I concur in the order reversing the judgment and remanding the case for a new trial for what is stated in the prevailing opinion that the "whole picture" is not fully "set up" by reason of the exclusionary rulings of the court, and of which the prevailing opinion seems to find error.
It should, however, be observed that this action is brought solely against the defendant upon a promissory note made by William Roberts, Oren Burke, and Ralph Myers, and upon which the defendant was but one of six indorsers. On the record it plainly appears that the defendant is an indorser for the accommodation of the makers of the note. The defense as pleaded in the answer, so far as pertinent to what is here stated, is set forth in the prevailing opinion to the purpose and effect that it was agreed between the plaintiff and the makers of the note and the indorsers that the consideration for the note (in this instance a certificate of deposit showing that the makers had deposited $5,000 with the plaintiff at 4 per cent per annum) would be deposited with the surety company as collateral, to keep and to hold the surety company free from any loss or damage which it might sustain by reason of its undertaking made in behalf and for the benefit of the makers of the note in respect to the contract referred to in the prevailing opinion. If no loss were sustained or liability incurred by the surety company by reason of its undertaking, then and in that event it would return the certificate of deposit to the plaintiff, and the plaintiff would apply the full face value thereof, including interest, toward the payment of such promissory note. The defendant asserts that the certificate of deposit was returned to the plaintiff. The evidence, however, shows that in lieu of the certificate of deposit a check made by *Page 435 the surety company for the full amount was paid over to the plaintiff, but the whole amount thereof was not applied by the plaintiff toward the payment of the note.
In the plaintiff's reply it is asserted that "on the 11th day of September, 1923," the certificate of deposit was issued by said bank to the said contractors, and that at said time said contractors "made some mention * * * that they might be required to use said certificate as collateral security in securing said bond and that plaintiff is informed and believes and therefore alleges that the surety company issued said bond for the contractors, but before doing so the surety company required the contractors to assign said certificate of deposit to it as collateral."
It is my opinion that the defendant's answer states a good defense. This is not disputed by the plaintiff at any point in the entire proceedings. The controlling fact on which the prevailing opinion seems to rest is that the defendant did not himself make and enter into a contract with the plaintiff; that although the makers of the note may have made a contract such as is asserted in the defendant's answer, not only for themselves but for the benefit of the defendant, and which induced the defendant to indorse the note, it would not be available to the defendant as a defense. This is obivious from what is said in the prevailing opinion. After giving a fair and complete resume of the defendant's testimony to the effect that he himself had had no conversation or talk with the plaintiff in respect to the object and purpose of the fund to be created by the execution and delivery of the note, it is said:
"The testimony of the defendant not only fails to give any support to the alleged contract; but on the other hand we think affirmatively shows that there was no such contract between him and the bank, the only parties to the action. Upon Mr. Hollingshead's testimony alone, had the plaintiff submitted no evidence at all, the plaintiff would be entitled to recover. We are therefore of the opinion that there is no substantial evidence to support the verdict; that the motion on the part of plaintiff for a directed verdict should have been granted, and judgment entered for the plaintiff." *Page 436
As is stated in the prevailing opinion, there is evidence in the record from the testimony of both Burke and Myers that the contract between them and the plaintiff was substantially as alleged by defendant, and that they communicated the substance thereof to defendant. It is also conlusively shown that the surety company did pay over its check in lieu of returning the certificate of deposit. The fact that the surety company paid over to the bank the amount of the certificate of deposit is, in my opinion, conclusive that it had not sustained any loss.
In view of the situation thus presented, I am unable to concur with the prevailing opinion in this respect. If there were an agreement between the plaintiff and the makers of the note to the effect that if the surety company sustained no loss by reason of its undertaking the amount of the certificate of deposit with interest thereon would be returned to the plaintiff and the plaintiff would apply the amount thereof toward the payment of the note sued upon, and the fulfillment or breach of such agreement would have the legal effect of releasing the makers from liability on the note, then, in my opinion, the defendant as an indorser would likewise be so released. It seems to me that if the maker of a note has a defense to the note, that defense is equally available to the indorser, irrespective of whether the indorser, the defendant in this case, was a party to such agreement. I am unable to concur in holding that where the makers of a note have a good defense thereto, the holder may nevertheless recover against the indorser by suing the latter alone.
Further, upon a new trial of the cause it cannot now be known what evidence may be offered by the defendant in response to the evidence of the plaintiff which was erroneously excluded at the former trial. I therefore think that this court should not at this stage express or intimate any opinion on the merits of the action. *Page 437