Hoffman v. . Moore

Smith, C. J. The question to be solved is simply this: What liability is incurred by a person who not being in privity with the written contract, writes his name on the back of a negotiable security before its delivery to the payee, and if open to explanation upon whom does the burden of proof rest? There is great diversity of opinion in the rulings of the courts and among elementary writers upon the point. By some of the authorities he is held to be liable as a second endorser; by others that he is a guarantor only of the debt; by some that he is a surety, and by the larger number that he must be regarded prima facie as a joint maker. 1 Danl. Neg. Inst. § 713, and cases referred to in notes. 1 Pars. Cont. 206; Ray v. Simpson, 22 How. 341. There is however a general concurrence of opinion that as between the immediate parties, their understanding of the obligation assumed may be shown by parol proof of the facts and circumstances attending the transaction, and the intention when ascertained will control and determine the liability. 1 Danl. Neg. Inst. § 710. In Baker v. Robinson, 63 N. C. 191, the facts were very similar, and it appeared that the parties signing intended to *316 give the weight of their names as sureties for the maker, and it was declared that they'were “sureties liable to the plaintiff in the same manner as if their names had been signed on the face instead of the back of the notes.” The subject has undergone a thorough review by the supreme court of the United States in Good v. Martin, 95 U. S. 90, and the true rule deduced from an examination of the cases announced in these words: “When the endorsement is in blank, if made before the payee, the liability must be either as an original promisor or.guarantor, and parol proof is admissible to show whether the endorsement was made before the endorsement 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 endorsing the note may he charged as an original provisor ; but if after the payee became the holder, then such a party can only be held as guarantor, unless the terms of the endorsement show that he intended to be liable only as second endorser, in which event he is entitled to the privileges accorded to such endorser by the commercial law.” The right to introduce proof to explain the intent with which the endorsement was made in order to fix the endorser’s legal liability, must be confined to the immediate parties to the transaction and an intent common to both. .As thus understood, the proposition is obviously correct. The intent must be not only'that of the person signing but that of the person to whom the note is payable, and the explanatory evidence is only competent in a controversy between them, and could not follow and affect the security when transferred before maturity to a bona fide endorsee for value and without notice. Mendenhall v. Davis, 72 N. C. 150; Hill v. Shields, 81 N. C 250. The legal effect of such a signing ought to be, and we think is, fixed and definite, when the security is assigned* and for like reasons should be, when, as in the present case, *317 it is delivered unexplained to the payee, and the legal liability of the endorsers not left contingent upon an unexpressed and unknown understanding among themselves. But however this may be, it is clear the evidence restrictive of the implied obligation must come from the parties who are charged. Not only was no such testimony produced, but the evidence tended to show that the plaintiff accepted the note under the belief that the signers were all sureties for the debt. The charge of the court was almost in the very words upon -which in Baker v. Robinson, supra, the decision was made, holding the endorsers responsible as sureties for the maker. . We do not construe the statute, (Bat. Rev. ch. 10 § 10) which declares an “ endorsement unless it be otherwise plainly expressed therein shall render the endorser liable as surety to any holder ” as applicable to the present case. It extends to endorsers who are known as such to the commercial law, and through whom the legal title of the holder of the instrument is traced, but does not include those who not being in privity with the-original contract simply write their names upon the back-of, it. It must be declared there is no error and the judgment is affirmed. No error. Affirmed.