Schley v. Merritt

Bartol, C. J., delivered the opinion of the Court. This suit was instituted by the appellees to recover from the appellant, the amount of a promissory note* — 358 — drawn by George W. P. Smith, and endorsed by James Higgins the appellant’s testator. . The defence was, that there was not sufficient notice of the dishonor of the note, to bind the appellant; and the Court below in refusing the second prayer of the appellees, and granting the first prayer of the appellant, ruled that question in her favor : it does not, therefore, properly arise on this appeal, and is not material to be decided. The bills of exceptions present two questions for our decision: First. — Whether Smith, the drawer of the note, was a competent witness for the appellees, to prove the facts stated in the first bill of exceptions, and second; whether the facts testified to by him, and stated in the appellees’ first prayer, were sufficient to bind Higgins’ executrix to pay the note, witho.ut notice of demand and non-payment. First. — The competency of the witness Smith does not depend in any manner upon the construction of the Act-of 1868, ch., 116. In a suit upon a promissory note by the endorsee against the endorser, the drawer has always been held to be a competent witness for the plaintiff, not having any. interest in the event of the suit which would disqualify him ; his testimony could not tend in any manner to exonerate himself; for he still remains liable to the holder of the note ; and is answerable over to the endorser, in case judgment has been recovered against the latter, and paid by him. No authorities need be cited for this familiar rule of evidence; it was conceded by the appellant’s counsel in the argument. But it was contended that the witness was incompeteiit to testify to the particular facts enumerated in the exception because it is supposed they tended to relieve himself from his primary liability upon the note, and to fix it upon Higgins the endorser. Such however, could not in our opinion, .be the effect of his testimony. If the judgment — 359 — recovered against the appellant in this case be paid by her, she would have a right of action against the witness, as drawer of the note; the judgment would be evidence of his liability, and fix its amount; and in a suit against him, he could not avail himself for his defence, of the testimony given by him in the present suit, but would be compelled to estabish his defence by independent, legal and competent testimony. A question very similar to this, arose in Bank of Columbia vs. Magruder, 6 H. & J., 172, where objection was made to the competency of George Magruder, the drawer of the note, as a witness for the plaintiff in a suit by the endorsee against the administratrix of the endorser. The testimony offered by the witness was “ that at the time the note was drawn and endorsed, the intestate was indebted to him (the maker) in a large sum of money, which though not exactly liquidated between them, was believed by them both to be fully equal to the amount of the note, and that it was agreed between them that the note should be offered for discount at the Bank of Columbia, and the proceeds taken by the witness on account of the debt so due to him by the intestate ; and that the intestate should have all the time to pay the note that the bank would allow him.” The Court decided that the witness was competent to give the testimony offered. In noticing the objection, Judge Earle said, (p. 178,) “Should the case be established on his testimony against the administratrix, and the principal, interest and costs recovered of her, she will have her remedy against him as drawer, and it is not easy to perceive how the evidence given by him, or the verdict founded on it, could any way benefit him in the defence he may please to set up to her action. If the account he has spoken of, is used in bar of her suit, it must be supported by competent testimony, wholly — 360 — unconnected with his narrative concerning the original negotiation between him and the endorser ; and he can have no advantages in such defence, which he would not have in an action instituted against the administratrix on the same account. A recovery in this cause against the administratrix will carry the costs, and as far as they go, will augment her demand against George Magruder; and in this view, he may be said to be a witness swearing against his interest.” We consider this reasoning as a complete answer to the objection now urged to the competency of the witness Smith, and therefore, affirm the ruling of the Court below, in the first bill of exceptions. 2d. By the appellees’ first prayer, which was granted, the jury were instructed, “that if they should find, that the note offered in evidence was made by Smith, and endorsed by Higgins, and that at the time the note was made and endorsed, Higgins was indebted to Smith in an amount larger than the amount named in the note, and in consideration of said indebtedness, and for the purpose of paying the same, in whole or in part, it was agreed by Higgins with Smith, that said Higgins should pay said note to the holder thereof, unconditionally, as his own indebtedness; then no notice of demand and protest of said note, is necessary to fix the responsibility of the defendant in this action.” We find no error in this instruction. The question whether there was evidence proper to be submitted to the jury, to support the facts stated as the hypothesis of the prayer, is not an open question for the appellant in this Court. Not having been specifically made in the Court below,- as required by rule 4, (29 Md., 2,) the appellant is precluded from making it in this Court. There can, we think, be no well founded objection to the proposition of law announced by the prayer. It is unnecessary to examine the several cases cited at — 361 — the bar involving- the question of what particular facts and circumstances have been held sufficient, or insufficient to excuse the want of due demand and notice to bind the endorser. The present case is free from difficulty on this point. Judge Story in his work on Promissory Notes sec. 357, says: “An original agreement on the part of the endorser, made with the maker or other party at all events to pay the note at its maturity,” renders such notice unnecessary. This case falls directly within that rule; for the jury were required to find 4 4 that Higgins agreed to pay the note to the holder thereof, unconditionally as his own indebtedness-.” The effect of such an agreement, is that the endorser thereby agrees to become the principal debtor, and in such case, notice is not required to bind him. The object and reason for requiring notice to the endorser, is to enable him to secure himself by proceeding against the drawer; but where, as between them, no such right exists, the endorser is not entitled to notice. It is not necessary that the agreement should be made with the endorsee; the question of want of privity does not arise here, as in the case of Price vs. Easton, 24 E. C. L., 93, cited by appellant’s counsel. Here the suit is not based upon the alleged agreement between Higgins and Smith; but that is relied on only as evidence to show the true relations between the drawer and endorser, for the purpose of showing that the latter was not entitled to notice of demand on "the drawer, and non-payment of the note. Nor is it obnoxious to the objection that it varies or contradicts the terms of the written contract as expressed by the note; as was the case in Free vs. Hawkins, 8 Taunton, (4. E. C. L., 31,) also cited by appellant’s counsel. In the opinion delivered by Gibson, C. J., in Cramer vs. Sanford, 4 W. & S., 328, cited by appellant, the learned judge expresses in a few terse and pointed words — 362 — the true rule governing cases of this kind. He says, (p. 331,) “The true criterion seems to be the obligation to take up the note. When that remains with the maker, it continues to he the duty of the endorsee to apprize the endorser of the maker’s default; where it has devolved on the endorser himself, he needs no notice.” (Decided 18th February, 1873.) That obligation depends upon the true relations between the maker and endorser; and where the latter has agreed to pay the note at maturity, absolutely as his own indebtedness; then he is denied the right to require that demand should first be made upon the maker, and that he should have notice of his default. Judgment affirmed.