Exchange National Bank v. Chapline

Smith, J., (after stating the facts). There is no doubt that the loan made by appellant was to Eagle So Co. and not to the Merchants So Planters Bank, and it is equally as certain that Eagle deposited the note of himself and the other directors as collateral security for this individual loan made to him. But this was a non-negotiable instrument, and, as such, a holder who took it even before maturity took it subject to all defenses and equities which were available between the original parties. Am. So Eng. Enc. Law (2 ed.) vol. 4, p. 133; Wettlaufer v. Baxter, 26 L. R. A. (N. S.) 804. The interest of the appellant therefore was the same as that of Eagle, and the note was subject to any defense against it which would have been available against him. As a joint maker of this note, it was Eagle’s duty to pay it, and, having paid it, it could be kept alive only for the purpose of contribution from his comakers. The consideration for this note was the satisfaction of the cashier’s shortage, and this was paid to the Merchants So Planters Bank with Eagle’s individual check, when the bank auditor refused to accept the note as payment. A joint note is extinguished by an assignment to one of the makers on payment by him, leaving him a right of action against the others for contribution. 7 Cyc., note 16, p. 789; Stevens v. Hannan, 49 N. W. 874; Daniels on Negotiable Instruments, vol. 2, par. 1236. The evidence of Buffalo, the cashier of the Merchants & Planters Bank, was that when Eagle paid the shortage by a check for its amount against his individual account, Buffalo knew nothing of this note and never had it in his possession, and no record thereof was ever made on the books of his bank, and later in the day, after Eagle’s check had been paid, Eagle brought the note into the bank and directed Buffalo to endorse the bank’s name thereon in order that he (Eagle) might hold one or two of the directors liable to him for their pro rata part of any sum he might finally fail to realize from Groodrum’s property; and no authority for this endorsement was given him except Eagle’s direction above stated. This transaction amounted to a mere accommodation endorsement, and under the circumstances here stated did not operate to make the bank liable to one charged with notice of that fact. Simmons National Bank v. Dilley Foundry Co., 95 Ark. 368; Cook v. Tubbing & Webbing Co., 9 L. R. A. (N. S.) 193. Whatever may have been the representations of Eagle to the appellant, or whatever may have been its expectation flowing therefrom, the fact remains that the note under consideration is non-negotiable, and while the endorsement by the cashier of the bank to which it was payable was a transfer of it, yet such transfer carried with it no guaranty of its payment, for such is the law, unless the assignor makes the assignment in a form from which an intention to guarantee the payment of the instrument may be inferred, or induces the assignee to take it by an agreement, express or implied, to that effect. 4 Am. & Eng. Enc. Law (2 ed.) 479, and cases cited. Upon the whole case, we think the chancellor’s finding is not contrary to the preponderance of the evidence, and the decree of that court is accordingly affirmed. Kirby, J., dissents.