Collins v. Everett

By the Court. Nisbet, J. delivering the opinion. There were originally three counts in this writ — one, which charged the defendant, Collins, as guarantor, seems to have been abandoned. Of the other two, one charges him as surety to the maker, under the Act of 1826; and the other as an original prom-isor. The Court below having admitted parol testimony to show at what time, and under what circumstances, Collins indorsed this note, charged the Jury, “ that the recovery by the plaintiff depends upon the time at which the name ofthedefendant was written upon the note. If you believe from the testimony, that the defendant wrote his name upon the note, before it was delivered to the plaintiff, without further explanation of his liability, then you ought to find for the plaintiff; for the contract was not complete until the note was delivered; and the payee may treat the defendant as a joint maker or surety. And the writing of the name on the back of the paper as effectually binds the party as if it were written in the face. If Collins was interested in the original consideration, then he is liable as a joint maker; if not, then as surety. But if you believe from the evidence, that Collins did not write his name on the back of the note, until after the delivery of the note to Everett, you ought to find for the defendant.” To the admissibility of the parol testimony, the defendant excepts —also to the charge of the Court; maintaining, that according to the legal effect of the instrument, if Collins is liable to the plaintiff, he is liable only as indorser, and therefore cannot be liable as surety, or as joint promissor. And farther, that if the parol testimony was properly admitted, yet Collins is not liable as surety or joint promissor, if “ he signed the note before the delivery of it to Everett, the payee;” and can only be made liable as such, upon its being proven, that by agreement with the payee, he consented or intended to be so held liable. [1.] I shall review these questions, first in the light of the Law Merchant, irrespective of our Act of 1826. According to Com274 mercial Law, we think with the plaintiff in error, that’this defendant, by the legal effect and character of the instrument, is an in-dorser, and can be made liable in no other character. There is no rule of pleading better established, than that a note must he sued on according to its legal import. Lord Kenyon in 'Bishop vs. Haywood, 4 T. R. 471. The plaintiff not having declared against the defendant as indorser, if the legal import of the note is such as to give him that character, it follows that the plaintiff cannot recover. According to the principles of the Common Law, the import of this instrument to my mind is clear — and its character decidedly fixed. It is made by Moore, payable to Everett, or order, and indorsed by Collins. It is negotiable — not by delivery, but by indorsement. The title being in Everett the payee, and being negotiable only by his order, there it remains until he chooses to pass it out of himself. And inasmuch as the title could not pass without his indorsement, Collins must be held in legal contemplation to occupy the position of second indorser, with all the rights which appertain to a second indorser, and with the liabilities which attach to him as such. He is presumed to have indorsed with reference to these rights and liabilities — he is presumed to have indorsed with a knowledge of the law which would govern his indorsement. And the payee is presumed to have taken the paper with a knowledge of the extent of the indorser’s liability; for he too, is to be held cognizant of the law of the land. We are to hold as a general proposition, that contracts are made with reference to tho laws which are to govern them. Thus, if one indorses a commercial paper, all who receive it, are taken as conceding the legal rights of the indorser, as established by the Law Merchant. So the indorser becomes a party to the paper, with the implied concession of his liability, as fixed by law.— Nothing in the science is more familiar than these general principles. Now it is admitted that this instrument departs from the usual form of negotiable paper. The usual form is to make the note payable to the indorser, who putting his name on it, by ordinary sequence, the title passes. Here the payee is a distinct person from Collins, whose name is on the note as indorser— there is no privity between him and the payee. If Everett the payee, was in fact the original creditor, or if he was not, but the note was made payable to him, with the expectation and intent to procure his name as first indorser ; in either event, Gollins’ po — 275 — sition is that of indorser. If the latter was the understanding, and it were carried out, there would be no controversy about his position — it would be that of an ordinary indorser. If, however, the former be true, and the note was delivered to Everett with Collins’ name upon it, for a consideration passing immediately to 'Moore, the maker, from him — still, Collins is an indorser. The record, however, shows that 'Everett, the payee, is the owner of the paper — that it is payable to his order, and that Collins’ name and no other, is upon it. In this state of the case, I hold Collins an indorser, for the credit of the maker, and liable, not to the payee Everett as his indorser, but to sueh names as might in the negotiation of the note, come after his own. It is not necessary, in order to sustain our position, to demonstrate that Collins may be made in some form, liable to the plaintiff. Nor does it follow, that because the payee cannot be an indorsee to Collins, he, Collins, cannot be an indorser. We say that he is an indorser with his liabilities restricted according to the instrument upon which his name appears. In order to the negotiation of this note, there is a legal necessity that the payee’s name should be on it. Suppose it was upon it, he would, by the necessity of legal rule, be an indorser precedent to Collins. And if so, he is not Collins’ in-dorsee. Upon the paper then alone, he could not go against Collins. Nothing is plainer than that an indorsee may resort to preceding indorsers for payment — and nothing is plainer than that the reverse of this rule, as a general proposition, has no foundation in the law. 4 T. R. 471. From aught that appears, Collins indorsed this note for the accommodation of the maker and the payee, upon the responsibility of the maker and payee, as first indorser — this is the import of the instrument. The fact that the note is still in the hands of the payee, does not import any thing different. The fact that the payee may have rights, springing from matters dehors the instrument, is not the criterion for our judgment. We look at the note with the indorsement, and to it we apply the principles of the Commercial Law, and by that test, we can arrive at no other conclusion. And to this conclusion we are conducted, not alone by general principles, but by authority. Herrick vs. Carman, 12 Johns. R. 159, 160. 10 J. R. 224. Tillman vs. Wheeler, 17 Johns. R. 328, 329. Seabury vs. Hungerford, 2 Hall, N. Y. 80. Hill vs. Newcomb, 3 Hill, N. Y. 233, 234. 11 Conn. R. — 276 — My object, thus far, has been to demonstrate that according to the Common Law, Collins occupies the position of a second in-dorser upon this note and cannot be liable as surety or joint promisor. I deem it necessary again to say, that it does not follow from that position that he is liable to this plaintiff as his in-dorsee, upon the paper — the contrary follows. I am free to admit that there are cases in the books, where an indorser, situated, as Collins is upon this note, has been held by a special case made, liable to the payee. In Bishop vs. Haywood, Lord Kenyon admits that si'ch a thing may be. And I farther admit, that if this note was payable to Everett alone, that is, if it was not negotiable —a different rule would obtain. Inasmuch as it is negotiable, and is payable to the order of Everett, and Collins’ name is on it, the legal import is, that he is the second indorser, and to him attaches all the rights of such a position. His liability is secondary — he is entitled to demand and notice, and to reimbursement, in case he pays the note; the note having previously been indorsed by the payee. And we cannot give to the paper such import as would make him primarily liable as original promisor. The note and the indorsement is the evidence of the contract. We cannot step aside from the principles which declare its effect, and give to it a different construction. We disclaim the right to make laws, in order to avoid what may be claimed as a hardship. If it be conceded, for the sake of the argument, that in a given case the administration of the law works injustice, still it is the duty, as it is also the pride of this Court, to declare it. Our powers are circumscribed by the laws, be they what they may, which are constitutional, and not in conflict with the great fundamental principles of the government. There are several cases in the American Books, where an indorser upon a note pa\ able to the order of another person, in a suit by the payee, has been held an original promisor upon a special case made. And this has been done, not by a construction of the instrument itself, but by letting in parol testimony, to show an undertaking so to be bound. Such was the case of White vs. Howland, 9 Mass. 314, and of Moise vs. Bird, 11 Mass. 435. Herrich vs. Carman, 12 Johns. R. 159. Nelson vs. Duboise, 13 Johns. R. 135. In all these cases, and in most others of like character, it seems to bo conceded that such a character could not be given to the indorser upon the instrument alone, and therefore parol testimony was — 277 — admitted to prove him an original undertaker. This, I infer from the cases, need not be proven absolutely, but the extent to which the cases go, is, that there must be evidence of an agreement to be bound to the payee. “If,” says Mr. Justice Bronson, “the note is negotiable, the only inference to be drawn from the fact of his putting his name on the back of it, is, that he intended to give the maker credit by becoming answerable as indorser, and this inference is so strong that it will prevail even when his obligation as indorser cannot be made operative without first obtaining the name of another person upon the paper. Before ha can be made liable as maker or guarantor, there must at least be an agreement that he will answer as such.” Seabury vs. Hungerford, 2 Hill, N. Y. R. 84. The same learned Judge also says; “ It is not enough that the indorser knows what use is to be made of the note, or that he indorses for the purpose of giving the maker credit, either generally, or with a particular individual.” The case of Nelson vs. Dubois, 13 John. 175, went upon the ground expressly, that the indorser agreed to be bound to the payee for the amount of the note at the time it was given. In that case, it was in evidence that the plaintiff refused to sell the horse, which was the consideration of the note, until the indorser did so agree. In Hall vs. Newcomb, the same doctrine is held. In this case, the defendant (the indorser) knew what use was to be made of the note ; he was privy to the consideration. Yet the Court held that that was not enough. Gowen, J. said : The note in question was payable to the plaintiff or order, and there was nothing in the in-dorsement by the defendant', to indicate that he meant to be considered liable in any other character, than that of a strictly commercial indorser. True, he knew what use was to be made of the note, he was privy to the consideration. But so is every accommodation indorser, who becomes a party, with intent to raise money at a particular bank. This takes nothing from his right to require presentment and notice, provided the note is negotiable.” 3 Hill, N. Y. 234. See also Dean vs. Hall, 17 Wendell, 214. Now, what do these authorities prove 1 Clearly this, that in cases like the one at this bar, if the parol testimony be admitted, yet the indorser cannot be charged as surety to, or joint promisor, unless it be proven that he agreed to be so chargeable. There are cases which charge him, upon proof of being privy to the consideration; but the weight of the authority does not stop at that. — 278 — They require proof of an agreement. Now, the position taken by the Court below, stops short of both these requirements. The Judge holds that proof that the indorser put his name upon the paper before it was delivered to the payee, is sufficient to charge him as surety or joint promisor with the maker. In our judgment, that opinion is not sustained by the authorities. There are cases, where, with a view to determine whether the undertaking be original, or a subsequent guarantee, and that, to determine the applicability or not of the statute of frauds, the time of the signature becomes vital. In this case, the question of guarantee and of the statute of frauds is not made. The count in the declaration, which charges Collins as guarantor, was abandoned. It occurs to me that if liability as surety or promisor can be fixed upon Collins, by parol testimony, it can only be done by proof of an agreement, and that he did so agree ought to be specially averred in the declaration. If the pleadings are only according to the paper, I cannot see, if upon other grounds the parol testimony be conceded to be admissible, how it can be adduced under the declaration. So that, according to the principles of the Common Law, we think the Court erred in not ruling according to the request of Counsel for the defendant, that the legal import oí the note sued on, was to make the defendant liable as second indorser, and that the court also erred in charging the jury, that if they believed from the evidence that Collins signed the note before it was delivered to the payee, he was liable as surety or joint prom-isor. [2,] In the discussion of the last named position of the Circuit Court, I have gone, as I must needs go, upon the concession that the parol testimony, in this case, was rightfully admitted. But was it l "We are satisfied that it was not. Enough has been already disclosed, to show that before highly respectable courts in the United States, in similar cases, it has been held admissible. Yet in relation to these cases, this idea, (before suggested) may be taken, to-wit: that the special case of agreement was made in the pleadings, set up as the ground of liability at the time of, or anterior to the indorsement. Here, by the pleadings, Collins is charged as surety, according to the tenor and effect of the note. It may be held doubtful, whether such testimony be not excluded by the form of the pleadings. But aside from this view of the matter, upon general principles, the evidence was not admissible. — 279 — In the case of Stubbs vs. Goodall, (4 Kelly’s R. 106,) tried before this court, at Savannah, in January last, the same question was made,and after a solemn and very able argument,determined against the admissibility of the evidence. In that case in a suit against an indorser, upon a note not made payable at bank, or there discounted, or deposited for collection, the defendant offered to prove that it was the intention of the parties that it should be negotiated at a chartered bank. Upon the face of the note and by operation of our act of 1826, the defendant was not entitled to demand and notice, before liability. According to the contract, as proposed to be set up by the parol proof, he would be liable only as an indorser at Common Law, that is after demand and notice. The effect of this testimony would be to introduce a new rule of liability for the indorser, and impose additional obligations upon the holder. It was, therefore, essentially to vary the written contract, and was properly rejected. For the same reason, it ought to be rejected in this case. The legal import of this instrument, is to make Collins a second indorser, with secondary liability, according to the Common Law, upon presentment for payment and notice, and with the right of going upon a previous in-dorser, if any, in the event of his having the note to pay. The effect of the parol testimony, is to change altogether this import, and to malte Collins primarily liable as an original promisor; to substitute a new contract, in short. The writing is the evidence of the contract. If that is plain — if from that the meaning of the parties is fairly deducible, it must stand. The law will not make for them a new contract. It comes in, as in case of latent ambiguities, to elucidate a clear provision, made obscure by something foreign to the instrument. But no authority is found in the books, from the reign of Alfred to this day, for the incorporation in a deed by parol, of a new limitation — in a will, a new devise, or in a contract, a new and distinct obligation. The rules of evidence touching this subject, ought to be more stringent when applied to negotiable paper, because, in proportion as the rights of parties to notes and bills are made to exist in parol, their negotiability will be restrained. Commercial expediency strongly forbids all interference with the contracts of parties, as the law declares them upon the face of negotiable securities. If, as we believe, this instrument has a clear legal character, we cannot change it by parol. If it affords evidence of a contract, we cannot — 280 — alter, add to, vary, or contradict it, much less can we substitute for it an entirely new contract. I shall not attempt any argument, or review of the authorities upon this branch of the cause; for both, I refer to the case of Stubbs vs. Goodall, decided by this Court, at Savannah, in January last. [3.] Whilst we are constrained to correct what we conceive to be errors in this record, we nevertheless sustain the judgment under our own act of 1826, and upon the first count in the declaration. Our construction of this instrument upon Common Law principles, is, that Collins is an indorser; and it is in reference to this class of persons, that the General Assembly, in their Act of 1826, legislated; for the act is in the preamble declared to he, “ an act to define the liability of indorsers of promissory notes, and to place them upon the same footing with securities.” Although we do not hold the preamble of an act by any means conclusive as to the intention of the Legislature, for that is to be ascertained from the body of the act itself, in the main ; yet it is a legitimate aid to construction. By the act itself, as well as by the preamble, we arrive at the conclusion that the intention of the Legislature was to repeal the Common Law, so far as it establishes certain legalrela-tions between the holder of apromisory note not given for the purpose of negotiation, or intended to be negotiated at any chartered Bank, nor deposited in any chartered Bank for collection, and the indorser upon such a note. What those relations were, are well known. The liability of the indorser was collateral, or secondary — that is to say, although liable to the holder, yet it was on condition that the maker failed upon demand to pay, and that he had notice of the demand and refusal. By the Common Law, too, the holder could resort to an indorser only in a several suit. The Legislature repealed the Common Law in these particulars, and established á new and wholly different relationship between the holder and indorsers — the relationship of payee and original promisor — and placed the indorser upon the same footing with securities. The word securities in the Act, is synonymous with promissoj^|, in its relation to the payee, or the holder of the note. It is descriptive of the relation which an indorser, under the Act, would bear to the payee or other holder. That is to say it gives to him the rights and remedies against the indorser, which he had before the Act, against one who was in all particulars a — 281 — surety. That act was designed for the relief of the holder, to re* move from the payee the burden of the demand and notice, which the Common Law cast upon him — and to facilitate his remedies. The preamble asserts the object of the Act to be, to define the liability of indorsers, and “ to place them upon the same footing with securities.” The footing, status, of sureties was that of primary liability, without demand and notice.' To that position, the indorser is remitted, by the Act of 1826. To analyze this Act. The first proposition is, “ That the practice heretofore required of making a demand upon makers of promissory notes and other instruments for the payment and performance of the same, and the giving notice of such demand within a reasonable time to the indorser of said promissory notes and other instruments, shall cease and become entirely unnecessary to bind said indorsers.” The second proposition is, “ Whenever any person whatever, indorses a promissory note or other instrument, he shall be held, taken and considered as security to the same.” The third is, “ That he shall be in all respects bound as security, until said promissory note or other instrument is paid off and discharged.’ ’ And the fourth, “ He- shall be liable to be sued in the same manner and in the same action with the principal or maker of said promissory notes or other instruments.” There are two provisos to the act; the first withholds its operation from promissory notes, “ which shall be given for the purpose of negotiation, or intended to be negotiated at any chartered bank, or which maybe deposited in any chartered bank for collection.” The second saves to the indorser the right of defining his liability in his indorsement. Prince, 462. From this analysis, it is obvious that the Legislature intended to dispense with demand and notice in order to charge the indor-ser; to make him suable in the same manner as the maker, and, if desired, in the same action with him ; in short, to place him, according to the words which they used, in all respects, upon the footing of securities, to be bound as such until the note is paid. The language of the act is exceedingly broad and comprehensive, and various forms of expression are resorted to, as if to shut out the possibility of doubt as to its meaning. Thus, it declares, “ whenever any person whatever indorses a promissory note, &c.” intending, it would seem, by the generality of the terms used, to comprehend, not alone all classes of men, but all descriptions of indorsers, whether for accommodation, or a consideration, or with — 282 — a liability peculiar and special by reason of the form of the instrument, as in this case. They could not have said more, if they had said, that in all cases where a name appears upon an instrument,, which is the evidence of debt, that name shall be as a surety to the owner of it. So, farther, with persevering labor, to be explicit, the General Assembly say, that in such a case, (that is any case, where any person shall indorse a promissory note,) the in-dorser shall be held, taken, and considered as security to the same, and be, in all respects, bound as security.” How can we, under such general words, and in defiance of specifications thus minute, take this case from the operation of the statute 1 To do so would be to defeat the intention of the Legislature. Let it be remembered too, that in the construction of the statutes, we have no vocation, with ingenious subtlety, to defeat what the Legislature has enacted — our duty is, with open fairness, to give effect to its will. If that will is to be ascertained alone from the two' distinct enactments, to-wit: those which dispense with demand and notice, and make the indorser suable in the same manner, and in the same action with the principal or maker; then, it is the will of the legislature that the indorser be a surety. Because the distinguishing privilege of the indorser at common law was to have a demand made upon his principal, and to receive notice of his refusal to pay, and to be severed in the action. If these are taken from him, what remains to distinguish him from an original undertaker ? Denude him of these attributes of character, and his character is changed. He assumes the attributes which characterise a surety. It may be said; that upon Common Law principles, as to the1 payee of this note, Collins is not an indorser, and not being an in-dorser as to him, he is not made by the act a surety as to him. The reply to this idea is, that the act itself makes any person whatever who indorses a note, a surety. There is no exception in it. And if the indorser is recognised at Common Law, for any purpose and to any extent as such, he is embraced in the terms, and falls certainly within its spirit. We have decided that Collins is, at Common Law, an indorser, he is, therefore, under the act, a surety. If he be at all an indorser, the statute comes in and attaches to him the liability of a surety. To sustain this action, it is not necessary that we establish a title to this note in the plaintiff, upon the principles of the Law-Merchant. For, observe, that — 283 — the Legislature lias not only made him a surety,hut has declared that he shall be sued, as maker. The remedy is given at the same time as the right. Wherever there is an indorser, the right to sue him vests in the payee by virtue of the sovereign, ordaining power of the Legislature. The record discloses that this plaintiff is the owner of the note,- it is made payable to him and his order; he is in possession ; it comes out from him on the trial; it shows that Collins is an indorser; the pleadings charge him as surety under the act of 1826, and we have no alternative but so to hold him. If there were doubt of the fact that the intention was to hold the indorser liable as surety, it is removed by these further considerations. The second proviso authorises the indorser to de-fne his liability in the indorsement. Under it, by a special in-dorsement, he may retain his Common Law right to demand and notice, and also his right to be sued severally. He may, in short, prevent that general effect of the statute which puts him in the position of a surety. Now, why provide for these things in a special indorsement, by proviso, unless in the body of the act they are taken from him ? Why allow him, by proviso, to define his liability in character of indorser, unless by the general operation of the act, his character as such, had been annihilated % Such a concession implies a previous negation. Hr. Collins, farther, under this proviso, might have retained his .character of indorser; he might have made demand and notice a condition precedent to liability; he might have declared that he was in no event to be liable to the plaintiff, and that the sole object of putting his name upon the paper was to give credit to it in after stages of its circulation ; he might have made, with the parties in his indorsement, any contract not.repugnant to the Constitution and laws. He has not done so. And. what is the inference to be drawn from his omission to define his liability? It is that he contracted to take upon himself the liability to the payee, which the statute imposes, to wit: the liability of a surety. For he is presumed to be cog-nisant of the provisions of the act, and to have contracted in reference to them. It is difficult, if this note and this statute be presented side by side, before the judgment seat of reason, to imagine that she could award any other sentence, than that of liability, on the part of Collins as surety. Again : that the Legislature intended to make all indorsers upon notes not intended to be negotiated or payable at bank, sure — 284 — ties, is manifest by subsequent legislation. The acts of the Legislature which relate to the control of executions by sureties and in-dorsers, against principals and prior indorsers, are in pari mate-ria with the Act of 1826. Sureties on appeal — on stay of execution — on recognisance, and on bonds and notes, upon paying off a judgment against their principals, are authorized to control the execution against their principals. And by the Act of 1839, anjndorserwhohaspaidthejudgmentfounded on a note negotiated or payable at bank, may control an execution against his prior in-dorser, for reimbursement. But no where in the statute book is any provision made for an indorser upon a note like this, not intended to be negotiated at bank, to control an execution against his principal or prior indorser. We cannot account for this omission, but upon the hypothesis that the Legislature considered in-dorsers upon notes not intended to be negotiated at bank, as sureties, and provided for in those acts which relate to them. We think the plaintiff ought to recover on the first count in the declaration, and affirm the judgment.