Head v. Green

11 F. Cas. 954, 5 Biss. 311

• Court: U.S. Circuit Court for the Northern District of Illnois
• Decided: May 15, 1873
• Status: Published

Opinion

BLODGETT, District Judge.

The only question now made is as to what is the true measure of damages. The well-established rule in actions by indorsees against indorsers or guarantors of negotiable paper is, that the measure of damages is the amount paid by the assignee or indorsee to the guarantor or indorser, With interest. But this rule has been only’applied, so far as my examination has gone, to cases where there was either an express or implied guaranty of payment or collectability, and I have been unable to find from any research of my own, nor has the industry of counsel on either side furnished me with any adjudged case, or even the dictum of a court or text writer, as to what is the true measure of damages on the breach of a guaranty like this. On a guaranty of payment or collectability, the holder knows-that if he takes the necessary steps to fix the liability of the guarantor, he can recover back at least the amount paid for the note, with interest; but in a guaranty like this, he has no such redress. Here the holder of the guaranty takes all the chances of the collecta-bility of the demand. There is no liability even by the guarantor in case the maker of the paper proves insolvent, but the holder must lose all he has paid unless he can collect from the maker. And it seems to me that the measure of his damages, in case of a breach t>f the contract as to the amount due, is what plaintiff nas lost by that breach; which in this case should be the whole amount due on the note at the time suit is brought. And it appears to me that one-weighty reason why this rule should be applied to a guaranty like this, is that the holder of notes or bills who attempts to negotiate them after due, must be presumed to-know (and he alone) whether there are any legal or equitable defenses to the paper he purposes to transfer to another. And as he assumes no risk in regard to the collectability of the debt, he should at least be held to-make good his express undertaking that the-paper represents an honest demand for what purports to be due thereon. Can it be supposed that any person would buy a note with, such a guaranty unless he understood that the guarantor was holden to make good the-pledge he gives? [I do not say he is holden for the full amount due on the note, for the maker of the note may be insolvent, and a judgment obtained would be worthless, but the measure of his liability Is the value of the judgment, if one had been obtained, against the maker.]² And here it appears-that the judgment would have been worth the lull amount, if it had been obtained. Motion for new trial overruled, and judgment for plaintiff.

2 [From 5 Chi. Leg. News. 423.]