Bates v. Ryland , 6 Ala. 668 ( 1844 )

GOLDTH WAITE, J.

The case now to.be considered, involves the construction of the several statutes defining the liability of indorsers of promissory notes not payable in bank; and this construction will be best come at by a collation of the original statutes.

The act of 1828, was the first which made a distinction between notes payable in and out of bank; and, with respect to the latter class, provided that the assignee might sue the maker and indorser in the same action, if suit was brought to the first court of the county where the maker resided; but, if the assignee failed to join the indorser in the action, he was not permitted to sue the indorser until the maker was prosecuted to insolvency; which was to be proved by a return of nulla bona, or other sufficient proof. If the assignee failed to sue the maker to the first court, then the indorser was discharged from liability, unless the suit against the maker was delayed by his consent. [Acts of 1827-8, p. 37.[

The act of the next session, takes from the assignee the right to maintain a joint action against the maker and indorser, and provides, that the return of no property found, upon an execution against the maker, shall be sufficient evidence of his insolvency to authorise a recovery against the indorser. [Act of 1828-9, p. 59.]

It will be seen, therefore, that the act of 1827, as controlled by the subsequent amendment of it, imposes two conditions as preliminary to the liability of the indorser; the first is, that a suit against the maker shall be brought to the first court of the county where he resides; the second is, that the maker shall be prosecuted to insolvency. If the first of these conditions is not performed, the indorser is discharged, unless the suit against the maker is delayed by his consent. There is nothing whatever in the statute, which warrants the inference that the consent of the in-dorser to the delay of suit against the maker, shall relieve the holder from a compliance with the other condition. Nor is there, in our judgment, any sufficient reason to engraft such a construction on the statute.' The legislature has thought proper to declare that there shall be no remedy against the indorser until the maker has been prosecuted to insolvency, and the consent of the former, that the suit against the latter may be delayed, connot invest the assignee with a new and distinct right, independent of his contract; which would be the effect, if the liability of the indorser, instead of being conditional upon the prosecution of the maker to insolvency, was to become direct and absolute at the expiration of the time given by the holder to the maker. It is true, that under peculiar circumstances, a very liberal construction has been given to these enactments, so as to let in the remedy against the indorser, when, from the occurrence of some fact, subsequent to the indorsement, it is impossible to perform the conditions within the State. [Roberts v. Kilpatrick, 5 S. & P. 96; Woodcock v. Bennet, 2 Porter, 456.] But the construction given under such circumstances, has no application to the present case, when there is no pretence that the condition might not have been performed.

Our conclusion on this point of the case, then is, that the consent of the indorser, that the suit against the maker might be delayed, did not discharge the-other condition upon which his liability depends; and that, notwithstanding the consent, it is incumbent on the assignee to prosecute the maker to insolvency, unless that condition in the contract is otherwise discharged. The consequence of this conclusion is, that the judgment on the demurrer to the counts, is free from error.

2. The next question is that which arises on the demurrer to the evidence The plaintiff insists the proof shows that the note executed by McRae was no discharge of the pre-existing liability of the defendant. What this pre-existing liability was, is very clearly shown by the statement of the testimony given by McRae at the previous trial. When the note, now sued on, was made, another was given up, to which the defendant was the maker and McRae & Lang indorsers. That note was, doubtless, for money lent by the plaintiff to the defendant, but there is no evidence showing, or tending to show, that the one sued on was founded on the same consideration. McRae had collected money for the defendant, and used it, instead of paying the note which had previously been given to the plaintiff; and the money thus used by McRae, was the consideration for which the note sued on was given. The actual consideration of the note, as between McRae and the defendant, is not, however, a material inquiry, as it is clear that the note was passed to the plaintiff in lieu of the other note, and could have been given in evidence under the count for money lent, if the effect of the new contract was otherwise than to discharge or suspend the former one. We shall, therefore, examine the evidence in this point of view.

Notwithstanding the use, by McRae, of money which he was to apply to the payment of the note made by the defendant in the first instance, yet the latter continued liable to the plaintiff, and might have been sued immediately; instead of this course being taken by the plaintiff, the parties met, tho new note is transferred and the old one given up or cancelled. The new note was drawn at one day after date to enable the plaintiff to draw interest, but the agreement was to give the maker twelve months to pay it. Under these facts, nothing is more clear than that the creditor, on-' account of the previons indebtedness of the defendant, accepted from him the note of McRae, without any stipulation or understanding with respect to the manner in which it should operate on the existing claim. It, therefore, becomes necessary to inquire, what consequences flow from these acts of the parties.

In England, the effect of taking a note, under such circumstances, is that the creditor cannot proceed for the original debt without showing the use of due diligence to obtain payment of the substituted note, and notice to the party of its dishonor —~ [Chitty on Bills, 8 ed. 198, and cases there cited.] Mr. Justice Story lays down the same doctrine, in very broad terms, as the recognized law in this country. [Story on Bills, 127, §112.]— The supreme court of New York seems to go farther, and held, that the original debt is gone by the acceptance, on account of it, of the note of a third person indorsed by the debtor, so that no remedy whatever can be had except on the indorsement. [Frisbee v. Larned, 21 Wend. 452.] If we are correct in supposing this to be the effect of the decision just cited, it cannot, as it seems to us, be reconciled with the English decisions; for there, it is certain, that a suit is maintainable upon the original consideration; and,- in- a modern case, such was held to be the rule, although the bills, received on account of the consideration sued for, had been- -passed off to others, upon showing that they had been taken up by the plaintiffs after being dishonored, and were then in the hands of their agent abroad. [Hadwin v. Mendizabell, 10 Moore, 477.] So, too, in Kearslake v. Morgan, [5 Term, 513,] whieh is the leading case, it is conceded that a plea, to an action for the original consideration, asserting the note of a third person had been accepted on account of the debt, would be well answered by a replication that the note had been dishonored and notifce duly given. These authorities show, very conclusively, that it is immaterial whether the action is founded on the precedent debt, or on the note or bill received on account of it, as, in either case, the plaintiff is bound to show due diligence; and, when the suit is for the original consideration, to also show that the note indorsed to him yet remains his property.

The examination thus made,leads usto thoopinion thattheplain-tiff here is entitled to declare for the precedent debt or consideration, but ho is not entitled to a recovery upon it without showing the same degree of diligence as is necessary to charge the defendant on his indorsement. Independent of authority, we think this conclusion can be supported by sound reasons. If the note was indorsed to and owned by a third person, he would have no other rights than such as accrued to him as indorser of the paper. As these rights depend almost entirely, as against the in-dorsers, upon the exercise of diligence, once gone by laches, they cannot be revived by coming into the possession of a former in-dorser. If laches will discharge an indorser who receives money as the consideration of his indorsement, tthe same reason applies with equal force when the consideration is a precedent debt, as it is impossible to say that he may not be as much injured by the omission of due diligence in the one case as in the other.

3. It is true, the diligence required of the holder of a note is Widely different, under our statutes, from that called for by the commercial law; but the difference does not, in our judgment, affect the principle on which the-liability depends. Under both systems, the contract of the indorser is conditional, and not absolute. Under the one, demand of payment of the maker and notice to the indorser, is the condition; and under the other, a suit prosecuted to insolvency against the maker; and, also, that such shall be commenced at the first term of the court where the maker resides, unless delayed with the consent of the indorser. In the present case, the evidence was sufficient to authorize the inference, that the suit against the maker was delayed, with the defendant’s consent, for 12 months; and the condition required by the statute, in this respect, being waived, was not revived at the expiration of that period; it was necessary only to prosecute to insolvency at some time after the expiration of that given as delay.

4. The evidence demurred to, does not show the existence of any suit against McRae, or McRae & Lang as the makers of this note; consequently, there is nothing from which to infer that the second condition imposed by the statute, has been performed;' nor is there any peculiar circumstance exhibited which leads to the conclusion, that this condition might not have been performed at the time when this suit was instituted. We infer, therefore, that the suit was prematurely commenced, whether the remedy is considered as on the note or as on the original debt.

5. The evidence, however, discloses the fact that McRae is now dead, and was insolvent soon after making the note. If he alone is bound by this note as maker, we think there is no question that the concurrence of his death and insolvency would be a discharge of the statutory condition. Indeed, it may be deserving of serious consideration, whether the mere intervention of the death of a maker of a note, does not produce the same consequences to the indorser, inasmuch as it becomes impossible thereafter, to comply with the condition imposed by statute. The death of the maker of the note having occurred subsequently to the commencement of this suit, does not cure the defect in the title to sue. The rights of the parties must be examined as they were when the suit was instituted; and, as we have shown, being then premature, it cannot be sustained by the occurrence of a fact, the existence of which, at its commencement, would have authorized the suit.

6. Upon the question raised in regard to the rejection of the witness, there is no conflict of decision. A witness cannot be excluded by merely showing his confessions to others that he is interested. [See cases collected in Cowan & Hill’s notes, 258.] In no aspect is proof of such confessions any thing more than hearsay; and if permitted to exclude a witness, no rule would tend more effectually to prostrate justice. We place our decision on this ground, because it is perfectly clear; remarking, at the same time, that the evidence of the confession itself does not seem to establish any interest. Although the admission of the testimony of the witness possibly would not have produced a different result in the court below, yet the evidence was proper to be left to the jury under the common count; and, therefore, for this error, the judgment is reversed.

Reversed, and remanded.