Stewart v. Preston

Bax.tzei,l, Justice: This is an appeal from a judgment of the late Superior Court for the County of Gadsden, rendered on a petition filed by appellant to obtain the foreclosure of a mortgage, under the Statute “ to regulate “ the foreclosure of mortgages by the Courts of Common Law, and “ for other purposes.” The plea filed by defendant is, “ that the mortgage was executed and delivered to Edward Carey and others, to indemnify them as endorsers on certain notes therein named; that it was intended by the terras thereof to operate only as a personal covenant of indemnity, — 21 — and therefore not subject to the operation of the assignment set forth in the petition, nor does the assignment convey such an interest as would give him the right to foreclose against the respondent.” An examination of the deed will at once show the fallacy of the position that it was given for indemnity merely. It is true the recital of the instrument expresses its “ purpose to be the securing Carey and the other endorsers from any damage, loss or liability, in consequence of their endprsements,” but the conveyance is made subject to “ the conditions and stipulations, that if Preston shall pay all and “ each of the notes as they become due, and not make default in any “ of them, then the above obligation to be void, and the title thereby “ conveyed ; and it was further expressly stipulated, that if Preston “ shall fail in payment of said notes and suffer the same to be protes- “ ted, or to remain over due in whosoever hands the same he found, “ then the said Carey and others, on making affidavit of such non“payment, and the amount thereof, shall be permitted to foreclose the “ mprtgage, take out execution and bring to sale the said negroes, or “ any portion necessary to the payment of the sum due, notwilhstand- “ ing said sum may not have been' paid or any part thereof, by said “ Carey and others.” We are not permitted in the construction of this or any other instrument, to consider one part to the exclusion of another, but must look at the whole to perceive the design of the maker of it. Indemnity was certainly its purpose, but there was an- object beyond this, plainly expressed, by which indeed it was to be accomplished, which was to provide for “payment of the notes,” and payment in whoso- “ ever hands the same might he found.” It is on payment alone of the notes that the “ title conveyed and the obligation are to be void,” and extraordinary means are provided to coerce payment even before the endorsers sustain any damage. Now if indemnity had been the sole object, these provisions would have been excluded, and others introduced to the effect that the title and obligation should be void on the endorsers being relieved or released from their responsibility. Such however is not the case. It is then in the opinion of the Court not a mortgage of indemnity to the endorsers merely, but to secure the payment of the notéis in addition. The decision of this point carries with it the other one taken by defendant’s counsel dependent upon it, that being for indemnity merely, the mortgage was not assignable. As a general rule the endorsement of the notes secured by a mortgage carries with it the — 22 — mortgage ; this has not been denied in argument, and it has not been deemed necessary to cite authorities in support of it. In the present case there is an endorsement by Carey and others, to the plaintiff “ without recourse,” and we proceed to enquire as to its effect upon the transfer of the mortgage. “ A qualified endorsement in no respect affects the negotiability of “ the instrument, but simply qualifies the duties,- obligations and 'res- “ ponsibilities of the endorser resulting from the general principles “ of law. Thus for example an endorsement of a note to A, without ‘‘recourse will not restrain the negotiability of the note, but willsim- “ ply exclude any responsibility of the endorser on the non-accep- “ tance or non-payment thereof.” Story on Prom, notes 160, Section 146. The form of such an endorsement best expresses its nature and character: “ James Atkins sans recourse or James Atkins with in- “ tent only to transfer my interest, and not to be subject to any liability “ in case of non-acceptance or non-payment.” Story on Notes, 149 ; Chitty on Bills, 250 — 251. Whatever interest then would pass by a general or full endorsement, it seems will pass by a qualified endorsement. If right in this respect, the endorsement in this case carried with it the right and interest of the mortgage, as it certainly did the right to the note itself. This however is not so material, as there is a direct assignment and transfer of the mortgage by Carey and others, the grantees, to the plaintiff. It is alleged that this is invalid on account of the erasure of the words Bank of Columbus, and interlineation of the name of plaintiff, but the law is too well settled to admit of controversy on this point: “ An interlineation or erasure apparent on the face of “ the deed,” says Chief Justice Marshal, in the case of Speake and others, vs. The United States, “ does not of itself avoid it. T.o pro- “ duce this effect it must be shown to have been done under circumstances that the law does not warrant.” 9 Cranch, 28 ; 3 Condensed rep. 244. In that case the facts were distinctly put in issue by the plea of non est factum, - whereas in the case under consideration, there is neither averment nor proof that the alteration was illegally or improperly made. We might here close our examination of the case, having disposed of the objections raised by defendant in his pleading, and show a clear and sufficient right in the plaintiff to recover. All other de23 fences, according to the rules of pleading, are considered as waived, especially such as are connected with the facts of the' case ; and the rule in this respect is founded upon principles of justice and proprie-' ty. Where .a defence is made in appropriate season, the opposing party may prepare'to meet it, to explain' and remove'whatever may be prejudicial to his case. But when made at an unsuitable time, it may surprise, and if received, do injury and injustice. ' With these rvemarks, we proceed tó notice objections urged in this Court by defendant’s counsel with great zeal, and on which great reliance has been placed, which though not presented by the defence below, it maybe more satisfactory to have cbnsidered. “ That the mortgage was made and delivered Upon a ;state of circumstances which afteryards became changed and altered, and to effect purposes afterwards abandoned, and that in truth the.deed was delivered upon conditions not performed. -The notes were endorsed by them without recourse, that endorsement wás contemporaneous with the making of the notes in point of law, and thus evinces an entire change of the original design of the parties. In argument it was said, that Carey and others, never were bound, they did not become liable on Preston’s account, they never were sureties at all, they never run any.risk on his account,” 1 ’ ,~ If all this be true, it was certainly most material to Preston’s de-fence ; it must have been known to him at the time of filing his plea and his failure to rely upon it, if not entirely at variance with its, existence, to say the least, is wholly inexplicable. The position “ that Carey and Others, were never sureties, por liable on Preston’s account, nor run any risk for him,” is rather broad, considering' the character of the deed and its provisions, declaring expressly that'they had endorsed for him, and had become his securities.” The other points are based oh the'assumption that “the endorsement of Carey and,others, was contemporaneous with the making of the notes in point of law,” and that Prestop derived no benefit or advantage from it. Such a presumption would be a very forced one, opposed as it is to the recital óf the deed, declaring that they had endorsed -in blank, to its objects and'pufposes — its delivery and possessión by plaintiff, and the direct object and end of Preston in making and procuring them all. The notes are payable at either of the Banks in Columbus, and were obviously designed for discount..' The fact of the endorsement sho.ws that he could not get money, on his own credit, or the discount without endorsers may have been., against the rules of the — 24 — Bank; hence he procured them — that he could not get it on endorsement alone ; hence he gave a security on property. Now that Preston, after completing his arrangement and before presenting the notes for discount, should have filled up the endorsement so as to destroy the liability oí the endorsers, is wholly incredible ; the more so if the effect of the act were to invalidate the mortgage also. He would then, according to the argument of defendant’s counsel, have presented his notes for discount with no security. But if the endorsement was of no use to him nor the mortgage either, why not destroy them and substitute his individual note in their place ? He certainly could not in honesty and fairness have presented a note secured apparently with endorsement and mortgage, for discount, which he knew' at the time to be invalid and worthless. We will not presume a state of facts so injurious to fair dealing and common, honesty. Oh the contrary the fair and rational inference is, that these instruments Were made for an object which was attained, and that they were of use to him. The fair presumption is that the notes were discounted whilst the endorsements were in blank, on the faith of them and the mort. gage, and that the endorsers either took them up by payment or otherwise, and'afterwards transferred’them to the present holder, he taking them with the qualified endorsement; or that the endorsers, the notes having been discounted at Bank, bargained for their exoneration from the endorsement by giving an assignment of the mortgage, an arrangement which they had a right to make, and which Preston could not object to, as by it, his purpose of saving his endorsers through means of a deed made expressly for that object, was fully attained. We have seen, however, that the effect of the qualified endorsement was to transfer the right and interest of the mortgage, so that the effect would be the same, whether the endorsement was filled up contemporaneously with the note or afterwards. If the Bank, or party negotiating the notes, dispensed with the endorsement, so far as to take it without recourse, their design must have been to rely on the mortgage ; and from the fact that it was not discharged, or in any way cancelled, but placed on the record found in possession of plaintiff, the inference is conclusive that Preston regarded it as valid, and a subsisting security. Strong as the above positions are, they are fortified by the fact that credits appear oil the note for monies received by plaintiff of defendant, to nearly half his indebtedness. We fully concur in the position taken by defendant’s counsel, that the mortgage created a trust for the payment of the notes, and that — 25 — Carey and others might, in a proper case, have been decreed to allow the use of their names, if necessary to a suit, fo have the mortgaged property applied to their payment. This-was’not necessary in this case, as they have assigned their mortgage to plaintiff. Upon the whole, we are of opinion that the judgment of the Court below was erroneous and should be reversed. ' It is therefore considered by the Court, that the judgment of the Superior Court be, and the same is hereby reversed and set aside!,'with costs.' And it is further ordered, that this case be remitted to the Circuit Court for the county of-Gadsden, for farther proceedings to be had in conformity to this opinion. Per curiam. ' Judgment reversed.