Werner Piano Co. v. Henderson & Reese

Wood, J., (after stating the facts). (1) Section 36 of the law of negotiable instruments, act 81 of the Acts of 1913, page 280, provides: “An endorsement is restrictive which either, * * (2) constitutes the endorsee the agent of the endorser; or (3) vests the title in the endorsee in trust for or to the use of some other person.” Under this statute the endorsement on the notes in suit was a restrictive endorsement. If was a specific direction to pay to the order of the First National Bank ‘for the credit’ or ‘on account of’ the appellant, 'and thus was a limitation upon the power of the endorsee to use the proceeds of the notes in .any other manner. In volume 3, B. C. L., page 972, speaking of the restrictive endorsement under negotiable instruments law, it is said: “'Such an endorsement may consist in a direction to pay ‘to my use,’ ‘on account’of’ the endorser, ‘to the credit of’ the endorser or another.” Under the statute (section 37) a restrictive endorsement confers upon the endorsee the right “ (1) to receive payment of the instrument, (2) to bring any .action thereon that the endorser could bring. ” (2) The endorsement under review was tantamount to an endorsement to the bank “for collection, proceeds to be credited to account of” appellant. It was said in 3 R. C. L., page 973, “The contract in such oases is not strictly a contract of endorsement, but rather the creation of <a power, the endorsee being the mere .agent of the endorser to receive and enforce payment for 'his use. The contract constitutes the endorsee the agent of the endorser to present the paper, demand and receive payment, and remit the proceeds,” or apply as directed. See also cases cited in notes. It follows that the court should have declared as matter of law that the appellant was not an innocent purchaser for value of the notes in suit, inasmuch as it had notice, by the restrictive endorsement, of any defenses that the makers of the notes might have as against the payee. It was an issue of fact under the evidence for the jury to determine whether or not the order had been countermanded before the Bernard Manufacturing Company accepted or approved the same. True, the testimony on this point was conflicting, but this made it an issue for the jury, and this issue was submitted under proper instructions. The jury had the right, under the testimony, to find that 'the Bernard Manufacturing Company had acted upon such countermand and had directed the party from whom it claimed to have purchased the piano not to ship the same and that the piano was never shipped. The jury were warranted in finding that there was no completed contract, .and that there was a failure of consideration for the notes in suit. These issues were submitted under correct instructions. We find no error in the ruling on the admission of testimony. The principal question in the case was whether or not the appellant was an innocent holder for value of the notes in controversy, and, as we have .seen, under the restrictive endorsement, the court should have told the jury that it was not an innocent holder for value. The other questions being issues of fact, were correctly submitted, 'and there was evidence to sustain the verdict of the jury. The judgment is therefore correct, and it must be affirmed.