McComb, Simpson & Co. v. Thompson

— 143 — By the Court C. E. Elandrau, J. The following facts are admitted by the pleadings. That on the 25th day of August, 1856, the Defendants McComb, Simpson & Co, now the Appellants, were partners in trade at Stillwater in the then Territory of Minnesota. That on said 25th day of August 1856, the Plaintiff Thompson sold and delivered to the Defendants cattle to the value of seven hundred dollars. That in consideration of the said sale of cattle, the Defendants procured one George A. Wells to make his promissory note for seven hundred dollars, payable to the order of the Plcmvtiff., in three months from date, with interest at ten per cent per annum, and five per cent per month after maturity until paid, and before delivering the same to the Plaintiff, the Defendants endorsed the note by writing their Copartnership name upon the back of it. That the Defendants so-endorsed the note .for the express purpose of securing the payment thereof, and the purchase price of said cattle, and that the note was received for the purpose by the Plaintiff. That the Defendants were duly notified of the demand and refusal of payment, which facts are alleged. The answer of the Defendant seeks to put in issue some of the facts stated above to be admitted, but leaves the case substantially as stated in the complaint. A demurrer to the answer was sustained by the Court below, and from the judgment on demurrer an appeal is taken to this Court. The question then is, does the complaint disclose a cause of action against the Defendant? The relation in which the parties stand to each other on the face of the note, unexplained and unaided by extrinsic facts, is that of the payee of a note seeking to charge and recover against his second endorser; regarding the parties in the light of endorsers of commercial paper, and determining their rights and liabilities by the rules applicable to that branch. I have no hesitation in saying that the Plaintiff could not recover, the rule of liability being exactly the reverse, each subsequent endorser being entitled to recover against all that precede him on the note. If therefore • the Plaintiff can sustain his action, it cannot be against the Defendant as an endorser of the note. — 144 — I am equally clear that the Defendant cannot be held responsible as a guarantor of the note. To sustain that relation there must be a principal and existing debt by one party, which debt the guarantor, by a distinct agreement, for a valuable consideration, which must 1)6 expressed m his contract, agrees shall be paid by the principal debtor. The undertaking of the Defendant in this instance lacks the essential feature of a contract of guaranty, in not expressing any consideration. If, then, the Defendant can be held responsible to the Plaintiff at all, it must be in virtue of facts which do not appear on the note itself. The question, so far from being new, has, more than any other, engaged the attention of the Courts, in almost all the States, for many years, and has received as many different solutions as its anomalous character has been differently accepted and treated by peculiar minds; but, through all the mass of judicial decisions involving the question, one characteristic feature prevails — a desire to impose a responsibility upon the party who places his name upon commercial paper. As between the original parties to a contract, it is certainly the duty of courts to carry out their intention, whenever that intention can be arrived at; and the prevailing view in connection with notes endorsed in the manner of the one in question, is, that the party putting his name on the back of the instrument had some intention of creating a liability against himself; for what purpose, and in favor of whom, not appearing fully, but being left in doubt by the paper itself, the courts have allowed the true intention to be reached by averment and evidence. The Counsel for the Plaintiff in Error relied on the argument on the more recent New York cases, which, hold that no parol evidence will be admitted to change the relation which parties to a note or bill bear to each other on the face of the instrument, and exhorted the Court, at its outset, to beware of the difficulties in which the New York courts find themselves involved, compelling them to overthrow the decisions of generations; which have, he contends, been made to meet the particular cases involved, and not upon the general principles which should control any particular branch of the law. An — 145 — examination of the New York cases on the subject under consideration in this action, cannot fail to impress upon the reader the danger of any departure from settled principles and precedents in the administration of law. In 1848, we find the following language held in 1 Comstock, 324: “There are few cases in the books which hold in effect that a written contract of one kind may be turned into a contract of a different kind by parol proof, concerning the intention of the parties; the endorser of a promissory note may, under certain circumstances, be charged as maker, or guarantor, and the guarantor of a promissory note may be sometimes charged as maker or endorser, although these cases stand upon no principle, it has been a work of some time and difficulty to get rid of them. ” In this summary manner does the Court in that State wipe out the weight of authority in its own State, and those of a large majority of the States of the Union. The highest respect is due to the decisions of the Courts of New York, from the distinguished character of her jurists, and we shall always differ from them with reluctance and hesitation, but with much more confidence in this instance, as we are supported by the authorities of all the other States we have had access to, including nineteen in all, cited on the argument of this case, and that of Marienthal et. al. vs. White and Taylor, argued at this term, and by the additional fact that that State is still divided in its own Courts on the question. 23 Barb., 534. There exists this further reason for allowing the Plaintiff to recover in this action against the Defendant, as a maker of the note, that this Court has already held such to be the law in three different cases, 1 Min Rep. 369, 380, 383, where the views of the Court are given by Mr. Justice Sherburne in a well considered opinion, and a full review of the authorities, in which he scrutinizes the later decisions of the New York Courts, and sensibly weakens their force as authority. We think the following rules may be regarded as fully established and received as law: That in an action by the payee against a party who has written his name on the back of a note, parol evidence is admissible to show that it was placed there before the delivery to the payee, and also to show the intention of the parties at — 146 — the time Ms name was so written on the note, concerning tbe character be sustains to tbe note. That if it appears from tbe evidence that bis name was so placed on tbe note to give it credit witb tbe payee, and tbe payee was influenced in receiving it, and parted witb Ms money or property in consequence of sucb name, tbe party so signing may be beld as an original maker of tbe note. That if there is anything to be found in the writing itself that indicates what tbe particular relation is that tbe party intends to assume to the note, then parol evidence is not admissable to vary sucb relation, but tbe party must be tried upon his written contract. These views are founded in, and sustained by, reason and principle. Tbe mere fact of tbe name being on tbe back of tbe note, where an endorsement is usually made, is not as absolute in indicating its character as if it bad written over it a contract of endorsement; and is capable of an explanation, as between all parties, before tbe note leaves tbe bands of tbe payee. Of course, this should not obtain in tbe bands of a bona- fide holder: but while in tbe bands of tbe payee, tbe presumption is equally balanced, at least, as to whether it was signed before or after delivery; and as tbe consequences may depend essentially upon that fact to the payee, it would be illogical to recognize any rule which would deny him tbe right to show it. Tbe fact once appearing that tbe name was written before delivery, it cannot be inferred that tbe party intended to become an endorser to tbe payee, as tbe note when presented for bis signature before deliveiy clearly informs him that it is for tbe benefit of tbe payee that tbe note is made, and that be cannot become tbe first endorser, but must be second to tbe payee, and consequently of no service to him in that capacity. As has been shown, a first endorser cannot recover against those below him, but must rely upon tbe maker and bis guarantors. He cannot be presumed to have intended to become a guarantor, as bis engagement bears no resemblance to that contract. It would be doing equal violence to tbe intention of tbe parties to presume that they meant nothing by their contract; and it is to enable tbe Court to avoid this obscurity, where everything leads tbe mind to tbe conclusion that a lia — 147 — bility was designed to be incurred, that parol evidence is admitted — not to change the contract of the parties, nor to make a new one for them, as is termed in the New York cases, but to determine what the contract of the parties really was, and to award judgment according to the truth, as they originally had intended. The Court below was right in sustaining the demurrer to the' Defendant’s answer, as it admits the material facts in the complaint, which bring the Defendant within the rule above laid down, and show that he placed his name on the note with the intention of assuming the liability of an original maker. The judgment is affirmed.