Walling v. Cushman

130 N.E. 175, 238 Mass. 62, 1921 Mass. LEXIS 934

Opinion

De Courcy, J.

The three notes in suit were made by the Boston Colorado Power and Water Company, a Colorado corporation having a usual place of business in that State, and were payable to its order. They were dated at Denver, Colorado, and were madé payable at a trust company in that city. One of the indorsers was Matilda M. Chesbrough, the defendant’s intestate, who was a director of the company and wife of Fremont B. Chesbrough, its president. The notes were discounted by the Bank of Trenton, Michigan, a partnership of which the plaintiff is trustee in bankruptcy. It is agreed that at maturity the notes were presented for payment at the place indicated therein and were not paid; that they were duly protested, and that proper notice was given to each indorser. No issue was raised as to the bank having taken the notes for value without notice before maturity. The plaintiff offered the Colorado statute with reference to contracts of a married woman, put the notes in evidence, and rested. The defendants "offered to prove that by the law of Michigan, Matilda M. Chesbrough was not liable on the notes in suit, and that by the law of Michigan she was not estopped to set up the invalidity of her indorsements on said notes.” They further offered to prove that at the time “when said notes were indorsed and discounted, Matilda M. Chesbrough was domiciled in Michigan.” The presiding judge ruled that that evidence was immaterial; ordered a verdict for the plaintiff, and reported the case, with the stipulation of counsel that, if the order for a verdict was correct, judgment should be entered thereon.

The maker of a note is ordinarily deemed to have bound himself in accordance with the laws of the place where it is payable, where his contract is to be performed. See 5 R. C. L. 964. Cherry v. Sprague, 187 Mass. 113. As the contract of the indorser is a new and separate one, its validity is determined, as a general rule, by the laws of the State where the contract of indorsement is made; that is, where it takes effect by delivery. Lawrence v. Bassett, 5 Allen, 140. Akers v. Demond, 103 Mass. 318. Milliken v. Pratt, 125 Mass. 374. This general rule, however, is not applicable when it appears from the special circumstances that the parties intended otherwise. And admittedly the presumption at common law is the same as that now formulated in the negotiable instrument law, G. L. c. 107, § 69, “Except where the contrary appears every endorsement is presumed to have been made at the place where the instrument is dated.”

As already stated, these notes were dated at Denver, Colorado, and were payable there. It appears that the note described in the first count was made and indorsed in Illinois; but no one suggests that the parties had the law of that State in view as determining their legal liability. It does not appear where the other two notes were made and indorsed. Nor does it clearly appear that the obligation of the intestate first became complete by delivery of the notes in Michigan. Apparently the $50,000 of indorsed notes authorized by the corporation in March, 1912, were then delivered in Chicago to C. H. Lord, who assisted “in negotiating the bonds of Boston Colorado Power and Water Company and in arranging to finance the company and in raising money for its needs.” As financial agent of the corporation he received the notes with authority to discount them wherever he could, and may have advanced his own money, so far as appears. On this record the domicil of Mrs. Chesbrough was immaterial. Milliken v. Pratt, 125 Mass. 374, 377. We cannot infer, in order to overcome the legal presumption, that she indorsed the notes with a view to have them delivered in Michigan, knowing that she would not there be bound by her indorsement. Much less can we assume that the partners who carried on the Bank of Trenton, knew that “M. M. Chesbrough” was a married woman, domiciled in that State, and that they knowingly accepted delivery of a note with an indorsement that was legally worthless.

Apart from the presumption that the indorsement of the defendants’ intestate was made in Colorado, it may well be held that they are estopped from setting up the claim that it was made in Michigan. In Towne v. Rice, 122 Mass. 67, where the note in suit was dated at Boston, the defendant claimed'that it was in fact made in New York, and void under the usury laws of that State. It was said by Devens, J., "The defendant seeks, as against an innocent purchaser in Massachusetts before maturity and without notice, to falsify and contradict the mote signed by him, by proving that, although dated at Boston, where it would be valid notwithstanding the amount of interest reserved, it was actually made in New York, for the purpose of then proving, by the statutes of New York, that it is void. Unless he can be admitted to show that it was thus made, he cannot avail himself of the defence which he desires to maintain. No case to which we have been referred, or which we have been able to find, goes so far as to permit such proof.” In Chemical National Bank of New York v. Kellogg, 183 N. Y. 92, the defendant Amy H. Kellogg indorsed the note in question at her residence in New Jersey, for the benefit of her husband and there delivered it to him. The plaintiff, a banking corporation in New York, in good faith and without notice discounted the note, and used the proceeds to take up a prior note held by it. The defendant would be liable under the laws of New York, but not liable under the laws of New Jersey on the facts disclosed. It was said by the court: “The defendant could not make her coverture a trap to catch innocent persons. She could not deliberately give the appearance of validity to her contract and then as against a bona fide holder plead that it was invalid. She knew that the note was dated and payable in New York, and that the presumption from those facts was that it was indorsed there. She also knew that if she delivered the note in this condition to her husband to enable him to negotiate it, any one who acted on such presumption, as he lawfully might in the absence of notice, would be injured if she should plead her coverture and that she actually indorsed it in New Jersey. It wag, therefore, her duty, if she wished to act honestly toward others, to attach some notice to her indorsement, or give notice in some other way, so that innocent third parties might not be harmed by relying upon appearances which she had aided in creating. . . . Pleading her indorsement as a New Jersey contract under these circumstances would be an attempt to take advantage of her own wrong, which the law will not permit. . . . Commercial necessity requires that only slight evidence should be insisted upon to establish an estoppel in pais as to the validity of commercial paper. The only practicable rule is to make the face of the paper itself, when free from suspicion, sufficient evidence, in the absence of notice, against all who aided to put it into circulation in that condition, unless the note is void by the positive command of a statute, such as the act against usury. No other rule would work well, for it would be intolerable if every bank had to learn the true history of each piece of paper presented for discount before it could act in safety. . . . Independently of the statute which will be cited presently, the argument in favor of an equitable estoppel rests mainly on the presumption that a note dated and payable in New York was made and indorsed in that State.” See also Lennig v. Ralston, 23 Penn. St. 137; Quaker City National Bank v. Showacre, 26 W. Va. 48; 2 L. R. A. (N. S.) 299 note.

This reasoning is equally applicable to the case at bar.

On the facts disclosed we are of opinion that the presiding judge rightly ordered a verdict for the plaintiff on either or both of the above grounds. In accordance with the report judgment must be entered on the verdict.

So ordered.