Quimby v. Varnum

76 N.E. 671, 190 Mass. 211, 1906 Mass. LEXIS 1049

• Court: Massachusetts Supreme Judicial Court
• Decided: January 5, 1906
• Status: Published

Opinion

Hammond, J.

The note of October 10, 1898, was given before St. 1898, c. 533, (now embodied in R. L. c. 73,) took effect; and of course the rights of the parties so far as respects that note are to be determined by the law of this Commonwealth as it was before the statute. By that law Howe, although entitled to notice of the dishonor of the note the same as an indorser, was nevertheless a co-maker and joint promisor, and the payment of the note by him extinguished it; and he could not thereafter put it in circulation as against his co-promisor, although in a proper action he could recover of him the amount paid, if, as between the two, it was the duty of the latter to pay the note. Pray v. Maine, 7 Cush. 253, and cases cited. Brooks v. Stackpole, 168 Mass. 537. National Bank of Republic v. Belano, 185 Mass. 424.

The same doctrine is applicable to the note of April 10,1899, which was made after the statute above named took effect, unless there is something in that statute to the contrary. The plaintiff contends that there is something there to the contrary. He contends that under R. L. c. 73, §§ 80, 81, the rights and liabilities of Howe were those of an indorser and therefore he was only secondarily liable, and that by § 138 the payment of the note by Howe did not extinguish it but he was remitted to his former rights on the note, and under that section and § 67 might reissue it.

But we cannot adopt this interpretation of the statute. It is manifest that the precise case in hand, so far as respects the original signature of Howe, is described in § 81 of tbe statute in the following words: “ Where a person, not otherwise a party to an instrument, places thereon his signature in blank before delivery, he is liable as indorser . . . : 1. If the instrument is payable to the order of a third person he is liable to the payee and to all subsequent parties.” This section accurately defines the liability of Howe upon this note. And in a sense this liability may be said to be secondary.

Section 138 of R. L. c. 73, provides that “ where the instrument is paid by a party secondarily liable thereon it is not discharged ; but the party so paying it is remitted to his former rights as regards all prior parties, and he may strike out his own and all subsequent indorsements, and again negotiate the instrument,” with some exceptions not here material. It is plain that this section cannot apply to a case like the one before us. First, what kind of note would this have been if Howe had done what the statute suggests ? Let him strike out his own and all subsequent indorsements. Subsequent indorsements must be held to mean subsequent in point of liability. He must therefore strike out not only his own indorsement but also that of the payee. Having done what the statute says, he has a note signed by Varnum payable to the order of Hurley, but without Hurley^ indorsement, and further, without any right to Hurley’s indorsement. Is such a note negotiable ?

* Again, the statute says that the party secondarily liable is remitted to his former rights as regards all former parties. But the only prior party Howe could look to is the maker, for he stands next to the maker in the order of liability, but, as against him, Howe never had any claim on the note as such, and it never was intended that lie should have. If this note never had been delivered to Hurley, but had been handed to Howe in the first instance by Varnum, could Howe have negotiated it without the indorsement of the payee? And when he has paid it and is remitted to his former rights, does he get any other right than he had before ? The section is clearly inapplicable to such a state of things. It is intended to apply where the person secondarily liable can trace his title on the face of the note and its indorsements through the prior parties to the party whom he seeks to hold. This Howe could not do, nor can the plaintiff. Having paid the note Howe had an action against Varnum to recover, but the action, was not upon the note.

It follows that the plaintiff cannot recover on either note.

Exceptions sustained.

In the case at bar the note sued on did not bear the indorsement of the payee, Hurley having struck out his own indorsement before he handed the note to Howe. See p. 211.