Waterbury v. Sinclair

S. B. Strong, J.

This is an action on a promissory note by the payee against the maker and an indorser, who was a feme sole when she indorsed the note, but has since married, and her husband. The note was payable to the plaintiff, or his order, three months after its date. It was partly for a debt from the maker to the payee existing at the time, and partly for prospective rent, and was made and indorsed pursuant to an arrangement between the maker and the payee to extend the time for the payment of the debt, and to permit the continued occupancy of the demised premises, which was known to the indorser. It *27was indorsed in blank before it was delivered to the plaintiff. The note was presented to the maker when it became due, and payment was refused, and it was thereupon protested, and due notice was given to the indorser.

As the note was negotiable, and there is no express engagement by Mrs. Sinclair as guarantor, she must be considered as an indorser only. The allegation in the complaint that she agreed to guarantee the payment of the note, is not therefore made out; but as that is coupled with the averment that she agreed to indorse it, what is said in reference to the guarantee may be considered as surplusage. The plaintiff can sustain his suit if he should prove enough of the averments in his complaint to maintain an action, although he may fail in establishing the whole.

The main question is, whether one who has indorsed a note before delivery can be made liable to the payee who has not indorsed it. That one may become an indorser under such circumstances appears to be well settled. An indorsement by •the payee is undoubtedly essential to a valid transfer of the note when it is' payable to his order; and when he actually indorses it, I cannot see that he can maintain an action upon it against a subsequent indorser. That, if permitted, would be an inversion of the usual order of liability. The idea of the late chancellor, that a subsequent indorser may be rendered responsible to a prior one by an indorsement by the latter without recourse to him, and a delivery of the note to some nominal plaintiff, who might prosecute for him, was dismissed when it was advanced by a learned member of the Court for the Correction of Errors, and at any rate is not now considered tó be sound law. That any one who writes his name upon the back of a negotiable note, not then endorsed by the payee, assumes an inchoate liability, there can be no doubt. If the name and signature of the payee should afterwards be prefixed, that would be clearly all that would be formally necessary to consummate the responsibility. That would, as I conceive, be absolutely necessary in all cases where the holder was to be any other than the payee. But is there the same, or any, necessity for an indorsement by the payee when there is a general indorsement by another designed for his benefit? What is the general engagement by the indorser ? It is to pay the note to any subsequent holder, provided *28it is duly presented to, and payment refused by, the maker, and due notice of non-payment is given. It can make no difference, as I conceive, whether the subsequent holder is the payee or another. There is the same equity in favor of either, and there is no technical rule against the liability to the payee, unless he is also the prior indorser. An indorser of a promissory note is considered in the light of a drawer of a bill of exchange upon the maker to pay the amount to any subsequent holder, whether named or not. (Chitty on Bills, 155, 156, and the cases there cited.) Surely he can make the bill of exchange payable to the person named in the body of the note as the payee. There is no principle applicable to commercial paper which forbids that. That it may be an order upon the maker to do what he at the same time engages to do, can make no difference. That is done, or is the effect of what is done, in other cases; as where there has been a previous promise of the drawee of a bill of exchange to accept it, or where a bill payable at a future day has been accepted. There are in such cases both an order from one and a promise by another upon such order already made, or to be made, to pay. In substance the note in question contains a promise to pay money to the payee upon the order of the indorser; and that under such circumstances an action may be maintained by the payee against the indorser, was decided in the case of Willis v. Greene (10 Wend., 516). There is no necessity for proving a valid consideration for the obligation of an indorser, and certainly none for reducing the consideration to waiting. He is not considered as entering into a special promise to answer for the debt, default, or marriage of another person within the statute. An entire want of consideration might be available between the original parties at common law, but in this case enough is averred to cause the liability of an indorser. The case of Gilmore v. Spies (1 Barb., 158 ; and 1 Comst., 321) was much like that now under consideration, except that no notice bad there been given to the indorser. He escaped solely on that ground. The counsel for the defendant in that case, who was an acute and experienced lawyer, contended before this court that the indorser was “ only liable on condition of a demand of payment at the expiration of the days of grace and notice of non-payment.” He did not contend, nor did this court assume, that the indorser would not have been liable if de*29mand of payment had been duly made, and notice of non-payment had been given. If in that case the indorser had not originally assumed any liability to the payee, that would have been a sufficient defence for him, and it would have been unnecessary to consider any other. When the case was before the Court of Appeals, the defendant was considered by Judge Bronson to be an indorser, and as such entitled to notice of nonpayment. Such was also the opinion of Judge Jewett; but Judge Gardiner dissented, and held that the defendant by his indorsement contracted that if the note was duly demanded of the maker, and not paid, or if after the exercise of due diligence no such demand could be made, he could on due notice pay the amount to the indorsee or holder. In that case, as in this, the action was by the payee of a note against the indorser, and neither counsel nor any of the judges supposed that the indorser did not assume any liability to the payee. In the case of Herrick v. Carman (12 Johns., 159), the note, it is true, had been indorsed by Herrick when it was delivered to the payee ; but they subsequently prefixed their indorsement, and then sold it to Carman at a large discount, to whom the facts were known. Chief-justice Spencer remarked that it did not appear that Herrick indorsed the note for the purpose of giving the maker credit with the payees, or that he was in any wise informed of the use to which the maker intended to apply the note; and that in the absence of any proof to the contrary, the court must intend that Herrick meant only to become second indorser, with all the rights incident to that situation. The chief-justice adds, that Herrick must have known that his indorsement would be nugatory unless preceded by that of the payees of the note. He cites no authority for this, and it is to be presumed that what he said was in reference to the circumstances of that case, and that he did not intend to lay down the rule as of universal application. The case of Ellis v. Brown (6 Barb., 282) was where there had been a transposition of indorsements, and the question was, whether in such case an indorsee in effect could recover against his indorser, and it was rightly decided that he could not. That is certainly the rule when the payee of the note actually indorses it, or when his indorsement is necessary to give it effect in the hands of him who seeks to enforce it. But in the present case no indorsement by the payee was neces*30sary in order to perfect his rights. His rights, whatever they were, accrued when the note was delivered to and accepted by him, and were in no manner -dependent upon any additional indorsement. What they were has been already shown. I repeat, that the rule that the payee must first indorse a note is founded upon the fact that he alone can transfer it; and that where, as in this case, there was no transfer, the reason of the rule fails, and it is therefore inapplicable.

There must be a judgment for the plaintiff, with leave to the defendants Sinclair and wife to withdraw their demurrer, and answer in twenty days, upon the payment of costs.