Adrian v. . McCaskill

Davis, J. (after stating the case). The note is dated January 10, 18S4, and is payable to “ W. C. Patterson'or order,” on the 1st day of November. It is indorsed by the payee and by the defendants, the name of the payee appearing as first in order. On the 25th day of January, 1885, more than twmlve months after its date, and long after its maturity, the plaimiffs became the purchasers from the payee, with the indorsement as set forth. Were the facts, admitted to be true, admissible to explain the character and nature o f the indorsement of the defendants? *186 The plaintiffs say that, as they had no actual notice of “ any such equities of defence,” and were purchasers for value, the evidence was not competent as against them. By statute, promissory notes, whether with or without seal, are made assignable, “ in like manner as inland bills of exchange are by custom, of merchants in England.” They are, in the language of the mercantile law, ‘negotiable,” and may be transferred and negotiated, free from any equities-which exist between the original parties to them. “Each indorser, including the payee, down the line, has and passes the legal title, and his indorsement in legal import is a contract with his indorsee, and all subsequent holders by indorsement, that the maker will pay the note, or * * * he will.” Hill v. Shields, 81 N. C., 250, and the eases there cited, and innumerable decisions, English and American, cited in Parsons, Daniel, Randolph and other elementary writers upon the subject, indicate the solicitude of courts to protect bona fide purchasers and innocent holders of negotiable paper, so essential to commerce and trade; and the construction placed upon sec. 177 of The Code (C. C. P., § 55), in Harris v. Burwell, 65 N. C., 584, and Martin v. Richardsont 68 N. C., 255, has been limited to the makers of promissory notes, &c., and held not to apply as between indorsers. Conceding the importance of protecting bona fide holders of commercial paper “in its unchecked circulation,” what are the liabilities of the defendants in the present case? That the holder of a negotiable note is presumed to be the owner admits of no question, and that, after such a note is put in circulation, indorsers are liable in the order of succession, is- equally clear, if the indorsement be not limited or qualified. No prior indorser can look to any subsequent indorser. “ One who obtains possession of a bill or note, after indorsing it, is restored to his original position, and cannot, of course, hold intermediate parties, who could look to him again.” 2 Ran. Com. Pa. S., 719. It must be *187 equally clear that one who derives possession from him,, with notice of this fact, cannot hold such intermediate indorsers liable, and, when such indorsements are in blank, parol testimony is admissible to show the relation in which they stand. Ibid., §§778, 841 and 883. When the note was returned to Patterson, he became again the owner, and, as between him and any subsequent in. dorsers, the relation of indorser and indorsee ceased. The plaintiffs were not the indorsers of the defendants. It is clear that Patterson could not, by reason of the blank indorsement of McCaskill & McLean, hold them liable for the note, for he stood in the relation to them of a prior indorser. The plaintiffs derived their title directly from Patterson, the original payee, who had re-a'cquired the title, and not as successive indorsers, deriving title through the indorsement of the defendant; and this distinguished this case from Hill v. Shields, supra; Parker v. Stallings, Phil., 590, and similar cases. The plaintiffs were affected with, and bound by, notice of what appeared upon the note itself, and they took the note from the original payee, bearing upon its face the fact that he was the first indorser, and that the defendants were his indorsees. An indorsement in blank by the payee is presumed to have been intended as a transfer, and, though this may be rebutted by parol proof (Davis v. Morgan, 64 N. C., 570), the admitted facts in this case show that the indorsement by the payee was in accord with the presumption — & transfer to-McCaskill & McLean. But it is insisted that, as between the indorsers in blank, the holder may fill the blank by making it payable to himself, or to any one he may choose. This is so, where he obtains the note, not from the payee or a prior indorser, but holds it as a bona fide purchaser, without any knowledge or notice of the relation sustained by prior indorsers to the note. In the present case, if the plaintiffs, purchasing the note,. *188 not from the defendants, but from the prior indorsing payee, had filled the blank indorsement of McCaskill & McLean to themselves, it would not have been in accordance with what they knew the fact to be, and would have been a gross wrong, if not fraud, upon the defendants. The plaintiffs further rely upon the well-settled rule “ that whenever one or two innocent persons must suffer loss by the acts of the third, he who, by his negligent conduct, made it possible for loss to occur, must bear the loss, for it is against reason that an innocent party should suffer for the negligent conduct of another,” and that the defendants, by neglecting to erase their indorsement, “induced the plaintiffs to rely on the legal import of the indorsement, and ought not to be allowed, against the plaintiffs, purchasers for value and without notice, to make proof of the alleged facts.” Though the plaintiffs had no “actual notice,” we have already seen that they were charged, in law, with notice of facts apparent upon the face of the paper which they purchased from Patterson. But the defendants may have been indorsers for accommodation, or as sureties or guarantors. True; and the indorsement of a note by a third person, made at the time of its execution, binds him, according to the intention of the parties, either as joint principal or as surety. Baker v. Robinson, 63 N. C., 191. If the plaintiffs looked to the defendants as accommodation indorsers, or as guarantors, then, as they purchased the note from the payee after maturity, they were not “ bona fide holders before maturity,” but had notice, as appeared upon the face of the paper, of its dishonor. Rev. Com. Paper, sec. 672; Bank v. Lutterloh, 95 N. C., 495; Chaddock v. Vanness, 35 N. J., 517. So, whether by the one way or the other, the plaintiffs cannot hold the defendants liable. No error. Affirmed.