Frank v. Longstreet, Sedgwick & Co.

Lochrane, Chief Justice. The facts in this record show substantially that Lewis A. Guild had a promissory note, dated January 12th, 1867, due twelve months after date, at the Atlanta National Bank, for $1,136 00, made payable to him by Jane Frank and M. Frank, as security; that this note was not deposited at the bank for collection, but was in the hands of the payee after it became due, M. Frank, the security, making the proper waiver in writing, in relation to demand and notice, etc. After the note was due, Guild indorsed it and delivered it to the agent of Longstreet, Sedgwick & Company, in trade. These indorsers brought suit upon the note against the makers, in the county of Fulton, and, by second original, upon Guild, in the county of Calhoun. 1. We may here dispose of a question raised in this record upon the irregularity allged to exist in the second original. The declaration filed against Jane and Moses Frank, shows that they both reside in Fulton county, and avers Lewis A. Guild to be a resident of the county of Calhoun. In the second original, the venue is properly stated : Georgia, Fulton county; but omits to recite that Jane Frank and Moses Frank are of Fulton county — but after their names, adds: “And Lewis A. Guild, of the county of Calhoun, as indorser,’ etc. This omission is argued to be a fatal variance, etc. We see nothing in this objection. Section 3269, declares: “No technical or formal objections shall invalidate any petition or process; but if the same substantially conforms to the requisitions of this Code, and the defendant has had notice of the pendency of the cause, all other objections shall be disregarded; provided there is a legal cause of action set forth, as required by this Code.” In this case, the parties appeared and pleaded to the action. The maker and security set up usury and payment, and Guild pleaded that he indorsed the note after its maturity, that he gave notice to the parties to institute suit within three months, which they — 184 — failed to do, etc., and also failure of consideration in the property received in lieu of such note and obligation of indorsement, etc. After evidence was introduced, the jury found for the plaintiffs, and a motion for a new trial was made upon several grounds, viz.: 1st. That the Court erred in instructing the jury that the indorser was liable, even if the note was for usury, for the amount of the note. 2d. In not granting a non-suit as to the indorser, upon the ground that the note was payable at a chartered bank, and there was no evidence of a demand and notice upon the makers, etc. 3d. In excluding Guild’s testimony, proving notice to sue, the plaintiffs being residents of New York. 4th. That the verdict was contrary to evidence. 5th. Upon the form of the verdict, which was for §345 66, principal, against the maker and surety, and for $493 70, principal, against the indorser. 2. We will first notice the liability of the indorser. The proposition relied on is, that the usury vitiated the note, both as to the makers and indorser. Is this the law? We think not. The indorser, by his contract, for a consideration, undertook to pay the note, if the makers did npt. And conceding that he had taken this note for usury, he could not set up that to defeat the recovery as against him. In Marford vs. Davis, 28th New York, (1st Tiffany,) 481, it is laid down, “ An indorsement, as between the indorser and indorsee, is a new and independent contract, having no connection with a usurious contract between the payee and the person discounting it, and is unaffected by it. And it is not competent for the indorser to say that his indorsement is invalid, nor can he, in any event, set up his own illegal act in taking usury, to defeat a recovery against him upon the same instrument.” In Brown vs. Wilcox, 15th Iowa, (7th With.,) 414, on a note given for usury, it was held that the indorser was liable to the indorsee, where he could not maintain an action against the maker. In Mabry vs. Matthews, 10th S. & M., 323, it — 185 — was held, “ Where one knowingly indorses a note, after it has been paid off, he binds himself by such indorsement, and is liable for the amount of the note to the indorsee.” In the case in 1st Kelly, 406, the principle held does not conflict with the position presented by these cases. As to the maker, after dishonor, the indorser takes the note with all the existing equities growing out of the contract as a defense. But this rule does not apply to the indorsee; he guaranteed the validity of the paper, and is bound upon his contract of indorsement to the indorsee. The indorsement was a new contract: 2d Kelly, 167, Cox vs. Adams. And we, therefore, hold there was no error in the charge of the Judge, that the indorsee was liable to the indorser upon his contract, even if the note was tainted with usury or for usury, and such defense availed the makers. 3. The second ground of error is based on the failure of proof, that demand and notice upon the maker and security had been made. We recognize the general rule to be, that, though a note is past due, and indorsed by the payee, it is nevertheless incumbent upon the holder to make demand upon the makers, and give notice of their failure to the indorser ; the rule is briefly stated in Guild vs. Goldsmith, 9 Florida, 212: “An indorsee of a promissory note after it falls due cannot recover, from the indorser without proof of demand and notice.” The same principle may be found in Patterson vs. Todd, 18 Tennessee, 426 : “ The indorsee of an over due, negotiable note is not liable thereon, unless it should be presented to the maker within a reasonable time after its transfer, and notice of non-payment be given to the indorser.” In Hoadly vs. Bliss, 9 Georgia Reports, 303, this Court held that the indorser could waive notice and demand before maturity, but after maturity he may waive proof of demand and notice. In 14 Georgia Reports proof of demand and notice was held necessary to bind the indorser, and in 18 Georgia Reports, 518, Judge Lyon says: “ it is an indispensable part of the plaintiff's case; without proof of demand — 186 — and notice he is not entitled to recover.” The cases decided arise under the Act of 1826, and the proposition will not be gainsayed, that as to a note made for the purpose of negotiation, or intended to be negotiated at any chartered bank, and not paid at maturity, notice of the non-payment thereof, and of the protest of the same for non-payment must be given to the indorsers thereon within a reasonable time, or he will not be liable thereon. This is the Code, section 2739. But the question is, conceding that an indorser, after maturity, was entitled to demand and notice, how far binding, under fhe facts of this case, is the'language of our law in section 2739, which concludes, after reciting what is before stated as to notice of non-payment at maturity, etc., “ but in no other case and upon no other bills or notes shall notice or protest be held necessary to charge the indorser.” How, in this case the note was upon its face payable at a bank; the proof is, it was made to be negotiated there. But it was not paid at maturity, and the payee did not present it, but took the waiver of demand and notice by the security, when he indorsed this note, after due and dishonored, in his own hand. Is it within the legitimate inferences of the law that he was to have notice within the section of the Code, 2739, before he was liable on such contract of indorsement? Whatever the failure upon the part of the indorsee to sue, within reasonable time, the makers of the note might work to a discharge of the indorser, we do not think that failure to make demand or give notice to him can so result. This case is peculiar in the fact that the note, though made to be negotiated at a chartered bank, was not so negotiated, but remained in the hands of the payee. It was not paid at maturity, and the waiver of the security of demand and notice of the failure to pay at maturity is entered upon it. We are of opinion that the language of the Code, “ that in no other case shall notice be necessary to charge the indorser,” left this case out of the common law principle, and renders it unnecessary to have given him the notice, and we therefore affirm the judgment upon this ground. — 187 — 4. Iii the error complained of relative to the exclusion of Guild’s proving the fact of notice to sue within three months, we do not think it was error in the Court to have refused the proof. This Court, in 26th Georgia Reports 537, have held “ when a writing is beyond the jurisdiction of the Court verbal evidence of its contents is admissibleand in 39th Georgia Reports, 242, this Court again said: “,The contents of a paper beyond the jurisdiction of the Court, and not in the power of the party wishing to use it, may, without doubt, be proven by a proven copy.” But there must be, to let in such testimony, proof, first, that such notice or writing was actually served upon the party. Contents of letters addressed to them, or sent, without proof of delivery or receipt by the party, would be insufficient. The notice here said to have been given, was under a statute or section of the Code 2128. It may be served upon the creditor, his agent, or person having possession of or controlling the obligation. But the fact of service actually made must precede any proof of the contents of the notice said to be served. And we hold that before evidence could be given of the contents of such written notice required by the statute, it was necessary to serve the party or his attorney with notice to produce the notice, and upon failurethen verbal evidence of its contents is admissible. 5. We now come to that part of the case in which we find more difficulty in arriving at a correct conclusion. Was the verdict contrary .to the evidence ? Mrs. Frank says she borrowed money of Guild; the amount was $2,400 00 at 3J per cent, per month ; three notes were given of $1,136 00 each, at twelve months each. She further says she has paid two of the notes. She then details the amounts paid, aggregating over the amount of $2,400 00 and legal interest. She says the note sued on is all usury. She also says she has paid $724 00 on this note sued on. It is evident in the evidence of Mrs. Frank, that she regards the transaction as an entirety, and reasons or rather answers for the reason that, as the original amount was — 188 — $2,400 00, and she has paid this with legal interest, this note sued on is all usury. But the law does not calculate in this way. In Primrose vs. Anderson, 24th Pennsylvania State Reports, (12th Harris,) 215, the law is correctly laid down. “The taking of usurious interest upon one negotiable promissory note cannot be set up in defense to an action upon another such note held by the same person.” These notes were neither all usury upon her statement, but each contained as usury the amount over the principal and legal interest — thus $800 00 received would bear interest for twelve months, if due at that time. This would make $856 00. The amount of the note sued on is $1,136 00. The balance, or $280 00, would be usury. If she paid the sum of $724 82 on the note when due, then the balance due would be $134 18, and that, plus interest thereon since that time, would be her indebtedness; which, by calculation, would show that the verdict as against Mrs. Frank and Mr. Frank was for too large an amount, or an amount not warranted by the evidence, as between her and the plaintiffs. She was entitled to all equities of defense to the note sued on. What usury she may have paid to Guild does not come into her right of equities as between her and the plaintiffs; she is confined to the note and the transactions growing out of the note.