83 S.E. 585 | N.C. | 1914
This action was brought to recover the sum of $10,144.50, as due upon four several notes indorsed in blank by the defendant. The case was referred to Hon. Howard A. Foushee, who made his report, in which, after finding the facts and stating his conclusions of law therefrom, recommended that judgment be rendered in favor of the plaintiffs, and against the defendants, for $10,144.50, the amount due on the notes, with interest on $7,144.50, from 20 March, 1911, and on $3,000 from 8 April, 1911, until paid, together with the costs of the action; and further recommended that no execution be issued on said judgment until 1 May, 1915, and that the three F. A. Moore notes, and the assignment from him securing the same, and the Louis Moore note with the assignment securing the same, should all be delivered by the said trustee to the clerk of the Superior Court of Durham County, State of North Carolina, to be held by him until such time as said R. O. Everett pays said judgment, at which time the same shall be delivered to him. Defendant excepted to the conclusions of law of the referee.
(602) The material facts are as follows:
On 20 March, 1911, F. A. Moore executed and delivered to the defendant R. O. Everett three demand notes aggregating $7,144.50, and the same are set out in the record. As stated, the notes were payable on demand and were secured by an assignment of an interest of F. A. Moore in his share and portion of the estate of John Annin of New York City. This assignment, which was deposited with R. O. Everett as collateral for the payment of said notes, in addition to transferring and assigning an interest to secure said notes, constituted and appointed the defendant R. O. Everett, or any person whom he might substitute, as his lawful attorney to collect said interest in said estate and apply the same to the discharge of said indebtedness.
On 8 April, 1911, Louis Moore executed and delivered to R. O. Everett and G. C. Farthing his promissory note for $3,000, payable on 1 September, 1911, and to secure said indebtedness transferred and assigned to R. O. Everett an interest in the estate of John Annin, and appointed R. O. Everett, or any person whom he might substitute, as attorney to collect the same and discharge said indebtedness. The Louis Moore note and the assignment appear in the record. On or about 11 April, 1911, R. O. Everett, by indorsement, duly transferred and delivered to G. C. Farthing, for valuable consideration, the four notes above referred to, together with his interest in said assignments, which were given as collateral therefor. At the time these four notes were so indorsed and transferred to G. C. Farthing there was an agreement between R. O. Everett and G. C. Farthing that if F. A. Moore and Louis Moore did not pay and the money was not realized on the assignments of their interest in *661 the Annin estate, R. O. Everett would be ultimately responsible for the payment of said notes, but he would not be called upon to pay the same until the estate of John Annin had been exhausted. G. C. Farthing held the notes so indorsed to him from 11 April, 1911, until 23 August, 1912, when the said Farthing executed and delivered to R. H. Sykes and W. P. Clements, trustees, a deed of trust conveying his property to them, and, among other things, all the right, title, and interest of G. C. Farthing in and to the above described notes and collateral assignments, and on said date the trustees took possession of said papers and retained them until the commencement of this action. Said trustees of G. C. Farthing made demand upon F. A. Moore and Louis Moore, but they failed to pay said notes, and the estate of John Annin has not been wound up. Demand was then made by the plaintiffs, Sykes and Clements, trustees, upon R. O. Everett for payment, and he declined to pay, upon the ground that he was not liable until the Annin estate had been exhausted.
The referee made the following findings of fact, among others:
7. That at the time said three F. A. Moore notes were indorsed (603) to G. C. Farthing, towit, 11 April, 1911, it was done upon an agreement between R. O. Everett and G. C. Farthing that he would be ultimately responsible for the payment of said notes, but that he (Everett) would not pay the same until the estate of John Annin had been exhausted. In the event there was any trouble about the collection of said notes, that he (Everett) would procure and pay for the services of an attorney and that he (Everett) would hold Farthing harmless against the cost and expenses of any litigation incident to the collection of said notes. That Farthing did not know anything about the Annin estate, and that Everett told Farthing he had been to New York and he expected the same to be closed up in sixty or ninety days, and that the notes were perfectly good. That Farthing relied upon the representations of R. O. Everett and took over said notes without investigation.
9. That at the time said Louis Moore note was transferred to G. C. Farthing, as aforesaid, towit, 16 April, 1911, it was agreed between Farthing and Everett that he (Everett) would be ultimately responsible for the full face value of said note, but that Farthing should not call on him to pay the same until the collateral was exhausted, and that if any attorney was needed to collect the Louis Moore note, that he (Everett) would pay the expenses of same, and that Farthing should be held harmless by reason of any litigation concerning the same.
10. That said estate of John Annin has not been wound up; that R. O. Everett has employed counsel and has made repeated trips to New York to see said attorneys and to expedite the winding up of said estate of *662 John Annin, but so far the end is not in sight, and no one knows when the suits incident to the winding up of said estate will be ended.
The exceptions coming on to be heard before Judge C. C. Lyon, the following judgment was entered thereon:
"This cause coming on now to be heard upon the report of Hon. H. A. Foushee, referee, and the exception filed thereto by the defendant, after hearing argument of counsel, it is ordered, considered, and adjudged that the report of the referee be and the same is hereby in all respects confirmed; and it is further ordered, considered, and adjudged, in accordance with said report, that the plaintiffs R. H. Sykes and W. P. Clements, trustees of G. C. Farthing, as such trustees, recover of the defendant R. O. Everett the sum of $10,144.50, with interest on $7,144.50 from 20 March, 1911, until paid, and with interest on $3,000 from 8 April, 1911, until paid, together with the cost of this action, to be taxed by the clerk of this court; and, in accordance with said report, that no execution issue on this judgment until 1 May, 1915. It is further adjudged that the three F. A. Moore notes, as set out and described in the report of said referee, together with the assignment securing (604) the same and the Louis Moore note, as set out and described in the report of said referee, together with the assignment securing the same, should all be delivered by said trustees to the clerk of the Superior Court of Durham County, N.C. to be held by him until such time as the said R. O. Everett pays this judgment, at which time the said notes and assignments shall be delivered to the said R. O. Everett."
From this judgment defendant appealed to this Court. The larger part of the argument before us was taken up with a full discussion of the question whether a blank indorsement by the payee, or one of the payees, to a third party can be explained by oral evidence showing what the special contract between them was, and that it was different from the one implied by law from the mere indorsement of the paper. This is a question of evidence, and the admission of the oral proof could only be incompetent on the ground that it would vary, alter, or contradict the terms of a contract which the parties have reduced to writing as the only expression of their agreement, and would violate the general rule of evidence prohibiting the introduction of such evidence. But there was no exception to the evidence, as there should have been, if that rule was relied upon; but the evidence was admitted without any objection, so far as appears, and the referee found the facts in regard to the special contract. *663 Besides, if plaintiffs had objected, they have not appealed, and the exception to the admission of the evidence would not now be open to them.
But waiving, for the present, this view of the record, and considering the other question argued, we are of the opinion that, by our decisions, although there is some conflict in other States, the evidence is competent. In Mendenhall v. Davis,
Two cases, which are apparently relied on by appellee, should be noticed. Davidson v. Powell,
(606) The other case is Bank v. Pegram,
In commenting upon the very instructive case of Baxter Natl. Bank v.Talbot, 13 L.R.A. (Mass.), p. 52, the learned annotator says: "While it is elementary law that parol evidence is incompetent to vary the terms of a written instrument, still it is equally well settled that, as between the original parties to commercial paper, such proof is admissible as will have a tendency to establish the character in which an indorser in blank intended that he should be bound; and proof of this intention will countervail the prima facie presumptions which the law indulges with reference to the paper," citing Riley v. Gerrish, 9 Cush., 104; Sylvesterv. Downer,
On the same theory that parol evidence is admissible as between the first parties to the blank indorsement, it is also applicable as against subsequent holders with notice. 8 Cyc., 266; Davidson v. Powell, supra. An assignee, under a general assignment, acquires the property of his assignor, subject to all equities against him. 4 Cyc., 219; Wallace v.Cohen,
(608) It may be added that plaintiffs acquired the notes by the assignment to them, after their maturity, and therefore, in law, with notice of all equities and other rights of the indorser, Everett, and consequently, in law, took subject to them. Causey v. Snow,
What, then, was this agreement? It is true, as argued by defendant's counsel, that the taking of collateral security does not suspend the right of action upon the principal debt, in the absence of any stipulation to that effect. Jones on Collateral Security, sec. 590. But that is not the question, by any means, as the agreement did not consist merely in the transfer of collaterals. It was distinctly understood and agreed that Mr. Farthing would not look to Mr. Everett for payment until he had exhausted
the Annin estate. This was a valid agreement, and Mr. Farthing is bound by it, and his trustees as well. It bears a close resemblance to a guaranty of collection. We said in Cowan v. Roberts, 134 N.C. at p. 418: "A guaranty is a promise to answer for the payment of some debt, or the performance of some duty, in case of the failure of another person who is himself in the first instance liable to such payment *667
or performance. Carpenter v. Wall,
The cases relied on by plaintiffs, holding that a creditor having collateral security for his note may, notwithstanding this fact, sue the debtor without first resorting to the collateral and exhausting it (Jones on Collateral Security, sec. 686; Silvey v. Axley,
What defendant said as to the time within which the estate could be settled is not material, as there is no allegation or contention that there was any false and fraudulent representation. It was merely the expression of his opinion or "expectation," and it may have been a correct one, if proper diligence had been used in prosecuting the case against the estate. He is not responsible for the delay. Besides, the court had proceeded upon the theory that the contract is valid, by allowing him more time for the settlement, to which he would not be entitled if there had been any fraud or other equitable ground upon which to set it aside.
This view of the case is not only in accordance with good law, but good morals and manifest justice. When Mr. Farthing accepted the notes from Mr. Everett, he did so with an express agreement, as found by the referee. That agreement was definite and binding, towit, that Everett *669 should be ultimately responsible if there was failure on the part of the Moores to pay, and on the part of the estate of John Annin to make good the liability. He agreed to bear the expenses of suing them, and has done so. It is now found as a fact that the estate of John Annin has not been wound up, and of course has not been exhausted. It is not even found as a fact that it is insolvent, and we were told on the argument that, as a matter of fact, it is not. Then why should the terms of the agreement entered into between Mr. Everett and Mr. Farthing be varied by the court in order to accelerate the time for payment by the defendant? If Farthing had sued the defendant Everett upon these notes, and this agreement had been shown, the court would not have sustained his action.
It must be declared that there was error, and the judgment will be reversed and the action dismissed.
Reversed.
Cited: Fowle v. Mclean,
(611)