Charles v. Denis

Cole, J. This is an action by the indorsee against the in-dorser in blank of a promissory note. The defendant set up certain matters' in his answer, which he was permitted to [57] show by parol evidence, against tbe plaintiff’s objection, to tbe effect tbat, at tbe time tbe indorsement wTas made, it was understood and agreed between tbe parties tbat tbe defendant was not to be held liable as indorser, and tbat the indorsement was made simply for tbe purpose of transferring tbe title. Tbe court below held that, as between tbe original parties,' it was competent to prove the agreement by parol, and instructed the jury, in substance, tbat if they were satisfied from the evidence tbat such an agreement was made, they must find for tbe defendant. Tbe correctness of this ruling is tbe only question' we deem it necessary to consider in tbe case. There are unquestionably authorities which decide tbat a blank indorsement of a note does not, as between tbe immediate parties, preclude evidence of a contemporaneous parol agreement showing tbat a restricted operation was intended to be given to tbe indorsement, or that the transfer was upon trust, or not absolute. These cases, however, seem to be in violation of an important rule, tbat evidence of this description is introduced to vary and change tbe legal import of the contract as implied from tbe indorsement. By tbe indorsement, tbe defendant promised to pay tbe note at maturity if tbe maker failed to pay it. “ "Where a man writes bis name, without anything more, on tbe back of a negotiable promissory note, be agrees tbat be will pay tbe note to the bolder on receiving due notice tbat tbe maker, on demand made at tbe proper time, has neglected to pay it. This is tbe legal effect of tbe indorsement, and tbe case is not open to any in-tendment, certainly not to tbe presumption tbat tbe party meant to contract a different obligation.” BeoNsoN, J., in Seabury v. Rmgerford, 2 Hill, 80-82. The mischief of admitting parol evidence to vary such a contract is tbe same as though the contract which tbe law presumes from tbe indorsement were written out in full. Upon this point, Prof. Parsons says: “Suppose over an indorsement an agreement is [58] written out in full, setting forth exactly the same promises which the law implies from a blank indorsement; suppose, further, that in an action by the indorsee upon this indorsement, evidence was offered by either party, which was inadmissible on the ground that it varied a written agreement: would the same evidence be inadmissible in the same action, if the indorsement were in blank? ¥e are strongly disposed to say that it would be so, as a general rule, and to consider those cases in which such evidence would seem to be admissible, as exceptions.” 2 Parsons on N. & B., pp. 28-4. The evidence admitted in this case to show that the indorsement was without recourse, was a direct contradiction of the obligations implied from the indorsement of the defendant. Bank of the United States v. Dunn, 6 Pet., 51-59. It is in principle the same as though the plaintiff had offered to show by parol that the defendant had waived demand and notice; or the same as an offer on the part of the defendant to contradict the instrument in any important particular. The legal effect of a regular blank indorsement cannot be controlled by parol evidence of an agreement that the indorsement was without recourse. Wilson v. Black, 6 Blackf., 509; Campbell v. Robbins, 29 Ind., 271; Lee v. Pile, 37 id., 107; Bank of Albion v. Smith, 27 Barb., 489; Fassin v. Hubbard, 55 N. Y., 465; Barry v. Morse, 3 N. H., 132; Crocker v. Getchell, 23 Me., 392; Stubbs v. Goodall, 4 Ga., 106. It is not denied that there is considerable diversity of judicial opinion upon the question; but we think the sounder doctrine is laid down in those cases which put all indorsements on substantially the same footing, and which hold that the legal effect of an in-dorsement in blank cannot be overcome or destroyed by parol. The contract by a blank indorsement is fixed by law, and should not be' rendered uncertain by parol, any more than when written out in full. “ And since the same injurious results would flow from permitting the legal effect of an in-dorsement in blank to be destroyed, as if it were an indorse [59] ment in full, no indulgence should be grantéd to the former contract over the latter. Otherwise, indeed, no one can ever know how, or to what extent, an indorser in blank is bound.” 2 Parsons on N. & B., p. 521. The case of Harrison v. McKim, 18 Iowa, 485, holds, “ that while a blank indorsement is in law an authority to the indorsee to fill it up as absolute and unconditional, yet, when the actual agreement between the parties has limited, that authority, the filling of the blank by the indorsee in any other manner than according to the agreement is a fraud upon the indorser, which vitiates the writing, and of course opens the door for proof as to what the real contract was.” p. 492. In Hill v. Ely, 5 S. & R., 363, “ the evidence offered went to prove a direct fraud in obtaining the indorsements, or their perversion to a purpose never intended — á fraudulent purpose.” p. 366. ¥e do not care to dwell upon the distinction made in these cases. We think the sounder and more salutary rule, as applied to the contract, is the one which we have adopted. By the Court.- — The judgment of the county court is reversed, and a new trial ordered.