Citation Numbers: 24 F. 221
Judges: Dyer
Filed Date: 5/15/1885
Status: Precedential
Modified Date: 9/9/2022
Upon the argument it was contended in behalf of the defendants that the burden of proof to show that the defendant indorsers wore co-promisors with the Lock-Stitch Fence Company upon the notes, and therefore jointly liable as makers, was upon the plaintiff; that the notes themselves were not evidence of such joint liability; that the liability of the defendant indorsors, if any, was that of guarantors, and that therefore they could not be sued with the maker of the notes as jointly liable thereon; that for these reasons the court should have instructed the jury, when requested so to do at the close of the plaintiff’s case, to return a verdict for the defendants, except the Lock-Stitch Fence Company; and that in any event upon all the facts shown, considered in connection with the principles of law which it was claimed must control the disposition of the case, there should be a judgment in favor of the defendants L. E. Dill-man, Shrefiler, Kleinfelter, and A. Dillman.
Stating the grounds of the defendants’ contention more in detail, it was urged that the effect of the plea of non-joinder, verified by affi
Shortly stated, the controversy between the parties involves this question: What liability is assumed by a third party who places his name upon the back of a negotiable promissory note at the time of its execution by the maker, and before its delivery to the payee; and must liability in such case be determined in this court according to the course of judicial decision in the state where the obligation was incurred ? Whether, in the case stated, the liability is that of original promisor, indorser, or guarantor, has been a question upon which great diversity of opinion has existed in many of the courts of the states. But the- growing current of authority, even before Good v. Martin, 95 U. S. 90, seemed to tend towards the view that the liability assumed by a third party who thus indorsed a note in blank was that of original promisor, although a different rule was, and is yet, adhered to in some of the states. In New York it has been held, in a long line of cases, of which Haviland v. Haviland, 14 Hun, 627, Phelps v. Vischer, 50 N. Y. 69, and Coulter v. Richmond, 59 N. Y. 478, are examples, that presumptively such a party stands to the paper in the relation of indorser, but that this presumption may be rebutted by parol proof that the indorsement was made to give the maker credit with the payee. The same rule of liability prevails in Wisconsin. Cady v. Shepard, 12 Wis. 713. In Massachusetts it is held in a series of cases too extended for citation that if a third person place his name in blank on the back of a note before its delivery to the payee, he is an original promisor, and the presumption is, in the absence of anything to the contrary, that the names on the back and on the face of the note were written at the same time. To the same effect are 1 Pars. Gont. (6th Ed.) 243; Irish v. Cutter, 31 Me.
In this state it appears to be the established rale that a blank in-dorsement by a third party, made under the circumstances heretofore stated, is prima facie evidence of a liability in the capacity of a guarantor. In most of the eases wherein it has been so held, the holder sought to enforce against such third party the liability of guarantor, and the contention of the latter was that he could only be made liable as indorser. Camden v. McKoy, 3 Scam. 437; Cushman v. Dement, 8 Scam. 497; Carroll v. Weld, 13 Ill. 683; Klein v. Currier, 14 Ill. 237; Webster v. Cobb, 17 III. 459; Heintz v. Cahn, 29 Ill. 308; Glickauf v. Kaufmann, 73 Ill. 378; Boynton v. Pierce, 79 Ill. 145; Stowell v. Raymond, 83 Ill. 120; Wallace v. Goold, 91 Ill. 15.
But Good v. Martin, supra, must be regarded, I think, as settling the law upon this vexed question in the federal courts. In that case Good indorsed a note In blank after it was signed by the makers and before its delivery to the payee, and it was sought to hold him as a joint maker. In the opinion of the court, the authorities are reviewed, and it is distinctly held (1) that if a third person put his name in blank on the back of a note at the time it was made, and before it was indorsed by the payee, to give the maker credit with the payee, or if he participated in the consideration of the note, he must be considered as a joint maker; (2) but if his indorsement was subsequent to the making of the note, and to the delivery of the same to take effect, and lie put his name there at the request of the maker pursuant to a contract of the maker with the payee for further indulgence or forbearance, he can only be held as guarantor; (3) if the note was intended for discount, and he put his name on the back of it with the understanding of all the parties that his indorsement would be inoperative until the instrument was indorsed by the payee, he would then be liable only as a second indorser, in the commercial sense. Says Mr. Justice Clipjfoed, speaking for the court:
“Mliere the indorsement is in blank, if made before tlio payee, the liability must be either as an original promisor or guarantor; and parol proof is admissible to show whether the indorsement was made before the indorsement of the payee, and before the instrument was delivered to take effect, or after the payee had become the holder of the same; and, if before, then the party so indorsing the note may be charged as an original promisor, but if after the payee became the holder, then such a party can only be held as guarantor, unless the terms of the indorsement show that he intended to be Liable only as second indorser, in which event ho is entitled to the privileges accorded to such an indorser by the commercial law.”
Applying to the cases at bar the principles thus laid down, it cannot be doubted that prima facie the liability of the defendant indors-ers on the notes in suit is that of original promisors; nor can it bo successfully questioned, in the light of this adjudication, that the notes themselves, with the indorsements thereon, are evidence of such lia
But it was contended by counsel for the defendants that, as the notes in suit.were executed and were made payable in this state, the law of the state, as established by the course of judicial decision here, must prevail in determining the character of the liability assumed by the defendant indorsers. This proposition was urged with much plausibility and force. That the question here involved is one of general commercial law must be admitted. The decisions in Illinois which have been cited, are not founded upon any local statute, nor, in my opinion, upon any such local usage as is alluded to in Swift v. Tyson, 16 Pet. 1. Nor does the determination of liability in the cases at bar rest upon an interpretation of any statute or consideration of any local usage. It involves simply the legal relation which certain parties bear to instruments of a commercial nature, the true interpretation and effect whereof are to be sought, not in the decisions of the local tribunals, but in the general principles and doctrines of commercial jurisprudence. The case of Swift v. Tyson, supra, is so familiar that extended reference to it is unnecessary. It had been held for a series of years in New York, by the supreme court of that state, that a pre-existing debt was not a sufficient consideration to shut out the equities of the original parties in favor of the holders. But in Swift v. Tyson, which came up from New York, the supreme court of the United States held a contrary doctrine to that announced by the courts of the state upon the question of the right of a bona fide, holder of a.bill of exchange, who had taken it before maturity, in payment of a pre-existing debt, without notice of any equities between the original parties, to recover without regard to such equities.
In Oates v. National Bank, 100 U. S. 239, a commercial transaction was under consideration, which arose in Alabama. It was an action by a national bank, located in that state, against a citizen of the state, upon a promissory note there executed, and there made payable and negotiated. It was contended that the decision of the supreme court of Alabama should be accepted as the law governing the rights of the parties. But in reply to that contention, the supreme court of the United States, said;
“While the federal courts must regard the laws of the several states, and their construction by the state courts, (except when the constitution, treaties, or statutes of the United States otherwise provide,) as rules of decision in trials at common law in the courts of the United States, in cases Where applicable, they are not bound by the decisions of those courts upon questions of general commercial law. Such is the established doctrine of this court, so frequently announced that we need only refer to a few of the leading cases*227 bearing upon the subject. Swift v. Tyson, 16 Pet. 1; Carpenter v. Providence Ins. Co. Id. 495; Watson v. Tarpley, 18 How. 517.”
Again, in Railroad Co. v. National Bank, 102 U. S. 34, tlie question was whether the holder of negotiable paper transferred merely as collateral security for an antecedent debt — nothing more — is not a holder for value, within the rules of commercial law which protect such paper against tlie equities of prior parties. Mr. Justice Hablan, speaking for the court, in a very able opinion, admitted that if the principles announced in the highest court of the state of New York were to be applied to the case, a different conclusion would be reached than that announced in the opinion. The note in suit was executed and made payable in the state of New York, but the court reaffirmed the doctrine of Swift v. Tyson and Oates v. National Bank, and refused to follow the decisions of tho state court. Upon the authority of those cases I must hold that, as the question in judgment is one of general commercial law, the decisions of the courts of-the state upon it, though commanding, as they should, our attention and high respect, are not necessarily controlling here. Especially is this so if Good v. Martin, supra, is to be considered, as I think it must be, an exposition of the law upon tlie question of tho character of the liability presumptively assumed by the defendant indorsers when they placed their names on the back of the notes in suit. This act of the parties occurred at the inception of the notes and before their delivery to the payee. Their indorsements, therefore, must be presumed to have been made for the same consideration as that expressed in the notes and as part of (lie original contracts.
As we have seen, an affirmative admission was entered on the record, before tlie plaintiffs rested their case, that the defendant in-dorsers indorsed the notes prior to their delivery to the payee. But without such admission, the notes themselves, with tlie Indorsements thereon in the order in which they appear, in connection with the presumption arising therefrom, afforded priwm facie evidence of liability as original promisors within the doctrine of Good v. Martin. This was proof that satisfied tho requirement of section 36 of the practice act before quoted, wherein it imposed upon the plaintiffs — as in such cases undoubtedly it does, when a verified plea denying joint liability is filed — the burden of showing tho joint liability of tlie defendants.
It remains only to consider whether the extrinsic oral - testimony tending io show tlie circumstances under which the defendant in-dorsers placed their names on the notes over eomesor changos tho prima facie case made by the plaintiffs. In Good v. Martin it was held that the interpretation of the contract in such case ought to be such as carries into effect the true intention of the parties, which may be made out by parol proof of the facts and circumstances which took place at the time of the transaction. The language of tlie opinion makes it somewhat doubtful whether the court meant to go further than to hold that parol proof is admissible to show whether the
Judgment will be entered against all the defendants as jointly liable Upon the notes in suit.