Hahn v. Hull

2 Abb. Pr. 352, 4 E.D. Smith 664

• Court: New York Court of Common Pleas
• Decided: December 15, 1855
• Status: Published

Opinion

Woodruff, J.

The plaintiff in this action avers in his complaint that the defendant, Parsons, made his promissory note, whereby he promised to pay to the order of plaintiff, three hundred dollars, for value received, and that the appellant “ Hull, endorsed the said note to induce the plaintiff to accept the same.” He then avers presentment at maturity, demand, non payment by Parsons, and notice to Hull — and that he, (the plaintiff), is now the lawful holder and owner of the said note. To this complaint the defendant, Hull, interposed a demurrer, the grounds of which may be summed up in the claim that the complaint does not state facts sufficient to constitute a cause of action against him. Judgment having been ordered for the plaintiff, upon the demurrer at the special term, Hull appeals.

What liability is incurred by a party who writes his name upon the back of a negotiable promissory note, (made payable to the order of a third person), before the same is endorsed by the payee, is a question that has occupied a large share of the attention of the courts of this State for more than forty years. And the courts of others of the United States have been much occupied by the same question.

It has always appeared to me the safest and most consistent view of such an endorsement, to hold that a person so writing his name, is to be taken to intend to become an endorser subsequent to the payee of the note, and with all the rights incident to that situation. Spencer, J., in Herrick v. Carman, (12 Johns., 159), says “ the fact of his endorsing first in point of time can make no difference, for- he must have known, and we are to presume acted on that knowledge, that though the first to endorse, his endorsement would be nugatory unless preceded by that of the payee of the note,” and there it was held that the payees could not recover against one whose name had been thus endorsed on the note, although the payees had accepted the note and sold goods on the credit thereof, such endorsement being thereon at the time. But it is in the same case intimated that, “ had it appeared that the plaintiff en. dorsed the note for the purpose of giving the maker credit with the payees, he would be liable to them, and his endorsement might have been converted into a guaranty to pay the note. Following this suggestion is the case of Nelson v. Dubois, (13 Johns., 175), ⅛ which it is distinctly held that when such endorsement is cotemporaneous with the delivery of the note to the payee, and is made for the security of the payee and payable to him, or bearer, he parting with property on the credit thereof, such endorsement is an absolute undertaking to pay the note, and that such endorser is as much liable as if he had signed the note. Next, Campbell v. Butler, (14 Johns., 349) in which case the note was payable to the order of the payee, was decided in the same manner, to wit, that such endorsement was in effect a special guaranty, and that the payee might fill it up with an express undertaking to pay the note as guarantor. In Tillman v. Wheeler, (17 Johns., 326), the court recognizes the doctrine of the above cases. But, although it appeared as in Wilson v. Dubois, that the payees took the note and parted with property in reliance on the security of such an endorsement, yet it was held that as it did not appear that the endorsement was made by the defendant/br that purpose, he was not liable to the payees; “the legal presumption (the court say) from the appearance of the paper is, that the defendant put his name on the note as second endorser, on the responsibility of the payee.” But the court clearly intimate that had it beoa also proved that such endorsement was intended by the defendant as a security to the payee, the latter might have recovered upon it as a guaranty of its payment.

But I do not intend to go through with all the cases in this State on the subject. It came at last to be held, following the Massachusetts cases, that such an endorsement not only amounted to a guaranty of payment but that the endorser might be treated as a joint and several maker of the note itself.

In Dean v. Hall (17 Wend., 214), a distinction was taken in reference to such an endorsement between the case in which the endorser was privy to the original consideration, in which it is said he may be charged as maker and the case in which his endorsement was subsequent to the making, and he had nothing to do with the consideration in which he is held liable only as guarantor or endorser. In that particular case the note being made payable to bearer, there seems to me no reason for regarding the endorsement as any other than an ordinary commercial endorsement, binding the defendant as endorser, to any one into whose hands after such endorsement it should come ; and such was then the view of the court, by whom, for the want of demand and notice, the defendant was held not liable.

And yet if parol proof is admissible in any case to show that a blank endorsement was intended as an absolute undertaking to pay the note, I perceive no reason founded in principle why such evidence may not be given when the note is payable to A. B. or bearer, as well as where it is payable to A. B. or order. If the prima facie legal import of the contract may be varied, yea, even contradicted in the latter case, surely it might, I think, in the former.

Numerous cases followed in which it began to be doubted whether in any case such an endorsement could be regarded as the making of a note, or even as absolute guaranty of its payment, and the like questions were agitated where the endorsement was not in blank but was filled up in the form of a guaranty, — until by the cases of Durham v. Manrow (3 Hill, 533), and Hall v. Farmer, (Ib., 553), it is left by the Court of Appeals in great doubt whether if such endorser writes over his name in very terms “ I guaranty the payment of the within note,” such guaranty is not wholly void by the statute of frauds because no consideration is expressed therein, and the only alternative seemed to be to hold such *a guaranty was in effect the making of a promissory note the consideration whereof is to be found in the note upon which it is endorsed. If the mere signature imported such a guaranty and could be held valid as such, it is difficult to see why it should be less valid when words of guaranty in terms, are endorsed and subscribed. And a distinction is therefore again taken between such an endorsement of a guaranty in form, made at the execution and delivery of the note itself, and an endorsement in the very same words made subsequently to such making. This has something the appearance of reasoning in a circle. An instrument is produced — on the face of that instrument it is a guaranty of the payment of another man’s debt, but first prove By parol that such is not its legal effect, and then you may give parol evidence that will alter its prima facie import.

This criticism does not conflict with the cases which allow the consideration of an instrument to be inquired into, or which allows one who has paid money on an accommodation note, or an accommodation endorsement, to recover it back. Those cases do not seek to alter the import of the instrument' itself, but rest on the well settled rule that the consideration of an instrument not under seal, may always be inquired into.

In Seabury v. Hungerford, (2 Hill, 80) the doctrine that a blank endorsement of the description in question may be regarded as a guaranty; or as a joint and several making of the note is wholly repudiated, whenever the endorsement can take effect as an ordinary commercial endorsement; thus holding that in some cases, at least, the endorsement is to be construed according to its prima facie legal import, and that in such case it cannot be changed by parol proof into a contract of a different kind. That case was one in which the note was payable to the plaintiff or bearer, and there was, therefore, no necessity that the payee should endorse it. It would pass even to him and bind both maker and endorser to him as holder by delivery. The defendant was therefore held liable as commercial endorser and on no other terms. And in Hall v. Newcomb, (7 Hill, 416), where such an endorsement appeared on a note payable to the plaintiff or order, it was held that the defendant was not liable as maker nor as guarantor; thus over-ruling all the previous cases to that effect. And this was so held notwithstanding proof that the defendant was privy to the original consideration of the note, and wrote his name thereon for the accommodation of the maker, knowing that the maker was to procure money from the plaintiff thereon. No demand of payment or notice of non-payment was proved and the plaintiff was non-suitéd. The court undoubtedly held out the idea that by a circuitous endorsement without recourse, the plaintiff might have passed the note to himself and made title through the defendant’s endorsement, and to have charged the defendant as endorser to himself, provided be had shown demand and notice to charge him as endorser. But this point was not necessarily decided; as there was no proof of demand and notice, the defendant was clearly not charged as endorser, and as the court decided that he was not liable as maker or as guarantor, that disposed of the controversy in that case without inquiring further, whether he could be made liable as endorser, except in the very order and manner in which he stands on the note related to the parties thereto.

The case of Spies v. Gilmore, (1 Comst., 322), affirms the doctrine of Hall v. Newcomb, in a very strong case in which the express purpose of the defendant’s endorsement was shown to be to give the maker credit with the plaintiff, and goods were delivered to the maker with the defendant’s assent upon the faith of it. It was still held that the defendant was not liable as maker or guarantor, and demand and notice to the defendant not being proved, he had judgment. Obviously, if he was not bound as endorser to the payee, the result would have been the same, and if he was, then the want of demand and notice exonerated him. Tne case is therefore not inconsistent with the proposition, that you cannot by parol proof show that the endorsement was a contract to pay to the payee himself in default of payment by the maker.

I have thus noticed a few of the cases in this State, and only a very small portion of those bearing on the question, for the purpose of showing the fluctuation in the course of decision as well as the reasoning upon which the decisions have been founded.

In Ellis v. Brown, (6 Barb., 282), the subject has been fully considered by Justices Gridley and Pratt, the former denying that such an endorser can be made liable at all upon the note itself to the party to whose order it is payable, and in this he is sustained by the general term of the Supreme Court for the fifth district — Justice Pratt dissented. The numerous cases in this and some other States bearing on the question, will be found referred to in the case last mentioned, and in those to which I have above referred. And to my mind the case of Brewster v. Silence, (4 Seld., 207), in the court of last resort, carries with it a refutation of much that has been said in relation to the subject in the early cases. In the case last cited, the note was in the usual form, to the order of the payee therein named, and the defendant wrote thereon as follows: — “ I hereby guarantee the payment of the above note,” and subscribed his name. Now, although it was specially found that this guaranty was signed at the time of the making of the note — and that the consideration of the note was a pair of horses sold to the payee, a condition of which sale was that the note should be guarantied by the defendant, and which was not consummated until the execution and delivery of the guaranty, and that the defendant at the time declared that the horses should be his till paid for, — notwithstanding all this it is held that the guaranty was void under the statute of frauds, because no consideration was expressed therein.

Now in addition to what is above suggested, and what is ably argued in Ellis and Brown, above referred to, is it true that the mere signature of the defendant in the last case would have been more available to the plaintiff than it was with the words above mentioned written over it? If the words above used did not in connection with the note express the consideration, would his mere signature have done so ?

I am aware it will be said that having filled up his contract nothing could be added to what the defendant signed, whereas if his signature had been given in blank, it would have authorized a writing over it, an undertaking corresponding with the intent of the parties or the actual agreement made by parol; — as has often been held of the blank endorsement of a note not negotiable. Much of that doctrine is overruled by the cases above referred to; indeed if the signature can receive construction and effect as a commercial endorsement, it must be so construed, and parol proof cannot be received to alter it. So far I apprehend the recent cases are conclusive — and if the views of the majority of the judges in Ellis v. Brown, shall prevail, it will soon be settled if it is not already, that one who endorses negotiable paper in blank shall only be held liable according to the prima facie legal import of his endorsement in the very order in which it stands, and*according to the relation in which his name appears thereon. Whatever rights to indemnity parties may have as against each other, where notes are made or endorsed for accommodation, to be indemnified by the party for whose benefit such making or endorsement is advanced as a loan of credit, it seems to me that the contract which such making or endorsement imports, should not be varied to suit whatever case parol evidence may be called to establish, and if it should happen that the written endorsement does not in any case correspond with the parol agreement, we may repeat the remark in substance made in Brewster v. Silence ; that it is no reason for doing violence to sound, safe, and rational rules of law that the parties failed to make a contract which is legally binding; and this is oftentimes the answer to an endeavor to show by parol that the agreement was other than the written contract expresses.

But if it be conceded that in any case the endorser of a note drawn payable to the order of a payee therein named can be held liable as an endorser to him, I think the present is not such a case. The utmost that can now be claimed from the authorities as they now stand, is I think, that if it be shown that the intention of the endorser was to become security to the payee for the payment of the note, and the payee advanced money or property or gave credit upon the faith of such security, the name may operate to bind the former as such endorser, he being for that purpose duly charged by a demand and notice of non-payment. If I could assent to this, the inquiry would remain, lias the present plaintiff stated such a case?

All that is averred on this subject is, that the defendant Hull “ endorsed the said note to induce the plaintiff to accept the same.”

It is not averred that it was so endorsed as a security for the plaintiff (the payee). The consideration upon which it was given is not stated. It is not averred that the plaintiff advanced money, or property, or even gave credit upon the faith of such endorsement. Nor is it averred that the endorsement was made with any other intent than exactly what appears upon the face of the instrument, or to rebut the presumption stated by Judge Strong as follows, “ where a negotiable note is endorsed in blank by a person not being the payee or a prior endorser, then in the absence of controlling proof, it is presumed that such person means to bind himself in the character of an endorser and not otherwise, and precisely in the order and manner in which he stands on the noted (Story on Promiss. Notes, § 480). And as held in ITarvill v. Carman above referred to, “ the fact of his endorsing first in point of time can make no difference.”

All that the pleader professes here to give is a motive for the endorsement, not an averment of an intent inconsistent with the presumption above stated. The defendant,.no doubt, had a motive to do just what he did do, and just what he intended to do, and that was “ in the absence of controlling proof,” to bind himself as endorser “ precisely in the order and mariner in which he stands on the note.” This is the presumption and there is no averment of any other intent, or of any other agreement between the parties.

If we were called upon to speculate on the subject we might suggest various purposes for which just such an endorsement would be useful to the payee, but that is unnecessary. If the endorsement was claimed to be made with any other intent, the plaintiff should have so averred.

In my opinion the plaintiff here fails to show that the defendant endorsed the note with any other effect than to bind him to such persons as should become parties to the note subsequent to himself, in order of succession as among parties to commercial paper generally, and that he is not, by reason of anything appearing in this complaint, liable to the payee upon the note in question.

I think therefore the judgment should be reversed.

Daly, J. — concurred.