Alabama National Bank v. Rivers

BRICKLELL, C. J. This was an action instituted by the Alabama National Bank, appellant, against E. R. Rivers, appellee, to enforce the latter’s liability as an accommodation indorser of a check or draft, which had been purchased from the apparent payee upon appellee’s indorsement, and which had been raised from two dollars to two thousand dollars between the date of its issue and the purchase by appellant. On February 23d, 1892, the Gate City National. Bank of Atlanta, Georgia, issued its check or draft on the National Park Bank of New York for the sum of two dollars, payable to the order of Thomas Hall. Subsequently the draft was fraudulently altered by changing the name of the payee from Thomas Hall to M. Gellhorn, and changing the amount from two dollars to two thousand dollars, and punching •or cutting the figures “2000” in the body of the draft. The signature was not changed in any respect. On February 25th, 1892, Rivers, who was a customer of and well known to the plaintiff, went to the bank with said Gellhorn and, leaving the latter outside, asked the cash — 12 — ier whether he wanted any New York exchange, stating that a friend of his liad some and that he would bring him in. Receiving an affirmative reply, he called in and introduced Gellhorn, who produced the draft altered as stated above. The cashier agreed to purchase the draft, and told Rivers to indorse it. The latter at first refused to indorse the draft, saying that he had not come to indorse for Gellhorn, but only to identify him, but finally did so, writing his name under and after that of Gellhorn. The latter then went to the paying teller and received two thousand dollars less one dollar charged by plaintiff for exchange. Gellhorn was indebted to Rivers at the time in the sum of seven hundred and fifteen dollars, for which he had given security, and after receiving the money from the paying teller ho immediately returned to the cashier’s desk and asked the cashier to count out that amount for Rivers, which was done ; the latter amount being paid to Rivers by Gellhorn in the presence of the .cashier, and Rivers immediately deposited it to his credit in the plaintiff bank. The draft was sent at once by the plaintiff to its New York correspondent, the National City Bank, indorsed “for collection . ’ ’ The complaint consists of six counts. The first is in the statutory form of a complaint by indorsee against indorser ; the second, third and fourth declare on the contract of indorsement, reciting the forgery and averring presentment, non-payment and due notice of dishon- or ; the fifth and sixth are the common counts for money had and received and money paid. Besides the general issue the defendant filed many special pleas setting up the defense, in various forms, that the draft had been paid by the drawee upon presentment, that the defendant had indorsed the draft only for the purpose of identifying the payee, and not for the purpose of incurring any liability as an indorser, and want of consideration. It will be observed that the defendant at the time of the indorsement was a stranger to the draft, and that his indorsement was not, therefore, a regular indorsement for the purpose of transfer, but purely an irregular ' accommodation indorsement. There is, perhaps, no subject of law upon which there has been greater diversity of opinion than that of the nature of the liability incurred by such an indorsement.. But we need not — 13 — cite, nor attempt to reconcile, the various and conflicting opinions upon this question. The liability of an indorser is governed by the law of the place of the indorsement, and the liability incurred by the defendant must, therefore, be determined by the law of this State. The question has long been settled in this State, by decisions which have been steadily adhered to and followed, that such indorsements, unexplained, impose a liability on the indorser, in favor of the person against whom the indorsement is made, which is strictly analogous to the liability upon a regula]" indorsement. — Marks v. First Nat. Bank, 79 Ala. 562; Hooks v. Anderson, 58 Ala. 239; Price v. Lavender, 38 Ala. 389; Jordan v. Garnett, 3 Ala. 610; Milton v. De Yampert, 3 Ala. 648. And since the liability of an indorser is a contingent one, depending on due presentment, non-payment and notice of dishonor, if the draft in controversy was in fact and in legal contemplation paid by the drawee to the National City Bank, the agent of plaintiff for its collection, this fact constituted a complete defense to the present suit. If payment was made by mistake, or under such circumstances that the refunding of the amount paid could legally be compelled, and it was in fact refunded, these facts were proper matter for replication, or could; perhaps, be shown under issue joined on the plea of payment. The demurrers to the pleas setting up this defense were, therefore, properly overruled. But the court below erred in overruling the demurrers to those pleas which set up the defense that the defendant indorsed the draft only for the purpose of identifying Gellhorn, the payee, and not for the purpose of incurring any liability as an indorser. These pleas show that the facts relied on to establish the defense rested in parol only. The defense was, not that the liability incurred was that of a guarantor or surety, as distinguished from that of indorser, but that no liability whatever -was intended to be, or was, in fact, incurred, because the sole purpose of the indorsement was to serve as a memorandum to enable plaintiff, if necessary, to recall by whom the payee had been identified, and that this purpose was known to the plaintiff. Whether parol evidence is admissible to show that the circumstances attending the indorsement indicate an intention of the indorser to be bound only as a guarantor, surety, — 14 — or co-maker, and not as an indorser, we need not, therefore, decide. See Hullum v. State Bank, 18 Ala. 805; Tiller v. Shearer, 20 Ala. 596. It has long been settled by the decisions of this court that the legal effect of the indorsement can not be varied by parol evidence of an agreement, contemporaneously made, that the indorser of a note or bill should not be made personally liable for its payment. The specific legal import of the contract evidenced by the defendant’s indorsement was, that he would pay the draft if payment should be refused by the drawee upon due presentment, and he should be duly notified of the dishonor; and this import can not be destroyed and the contract varied, even in a suit between the immediate parties to the contract, by proof that the indorsement was only for the purpose of identification: — Day v. Thompson, 65 Ala. 273; Preston v. Ellington, 74 Ala. 139; Tankersley v. Graham, 8 Ala. 251; 3 Rand. Com. Paper, § 1903. Such pleas, moreover, since they deny the legal effect of the indorsement, that is, deny that it was made in such manner as to be binding on the defendant, should be verified by affidavit. — Code of 1886, § 2676; Tiller v. Shearer, 20 Ala. 597; Bryan v. Wilson, 27 Ala. 208. This ground of objection was not specified in the demurrers, and, therefore, can not be considered in passing upon them. We have referred to the want of the affidavit only for the purpose of showing that the legality of the testimony as to the circumstances under which the indorsement was made must be referred to the issues under which it was offered, and can not be considered for the purpose of showing that the liability incurre.d by the defendant was only that of a guarantor or surety, for which purpose it would have been illegal in the absence of a sworn plea. The court below gave the general charge in favor of the defendant, and it is earnestly contended by the appellee that the charge was properly given, because the evidence showed affirmatively, and was uncontradicted, that the draft w'as in fact paid by the drawee, and failed to show demand, protest and notice. The liability of an irregular accommodation indorser, when there is a valid consideration to support the indorsement, being, as we have seen, the same as that of a regular indox*ser, axid therefore contingent upon due presentment, non — 15 — payment and notice of dishonor, in order to charge such indorser these prerequisites to his liability must be proven. — Marks v. First Nat. Bank, 79 Ala. 562. When the indorsement is on a foreign bill of exchange, protest also is necessary to fix the indorser’s liability. But it is well settled doctrine that if the indorser of a bill or note, with knowledge that the usual steps of demand, protest and notice have not been taken, promise to pay, this, without more, fixes his liability to the same extent as if there had been no laches on the part of the holder. Bolling v. McKenzie, 89 Ala. 475; Kennon v. McRae, 7 Port. 175; 3 Rand. Com. Paper, § 1370 et seq.; 2 Dan. Neg. Instr., § 1147. And facts which excuse demand and notice, or operate as a waiver of laches in respect to them, will, in law, be deemed proof of such demand and notice, and allegations of these facts may, therefore, be proved by showing a waiver of them. — Manning v. Maroney, 87 Ala. 567. It was furthermore held by this court at an early day, that a promise to pay or acknowledgment such as shows that the indorser assumes a liability, will cast upon him the double burden of proving laches and that he was ignorant of it. — Kennon v. McRae, 7 Port. 175. There is evidence tending to show that on the second or fourth day after the plaintiff had mailed the draft to the National City Bank for collection, the cashier notified defendant of the forgery, and the defendant told him “to rest easy; that we [the bank] would not lose a cent by it; to give him time ;” and that subsequently Rivers wrote to the bank “agreeing to pay the money.” The defendant testified that the cashier on one occasion told him that if the plaintiff had to pay, it would look to him for reimbursement, and he replied, “Mr. Urquliart, if I have to pay it, it will be mighty hard; but if I have to pay it I will do it.” This was sufficient evidence of a promise to pay to require the submission to the jury of the question of laches in respect to presentment and notice. It is not necessary, in view of this evidence of a promise to pay, • to decide whether protest of the draft was necessary in order to charge the defendant, since protest is in general excused, or la,ches in respect to it waived, by whatever will excuse, or amount to a waiver of, notice of dishonor. — Manning v. Maroney, supra; 3 Rand. Com. Paper, § 1148. Hence, if necessary in this case, the — 16 — question whether defendant had waived the laches was for the jury to determine. The general charge could not, therefore, have been predicated on the want of evidence of demand, protest or notice of dishonor. Nor could it have been properly based on any want of consideration to support the contract of indorsement. It was not necessary that any consideration should have moved directly to the defendant. The consideration moving to Gellhorn, the payee, was sufficient to uphold not only his promise, but also the contemporaneous contract of the indorser. — Marks v. First Nat. Bank, supra. There remains to be considered, then, only the question, whether the evidence that the draft had been paid by the drawee was so undisputed as to justify the general charge. The testimony as to what occurred in New York at the time of and subsequent to the presentment of the draft to the drawee is very meager, and leaves to inference many facts which it was certainly in the power of the plaintiff to prove b}^ positive evidence. It appears from the testimony of plaintiff’s cashier that when the draft was sent by plaintiff to its correspondent, the National City Bank of New York, for collection, the amount thereof was entered to its credit in that bank, and that a week or ten days afterwards it “came back unpaid.” "When asked directly whether plaintiff was charged with the amount credited to it, he only replied, “Tine check came back to us, and when it is returned it means it is unpaid.” The cashier also testified that “it is the custom of banks in returning or sending back a check to charge it to your account when it is returned to you. It is the custom of baúles to return refused checks.” The draft, when offered in evidence, had stamped on the back, “Note teller. PAID. Feb. 27, 1892. National City Bank, N. Y.,” with pen and ink marks drawn through the words, and there was a peculiar cutting of the paper in the manner usually employed by the drawee bank to cancel a paid draft. Whether the draft was actually presented to the drawee and payment refused, or whether payment was made to the National City Bank and afterwards refunded upon the discovery of the forgery and charged back to the plaintiff, does not appear by positive testimony, but must be inferred, if found, from the facts stated and the fact of — 17 — the possession of the draft by the plaintiff. Conceding the defendant’s theory that the draft was actually presented and paid, we think the above testimony, aided by certain presumptions which the law indulges from the facts stated, was sufficient to raise an issue of fact as to the payment that should have been submitted to the jury. As between the drawee, the National Park Bank, and the National City Bank,. holding the draft for collection as the plaintiff’s agent, if the former in fact paid the draft to the latter, the payment, assuming the draft to have been raised as alleged, would be treated in law as made under a mistake of fact, and if the latter had not in fact paid the money over to the plaintiff, but .had merely credited its account with the amount, it could have been compelled to refund the money to the drawee, and having refunded it, could have charged back to plaintiff the amount credited. — Birmingham Nat. Bank v. Bradley, 103 Ala. 119; National Park Bank v. Seaboard Bank, 114 N. Y. 28; United States Nat. Bank v. Nat. Park Bank, 129 N. Y. 647; 3 Rand. Com. Paper, § 1486. And whatever it could have been legally compelled to do, it had the right to do without awaiting compulsion. In the ordinary course of banking business, the draft, having been paid, would have been surrendered to the drawee. But we find it in the possession of the plaintiff, stamped paid, not by the drawee, but by the plaintiff’s agent for its collection, and mutilated in the manner employed by the drawee to cancel paid drafts. What inferences and legal presumptions arise from these facts? It is well settled that if a note or bill is found in the possession of one who 'appears to have previously transferred it, the legal presumption is that it has been regularly returned to him and that the title is in him, and the burden of showing the contrary is on the defendant. — Anniston Pipe Works v. Mary Pratt Furnace Co., 94 Ala. 607; Price v. Lavender, 38 Ala. 391; Herndon v. Taylor, 6 Ala. 461. Conceding that the drawee paid the draft upon presentment, it could not have been regularly returned to the plaintiff, and the title could not be in the latter, in the ordinary course of business, unless upon the discovery of the forgery, the National City Bank had refunded the money to the drawee, received the draft in return, charged back to plaintiff the amount Qredited, and returned the draft to, — 18 — it. The just inference from the facts proven, aided by the legal presumption, is that all these things were done. In the absence, therefore, of proof sufficient to overcome the inference and presumption, the case presented is not different in any respect from what it would have been if the plaintiff had presented the draft directly to the drawee and payment had been refused. It follows that there was sufficient evidence of presentment, nonpayment, protest, if protest was necessary, and notice of dishonor, to justify the submission of these issues to the jury, and that the court below erred in giving the general charge in favor of the defendant. But we are of the opinion that the evidence would not justify a recovery on the common counts for money had and received and money paid. Rivers is not shown to have had any beneficial interest in the draft, as contended by counsel, and no part of the proceeds of the draft was paid to him by the bank. He was simply a creditor of Gellhorn, haying loaned him money and taken mortgages and indorsed notes a's security, and was innocent of any connection with, or complicity in, the forgery and fraud practiced by Gellhorn. When the latter received the money on the draft, he paid to the defendant the amount due him — seven hundred and fifteen dollars — taking a receipt in full discharging the indebtedness. The fact that Rivers knew the money was part of the proceeds of the draft, and that it was paid immediately after the cashing of the draft, is of no importance, when it is shown that he had no knowledge that the draft had been raised, and that upon the payment by Gellhorn of his debt, he discharged the same and surrendered the securities held by him. No greater reason can exist for holding him liable for money had and received, or money paid to the extent of the seven hundred and fifteen dollars paid to him by Gellhorn, than would have existed if, instead of being paid directly by Gellhorn, the money had passed through a dozen hands and then been paid to him by an entire stranger to the transaction. His liability is strictly that of an indorser, and not that of one to whom money has been paid under a mistake of fact. The inquiry in the 16th cross-interrogatory to A. W. Hill, as to who was the cashier and assistant cashier of the Gate City National Bank, the drawer, at the time — 19 — the draft was issued,- was irrelevant, and the answer was calculated to work injury to the plaintiff, in the minds of any of the jury who may have known the history of the assistant cashier’s connection with that bank. It does not appear, however, when the objection to the question was made, and the court can not, therefore, be put in error for overruling the objection. . Inasmuch as the question itself was illegal, the objection, if not made until the deposition was read to the jury, was properly overruled. — L. & N. R. R. Co. v. Hall, 91 Ala. 112. In view of the issues on which the case was tried, it was competent to inquire by whom the defendant was asked to indorse the draft. The cashier of plaintiff having testified that defendant had written to plaintiff promising to pay, and the letter not having been produced, it was clearly permissible for the defendant to deny that he had so written. That part of the proceeds of the draft which was paid by Gellhorn to defendant, having been paid to discharge an indebtedness due from the former to the latter, evidence was properly admitted to show that the notes evidencing the indebtedness were secured by the indorsement of a third person, since it tended to strengthen the testimony that .defendant- gave value for the money paid him. Let the judgment be reversed, and the cause remanded for further proceedings in conformity to this opinion. Reversed and remanded.