Benton v. Fletcher

31 Vt. 418

• Court: Supreme Court of Vermont
• Decided: January 15, 1859
• Status: Published

Opinion

Poland, J.

The first question properly arising in this case, is whether the defendant is liable to the plaintiff as an indorser of the two notes mentioned in the declaration. Upon each of the. notes the defendant wrote and signed the following words : “I warrant this note collectible when due.” The plaintiff claims that the defendant, by thus putting his name on the back of the note, with these words written above it, incurred a double or twofold liability, first, as indorser, by which he made himself liable to pay the note absolutely to the plaintiff in case of non-payment by the maker at maturity, on proper demand and notice thereof to him, and secondly, as a guarantor, by which he became bound to pay the notes, provided the plaintiff should use reasonable diligence to collect the notes, and be unable to do so.

It is insisted that inasmuch as the transfer of the note in this form by the defendant to the plaintiff, would convey the legal interest in the note to the plaintiff, and enable him to maintain an action thereon against the prior parties, as indorsee, that therefore the defendant is also an indorser, and that not only is the legal transfer of the title made out, but also, as incident to that, the ordinary contract or obligation of an unrestricted or general indorsement is to be inferred.

We are not disposed to deny but that the plaintiff may treat what is written and signed by the defendant on these notes, as an indorsement or transfer of the legal interest of the notes to himself, so that he could sue on them as indorsee, or rather we think that the plaintiff would be authorized to add to what is written and signed by the defendant, an order directing the note to be paid to himself. A general or blank indorsement of a negotiable note, by the payee, or any subsequent holder, comprehends in itself two things, first, the transfer of the legal interest in the note to the indorsee, and secondly, the obligation assumed by the indorser. When the indorsement is general, or in blank, and is not controlled by evidence as to any actually different contract between the parties, the law attaches a particular meaning and extent to the contract, which is, that if the note is not paid when due by the maker, on proper demand, and notice of such nonpayment is seasonably given to the indorser, he will pay it. But it is still in the power of the party indorsing to transfer the legal title to the note, and at the same time to make any limitation or restriction he pleases as to his own liability as indorser, or to wholly absolve himself from any and all liability whatever, by indorsing the note without recourse. But in all such cases, however the indorser may limit or qualify, or wholly restrict his liability ; the transfer of the note is equally perfect, and he is an indorser, and the person taking it is indorsee, and may sue upon the note as such.

We see no objection to holding, that whenever the payee or other holder of a negotiable note transfers it absolutely, and puts his name upon the back of it, however he may restrict his own liability, whether it be absolute or conditional, or whether he is wholly relieved from any liability, the holder may still treat it as an indorsement of the note to him, and add the proper words of transfer to himself. But upon the plainest principles, when the indorser, instead of indorsing a note in blank, leaving the law to establish the measure and extent of his liability, writes out and signs a contract by which his liability is to be measured, that is to be regarded as the only contract into which he has entered, and having thus expressed the measure of his liability, there is no room left for legal inference and implication as to what his contract is. It is a plain case of the application of the familiar maxim: “ Hxpressio v/nius, exclusio alterius.”

The plaintiff’s view of the law upon this point is claimed to be supported by a decision of this court, Partridge v. Davis, 20 Vt. 499. The defendant in that case sold and transferred a note with these words upon the back of it, signed by the defendant, “ I guaranty the payment of the within note,” and it was held that the defendant might be made liable as indorser, upon proof of demand and notice, and also that he was liable as guarantor, without proof of any demand and notice, if the note was not paid at maturity. The court held that this was an absolute guaranty that the note should be paid at maturity, and that neither demand and notice of non-payment, or any proceedings to enforce collection, were necessary in order to render the defendant liable.

In short, the court held that the defendant’s liability under his express contract, was precisely the contract which the law would' imply from a blank indorsement, except that by it he had waived any obligation to make demand and give the defendant notice of non-payment, and that his liability being the same as that of an indorser, he might be sued as such. But the court did not decide that when the defendant’s express contract was conditional only, and different from that of an indorsee, that the law would super-add, by implication, another and a different contract.

But the very point made by the plaintiff upon this part of the case, seems to have been decided in the subsequent case of Hammond v. Chamberlain, 26 Vt. 406.

•In that case the defendant, on the transfer of a note to the plaintiff, signed the following words on the back of the note: “ I hereby guaranty this note good until January 1, 1850.” The plaintiff insisted that the defendant was liable as an indorser, 'but the court held otherwise, and decided that these words only amounted to a conditional guaranty that payment could be enforced against the makers if legal diligence was used for that purpose. The whole current of decisions. in this State, upon these conditional guaranties, seems to be founded upon the same general idea of their nature and effect.

The liability of the defendant being only, that of a conditional guarantor, a long and unbroken series of uniform decisions in this State, commencing with Foster v. Barney, 8 Vt. 60, have established, that in order to make the defendant liable, the plaintiff must first use all reasonable diligence to collect the note, and that it is only upon failure to enforce collection of the note, that the defendant’s obligation to make payment arises.

But the plaintiff insists that by the terms of this guaranty he was only bound to attempt to enforce collection against Catlin, the maker, and that he was not bound to attempt collection of Leavenworth, who, upon the face of the note, appeared to be an indorser, and that as Catlin was admitted to be insolvent when the notes matured, he was not bound to make any effort to collect the note.

. It might well admit of doubt whether, under this view of the law, he would not have been bound to proceed against Leavenworth, as a maker, under the decisions in this State, he not being the payee of the note, and having put his name upon the note before it was originally negotiated; but we are not disposed to put our decision on that ground.

Treating Leavenworth merely as an indorser of the note, we think the plaintiff was equally bound to take the necessary legal steps, not only to make him liable as indorser by making demand and giving notice to him of non-payment, but that he was also bound to use all legal means to enforce payment from him as well as of the maker. He was not in form an original party to the note, but by indorsing it he became a party to it, and all the books speak of an indorser as a party to the note, as well as the maker and payee. Leavenworth having thus become a party to the note before the defendant executed this guaranty to the plaintiff, and liable to pay it if the maker did not, we can see no rear-son why it was not equally the duty of the plaintiff to attempt collection from him as from any other party, and such must have been the understanding of the parties. A guaranty that a note is good, or that it is collectible, amounts to this, that the parties liable upon it are able to pay it, or that collection can be enforced against them, and there is no sense in applying this to one party more than another, when they are both liable. The case of Moakley v. Riggs, 19 Johns. 69, was an action upon a guaranty, much like the present, of a note where there were indorsers upon it. The plaintiff had instituted legal proceedings against the indorsers, but not against the maker, and it was held that the defendant was not liable on his guaranty. Spencer, Ch. J., who delivered the opinion, says, “ The guaranty extends as well to the maker of the note as to the indorsers. The plaintiff accepted the note with the several and respective liabilitesvof the maker and indorsers, and his title to demand of the defendant the performance of the guaranty depends on his showing, either that he has with reasonable vigilance pursued a due course of law, that is, commenced and prosecuted suits to effect against all the parties to the note, and has thus ascertained that the note was not good and collectible, or he must set forth a legal excuse for omitting to do so.” And again he says, “The defendant has a right to insist that he entered into this guaranty under the express condition that he was not to be liable unless the note turned out not to be good or collectible after a regular prosecution against the maker and indorsers of the note with due and reasonable diligence.” The law thus laid down by so eminent a judge, we think is entirely just and reasonable, and exactly applies to this point in the present case, and is fully adopted as the law of the case.

But the plaintiff insists that if he was, by the terms of the guaranty, bound to proceed against Leavenworth, the indorser, as well as against Catlin, the maker, he was excused from any such effort, because Leavenworth died before either of the notes matured. If the death of Leavenworth put an end to all remedy for enforcing payment of the note by legal means, we should be fully prepared to adopt this view of the plaintiff.

But it is not contended that it did, and the case shows that he was represented by an executor before the notes fell due, and that he left ample estate for the payment of these notes, and all his other debts. The plaintiff presented the notes before the commissioners on his estate and they were duly allowed, and the case was in due progress of settlement in the probate court when this suit was commenced. The claim of the plaintiff is, that the fair construction of the defendant’s guaranty is, that he could enforce payment of the note by an ordinary suit at law against those liable to pay the note, personally; and that as he was prevented from having this form of remedy by the death of the party, he was excused from using such other remedy as the law gives to enforce payment from the estate of the party, however ample. But in our opinion no such narrow construction is required, or even allowable, and no specific form or character of legal remedy is to be intended, nor is it requisite that it shall be an action in common law form, or against the person of one or all the prior parties to the note, hut the holder is bound to use all legal remedies, whatever their form may be, to realize payment from the prior parties, or from their property.

By our law, the estates of debtors, both real and personal, are made liable for the payment of their debts, and tribunals are established and legal means provided equally efficient to that end, as the ordinary courts of law are to enforce payment of their debts while in life, and it is as much the duty of the plaintiff to resort to the remedies afforded by the law through these courts, as it would be to the common law courts and their process, if Mr. Leavenworth had been alive when the notes fell due. This is supported by the case of Taylor et al. v. Bullen, 6 Cow. 624. The defendant in that case had sold a note to the plaintiffs, and warranted the collection of it, and promised to pay all costs on all suits legally commenced for its recovery. Before the note matured the maker died, but left sufficient -estate for the payment of his debts, but no administration had been taken thereon. It was held that the plaintiffs could not recover of the defendant, until they had first exhausted such remedies as the law gave for enforcing payment out of the maker’s estate. That seems a stronger case than the present, for there no representative of the maker had been appointed, and it does not appear precisely what form of remedy he would have had in that State. But the court say that “ if there is property enough the law points out sufficient remedies,” and the court held that the remedies afforded by law, whatever they were, must be pursued. The class of eases cited by the defendant’s counsel, where it has been held that where the maker of a note has deceased before the note matures, still, unless demand be made upon his legal representative, the indorser is discharged, and also that when the indorser has deceased, notice is equally necessary to be given to his representative to make his ' estate liable, go strongly in support of our conclusion on this point.

The plaintiff claims too, that if he was bound to resort to such remedies as the law afforded against Leavenworth’s estate, he has pursued such remedy to its legal termination, without producing payment. As before stated, the plaintiff procured the notes to be properly allowed by the commissioners on the estate, which was the first proper step toward enforcing payment out of the estate. The settlement of the estate would seem to have been delayed on account of the litigation of certain large claims presented against it, so that the time for paying debts was extended by the probate court for the full period allowed by law, three years, and then the plaintiff applied to the court for an order on the executor to pay the debts, which for some reason the court refused to make, and thereupon the plaintiff took an appeal, and such appeal was pending when this suit was commenced.

But it is quite evident that the plaintiff had not exhausted his legal and coercive remedies in the probate court. A creditor whose claim is allowed by commissioners, is not considered as having obtained a final judgment in the probate court until he has obtained an order or decree against the administrator or executor for the payment of the debts, or some dividend thereon, and until that is done, legal proceedings in the probate court must be considered as pending. Whether if such order had been obtained and the administrator or executor then refused to make payment of the debt, the plaintiff would be bound to commence a suit against the administrator or executor on his bond or otherwise, is not necessary now to be decided, though for one, I think he would be. Such action is considered merely as a means of enforcing the judgment of the probate court, as but a mode of obtaining an execution upon their decree. See Orange Co. Bank v. Kidder et al., 20 Vt. 519. But at all events we are all satisfied that the proceeding was not ended till a final decree was obtained in the probate court, and that the plaintiff has no right to assume in advance, that such decree when obtained would not be paid. The plaintiff complains, and perhaps justly, that the proceedings in the probate court have been long delayed, and that even after the last extension of time, in the power of the court to grant, had expired, the court refused to make an order for the payment of the debts. Whether the settlement of the estate has been proceedetl with as rapidly as it should have been, or whether the court properly refused to make the order prayed for, can not affect the legal rights of the parties, but it should be remembered that the proverbial delay of the law, and even of the inefficiency of courts, has not been exclusively confined to courts of probate. We are all agreed that the plaintiff had not so far performed the condition of this guaranty, by exhausting his legal remedies for the collection of the notes, when he commenced this action, as to be entitled to recover. This view of the case renders it unnecessary to decide the other questions that have been made in the case.

The judgment of the county court is therefore reversed, and a new trial granted.