Cady v. Shepard

By the Court, Cole, J. This action is upon a promissory note, made by one George Swaney, paymble to tbe order of tbe defendant in error, and indorsed in blank by tbe plaintiff in error. It was proven on tbe trial, and tbe circuit court found as facts, tbat tbe note was executed by Swaney and indorsed by Cady, and afterwards delivered to Shepard; tbat tbe note was given for goods sold and delivered by Shepard to Swaney, upon tbe faith and credit of Cady's indorsement, which Cady then agreed to give for this purpose; tbat Cady executed tbe indorsement in pursuance of this agreement, with intent to become liable to Shepard in tbe amount of tbe note, and to give credit on tbe same; and tbat Shepard was tbe owner and bolder of tbe note. It was also admitted upon the trial tbat due demand of payment of tbe note bad been made at its maturity, and that it was duly protested for non-payment, and notice thereof properly given to Cady. Tbe evidence íd respect to tbe attending circumstances under which tbe indorsement was made, was objected to as being incompetent. Now tbe legal inference from tbe face of tbe note mentioned in this case would be tbat Cady was second indorser. Tbe note being payable to the order of Shepard, in tbe ordinary course of business be would be tbe first indorser; and unless be indorsed the note without recourse, be could not maintain an action upon it — if tbe note afterwards came to his bands — ■ against tbe second indorser, because if be recovered, tbe second indorser would have an immediate right of action against him on his earlier indorsement. It would be, in effect, [643] tbe case of a prior indorser maintaining an action against a subsequent one. The note being payable to the order of Shepard, he must indorse it before it could come to the hands of Gady to be indorsed by him. This would be the legal intendment as to the chain of title, and the relative situation and rights of the parties., But notwithstanding this would seem to be the situation of the parties, and the natural construction of the contract from the face of the note, yet parol proof has been admitted to show what contract the parties intended to make, and then courts have resorted to one expedient and another to charge a party indorsing a note under such” circumstances. Sometimes they have said he was to be charged as a maker, sometimes as a guarantor, and sometimes as an indorser. “ Whatever diversities of interpretation may be found in the authorities, where either a blank indorsement or a full indorsement is made by a third party on the back of a note payable to the payee or order, or to the payee or bearer, as to whether he is to be deemed an absolute promisor or maker, or guarantor or indorser, there is one principle upon the subject almost universally admitted by them all, and that is, that the interpretation of the contract ought in every case to be such as will carry into effect the intention of the parties; and in most cases it is conceded that the intention of the parties may be made out by parol proof of the facts and circumstances which took place at the time of the transaction. Story on Prom. Notes, sections 58, 59, and 479.” Rey et al. vs. Simpson, 22 How. (U. S.), 349, 50. Under the decisions in this state, a party indorsing a note under those circumstances would undoubtedly be holden as an indorser, if at all. In Hall vs. Newcomb, 7 Hill, 416, Chancellor Walworth suggests the following method by which the indorsements on the note may be made to correspond to the intention of the parties when they made the contract, and consistency in the relations of the parties preserved. He says: “If the object of the second indorser is to enable the drawer to obtain money from the payee of the note upon the credit of the accommodation indorser, he may indorse it without recourse; and by such indorsement may either make it payable to the second indorser, or to the [644] bearer; and such, original payee may then, as legal bolder and owner of the note, recover thereon against such second indorser, upon a declaration stating such special in-dorsement by Mm and subsequent indorsement of the note to him by the second indorser.” However necessary and proper this course might be to avoid any difficulty in framing a declaration under the old practice, I can hardly think it would be proper under the Code, which requires a party to state in his complaint the facts constituting the cause of action. It seems to me that the complaint was properly framed in the present case, and that we must hold that by commercial usage, a party indorsing a note under the circumstances therein stated, is bound as an indorser. TMs is the most rational ground upon which to place the party’s liability, and is most in harmony with the contract actually made by the parties. And whether parol testimony should be admitted to explain the facts and circumstances under wlrich the indorsement was made, does not seem ‘to me now to be an open question. The authorities are too decided in favor of the admission of such testimony to be disregarded. See authorities cited on briefs in Rey et al vs. Simpson, supra; Moore vs. Cross, 19 N. Y., 227. The judgment in this case must be affirmed.