Castle v. Candee , 16 Conn. 223 ( 1844 )

Church, J.

The declaration, in this case, contains five counts, and all of them upon the guaranty or blank indorsement made by the defendant, of the note of Charles Bishop, payable to the plaintiff, on demand, with interest.

There is some obscurity in the case, arising from the statements of the motion for a new trial, when compared with the verdict of the jury. The charge of the judge, though it submitted to the jury the whole declaration, seems to have looked to the first count, as the only one upon which the plaintiff could sustain himself. And the motion also states, that the jury returned a verdict for the plaintiff upon the first count; yet the verdict is a general one, in favour of the plaintiff, upon all the counts. This being so, we must consider the verdict as having fixed the liability of the defendant, if the evidence offered by the plaintiff was admissible, under any one of the counts.

It seems, that in the first stage of the inquiry, the defendant objected to the admission of all the evidence of the plaintiff, which might conduce to prove a special contract different from the one which the law prima facie implies from the unexplained blank indorsement, until the indorsement should be filled up, if the plaintiff intended to rely upon the indorsement at all. The opinion which we have formed, and shall express, as to the admissibility of the note and other evidence, under the fifth count, may render an opinion upon this objection of no avail; but as the question has been much discussed, and has been considered, and is of much practical importance, we shall not avoid the decision of it.

It is true, that blank indorsements of negotiable paper, need not be filled up, on or before the trial, in ordinary cases; because the name of the indorser in blank, imports a definite contract, known to the parties and every body else—a contract and liability of equal certainty and precision, as if drawn out in written language. And the same is true, by our practice, of a blank indorsement of a note not negotiable, or of a negotiable note indorsed by a stranger to it. In all these cases, the law declares the contract; and the name in blank informs us by whom it was made. But the state of things is very different, where the object of the plaintiff is to abandon the contract implied by law, and to fix a liability, by the proof of a special contract, which the law has not presumed from the indorsement of the defendant’s name. In such cases, the purpose of the party, is, to deny the legal presumption, or to prove a contract entirely independent of it. Here it is certain, that to admit parol proof of such a special contract, without filling out the indorsement, would be to take the defendant by surprise and unprepared, and compel him, without notice, to make defence to a case different from the one he had a right to expect. We think, upon the principles of fair trial, that it is the duty of the plaintiff, in such case, if required, to fill up the indorsement, before trial, with the agreement upon which he intends to rely in his proof.

Another objection to the parol evidence offered, was, that it was inadmissible because opposed to the provisions of the statute of frauds and perjuries. So far as such evidence came in aid or in corroboration of the legal intendment arising from the blank indorsement, or conduced to prove the consideration of the promise alleged, it was not objectionable. Nor can we say, since the cases of Beckwith v. Angel, 6 Conn. R. 315. and Perkins v. Catlin, 11 Conn. R. 227, that parol proof of a special contract different from the one implied, is inconsistent with that statute; although it has been strongly intimated, that to prove, in such case, by parol, a mere collateral suretyship, cannot be permitted. Leonard v. Vreedenburgh, 8 Johns. R. 29. Herick v. Carman, 12 Id. 160. Nelson v. Dubois, 13 Id. 175. Campbell v. Butler, 14 Id. 349. But see Johnson v. Gilbert, 4 Hill, 178.

Upon the best consideration we have been able to give to this case, embarrassed as it is with many counts, and at the bar, with still more numerous questions, a majority of us believe, that the note and indorsement, and the other evidence in the case, were admissible under the fifth count in the declaration.

Since the case of Perkins v. Catlin, it will be unnecessary for us to review the peculiar law of this state regarding guaranties and blank indorsements. If, before that case, there had been any uncertainty, or various professional practice in regard to the nature of the contract implied by such indorsement, and the degree of diligence imposed upon the holder of notes thus indorsed; the careful consideration which this subject then received, and the elaborate discussion it underwent, should satisfy us, that nothing will be gained, by again throwing it open to doubt. We hold now, as then, that the prima facie import of a blank indorsement of a note not negotiable, is an engagement by the indorser, that the note is due and payable according to its tenor; that the maker shall be of ability to pay it, when due; and that it is collectable, by the use of due diligence: and although this doctrine, in most, if not in all, the former cases, has been applied to notes payable on time; yet in our judgment, it is as well applicable to notes like the present, payable on demand. The distinction between this case and the others, is not in the legal import of the indorsement, but in the duty of the holder of the paper. We have holden, in cases where the note was payable at a future time, that reasonable diligence required of the holder to pursue his remedy against the indorser, as soon as the note fell due, because, as by the terms of the note, the precise time of payment was fixed, it must be presumed, that the guaranty was given and received in reference to that time alone; and therefore, to postpone the legal measures for collection beyond that time, would be a violation of the understanding of the parties. And the law, in a case like this, holds the party to the use of due diligence in enforcing collection; and what will amount to the use of such diligence, in this case, as in the other cases, will depend, to some extent, upon the presumed intention of the parties. In ordinary cases of the guaranty of notes payable on demand, and especially, if indorsed by a stranger, forbearance is one object, if not the chief object, of the indorser. In the present case, in addition to this, the note here bears interest, showing certainly, that the parties all around, had further forbearance in view, and did not intend that the note should be sued instantly. In the exercise of reasonable diligence, therefore, this plaintiff was not obliged to sue immediately, as that course would have opposed the common understanding of all the parties interested. Vreeland v. Hyde, 2 Hall, 429. We cannot prescribe, if the case called for it, any certain rule of conduct, which the indorsee of such a note as this must pursue, in order to subject the indorser. He must observe due diligence; and what this is, as in other cases where the question of reasonable diligence arises, must depend upon the peculiarities of each case. And the indorser, by this doctrine, cannot be subjected to unreasonable hazard; because he, at all times, has the power in his own hands to require immediate action by attachment, for his own safety, if there was no contract to forbear for a definite time; and should the holder of the note then neglect to pursue the legal remedy, it would be a delay and negligence so culpable as to discharge the guaranty.

The fifth count in this declaration alleges the contract to be, that the defendant, by his indorsement on the back of said note, undertook and faithfully promised the plaintiff, that the note should be good and collectable, by the use of due diligence, for a reasonable time. If this note had been made payable at some future day, as in the common cases, there could be no doubt but it would, with the indorsement, have been admissible in evidence to prove that promise, under this count. But, as we have said, the law implies the same contract in the case of a note payable on demand; and therefore, it follows, that this note and indorsement were admissible, under this count.

Under the same count, the deposition of Bishop was admissible. The object of it was not to establish a contract at variance with the contract set up in this count. It proved, that the parties contemplated forbearance; and that the defendant positively refused to make any other contract, than, by his name in blank, he had already made. This deposition also conduced to prove the same consideration as is alleged in the fifth count.

The mortgage deeds furnished very little evidence in the case; and if they proved nothing, we should not, for that reason, grant a new trial. It might have been fairly inferred from these deeds, that the defendant understood the contract as authorizing forbearance, and that he recognized his continuing liability, when he received them as security.

We do not advise a new trial.

In this opinion Williams, Ch. J., and Storrs and Hinman, Js., concurred.

Waite, J.

The note in question is payable on demand, with interest, and is indorsed in blank, by the defendant, who is no party upon the face of the instrument. It was made and indorsed, as the plaintiff claims, for the purpose of enabling the maker to procure a loan of money from the plaintiff.

The question now is, what contract the defendant made, by his indorsement, under such circumstances. No decision has been cited relating to a case precisely like the present. We must, therefore, resort to decisions in other cases of a like character, for principles applicable to this case.

Had the note, instead of being payable on demand, been a negotiable note, and made payable on the expiration of a given time, the indorsement would be differently construed, by different courts.

Thus, the courts in Massachusetts say, the defendant, in such case, would not become a mere indorser, but an original promiser, liable to be sued as such, alone, or jointly with the maker. Austin v. Boyd, 24 Pick. 66. Baker v. Briggs, 8 Pick. 130. Oxford Bank v. Haynes, Id. 427.

The courts in New-York say, the legal effect of such an indorsement, is, that the indorser agrees that he will pay the note to the holder, on receiving due notice that the maker, on demand made, at the proper time, has neglected to pay it; and that he cannot be sued as an original promiser or guarantor. Seabury v. Hungerford, 2 Hill, 82. Hall v. Newcomb, 3 Hill, 234. Prosser v. Luqueer, 4 Hill, 420.

In Connecticut, our courts have said, that such indorsement prima facie implies a contract on the part of the indorser, that the note is due and payable according to its tenor, that the maker shall be of sufficient ability to pay it, when it comes to maturity, and that it is collectable, by the use of due diligence; and that a different contract may be proved to have been made, by parol evidence. Perkins v. Catlin 11 Conn. R. 213. Lafflin v. Pomeroy, Id. 440.

It is greatly to be regretted, that a contract of this mercantile character, upon an instrument designed upon its face to circulate in the community, should receive so many different constructions: that its meaning should depend upon whether it was made on this or that side of a state line: that it should be necessary for a person, before he could know what contract is contained in the indorsement, to inquire whether it was made in Massachusetts, New-York, or Connecticut; and if in the latter state, whether there are any witnesses, by which a contract may be proved different from what the law would otherwise imply.

And perhaps it would have been better, had our courts held, that such indorsements, like those made by the payee of a note, have a fixed legal character, not depending for their meaning, upon the vague and uncertain recollection of witnesses, and circumstances, often imperfectly presented on the trial; that every person, upon looking at such an indorsement, might say, at once, what contract it contained.

The correctness of the rule admitting parol evidence to explain the meaning, has been questioned, by eminent judges; and the rule itself, if not against the letter of the statute of frauds and perjuries, is certainly opposed to its spirit.

It is perhaps doubtful, whether such a contract would be enforced at all, by the English courts. They hold, that the consideration of a contract to answer for the debt of another, as well as the contract itself, must be in writing, or it will fall within the statute.

But what is the contract contained in this indorsement? Now, the construction uniformly given, by our courts, to all blank indorsements whatever, upon promissory notes, by a person not a party upon the face of the instrument, in the absence of all evidence but the indorsement itself, is, that the indorser agrees that the amount is collectable of the maker, when the note becomes due. I know of no exception to this rule.

Apply it to the present case. The defendant agreed, that the note was collectable of the maker, when it became due. Under the circumstances of this case, when did the note become due within the meaning and understanding of the parties? Not necessarily when it was delivered; for that would defeat the whole object of the parties in procuring the loan.

It seems to me the very language of the note itself furnishes the answer. It was due when payment was demanded. The whole contract of the promiser is, that he will pay the sum specified in the note, with interest, on demand.

It is said, the defendant’s contract is, that the note shall remain good, for a reasonable time. There is certainly nothing of that kind expressed, either in the note or indorsement. The maker clearly made no such contract; and I cannot see how it can be inferred from the indorsement.

But what is a reasonable time for a person to wait for payment of money loaned under such circumstances? Is it a week, a month, or a year? What is there to guide a jury to a correct result, in such case? Or what facts are there, which will enable a court to determine it, as matter of law?

Such a construction, it seems to me, is calculated to add great uncertainty to indorsements already sufficiently uncertain, by the admission of parol testimony to show their meaning. And if it does not render them utterly worthless, will make them such as no prudent man will wish to take.

The contract set out in the first count in the declaration, is, that the defendant, by his indorsement, promised that the maker should pay the money specified in the note, according to the tenor of the note. The jury were instructed, that the law upon the facts in the case, would imply such a contract, if no other was proved.

This instruction was given after much consideration; and a careful examination of the authorities since, has not led me to doubt its correctness. It seems to me, it must mean that, and nothing else. This construction would, in my view, be in perfect harmony with the decisions in our own courts, and such as would enable parties and juries to understand definitely the meaning of the contract. There would be no uncertainty as to the duration of the defendant’s liability,

If it be said, that the defendant ought not to be bound for an unreasonable period of time, the answer is obvious. He became the surety of the maker of the note, and as such, can put an end to his liability, in the same manner as any other surety. But so long as all parties are content to let the contract remain, I do not see how the defendant can complain. If he wishes to be relieved from his responsibility, let him take the necessary measures for that purpose. But I cannot see how that can be effected, by the mere silence of all the parties, as it might be, by the construction given by a majority of the court.

New trial not to be granted.