133 S.E. 196 | N.C. | 1926
The necessary facts will be considered in the opinion. Plaintiff brought an action against the defendants, who gave a negotiable note 23 February, 1921, to Tomlinson Guano Company, due 1 November, 1921, with interest from 1 January, 1921. Credit $150, 22 November, 1921. Plaintiff claimed it was the owner in due course. As a defense to the note, defendants allege that they stored with Tomlinson Guano Company, or Tomlinson Co., Inc., 79 1/2 bales of cotton upon certain terms to be sold and applied on the note. This was not recited in the note. They further allege that Tomlinson Guano Company, or Tomlinson Co., Inc., were one and the same concern. Both are insolvent and have been adjudged bankrupts. The defendants further allege "that without their knowledge, consent and acquiescence, the said 79 1/2 bales of cotton were sold and the proceeds converted to the use of Tomlinson Co., Inc., or Tomlinson Guano Company, and was not applied to the discharge of the notes to secure which the same were deposited."
The plaintiff's evidence was to the effect that the note was purchased 15 March, 1921, for full value, before maturity and without notice of any equities. We do not discuss the evidence introduced by defendants and that excluded by the court below tending to fix plaintiff with notice so that defendant's equities could be considered. We think the court below made no error in excluding that to which exception was taken. We think the evidence on this aspect not sufficient to be submitted to the jury. We pass on whatwe consider the main assignment of error. *798
The note, with all endorsements, is as follows:
"$6,000.00. Wilson, N.C. 23 February, 1921.
1 November, 1921, after date, we promise to pay to the order of Tomlinson Guano Company six thousand dollars at 6% int. from 1 January, 1921. Value received.
H. H. WALSTON, JR. (Seal.)
BRITTON HARRELL. (Seal.)
No. 82.
Demand, notice and protest waived; payment guaranteed by the undersigned.
TOMLINSON GUANO COMPANY.
N. L. Finch, Partner.
Pay to the order of
Tomlinson Guano Company,
For collection and return of proceeds to Powhatan Chemical Company,
Richmond, Va.
(This latter endorsement was stricken out, lines drawn through after it was recalled in February, 1922.)
Cr. 11/22/21 by cash, $150.00."
The note is negotiable in form. Defendants contend that the note was not negotiated in accordance with the law of merchants or the negotiable instrument law. The language on the note being "Demand, notice and protestwaived, payment guaranteed by the undersigned," the plaintiff contends it is an endorsement with an enlarged liability.
The defendants contend the language only showed a guarantee and nothing more, and does not constitute commercial negotiation in due course.
If the language makes plaintiff a holder in due course, it takes same free from equities and defenses which the maker has against the payee. The cases of Gillam v. Walker,
We can find no decision bearing on the question in this State. We must look elsewhere. The language "payment guaranteed by the undersigned," would indicate, as contended by defendants with much force, only a guarantee and not a commercial negotiation in due course. It is contended that especially is this true from the fact that the guarantor had cotton in its possession of defendants to sell, pledged to pay this note, which would further indicate that it would not, by the language, intend to make the note such a one — in due course — as to cut off the right of defendants to have the cotton, as agreed upon, applied on the *799 note when sold according to the terms. This position is borne out to a great extent by Mr. Justice Strong in Trust Co. v. National Bank, 101 U.S. Reports, p. 68 (October Term, 1879); the gist of this opinion is: "The defenses of the maker of a promissory note can be cut off only by the payee's endorsement of it before maturity. A guaranty written upon it by the payee is not such an indorsement." The learned Justice says at p. 70: "That a guaranty is not a negotiation of a bill or note as understood by the law merchant, is certain."
We have given this case thorough consideration, appreciating the hardship on defendants, but, under our negotiable instrument law and the great weight of authorities, we must hold that the writing on the negotiable note is an indorsement in due course, so far as to transfer to and vest title in the plaintiffs, and the guarantee is "An indorsement with an enlarged liability." Negotiable papers being so important to the life of trade that the decision of Mr. Justice Strong has not been to any extent followed, and numerous states of the nation have, to a great extent, passed uniform negotiable instrument laws. In this State, C.S., ch. 58 (1899), "Negotiable Instruments," sec. 3014, is as follows:
"An indorsement may be either in blank or special, and it may also be either restrictive or qualified or conditional."
"C.S., 3017. An indorsement is restrictive which either (1) prohibits the further negotiation of the instrument; or (2) constitutes the indorsee the agent of the indorser; or (3) vests the title in the indorsee in trust for, or to the use of, some other person. But the mere absence of words implying power to negotiate does not make an indorsement restrictive."
C.S., 3018. Effect of restrictive indorsement; rights of indorsee.
C.S., 3019. Qualified indorsement.
C.S., 3020. Conditional indorsement.
C.S., 3044. "A person placing his signature upon an instrument otherwise than as maker, drawer or acceptor is deemed to be an indorser, unless he clearly indicates by appropriate words his intention to be bound in some other capacity."
The language of these sections indicate that to make an indorsement, as in the present case, restrictive, some language must indicate it or the consequence is that the indorsement is with an enlarged liability. The weight of authorities, whether under negotiable instrument laws or by the law merchant, take this view.
The case of Ireland v. Floyd,
In Douglass v. Brown,
In First Nat. Bank v. Cummings,
In Delk v. City National Bank,
Lumpkins, J., in a well thought out opinion, with numerous authorities, in Hendrix v. Bauhard,
The Massachusetts cases seem to be in conflict on the question.
"The fact that an indorsement includes a guaranty or is in form a guaranty does not prevent the passing of title, such a writing according to the weight of authority amounts to an indorsement which transfers title to the note." 21 A.L.R., 1375. Digesting the cases — Anno. Cases, 1913 D., 688; 36 L.R.A., 232.
1 Joyce on Com. Papers (2 ed.), sec. 666, says: "The determination of the question whether equities and defenses between original parties are available against a bona fide holder in case of contract of guaranty, must rest largely upon the construction placed upon that contract in the different jurisdictions, and where it is determined that a payee or holder, who writes above his indorsement of negotiable paper a guaranty of payment, stands in the position of an indorser with an enlarged liability, such a transfer constitutes an indorsement of the paper."
Brannan's Negotiable Inst. Law, Anno. (14 ed.), 1926, sec. 38, p. 323, says: "Where the payee of a negotiable note indorses it, `I hereby guarantee the payment of the within note and waive demand and notice of protest,' he is liable not as a mere guarantor, but as an indorser with an enlarged liability. The N. I. L. (Negotiable Instrument Law) was not cited on this point. First National Bank v. Baldwin,
The decisions years ago on this important question were chaotic. In more recent years, and especially since the passage among the states over the nation of the negotiable instrument laws to make the laws more uniform, the decisions are more in accord and the great wealth hold that the indorsement, as in the present case: "Demand, notice and protest waived, payment guaranteed by the undersigned," is an indorsement with an enlarged liability. The language makes the holder one in due course and the instrument is taken free from equities and defenses which the maker has against the payee. The great importance in commerce and trade has forced uniform legislation in regard to negotiable instruments, and the courts have now, with few exceptions, held that the holder, under the facts in the present, is one in due course with enlarged liability.
"The Illinois Act adds, `and the addition of the words of assignment or guaranty shall not negative the additional effect of the signature as an indorsement, unless otherwise expressly stated.'" Chance v. Hudson, 233 Ill. App.?,? 542.
Dunham v. Peterson,
The indorsement is an enlarged liability. This is now held to be so by the great weight of authorities, both by the law merchant and the Negotiable Instrument Laws. The endorsement in some cases are "I hereby guarantee the payment of the within note," and others are as in the present case with the addition "Demand, notice and protest waived, payment guaranteed by the undersigned." Myrick v. Hasey (1847),
The reason of the conflict and chaos we think perhaps the question by the law merchant made the matter doubtful, although the weight of authorities do not so indicate; but, under our Negotiable Instrument Act, we think it clear that the indorsement carried the title and the holder was one in due course with an enlarged liability. For the reasons given, there is
No error.