed the burden of prosecuting an uncertain litigation and owed it as a duty to Fields so to do, it could rightfully secure itself against barren results, and it could justly reserve the privilege of determining what course should be pursued after judgment, as the last paragraph of the contract contemplates.

It clearly appears, therefore, that in the suit against DeWitt it was to the mutual advantage of both Fields and the milling company that the milling company should succeed. Their interests were identical and not adversary, and hence Fields was improperly joined as a defendant under section 36 of the code (Gen. Stat. 1901, § 4464), which provides that ‘ ‘ any person may be a defendant who' has or claims an interest in the controversy adverse to the plaintiff.” This being true, under the well-established law, no summons could issue for DeWitt from the county in which the suit was commenced.

The judgment of the district court is affirmed.

All the Justices concurring.