Shepard v. Hawley

Swift, Ch. J. In this case, it is contended, that the joint indorsement of a negotiable note, payable to two or more promisees, constitutes the indorsers partners in that transaction, and that notice of the non-payment of the note to one, is notice to both, as in the case of partners. The only authority to this point is the case of Carvick v. Vickery, Doug. 653, 4. n. It is true, there the court of King’s Bench granted a new trial on that ground ; but on the trial of the cause, Lord Mansfield permitted the defendant to prove the usage, and the jury declared they knew the usage to be otherwise, and found a verdict accordingly. This case, then, cannot be considered as an authority ; and we are at liberty to settle the question on principle. Where there are two or more promisees in a negotiable note, it is necessary that each should indorse it, in order to transfer it ; but such joint act, from the nature of the thing, can no more constitute them partners than any other joint transaction. The legal effect of such indorsement is to make them all liable to the indorsee, on failure of the payment of the note, if due notice is given them ; but, there is no reason for saying that such an act amounts to an agreement that they will be liable as co-partners with respect to notice ; for this is to extend the terms and nature of the contract. Such — 371 — construction ought not to be given toa contract, if it be unnecessary ; for it may subject the parties to inconvenience. In the case of partners, as all have a joint interest, notice to one is sufficient ; for he may withdraw the effects of the company, and pursue all the remedies to which they are entitled ; but where they are merely joint indorsers, no co-partnership actually existing, each may have a separate interest, both as to withdrawing effects, and pursuing legal remedies. The consequence then might be, that by giving notice to one indorser only, the others might lose their claims against those that are liable to them. Cases also may occur where the liability on the indorsement has been discharged by want of due notice, or some other laches, yet one of the indorsers, who may be a bankrupt, will have it in his power, by his acknowledgment of notice, to revive such extinguished liability, without the knowledge or consent of those who are thus rendered chargeable. This can easily he avoided by requiring notice to be given to all the joint indorsers to whom the holder of the note intends to look ; and then every one can protect his separate rights. The defendants also contended, that the plaintiff obtained the note by fraud, and offered testimony to prove the fact, which the court rejected as irrelevant. The facts stated constituted a fraud ; the evidence offered was pertinent to prove them ; and it ought to have been admitted. In this opinion Trumbull, Smith, Brainard, and Baldwin Js. severally concurred. Goddard, J. I am of opinion that the direction to the jury was wrong. If the principle laid down is correct, it must be applied to all cases where by the law merchant, notice of the dishonour or non-payment of a bill of exchange or promissory note is necessary. This rule, if adopted, it is obvious, may open a door to fraud, and create or continue responsibilities, which parties never meant to assume. A negotiable bill or note having been dishonoured, and due notice having been given, a right of action has accrued to the holder, and he may then hold the note or bill for an indefinite time without enforcing his demand by suit. A. and B. are joint promisees in a note. They indorse it to C. Payment is refused, when at maturity, A., who is the friend of — 372 — C., is embarrassed for funds. Notice, is given to him, but no notice is given to B., who is responsible. C. is content to suffer his money to remain on interest ; and out of favour to A., he neglects to collect his money until A. fails. He, then commences his suit against B. without notice, and collects his debt after the lapse of years, during which time B. has supposed that the bill or note had heen paid at maturity. B. may have had funds in the hands of the drawee to pay his part of the bill or note, which he has failed to collect, supposing they had been applied to the payment of this bill or note. Prior indorsers, who would have been liable to him, have not been notified, and he has lost his claim on them. Or if no notice was ever in fact given, and he had been discharged from the claim, it is in the power of A., who has become bankrupt, to revive or create a claim against him, by acknowledging that notice had heen given to him. A principle so dangerous ought not to be adopted, unless settled rules of law imperiously demand it. I have not been able to find any decision which supports such a principle. I find principles opposed to it. What is the object of requiring notice ? To enable the drawer or indorser to withdraw his effects, which, in contemplation of law, are in the hands of the drawee ; to enable the indorser of the note to obtain payment of the maker ; to notify others who may be liable to him. It is always presumed that the maker of a bill has effects in the drawee’s hands, and that the indorser has given value for it, and that each may sustain a loss by want of notice. It is on this principle that notice is required. Bickerdike v. Bollman, 1 Term Rep. 410. Vere & al. v. Lewis & al. 3 Term Rep. 182. Whitfield v. Savage, 2 Bos. & Pull. 280, 281. Chitty on Bills 162. In the case of French against the Bank of Columbia, reported in 4 Cranch 154. Chief Justice Marshall, in delivering the opinion of the court, says, “ Why is it that notice must immediately be given to the drawer that his bill is dishonoured by the drawee ? It is because he is presumed to have effects in the hands of the drawee, in consequence of which the drawee ought to pay the bill, and that he may sustain an injury by acting on the presumption that the bill is actually paid. The law requires this notice, not merely as an indemnity against actual injury, but as a security against a possible injury which may result from the laches — 373 — of the holder of the bill. To this security, then, it would seem, the drawer ought to remain entitled, unless his case be such as to take him out of the reason of the rule.” It is apparent that none of these ends of notice are attained by notice to one only of two or more joint indorsers or drawers. But the principle contended for is attempted to be maintained by considering joint indorsers or drawers as partners quoad hoc. To constitute a partnership, there must be either an agreement to share in profit and loss, or two or more must hold themselves out to the world as partners. The case in question does not state the defendants to be partners by any such agreement. Have they held themselves out to the world as partners ? There is nothing on the face of this note, or the indorsement, which has any tendency to hold out to the world such an idea ; and I believe it is against the universal sense of the mercantile world so to consider them. Partners usually transact business under some name. This note is payable to Asahel Loomis and Samuel Hawley, and by Asahel Loomis and Samuel Hawley indorsed. In cases of actual partnerships, it is said, that he who draws, accepts or indorses a bill for himself or partner, should always express that he does so for himself and partner, or it will be doubtful whether his partner is bound. Chitty on Bills 35. and the following cases there cited : Pinkney v. Hall, 1 Salk. 126. S. C. 1 Ld. Raym. 175. Smith v. Jerves & al., 2 Ld. Raym. 1484. Carvick v. Vickery, Doug. 653. The King v. Wilkinson, 7 Term Rep. 156. Meux & al. v. Humphry, 8 Term Rep. 25. Lepine & al. v. Bayley, 8 Term Rep. 325. If several persons employ one factor, and he draws a bill on them all, the acceptance of one will not bind the rest. Bull. N. P. 279. Chitty on Bills 34, 5. But the case of Carvick v. Vickery, Doug. 653. n. is relied on as an authority to support this case. In that ease, John Maydwell and his son, John Maydwell, drew a bill on Abraham Vickery, payable to their own order, and the son only indorsed it thus : “ Jn. Maydwell. " In an action by the indorsee against the acceptor, the court of King’s Bench. decided, that the indorsement was good, and said, that it was better that the father should suffer by the act of the son, than that the world, who would collect the condition and relation the parties to each other from the face of the bill itself, — 374 — should be deceived by it ; and Lord Mansfield, to maintain the position he had taken, denominated the promisees in that case partners to that particular transaction, although the case stated that they had no other connexion in business than the drawing of that bill. But it is remarkable, that in the trial of that very case afterwards, Lord Mansfield, upon objection, admitted evidence to prove, that by the universal custom and usage of merchants and bankers, such indorsement was held to be bad ; and the jury una voce said they wanted no evidence to prove that ; they knew it to be as stated ; and gave a verdict for the defendant. Let it be remarked, that the rule established by the court was for the benefit of trade, founded on the supposed law’ merchant, and opposed to the general doctrine of the common law that one joint tenant of a personal chattel can do no act; to affect his co-tenant. But it is said, that admitting one joint promisee cannot indorse for himself and the other, yet that having done so, he shall be responsible for all the consequences of this last joint act ; and on this ground notice to one ought to be considered as notice to both. I answer, that if one cannot indorse for both by the law merchant, they are in no sense partners. They are not supposed to have drawn upon the credit of joint funds ; they have not held themselves out to the world as partners ; the holder has not been deceived ; their acts have had no tendency to deceive the world. The holder will know, that they may draw or indorse upon the credit of separate funds, and will perceive the importance of notice to each to enable each to secure himself in relation to others, and to have all the security to which he is entitled by law. But it is said, that if a promise is made to several persons to pay on request, a request to one is sufficient. So notice to one member of a firm is notice to all. So where by statute an attorney is obliged to present his bill one month before suit, several underwriters being holden to pay, presenting to one is sufficient to maintain his action. In all these cases, it is presumed that if one person liable to pay money is called on to do so, he will notify all who are liable to contribute a part of it ; and if this is not done, they are — 375 — only subject to the inconvenience of a suit for money without being first notified. Cases arising under the statute of limitation have also been cited, where an acknowledgment of one joint promisor has been held sufficient to take a case out of the operation of the statute as to him and his joint promisor. These cases are not analogous. Slight evidence has been held sufficient to operate as a waiver of that statute, where courts have been satisfied that the debt had never been paid ; and whether they have gone too far or not, it is not now necessary to enquire. They do not apply to the case under consideration. I am of opinion, that it will be most conducive to justice, most consonant to mercantile usage, and the principles of law requiring notice, that all who may be affected by it, should have notice of the dishonour of a bill or note ; and that in this case, a new trial ought to be granted. Hosmer, J. gave no opinion, having been of counsel in the cause. New trial to be granted.