Hazelwood Brewing Co. v. Siebert

Opinion by Mr. Justice Potter, The plaintiff in this case was endorser upon a promissory note, upon which the defendant was a prior endorser. Being called upon to make good its endorsement, the plaintiff paid the note, and in turn required payment by defendant, which being refused, this suit was brought. The defendant sought to evade liability upon the ground that the plaintiff was an accommodation endorser, and that its action as such was hltra vires, and payment by plaintiff could not have been compelled, and for that reason it had no right to recover here. The court below held that the defense suggested was without merit, and that the payment of the note by the plaintiff in no way affected the liability of the defendant, as, in any event, he was liable to prior holders. With this conclusion we entirely agree. The plea of ultra vires is not to be interposed by a stranger to the contract. To entitle the defendant to raise this question it must appear that some right of his has been invaded by the act of which he complains. The defendant was unquestionably liable to other subsequent holders of the note, and he might have been directly sued by one of them, so that he was in no way injured by the payment of the note by plaintiff. The act may have been ultra vires, but the stockholders, the state,, and in some instances the creditors, are the parties entitled to raise the issue, and not a stranger to the transaction: 3 Thompson on Corporations (2d Ed. 1909), Sec. 2852. It is to the credit of the plaintiff in this case that it made no attempt to evade its agreement as endorser, and Ave see no reason Avhy the defendant should be permitted to insist that it be penalized for maintaining its commercial honor. Payment of the [12] note amounted to a repurchase of it, and we think the plaintiff was entitled to all the rights of an endorser, which included of course the right to recover from á prior endorser. The judgment is affirmed.