Noble v. Beeman-Spaulding-Woodward Co.

Mr. Justice Burnett delivered the opinion of. the court. It may be conceded that as to the bank the plaintiff, who signed the writing on the back of the note, and the defendants in this action, all of whom signed the note as makers, were all directly liable. Such is the doctrine taught by all the cases cited in the defendant’s brief: Hungerford v. O’Brien, 37 Minn. 306 (34 N. W. 161); Hecht v. Acme Coal Co., 19 Wyo. 10 (113 Pac. 786); Walter A. Wood Co. v. Farnham, 1 Okl. 375 (33 Pac. 867); Roberts v. Hawkins, 70 Mich. 566 (38 N. W. 575), and other cases. The question, however, here to be determined is not between the bank and the parties to this suit, but it is for us to decide what is the relation existing between the plaintiff, who signed the instrument on the back of the note, on the one hand, and the defendants here, who signed as makers, on the — 101 — other. In the first place, it is laid down in the case of Staver v. Locke, 22 Or. 519, 524 (30 Pac. 497, 498, 17 L. R. A. 652, 29 Am. St. Rep. 621), that “In determining the liability of a surety or a guarantor, it must be remembered that he is a favorite of the law and has the right to stand upon the strict terms of his obligation when such terms are ascertained.” 1, 2. It is manifest, upon the face of the writings involved, that at the outset the parties intended to be bound to the bank in different capacities, for, as conceded by all parties, Noble refused to sign the contract of guaranty indorsed on the note, unless the individual members of the corporation, including the answering defendant here, should themselves sign the note, and it was only when the note was again presented to blm with the signatures of the individual defendants as makers that he signed as he did. Our negotiable instrument law (Laws 1899, p. 27, § 63) provides: “ A person placing his signature upon an instrument otherwise than as a maker, drawer or acceptor is deemed to be an indorser, unless he clearly indicates by appropriate words his intention to be bound in some other capacity.” Under this section it is plain that Noble was not an indorser, because he indicated by the appropriate word “guarantee” his intention to be bound in that capacity and not as an indorser. Section 5862, L. O. L., says: “An accommodation party is one who has signed the instrument as maker, drawer, acceptor, or indorser, without receiving value therefor, and for the purpose of lending his name to some other person. Such a person is liable on the instrument to a holder for value, notwithstanding such holder at the time of taking the instrument knew him only to be an accommodation party.” The code has thus limited accommodation parties to the four classes of maker, drawer, acceptor, or indorser. True enough, it has not made it unlawful for any person to enter into a contract of guaranty — 102 — as to the debts of another party, bnt by the law, “the mention of one being the exclusion of the other, ’ ’ such a guarantor is not an accommodation party. Although, by placing his name only on the back of the note, Noble would have been an indorser, he clearly excluded himself from that category by the terms of the writing which he signed, indicating his intention to be bound in a different capacity. So far as anything is concerned in this case, the writing which Noble signed would have been equally efficacious if it had been inscribed on an entirely separate piece of paper, with appropriate words describing the instrument to be secured. 3-8. Taking Noble’s agreement and the note together, nothing else being shown, his liability is not concurrent-with that of those who signed the note as makers, but successive to theirs, and this would be true, in the absence of any other showing, even if Noble had only written his name on the back of the note before it was delivered to the bank and the money advanced thereon. The law of this state says that: “The person ‘primarily’ liable on an instrument is the person who by the terms of the instrument is absolutely required to pay the same”: L. O. L., § 6023. On the face of the note this is the liability of the defendant Smith. The same section says further: “All other parties are secondarily liable.” Even if Noble had merely written his name on the back of the note and thus became an indorser under the terms of Section 5896, L. O. L., he would still have been only secondarily liable, as .respects the makers, and hence not in the same category with Smith. But if we should treat Noble as strictly an indorser and not a guarantor, as far as appears from the note itself and its indorsements, “it is the established rule that the parties to ordinary commercial paper, negotiated for value in the regular course of business, are liable to each other in succession as their — 103 — names appear upon the instrument; the acceptor of a bill or the maker of a note being the principal debtor and the indorsers being liable severally in the order in wbicb their names are written. The same rule applies in the absence of special agreement to successive accommodation parties, and a subsequent accommodation indorser, who has been compelled to mee.t the obligation, may maintain an action upon the instrument against any prior accommodation party and recover the whole amount paid, although be knew that the latter’s signature was given for accommodation merely. It follows that successive accommodation parties, acceptor and indorser, maker and indorser, or successive indorsers, are not to be considered as cosureties, and therefore they are not entitled to contribution among themselves unless they specially agree that they are to be bound jointly and not severally, but where such an agreement exists, contribution may be enforced and the agreement may be proved by parol or may be evidenced by the circumstances of the case”: 1 Am. & Eng. Ency. Law (2 ed.), p. 356. To the same effect is the doctrine taught by the case of Montgomery v. Page, 29 Or. 320 (44 Pac. 689). There Montgomery bad signed a note as maker wbicb bad already been signed by a partnershi p in its firm name and by the individual partners. Montgomery was in fact a surety, and at the same time, as part of the transaction, the defendant Page wrote on the back of the note and signed these words, “for value received I hereby guarantee the payment of the within note,” and, having been compelled to pay the note, brought an action against Page and alleged that, at the time of the making of the note and the indorsement by Page, it was agreed between them that, in case either should be compelled to pay the note, the other would contribute half of the amount required to be paid. Based upon such an allegation, this court, in an opinion by Mr. Justice Wolveeton, held that the agreement — 104 — could be proved by parol and could be relied upon to take the case out of the natural operation of the law upon the writings embodied in the note and the indorsement thereof. The contract raised by operation of the law between the makers of a promissory note and the indorsers thereof is that the liability is successive. This contract may be overcome and the natural operation of the law be superseded only by a special contract between the parties thus bound to pay the note. Turning to the answer of the defendant Smith, we find it to be utterly silent about any agreement between himself and Noble about the relation to be sustained between each other as to the note, independent of the effect of the note itself and the contract indorsed thereon by Noble. All that the answer alleges in that respect is that Noble, at the time he executed the written guaranty on the note, knew that Smith was a surety or an accommodation maker and not a principal. Not having alleged any special agreement taking it out of the ordinary category, whereby Noble’s liability would be subsequent to that of Smith, the latter could not resist the action of Noble against him on that point. Moreover, if this were an open question on the pleadings, the trial court found in accordance with the allegations of the complaint in that respect, and this amounts to a verdict which we cannot disturb, unless we can affirmatively say there is no evidence to support it. Evidence of a nature tending to support the findings of the court in this particular is found in the circumstance that Noble was a stranger to the corporation, while Smith himself was a director and interested therein; that Smith signed as a maker, while at best Noble was only an indorser. The result is the same whether we consider the matter as one of pleadings or one of evidence. 9-11. It is next contended that the assignment of the corporation’s assets to Spencer, as trustee under the — 105 — agreement of August 2,1909, constituted á payment of the debts and a release to the company and of the sureties as to all creditors of the company signing an agreement consenting thereto, and that the assent of Noble was a material issue upon which the court refused to find. This contention is fallacious in at least two features: First, the answer upon which this contention is based alleges that the corporation borrowed the money directly from the plaintiff, and that the plaintiff accepted the promissory note as security for the payment of the loan, thus placing the plaintiff in the position of an original principal creditor of the corporation. This is manifestly so contrary to the other pleadings of the parties, as well as the testimony in the case, that the court would have been justified in utterly disregarding the contention as sham. In short, there is no testimony whatever tending to show that the plaintiff originally loaned the money to the corporation. On the contrary, all agree that the money was advanced by the bank on the note, signed, as stated in the pleadings, by the defendants here, and the agreement of Noble indorsed thereon. Further, the court did substantially determine the issue in the fourteenth finding of fact, in substance, that a large number of the creditors of the corporation signed the agreement with Spencer to convert the assets of the corporation into cash, but the plaintiff never did sign the agreement, and that nothing has ever been paid by Spencer to the bank or to the plaintiff on account of the note. Secondly, whatever was done with Spencer about realizing upon the assets of the concern was agreed upon before the plaintiff had paid anything on the note and while he was still either guarantor or indorser, as the case might be. He did not and could not release anything of value to the defendant Smith, for he had no control over the assets of the corporation, and was not in a position to exercise any control over them. He — 106 — could not do anything either favorable or unfavorable to Smith in that connection at that time, and hence it is immaterial to consider whether he assented to the Spencer contract or not. 12. The defendant also maintains that the default judgment taken against Beeman operates.to release Smith from any liability; in other words, that it is a bar to any judgment against Smith. Prior to the rendition of this default judgment against Beeman, the issues had been made up between the plaintiff and the defendant Smith. If he had intended to rely upon the Beeman judgment as a bar to a judgment against himself, Smith should have operated under Section 108, L. O. L., reading thus: “The plaintiff and defendant respectively may be allowed on motion, to make a supplemental complaint, answer, or reply, alleging facts material to the case, occurring after the former complaint, answer, or reply.” This is a statutory rule analogous to the common-law plea of puis darrein continuance, and if a party would rely upon anything occurring since the issues were joined, it was his duty to bring it to the attention of the court by a proper plea: 31 Cyc., p. 493; Trotter v. Stayton, 45 Or. 301 (77 Pac. 395). 13-15. Again, the obligation, of the defendant, which Noble guaranteed, was a joint and several obligation, being a note on which the words were, ‘ ‘ For value received, I promise to pay. ’ ’ Noble stands in the situation of saying to the defendants: “I guaranteed the performance of your joint and several obligation. Having performed that obligation for you and in your place, I now demand of you that you perform the same to me as you should have done to the bank.” Under such circumstances, the obligation, which they assumed to him who stood sponsor for them is not materially different from that which they assumed to the bank. In — 107 — good reason, therefore, the obligation of the defendants to their guarantor Noble is joint and several. It presents a case within the meaning of Sears v. McGrew, 10 Or. 48, where it was held that, when the action was upon a contract joint and several, a several judgment would be proper, as the defendant might have been sued alone in said case; therefore judgment might be rendered against one or more without waiting for the final trial. 16. It is lastly contended that Noble was not entitled to recover from Smith any attorneys ’ fees, and this will be considered in determining what judgment should have been entered in the court below, as we are empowered to do under Article VII of the Constitution. Without having taken an assignment of the note, Noble is not the owner or holder thereof in the true meaning and intent of the law. In legal effect he is not bringing an action upon the note. It is said in Section 5954, L. O. L., that: “Where the instrument is paid by a party secondarily liable thereon it is not discharged, but the party so paying it is remitted to his former rights as regards all prior parties, and he may strike out his own and all subsequent indorsements and again negotiate the instrument” — with certain exceptions not here material. It is argued that the right of again negotiating the instrument includes the right to bring an action upon it, from which it would follow that the present proceeding is directly upon the note entailing the allowance of attorneys’ fees. Manifestly, this section refers only to indorsers for value and not for mere accommodation. An indorser for value at some time prior to his indorsement owned the note with the right to sue upon it at maturity. With this right he parted when he discounted the paper by indorsement to a purchaser for value, who in turn by like process may transfer the title becoming liable by his indorsement to the — 108 — new indorsee, and so on without limit until the maturity of the instrument. Then, whichever of the successive indorsers is-compelled to pay is restored to his former rights within the meaning of this section, upon striking out his own and subsequent indorsements. The case is entirely different, in reason, concerning an accommodation indorser or a guarantor. Neither of them has any “former rights,” nor, indeed, any right whatever, until he pays the note or bill, and then it is the right of contribution or of reimbursement according to whether he is liable jointly with the others as among themselves or liable after them. So it is with the plaintiff here. He has performed his contract as a guarantor and is contending, not for the principal and interest and attorneys’ fees provided for by the note, not for contribution from a cosurety, but for reimbursement or, as some authorities term it, “exoneration” for the amount which he paid for the defendants in execution of his contract of guaranty. As against the apparent makers of the note, he has no cause of action, except that arising upon the contract which he carried out. This contract with them does not provide for an attorney’s fee. As we have seen, he is not an accommodation party, being neither a maker, a drawer, acceptor, nor indorser. By his contract he excludes himself from all those classes who alone, under Section 5862, are accommodation parties. Strictly speaking, he cannot enforce the terms of the note. He can only rely upon the contract which he himself made, and cannot extend its terms to matters not included therein. He is entitled to reimbursement and no more. 17. The amount he paid became due to him from and after April 14, 1910, the date he paid it. Interest in such cases is reckoned at 6 per cent per annum: L. O. L., § 6028. — 109 — The judgment will be modified and one entered here in favor of the plaintiff and against the defendant for $2,700, with interest thereon at the rate of 6 per cent per annum from April 14,1910. Modified. Mr. Justice Moore took no part in the consideration of this case. Mr. Justice Bean reserves the right to dissent.