Murray v. Anderson

"The negotiable instruments law purports to be a codification of the law merchant, or the common law with reference to negotiable instruments. . . The act . . when adopted in a particular jurisdiction becomes pro tanto the law respecting negotiable instruments in that jurisdiction, and supersedes the law merchant obtaining in that jurisdiction as to all matters covered by the provisions of the act." BeasleyHardware Co. v. Stevens, 42 Ga. App. 114, 118 (155 S.E. 67). Immediately prior to the passage of the negotiable instruments law in Georgia there was no statutory exception to the requirement that to bind an indorser of a negotiable instrument he should be notified of presentment and nonpayment. "When bills of exchange and promissory notes are made for the purpose of negotiation, or intended to be negotiated at any chartered bank, and the same are not paid at maturity, notice of the nonpayment thereof, and of the protest of the same for nonpayment or nonacceptance, must be given to the indorsers thereon within a reasonable time, either personally or by post (if the residence of the indorser be known), or the indorser will not be held liable thereon; but it shall not be necessary to protest in order to bind indorsers, except in the following cases, to wit: 1. When a paper is made payable on its face at a bank or banker's office. 2. When it is discounted at a bank or banker's office. 3. When it is left at a bank or banker's office for collection." Code (1910), § 4280. The Supreme Court in Hull v. Myers, 90 Ga. 674 (supra), under one construction made one exception. It was ruled that a majority of the directors of an insolvent corporation, who have under their control all the assets of their principal, and whose duty it is to see that funds are provided and the debt paid, are not entitled to notice of the dishonor of a promissory note which they endorsed for the corporation as accommodation indorsers. The reasoning of the ruling is that, since the note had to be presented to the indorsers for payment, they would know of its nonpayment and that additional notice would be superfluous. Irrespective of whether the reasoning is sound as applied to the facts of that case, the legislature in enacting the negotiable instruments law sought to cover the subject-matter of the notice necessary to bind indorsers, and set out what exceptions there should be to the general rule. The negotiable instruments law (Ga. L. 1924, p. 126), made three exceptions: "(1) Where the drawee is a fictitious person or a person not having a capacity to contract, and the indorser was aware of the fact at the time he indorsed the instrument; (2) Where the indorser is the person to whom the instrument is presented for payment; (3) Where the instrument was made or accepted for his accommodation." Code, § 14-827. The second exception stated covers the subject-matter of the exception declared in the Hull case, supra. The negotiable instruments law, however, restricted the circumstances under which the notice is excused. It means that, when the indorser is the person to whom the paper is actually presented for payment, he is not entitled to notice. The Code, § 14-801, provides: "Except as herein otherwise provided, when a negotiable instrument has been dishonored by nonacceptance or nonpayment, notice of dishonor must be given to the drawer and to each indorser, and any drawer or indorser to whom such notice is not given is discharged." By including the provision for an exception when the indorser is the person to whom the paper is presented for payment the law excluded an exception based on the fact that the paper might possibly or probably be presented to the indorser for payment. In this view, the petition in this case did not allege a sufficient excuse for failure to notify the indorser of nonpayment, nor did it allege any facts indicative of a waiver on the part of the indorser of notice of dishonor, either expressed or implied. It does not even allege a presentation and dishonor. I shall take these two questions up in inverse order. The note was due on demand and was secured by all of the cotton in the maker's warehouse, to be never less than 250 bales. The fact that there were three payments made on the note (dated September 30, 1929, January 9, 1930, and April 7, 1930) does not conclusively indicate presentment for payment or nonpayment. The payments can reasonably be accounted for by voluntary payments. No excuse for failure to notify the indorser of nonpayment appears. The petition merely alleged that at the time of the indorsement of the note J. T. Adams was president of the maker corporation, etc. It is not alleged that he was president, etc., at the time the note was presented or should have or might have been presented. Mr. Adams might have been succeeded by a new president the very next day, or he might have sold some of his stock or severed his relation with the corporation entirely before demand for payment was made and the note dishonored, if demand were ever made and the note dishonored. Can it be said that he waived his rights in advance? To ask is to answer the question. The mere fact that an indorser is an officer of a corporation which executes a note does not raise the presumption that the paper was executed for his accommodation. 8 Am. Jur. 395, § 718. "The fact that indorsers of corporate paper constitute a majority of the board of directors of the corporation does not dispense with the necessity of notice of dishonor." 8 Am. Jur. 395, § 719. It is necessary, in order to excuse notice of dishonor, that the paper was actually presented to the indorser for payment, where the indorser was the person to whom the paper was to be presented for payment in the first instance as agent of the maker of the paper. Verser v. Sterling Oil Refining Co., 89 Okla. 114 (supra). That case was decided by the Supreme Court of Oklahoma, whose negotiable instruments law is identical with Georgia's on the question under discussion.

The majority evidently proceeds on the theory that a presumption of the continuance of a status once shown to exist continues, to wit, that, because the indorser occupied a certain status when the note was indorsed (that of president and majority stockholder of the corporation making the note, etc.), he continued to do so. Besides the fact that the petition itself belies such a presumption (the defendant indorser is now alleged to be insane, and the date of his insanity is not given), the presumption is a rule of evidence and does not aid pleading, which must state the ultimate fact. 41 Am. Jur. 294, § 10. See, in this connection, Herzog v. Atchison, T. S. F. R. Co.,153 Cal. 496 (95 P. 898, 17 L.R.A. (N.S.) 428); Fredericks v. Tracy, 98 Cal. 685 (33 P. 750); Chambers v. Emery, 36 Utah 380 (103 P. 1081, Ann. Cas. 1912A, 332).

Under no view of the case does the petition allege the necessary ultimate facts of presentment and notice of dishonor. It is not sufficient that the petition allege evidentiary facts from which it might possibly be inferred that there was presentment for payment and notice of dishonor. I say that the petition did not even allege evidentiary facts which would even authorize such inferences, much less demand them. As I understand, the rule of pleading in Georgia, declared in every case I have been able to find where the point was ruled on, is, that as against demurrer, necessary ultimate facts must be alleged. The only exception to this rule is that, where evidentiary facts are alleged which demand the inference of the ultimate fact, the allegation of such evidentiary facts is held to be equivalent to an allegation of the ultimate fact required. The reason for this rule is sound, clear, and logical. If it is necessary for a plaintiff to allege that a certain event took place in the daytime, an allegation that it took place when the sun was directly overhead as to that particular place is equivalent to an allegation of the ultimate fact that it took place in the daytime, because from the evidentiary facts alleged the only conclusion is the existence of the ultimate fact. "It is notenough to aver facts from which the ultimate fact may be inferred, unless the evidentiary facts pleaded are such as todemand the inference of its existence." (Emphasis mine.)Bivins v. Tucker, 41 Ga. App. 771 (154 S.E. 820). That case cites Wright v. Hicks,15 Ga. 160 (3) (60 Am. D. 687),Charleston W. C. R. Co. v. Augusta Stockyard Co., 115 Ga. 70 (41 S.E. 598), Maynard v. Armour Fertilizer Works,138 Ga. 549 (5) (75 S.E. 582), Davis v. Arthur, 139 Ga. 75 (4) (76 S.E. 676), and several cases from this court. The case of Charleston W. C. R. Co. v. Augusta Stockyard Co., supra, was cited approvingly in Aiken v. Armistead, 186 Ga. 368,389 (198 S.E. 237). This court has since followed the Bivins v. Tucker case, supra. The rule is different in construing evidence. The distinction is shown by the cases cited in Bivins v. Tucker, supra, and others. If Hull v. Myers, supra, impliedly holds to the contrary, it is only a physical precedent and is not binding on the point. However, my interpretation of the ruling in that case is, that under the facts of that case the indorsers were liable as principals because the indorsers themselves actually borrowed the money. They were the payees in the note, and yet they advanced not one penny of their money. They did not lend the money to the corporation, take the note, and thereafter sell it.

Toler v. Goodin, 200 Ga. 527 (37 S.E.2d 609), recently decided, two Justices dissenting, follows the reasoning of the majority in this case, but it is contrary to older unanimous cases and is not binding as a precedent. The action was for specific performance of an alleged contract to adopt the plaintiff, made between the plaintiff's father and a Mr. and Mrs. C. J. Toler. The petition did not state specifically that the alleged contract to adopt had been breached or that a court of equity had jurisdiction because the Tolers failed to actually legally adopt the plaintiff. The court held that it was necessary, against a general demurrer, to allege the fact of non-adoption but that from the facts alleged it was necessarily impliedly alleged that the Tolers failed and refused to adopt the plaintiff. My view is that the court in that case misapplied the rule which I have quoted, that evidentiary facts are not sufficient to allege ultimate facts unless the inference of the ultimate fact is demanded. There is but one kind of adoption in Georgia and that is a legal adoption, which requires the solemn decree of a court. If you accept as true every fact alleged in the petition in the Toler v. Goodin case, the inference that the Tolers did not adopt the plaintiff is not only not demanded, it is not even authorized under the broader scope permissible under the construction-of-evidence rule. The only Georgia case cited to sustain the court's ruling is that of Davis v. Arthur, supra, which was cited inBivins v. Tucker, supra, to support a contrary ruling. The evidentiary facts alleged in the instant case do not demand the inference that the note was presented for payment to the indorser in his capacity as representative of the maker of the note, or that it was presented to anybody else, or that notice of nonpayment was given to the indorser, or that he waived any right he had under the law. What I might think of the "equities" of the case has nothing to do with my duty to decide the law as I am sworn to do.

My view that the petition is defective and subject to demurrer for failure to allege presentment and notice of dishonor, or a valid excuse for the absence of these essential ingredients of pleading in an action against an indorser on a negotiable instrument, is admirably supported by the following cases, discussing this principle of pleading: Evans v. Dickey,50 Ga. App. 127 (177 S.E. 87); Guaranty Life Insurance Co. v.Graham, 58 Ga. App. 767 (199 S.E. 829); Gulf Life InsuranceCo. v. Davis, 52 Ga. App. 464 (183 S.E. 640); Miller v.Quaker Savings Assn., 53 Ga. App. 703 (186 S.E. 885);Crosby v. Calaway, 65 Ga. App. 266 (16 S.E.2d 155);Central of Ga. Ry. Co. v. Tapley, 145 Ga. 792 (89 S.E. 841). In the Evans case, supra, we find this excellent statement of the rule of pleading here under discussion: "Allegations of matters vitally essential to set up a good cause of action will not be implied from the pleading, but must be distinctly made therein." In the Miller case, supra, it was held that on general demurrer allegations of the petition must be construed most strongly against the pleader, and essential allegations to make out a cause of action will not be presumed, but must be distinctly averred. These and similar rulings, different only in the language used, appear in the other cases cited above.

The specially concurring opinion seeks to sustain the petition on the ground that a general demurrer does not reach the defect in the petition, which fails to allege facts authorizing a finding of waiver of notice of nonpayment by so-called implication. There are many decisions from our Georgia courts to the effect that a petition which does not allege a fact necessary to state a cause of action is subject to general demurrer. I will nevertheless cite Moore v. Seabord Air-Line Ry. Co., 30 Ga. App. 466 (118 S.E. 471), and cases there cited; Mackler v.Lahman, 196 Ga. 535 (27 S.E.2d 35); Toney v. Ledford,184 Ga. 856 (193 S.E. 761); and see the numerous cases cited under the catchword "Petition" under the Code, § 105-801 (Ann.), holding that the failure to allege any one of the elements of malicious prosecution is fatal as against a general demurrer; and see in this connection also 41 Am. Jur. 335, § 66, where it is stated that, "if material allegations are omitted, it will be presumed in the absence of an application to amend that they do not exist." It is an elementary rule of pleading that a petition is construed on demurrer most strongly against the pleader (Pink v. A. A. A. Highway Exp., 191 Ga. 502, 13 S.E.2d 337; Daigrepont v. Tech Greyhound Lines, 189 Ga. 601, 7 S.E.2d 174, 127 A.L.R. 217); and, in view of these two rulings when applied to the petition in this case, which fails to allege notice of dishonor or any valid excuse for such failure, I think it is inescapable that the court erred in sustaining the general demurrer. See especially Gainesville News v. Harrison,58 Ga. App. 744 (199 S.E. 559); and, for a definitive settlement of the question that a general demurrer does reach the defect of a petition failing to allege facts authorizing a finding of waiver of notice of non-payment, see Ennis v. Reynolds,127 Ga. 112 (supra); American Bank Trust Co. v. McIntire,30 Ga. App. 593 (118 S.E. 582). In both of these cases the general demurrer to the petition contained almost the identical language of the general demurrer in this case, and both of our appellate courts held that the petition was defective and properly dismissed, and these decisions are binding upon this court. See also DeLoach v. Adams Loan Investment Co.,62 Ga. App. 61 (7 S.E.2d 580).

As to Judge MacIntyre's special concurrence: A demand on the indorser or his representative would not dispense with presentment for payment to the maker and notice of dishonor to the indorser. It takes both of those factors to render the indorser liable, unless they are for some reason excused. It seems to me that the trouble with the views of all the judges concurring in a reversal is that they have confused the rules and laws of evidence with the law of pleading, or vice versa. "The difference between a necessary allegation in a declaration and the evidence which may be sufficient to sustain such allegation is clear." Kendall v.Wells, 126 Ga. 343 (55 S.E. 41); Kirkland v. Brewton,32 Ga. App. 128 (122 S.E. 814). In pleading there is no such thing as an inference except where the evidentiary facts demand the ultimate fact. An inference is a deduction from facts proved, not facts alleged. For various definitions, see 43 C. J. S. 373. This concurring opinion assumes or infers from facts alleged that presentment was made to the maker while it was doing business, that it was made while he was still a director and still president or in control, and while the indorser was still mentally competent, or that notice of dishonor was given to the guardian, or that no presentment was made while the corporation was in business, and that it was thereafter excused. I have already cited authority for the proposition that an allegation of a status once existing does not permit an inference in pleading that it continues. That is a rule of evidence exclusively. The ruling in this case about amounts to holding that any petition would set forth a cause of action merely because the suit was filed. This question of inferring the ultimate fact from evidentiary facts at the pleading stage is analogous to the application of the maxim of res ipsa loquitur to pleading, and it is well settled that the maxim of res ipsa loquitur does not aid defective pleading. That maxim is simply a rule of evidence.Palmer Brick Co. v. Chenall, 119 Ga. 837 (47 S.E. 329).

I am further of the opinion that, in this special concurrence, the allegation touching upon the insanity of J. T. Adams has been misconstrued. The allegation is: "J. T. Adams has been properly adjudicated as a person of unsound mind, and R. L. Anderson Sr. has been by proper order of the court of ordinary of Bibb County, appointed guardian of his person and property, and is now acting as such." This is not an allegation that J. T. Adams was adjudicated of unsound mind as of the date of the filing of the petition. It is merely an allegation that R. L. Anderson Sr. is "now" (the date of the suit) acting as guardian. The fact that R. L. Anderson is now acting as guardian casts not one scintilla of light upon the question of the date when J. T. Adams was adjudicated insane, and to presume or infer that his insanity was adjudicated as of the date of the filing of the suit, would be a construction of the petition most favorable to the pleader.

The expression, "waiver, express or implied," in my opinion does not mean that one can impliedly waive a right. Waiver is the "intentional relinquishment of a known right." What the expression, "waiver implied," means is that the law may imply from facts and circumstances, outside of an express waiver, that one intentionally waived a right. There is no fact alleged in this case from which it can be inferred that the indorser waived presentment for payment, protest, or notice of nonpayment.