West Boston Savings Bank v. Thompson

Mobton, J. This is an action upon a promissory note, brought against the defendant as second indorser. The note is signed by one Hussey, dated July 31, 1874, and payable in two years to the order of Leonard A. Jones, and was secured by a mortgage of real estate. A few days after its date, Jones assigned the mortgage-and indorsed the note to the defendant as security for a loan of money. In October, 1874, Jones repaid this loan, and the defendant, at his request, assigned the mortgage to Pickering and Mosely, at the same time indorsing the note in blank. In November, 1874, Jones borrowed of the plaintiff the amount of the note, procured an assignment of the mortgage from Pickering and Mosely to himself, and executed an assignment of the same to the plaintiff, at the same time delivering to it the note, indorsed by himself and by the defendant. It was not necessary for the defendant to indorse the note; but, as he saw fit to put it in circulation with his indorsement, he became liable on it to any one who took it in good faith and for value before its maturity. It will hardly be serl [514] ously contended that his testimony that he “ did not intend to indorse it ” would affect the rights of a holder for value. According to the undisputed testimony at the trial, the plaintiff took this note in the usual course of business, for its full value, before its maturity, and, by the familiar principles governing the circulation of negotiable paper, it is entitled to recover against all the parties to the note. The defendant contends that the plaintiff lent the money upon the security of the mortgaged land, and did not rely upon his indorsement. But, if this be the fact, it is immaterial. The indorsee had the right to look to all the parties on the note. The fact that it did not rely upon the defendant’s name could not defeat this right or vary his liability under his contract. The defendant also contends that, as the plaintiff knew of the relation which the defendant sustained to Jones in regard to this transaction, it cannot recover. We do not deem it necessary to decide whether there would be a defence if the bank knew all the facts, because there was no evidence which would justify the jury in finding such knowledge. The only evidence to show this was the fact that Jones was one of the trustees of the bank, and sometimes acted as its attorney. But, in this transaction, he was acting solely as a borrower. He was not in any sense, either as trustee or attorney, acting for the bank, and the bank was not affected with his knowledge of the equities, if any, which would furnish a defence upon the note. National Security Bank v. Cushman, 121 Mass. 490. We are of opinion that the evidence at the trial would not have justified a verdict for the defendant, and that the court rightly ruled that the plaintiff was entitled to recover. Exceptions overruled. The defendant thereupon moved for a rehearing of the cause, and referred the court to West St. Louis Savings Bank v. Shawnee County Bank, 95 U. S. 557, and Lemoine v. Bank of North America, 3 Dillon, 44. Morton, J. After the foregoing opinion was written, the defendant filed a motion for a rehearing upon the point that, “ as matter of law, when the indorser of a note, which has been in circulation, takes it up, all indorsements on the note subsequent [515] to Ms are cancelled, and he cannot afterwards negotiate the note so as to make the subsequent indorsers liable to any person with notice of the facts.” This point, though not argued in the opinion, was fully considered by the court. There was no evidence at the trial that the plaintiff had actual knowledge of the relation which the defendant sustained to Jones, or of the consideration which moved the defendant to indorse the note. The only constructive knowledge with wMch the plaintiff could be affected, by the note and the several assignments of the mortgage, would be knowledge of the facts, that Jones transferred the note and mortgage to the defendant, that the defendant transferred them to Pickering and Mosely, that Pickering and Mosely transferred them to Jones, who simultaneously transferred them to the plaintiff, and that tMs was all done before the maturity of the note and in the usual course of business. The defendant contends that, when the note came the second time into the hands of Jones, the defendant, being a subsequent indorser, was released, and his liability could not be revived by a subsequent negotiation of the note. The rule undoubtedly is, that if the payee and first indorser of a note takes it up or pays it at its maturity, the subsequent indorser is discharged, and his liability cannot be revived by a subsequent negotiation of the note. But this rule does not apply to this case. The mere fact that a note, before its maturity, comes in the usual course of business into the hands of the payee after having been once negotiated by him, does not destroy its negotiability, nor defeat the right of a bond fide holder to recover against all who are parties to the note at the time it is negotiated to him. Motion for a rehearing denied.