Taylor v. M'Cune ex rel. Brant

The opinion of this court was delivered by Bell, J. The same strictness of proof is not indispensable to make the guarantee of a note or bill effective, as is necessary to sustain an action on the paper itself, and, therefore, the guarantor of a negotiable instrument, who is not at the same time a party to it, according to the custom of merchants, is not discharged from his liability by the neglect of the holder to give him notice of the default of the parties primarily liable, unless he can show by express evidence, or from fair inference, that he has actually sustained loss by the omission: Worrington v. Furber, 8 East, 242; Van Wart v. Wosky, 3 B. & C. 439; Gibbs v. Cannon, 9 S. & R. 198, If the party who ought first to be called on was solvent at the time the note or bill matured, and became insolvent afterwards, before notice, an inference of actual damage to the guarantor will be drawn from the want of notice, sufficient in itself to defeat the holder’s action. This inference will obtain, until rebutted by proof that, had notice been given, payment could not have been obtained from the original parties: Phillips v. Astling, 2 Taunt. 206; Swineyard v. Bowes, 5 M. & S. 62; Chitty on Bills, 10, Am. Ed. 441 — 2. But if these parties were bankrupt or wholly insolvent before the bill or note fell due, the inference -will be, that no injury arose from the want of notice, though this inference may also be rebutted by actual proof: cases above cited; Holbrow v. Wilkin, 1 B. & C. 10; 2 D. & Ryland, 59. Our own case of Leech v. Hill, 4 W. 448, adopts this doctrine, and shows [465] its applicability to a note informally endorsed, like that in suit here, by a stranger to it, where there is proof of an understanding by all the parties that the informal endorser was, in truth, a guarantor who undertook for the eventual payment of the note. A note so drawn and endorsed, was there said to be an anomalous instrument, subject to be construed “according to the contract and understanding of the parties exhibited in the evidence,” and that the plaintiff was not primé facie bound to a discharge of all the duties ordinarily due from a holder to an endorser. But in treating of the nature and consequences of such a contract, the learned judge who delivered the opinion of the court observed that, as it was impossible, “on account of the informality of the instrument, to treat it as a negotiable note, it can be considered in no other light than as an agreement of the defendant to become the surety or guarantor of the note, and as authorizing the plaintiff to write over his signature an engagement to that effect.” This proposition, which was not called for by the exigencies of the case, must be read in connexion with the preceding observations, that point to the necessity of explanatory proof, for otherwise it is not sustained by the authorities upon which the decision of Leech v. Hill was confessedly based. The judgment there pronounced looks for its support principally to the oral testimony of the defendant’s undertaking, and the object his endorsement was intended to sub-serve. This was indeed the very point of the case; and so considered, it is in entire harmony with the Massachusetts and New York decisions, to which the court referred. In all of these, the event was made to depend on the express undertaking of the defendant as surety, manifested, not merely by his irregular endorsement of the note, but by evidence aliunde. In each of them the question was, whether the object of the endorsement was to give to the maker of the note credit with the party to whom it was passed, resting on the good faith of the endorser. If so, it was thought this intent authorized the holder to write over the blank endorsement an express undertaking to pay the money: Josselyn v. Ames, 3 Mass. R. 274; White v. Howland, 9 Mass. R. 314; Nelson v. Dubois, 13 Johns. R. 175; Campbell v. Butler, 14 Johns. R. 349. As illustrative of the principle of these determinations, it may be sufficient to state the facts of that last cited. A. agreed to sell a W’agon to B., provided he would give security for payment of the money. B. offered to give O. and D. as endorsers of a note to be drawn by B., which A. agreed to accept. Notes were accordingly made payable to A. or order, • endorsed by O. and D., and delivered to A. In the action against [466] one of the endorsers, the other was examined as a witness, and testified that the object of the endorsement was to give the drawer a credit with the payee, and so secure eventual payment of the note. And upon his evidence it was held that A. might write over the endorsement a special promise to guaranty payment. In Herrick v. Carman, 12 Johns. R. 159, which perhaps may be regarded as the first of this class of cases in this country, the same principle was broadly asserted, but, inasmuch as there was no proof of a special undertaking, it was ruled the payee could not recover against the endorser; for, said the court, it is to be presumed from the unaided fact of his endorsement, that he put his hand to the paper to give it currency, as the note of the maker and payee, as first endorser. This was followed by the other determinations already cited, and the series was closed by Tillmon v. Wheeler, 17 Johns. R. 326, which is so very like the ease in hand, that it may not be unprofitable to state it somewhat at large. It was an action brought on an alleged special guarantee of a note drawn by M. & A. to the order of the plaintiff, and endorsed in blank by T., the defendant. On the trial, the note was produced with T.’s endorsement, but without any special undertaking written over it. It was proved that the makers of the note were desirous to purchase a quantity of leather from the plaintiff, on the credit of their joint note. This was refused, unless they procured a good endorser or satisfactory security ; and among other persons the plaintiff named T., as one with whose security he would be satisfied. Shortly afterwards, M. & A. again applied to the plaintiff for the leather, and produced the note in suit with T.’s endorsement, but without any agreement or undertaking in writing to guaranty the payment of it. The plaintiff accepted the note, and in consideration of it, and solely on the responsibility of T., as he then declared, sold the leather to the drawers. Under this state of facts, the plaintiff insisted, that, as he had refused to sell the goods without security, and having, upon the faith of T.’s endorsement, so sold them, the latter ought to be considered as having guarantied payment of the note, and consequently the plaintiff had a right to write over the blank endorsement a special guarantee, comporting with those counts of his declaration which averred such an undertaking. But, after observing that the case could not be distinguished from Herrick v. Carman, except that there the suit was against the defendant as endorser, while here it was upon an implied special guarantee, which did not vary the principle, the court held, that in the absence of proof that T. knew for what purpose the note Avas designed, or of a special promise by him, or [467] communication between him and the holder of the note, there was nothing to disprove the legal presumption flowing from the appearance of the paper; that T. put his name to it as second endorser, on the responsibility of the payee, and for the accommodation of the drawers and payee, as first endorser; that there was nothing in the transaction from which an inference could be drawn, that he was privy to the original contract between the drawers and payee; and that the declaration of the vendor, at the delivery of the goods, that he sold them solely on the responsibility of T., could not vary the nature of the paper, given without proof that the same declaration was made or communicated to T. before he endorsed the note. To this was added the observation, that “ if, under the circumstances of the case, the endorsement be construed to be a special guarantee, and an original contract in consideration of the delivery of the goods, there is no case where a note is innocently endorsed by a second endorser, previous to the endorsement by the first, in which, without his knowledge, the responsibility may not be varied.” This judgment is, it appears to me, decisive of the present litigation. If there be a difference between them, it is against our case, in which there is no evidence that the dealing between the original parties was on the credit of the defendant’s endorsement. All that appears is, that the plaintiff refused to take Short’s note without an endorsement; but even this fact was not communicated to Taylor, who, for aught that appears, was wholly •ignorant of the negotiation between Short and M’Cune. That the latter regarded Taylor simply as an endorser, is clear from the testimony of Nicholson. And how can we undertake to say, in the absence of countervailing proof, and in the teeth of the legal presumption, that Taylor esteemed himself as occupying any other position than that of second endorser, anticipating the signature of the payee ? Under the principle already discussed, the evidence in the cause presents us with nothing, on the faith of which we can hazard a different conclusion. And it follows that the charge of the court was in this important particular incorrect. There was no scintilla of proof of an understanding of the parties, differing from that to be drawn from the instrument itself, and consequently the plaintiff was not entitled to recover. There is nothing in the objection made to Short as a witness. He was not called to prove equality of liability between himself and Taylor. His testimony went directly to establish a liability on his part to respond to Taylor for whatever might be recovered, against the latter, together with the costs of the action. His [468] interest was, therefore, in equilibrio, or if it preponderated, it was adversely to his oath. Judgment reversed, and a venire de novo awarded.