Dawson v. Goodyear

Pardee, J. The court finds that when the plaintiffs indorsed the note at the request and for the accommodation of Sidney H. Dawson, there was an understanding between all the parties thereto that he would get it discounted at the City Bank; that he was unable to effect this purpose; and that upon his request the defendant discounted it. This understanding was no more than a hope, or an expectation; it was not such a contract as would limit Dawson to that single mode of obtaining money upon the note. The plaintiffs did not make their indorsement dependent upon any condition; his' right to deal with it in such manner as would best promote his interests was complete and absolute, and he transferred it to the defendant free from any conditions which would destroy or limit its negotiability. There was no misappropriation on the part of Dawson. The defendant, being thus in possession of the note upon a valuable consideration, had the right, so far forth as the plaintiffs were concerned, to sell it upon terms and conditions satisfactory to himself. By his act of purchase he had come into no contract relation with them by which he was in any degree hampered in the use of their indorsement; their liability upon that vas measured and fixed by [555] tlie law; it extended to the payment of the full amount expressed in the note upon the happening of certain events, all of which were beyond their control. The defendant could do nothing by which that liability could be enlarged; they could do nothing by which it could be lessened without the consent of the holders. This they understood. They expected the bank to hold it, and themselves to stand as the first persons to whom the bank would resort for payment upon default of the maker, and it is difficult to see that the defendant has added anything to the burden which they intentionally assumed. It is found that the defendant violated the agreement which he made with Sidney H. Dawson as to the manner in which he would deal with the note. This being so, Dawson has a cause of action against him and can recover damages. But the plaintiffs are in no legal sense parties to or interested in that contract; by no fair or reasonable interpretation of it can we say that either Dawson or the defendant intended to include them within its scope; they could suffer no injury, and w.ere not entitled to receive any benefit from it. If the defendant had agreed to surrender the note to Dawson for fifty Hollars, and had thereafter in violation of his agreement sold it to a bond fide purchaser who compelled the plaintiffs to pay the full amount, they would have had no cause of action against the defendant upon his broken promise; neither by act of the parties nor by operation of law have they succeeded to any portion of the rights of Dawson in this contract; and it is of the essence of the idea of negotiability that the defendant could enter into this contract for the purchase of the note without assuming any liability thereon to these plaintiffs as prior indorsers. It is also found that the defendant sold the note to a bond fide holder for the purpose of preventing Dawson from enforcing certain rights of set-off. This, so far forth as the plaintiffs are concerned, he had a right to do; they had authorized him to sell their negotiable contract for the highest price their names would command in the market; he was under no legal obligation to consult their interests in preference to his own; nor was he bound to protect Dawson [556] from insolvency because they had indorsed a note for his accommodation. The law does not undertake to redress all injuries; if the defendant, being largely indebted to Dawson had neglected to pay that indebtedness and by reason of such neglect Dawson became unable to take up the note and the amount was thereby lost to the plaintiffs, no one could claim that they would have had any cause of action against the defendant for not paying his debt to Dawson; and yet the connection between cause and effect can be traced with directness.- The web of business transactions is so complicated that the effect of a broken contract usually reaches many individuals ; but as a rule, the law declines to follow it beyond the party first and most directly concerned. And the case furnishes no opportunity for the application ‘ of the principle which would make the defendant responsible in damages to the plaintiffs for an injury done to Dawson with a fraudulent or malicious design to injure them through a contract relation with him. Eor the plaintiffs simply undertook to pay the amount of the note to the person who should be the bond fide holder of it at maturity, if the maker did not. Out of this there springs no such contract relation between them and Dawson as will transmit to them from him his right of action against the defendant for the violation of his agreement. There is no error in the judgment. In this opinion the other judges concurred; except Carpenter, J., who did not sit.