Butler v. J. B. Murison & Co.

Labauve, J. This suit is brought to recover of the defendants $20,000, evidenced by four promissory notes, each for $5,000, with ten per cent, interest from the 23d July 1861, under the laws of the State of Illinois, where they were executed, and made by the Chicago Beñning' Company to the order of and endorsed by E. S. Hunter; John B. Murison & Co. are the endorsers. It is aEeged in the petition, that said notes are signed by E. S. Hunter, the Treasurer, and countersigned by H. W. Hunter, the Secretary of the said Company, being the proper persons to execute the same, and having the authority to do so. That afterwards, the said payee endorsed the said four notes in blank, and then afterwards the said John B. Murison & Co., defendants and commercial partners, endorsed the said notes in blank, and delivered the same to petitioners. The answer admits the signatures to, and the endorsement of defend — 385 — ants upon the four notes referred to in the petition, but denies every other, allegation in the petition contained. It further states, as a special defence, that the endorsement of defendants was made and given at tho special request of one James F. Allen, who had obtained the said notes from the makers, and, at the time of the endorsement by respondents, owned and held the same; that when these defendants mado their endorsement, it was fully agreed by these appearers and the said Allen, that the said endorsement was merely nominal, and that these respondents were not in any event, to be regarded as liable for the payment of said notes. That respondents have, at no time, received either legal, equitable or moral consideration for their aforesaid endorsement, and that the same is nudum pactum. That the plaintiff has acquired possession of said notes from said Allen, without consideration, out of the usual course of business, at a timo and under circumstances sufficient to induce a reasonable belief of the existence of equities and defences against tho paper. That said notes wero not duly protested, nor legal notice given to these appearers. The answer specially denies that, at the time of the domand of payment by the notary with a view to a protest, tho bonds and coupons of interest, were by tho notary or any othor, returned, offered, or presented to tho makers of said notes, to the payee or to these respondents, as required by tho endorsement or agreement on the back of said notes. Upon these issues the lower Court, after having hoard the testimony, gave judgment in favor of plaintiff, and the defendants took this appeal. Upon the trial below, plaintiff offerod as a witness, the notary who protested the notes, to prove the facts connected with the tender of tho collateral bonds; the defendant objected that the law required the notary at the time of making protest of the notes, to state therein all the facts connected with the presentment for payment, and that tho notary could not testify to anything going beyond the protest, to modify or enlarge the same. The notary was properly received to prove the facts, as regarded the tender of the said bonds, notwithstanding nothing was said about it in the protest, or any statement made by Allen at the time, was a part of tlie res gestee in connection with the tender. The Court did not err in receiving the testimony. On the trial, the defendants offered the depositions of James F. Allen to prove that, at the time of the endorsement by said defendants, it was agreed between defendants and said Allen, that said endorsements wero merely'nominal, and that said defendants were not in any event to be held liable for the payment of said notes; the plaintiff objected on the score of interest in the witness, and that no parol testimony could be received to prove that the endorsement on the notes was made under any conditions. The Court overruled the objections properly. The notes had been — 386 — transferred by Allen to the plaintiff after due and protested; if Allen had any interest it was against the defendants, because if he had transferred to plaintiff a vicious paper, he was certainly responsible to him, (19 L. 472), and the agreement also between the defendants and Allen, followed, the notes in the hands of plaintiff, who acquired nothing but the rights of Allen. On the trial below, it was admitted by the plaintiff that if W. H. Belcher was present (Belcher was the President of the Chicago Refining Company), he would swear that the notes sued upon commenced by the loan, of a certain sum of money to the Chicago Refining Company by one James F. Allen; that to cover their first loan, the Company issued their promissory notes in favor of said Allen, and that said notes were neither payable to or endorsed by J. B. Murison & Co.; that said J. B. Murison & Co. did not at any time, endorse any of the notes at the request of the Chicago Refining Company; that tho endorsement of J. B. Murison & .Co. appeared for tho first time upon subsequent renewed notes; that the Company paid them no consideration for such endorsement, and that the endorsement, whenever made, was made at tho instance and request of other parties than the Company; that at the time of the making and giving to said Allen, tho notes sued upon, the notos returned to the Company, and which formed the sole and only consideration of the notes now in suit, had boen for two or three months over due and not protested, and without presentment for payment at maturity, and that presentment for payment at maturity had not been waived or in any manner dispensed with; that at the time of the settlement of the returned notes and the giving of the notes in suit, it was fully understood and agreed by and between Allen and the said Belcher; that the old and returned notes aforesaid, were settled and fully and completely extinguished by the notes of the Company sued on, secured by certain bonds handed over to Allen as collateral security for their payment; that the settlement and extinguishment of the old notes, was made without tho slightest reference to the endorsement of J. B. Murison & Co. upon the notes sued on; that such endorsement of J. B. Murison & Oo. formed no part of the agreement and settlement aforesaid, and that said settlement and extinguishment was perfect and complete without such endorsement. • J. J. Allen, the original holder of said notes, and who transferred them to the plaintiff, testified in substance as follows : I sold to A. J. Butler four notes of hand of if5,000 each, and I believe that they are in suit in the Sixth District Court of this city. * * * If my memory serves mo right, I received four notes in suit by Col. Butler, from the Chicago Refining Company, on the 23d day of August, 1861. In giving tho notes, the Chicago Refining Company was represented by ■William H. Belcher, as President. Tho four notes in suit were given in place of other notes of the Company, held by witness. *' * * * * In the summer of 1861,1 went to Chicago in company with Mr. Murison — 387 — for the purpose of making a settlement of four notes of $5,000, each past due. The notes were given by the Chicago Refining Company, payable to the order of and endorsed by John B. Murison & Co. I held no collaterals for the payment of these notes, except the endorsement of John B. Murison & Co.W. H. Belcher, on behalf of the Chicago Refining Company, made an arrangement and settlement with me of the old notes which I held against the Company. They did give me new notes for the four old ones. These notes are the same notes which are in suit in the Sixth District Court. He gave me, as collateral security for the payment of the notes, twenty bonds of one thousand dollars each, of the Chicago Refining Company; he did not offer me Mr. Hunter’s endorsement, but I solicited it; he did not tender Mr. Hunter to me as an endorser of the Company; I solicited him and obtained him. * * * From the time I received the bonds I kept control over them until I delivered them to Col. Butler, when I sold him the notes. I have been in the habit of loaning money to the Refining Company, of which Mr. Belcher was the President, both at St. Louis and Chicago, through John B. Murison & Co., with their assurance that it was perfectly safe, upon a statement of their willingness to endorse the papers at any time, which they did; I never knew Mr. Belcher before I went to Chicago, and then, through Murison & Co. This is all the consideration for the endorsement of the four notes sued upon, so far as I know. I only know that they done business for Mr. Belcher — were his agents. I never paid to them anything for their endorsements on the four notes. The first four notes (the original notes before mentioned) were given for money, and the last notes (the notes sued upon) were given to take up the first four. The first notes were made in the same form and with the same endorsements, with the exception of Mr. Hunter, who was not an endorser on the first notes which were given up. At the time I delivered the four notes to Mr. Belcher, I had no claim against John B. Murison & Co., except I held some of their bank checks, which have been paid. ***** When we were talking about loaning the Company the money, they, Murison & Co., made representations as to the solvency of the Chicago Refining Company, and stating their willingness to endorse their paper, and Mr. Murison stated to me that he thought them so entirely solvent that he had loaned them money belonging to his wife; I do not know that these statements amounted to any more on the part of Murison & Co., than the mere expression of their entire confidence in the solvency of the Refining Company; but the statement induced me to lend the money to the Company through them, on their endorsement on the paper. John B. Murison never entered into an obligation' with me to endorse the paper of the Company, which might be issued in my favor. The arrangement made with Mr. Belcher was not made by me, but — 388 — through Mr. Murison; I had a conversation with Mr. Belcher; I closed the transaction with Mr. Belcher, by taking four notes of $5000 each, due twelve months from the 20th July, 1861; they, the notes sued on,' secured by twenty bonds of $1,000 each, issued by said Refining Company, and the endorsement of John B. Murison & Co.; said notes were mado payable to the order of John B. Murison & Co., at the house of said firm in New Orleans. It was expressly understood that Murison & Co. should endorse tho notes at the time they were taken. I think I am in error by stating the notes were payable to Murison & Co.; they may have been payable to E. S. Hunter; I am not certain as to tho express agreement, as above stated, but there was a general understanding that Murison & Co. would endorse the notes; I take it for granted that they wore to endorse the notes, from the fact that I stated to Mr. Belcher that I had not come to Chicago to go away with less security than I came with, and Mr. Murison was present at the time I made the remark. I believe this is all tho understanding with Mr. Belcher, relative to John B. Murison & Co.; I obtained upon the new notes the security of E. S. Hunter and the security of the bonds; Mr. Hunter was not individually upon the old notes at the time I held the old notos. I held no bonds in my own right as security whon I delivered up the old notes and receivod tho new ones; Mr. Murison and Mr. Belcher were both present. Question by defendants’ counsel to this witness: At the time you stated that you did not wish to go from Chicago with less security than you came with, did or did not Mr. Belcher offer and give the notes endorsed by Hunter with tho bonds? The witness answers yes. Question by defendants’ counsel: Did or did you not receive from Mr. Hunter the notes endorsed by Belcher and the collateral after you had made this statement? This witness answers yes; at the time Belcher delivered the notes to me, the endorsement of Murison & Co. was not on them, but at that time I held tho old notes in my hands. Question: At the time you received the new ones of Belcher, was it not understood that the Company were entitled to a return of the old notes? Answer: I don’t know what the Refining Company understood when they handed me tho new notes; but it was not my understanding, nor my intention, to give up the old notos until I obtained tho endorsement of Murison & Co. on tho new ones. After tho now notes were in my hands, I called on Mr. Murison, and obtained tho endorsement of the firm. Question: At the time, and previous to the endorsement of J. B. Murison & Co., what did Mr. Murison state to yon? Answer: I don’t like to endorse that paper, or I don’t like to do this, speaking in an under tone; whereupon I replied to him: Very well, Mr. Murison, the old notes will do me, and then he endorsed them. Question: Did or did not Murison say to you: Captain Allen, if I endorse these notes, you are not to hold me responsible? Witness answers: — 389 — No. After lie had made the endorsement, he said to me: you must not hold me responsible, because, if I should have to pay them, it would ruin me. My reply was: Pshaw! Mr. Murison, you arc always borrowing trouble and paying interest for it. This statement was made, when he immediately got up, after mating the endorsement of this paper. This conversation was made to me in a low tone. Witness states that the notes in suit originate from a loan made by him to the Chicago Refining Company, made several years ago. ***** These notes were not, to the best of my recollection, payable to J. B. Murison & Co. I do not recollect if the first notes were endorsed by J. B, Murison & Oo. Theso notes were renewed from time tó time; I mean they were taken up by giving new notes, and finally merged in the notes in suit. ***** The first endorsement, whenever it was made, was made, I think, to facilitate the collection, at my request. It was not my understanding that Murison & Co. were not to be liable on their endorsement. I do not know what Murison & Co. thought about their liability on their endorsements; but my understanding was, that they were liable for it. They had no express understanding as to tho liability of Murison & Co. as endorsers. I did, to my recollection, in my intercourse and communications with Murison & Co., give them to understand that their names were on the notes simply for collection. I never'paid them anything for endorsing the paper. I don’t know that they ever derived any consideration from me, in any way, for the endorsement of any of these papers. * * * * Witness, being asked whether Murison did or did not endorse tho notes in suit with the understanding that the firm would be held responsible, answered: There was nothing express one way or the other, by words, until he presented the notes for endorsement.* * * * * He endorsed the notes at my request. Witness, being asked if he did or did not consider the endorsement of the old notes he gave to Belcher, as the ground for the endorsement of the notes sued upon? he answered: yes. _ He was also asked if there was any other consideration for the endorsement, by John B. Murison & Co., of the notes sued upon, to state that consideration. He answered: None that I know of. * * * * I never paid them anything for their endorsements. I sold the paper to Col. Butler, the plaintiff, for sixty cents on a dollar, interest off. The plaintiff, having been interrogated on facts and articles, confessed that he had obtained the ownership to the notes, after they were due and protested, from Allen, about the first of November, 1862, for about sixty cents on the dollar. It is shown that those notes were duly protested when due, on the 23d day of July, 1862, and the defendants were duly notified. The plaintiff has, so far, established by his evidence, the liability of the defendants, as endorsers upon the notes in suit; we have now to examine the defence made, going to show that said defendants are not — 390 — liable to the plaintiff. We must first see if Butler stands in a better position than Allen, his transferrer, would, if he were himself before the Court in this ease. These notes were transferred to the plaintiff more than three months after they had been due and protested, and this transfer, not being made in good faith, in the ordinary course of business, and before maturity, the notes carried with them, in tho hands of the plaintiff, all equities and defences that existed against Allen at tho time of such a transfer. Little v. Marshall, 1 R. 51. It is a settled rule of commercial law, that whoever takes a note after maturity, takes it subject to the equities between the original parties, existing previous to notice of transfer, and acquires no better right than the transferrer had himself. 18 L. 119; 7 L. 118; 19 L. 472; 17 L. 152; 5 An. 153. The equities and defences that exist between Allen and Murison & Co. can now be set up against Butler, who stands in the lieu and place of his transferrer, Allen. The evidence shows clearly that the defendants endorsed the notes gratuitously and without any pecuniary consideration from any one, and at the instance and request of Allen, the original holder; that the makers never asked them to endorse the papers; that the old notes, in renewal of which the ones in suit were given, were endorsed by Murison & Co. at the request of Allen, to facilitate their collection. The evidence shows that Allen accepted the new notes in lieu and extinguishment of the old ones, with the security of Hunter as endorser, and twenty bonds of $1,000 each, as collateral security, and that there was not the slightest reference made to the endorsement of Murison & Co. upon the new notes; that the arrangement and settlement wore complete, the new notes were delivered to Allen, endorsed by Hunter and accompanied by the twenty bonds, Allen having yet in his hands the old notes; it was after all this that Aden went to Murison and obtained the endorsement of his firm upon the new notes, by making threats of the old notes and intimating that Murison & Co. were bound on the same; the evidence shows that the old notes, renewed by the ones in suit, had not been protested, and Murison & Co. were completely discharged, as endorsers, at the time; and nothing shows that Murison & Co. were advised and aware of their discharge; and it appears that on the contrary, they endorsed the new notes under the impression that they were still liable; and Allen was instrumental in' holding them in that error. . They then endorsed in the ignorance of their discharge. They were not then more bound to Allen by their endorsement, than they would have been to pay their own note, had they given one in ignorance of their discharge in payment of the notes so endorsed by them; even if they had paid the notes in that ignorance, they could have recovered back the money from Allen. 17 L. 380; 7 R. 334; 5 A. 12; 11 L. 16; 2 A. 824; 12 R. 231; 10 R. 40, 61. The commercial jurisprudence is settled upon that point, and if Allen were now plaintiff in lipu of Butler, he would not recover against these defendants. — 391 — It is therefore ordered, adjudged and decreed, that the judgment of the District Court be annulled, avoided and reversed. It is further adjudged and decreed, that our judgment be rendered in favor of the defendants, and that plaintiff pay costs in both Courts. Howell, J., recused.