Gresham v. State Bank

Anderson, J., delivered the opinion of the court. Appellee, State Bank of Sunflower, sued appellants, W. P. and T. J. Gresham and W. Y. Pitman and wife, on a promissory note payable to appellee or bearer, and recovered a judgment for two thousand four hundred thirteen dollars, from which appellants prosecute this appeal. On the trial only the note sued on was offered in eAÚdence by the appellee. Thereupon both the appellants and appellee requested a peremptory instruction. The request of the appellee was granted, and that of the appellants refused, and accordingly the jury returned a verdict for appellee, upon which the judgment appealed from was entered. W. V. Pitman and wife were the makers of the note on which suit was brought, and appellants were indorsers thereon, being blank indorsers, and therefore what is known as irregular indorsers. The language of appellee’s declaration would justify the conclusion that it Avas appellee’s purpose to sue all the defendants as joint makers of the note, for the declaration simply sets out the execution of — 32 — the note by both the makers and appellants, that it was overdue, and default made in payment, without anything to indicate that the liability of appellants was as indorsers, and not as makers. However a copy of the note was attached to the declaration as an exhibit, and that shows that the Pitmans signed as makers and appellants as blank indorsers. Without deciding the question (for, in view of the conclusion we reach, it is unnecessary) we will treat the averments of the declaration, taken in connection with the copy of the note exhibited with it, as sufficient to show that it was appellee’s purpose to sue appellants as indorsers, and not makers. To so treat the declaration is most favorable to appellee, for if it is to be considered as a declaration against appellants as makers, it is at once apparent that there Avas a complete failure of evidence to establish appellee’s case, for the note, which Avas all the evidence introduced, shoAved they were indorsers, not maker's. As such indorsers their rights and liabilities, so far as the questions to be decided in this case are concerned, are fixed by sections 63, 64, and 89 of our Uniform Negotiable Instruments Act (chapter 244, Laws of 1916; Hemingway’s Code, sections 2641, 2642 and 2667), which are in the following language : “A person placing his signature upon an instrument otherwise than as 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.” “Where a person, not otherwise a party to an instrument, places thereon his signature in blank before delivery he is liable as indorser, in accordance Avith the folloAving rules: “(1) If the instrument is payable to the order of a third person, he is liable to the payee and to all subsequent parties. • “(2) If the instrument is payable .to the order of the maker or drawer, or is payable to bearer, he is liable to all parties subsequent to the maker or drawer. — 33 — “(3) If lie signs for the accommodation of the payee, he is liable to all parties subsequent to the payee.” “Except as herein otherwise provided, when a negotiable instrument has been dishonored by nonacceptance or nonpayment, notice of dishonor must be given to the drawer and to each indorser, and any drawer or indorser to whom such notice is not given is discharged.” It will be noted that under said act indorsers in blank, as were appellants, are only secondarily liable, and are dischargee! unless given notice of the dishonor of the instru-. ment. This court construing the statute so held in Taylor v. Ross (Miss.), 92 So. 637. However there is no controversy between the parties to this cause as to the extent of the liability of appellants as indorsers, and what was necessary to charge them with the payment of the note in case of dishonor. We only state the governing principles in order that the decision of the court on the main question in the case, which will now be considered, may be better understood. Appellants contend that the dishonor of a note by the makers, and notice of such dishonor to the indorsers, are conditions precedent to liability on the part of the indorsers, and that therefore, to be entitled to recover on such a note, the holder must allege and prove those facts, and that therefore appellee neither stated in its declaration nor proved a cause of action, and that, the declaration having failed to state a cause of action, appellants as indorsers were not required to plead under oath as provided by section 1977, Code of 1906 (Hemingway’s Code, section 1637), denying such dishonor and notice in order to put the holder to the proof thereof. On the other hand, appellee contends that liability on the part of the indorsers of a note begins Avith their indorsement and that'dishonor by the makers and notice thereof to the indorsers are conditions • subsequent, which, if not complied with, have the effect to discharge such indorsers from liability, AAdiich must be set up by the indorsers by a plea under oath as provided by the statute (section 1977, Code of 1906; Hemingway’s — 34 — Code, section 1637), and must be proven by them as pleaded, and that, appellants, as indorsers, having failed to interpose such a plea in this cause, appellee’s case ivas made out by the mere introduction of the note sued on. The question, therefore, in short, is whether dishonor and notice is a condition precedent to liability of the indorsers, or a condition subsequent Avhich operates to discharge them from liability theretofore incurred. As it appears to the court this question is settled in favor of the contention of appellants by the decisions of this court. In discussing the character of obligation undertaken by indorsers in Hawkins v. Shields, 100 Miss. 739, 57 So. 4, 4 A. L. R. 760, the court said, among other things: “The indorser engages that the bill or note will be accepted or paid, as the case may be, according to its purport; hut this engagement is conditioned upon due presentment, demand and notice.” (Italics ours.) Thomas v. Jennings, 5 Smedes & M. 627, Avas a suit by Jennings against Thomas, Ellison, 'and Osburn as joint makers of the note sued on, Avhich Avas payable to the plaintiff. The note Avas signed by Ellison and Osburn as makers, but the name of Thomas Avas signed in blank across its back. There Avas no evidence introduced in the case except the note itself. Thomas, the indorser, requested the court to charge the jury to return a verdict in his favor because plaintiff had failed to malee out his case., The trial court refused -to so instruct the jury. The court said that the question Avas whether Thomas Avas maker or indorser of the note, and that that was a question of evidence. (There could be no question of that sort under our Negotiable Instruments Act, for that act expressly provides that an irregular indorser'is secondarily liable.) The court said that if Thomas Avas maker the judgment was correct; but if he Avas indorser, and therefore secondarily liable, the judgment Avas incorrect “because of the absence of proof of the requisite demand and notice.” The court said further: “The criterion is Avanting by which to fix the nature of — 35 — his [Thomas’] liability. The plaintiffs, in failing to prove the circumstances which would authorize the holding him bound as maker, failed to make out their case.” To the same effect is Holmes v. Preston, 70 Miss. 152, 12 So. 202, in which Judge Cooper for the court reviewed and analyzed Thomas v. Jennings, supra, and applied the same to the case there under consideration. In that case there was a failure to prove that notice of dishonor had been given to the indorser. Among other things the court said: “This contention of appellees is upon the assumption that the defect of evidence goes only to the extent of a failure to prove that notice Avas given to appellant of the dishonor of the bill, and the argument is that, since the declaration did not aver such notice, the appellant, by failing to demur to the declaration, Avaived the defense of Avant of notice. There are tAVO replies to this. The first is that, under the rule announced in Thomas v. Jennings, [5 Smedes & M. 630], the mere production of the note Avas insufficient to fix any liability upon Holmes.” These cases clearly mean that dishonor by the maker and notice to the indorser is a condition precedent to the liability of the latter. In section 1186, 8 O. J., p. 901, it is stated that, Avhere it is sought to charge an indorser, and dishonor and notice are conditions precedent to liability, they must be alleged and proven. And it is stated there further: “It is insufficient to charge an indorser merely to set out a copy of the note, allege indorsement by defendant, and state that there is due plaintiff from defendant a specified sum which plaintiff claims; notice of dishonor must be alleged.” IIoAvever, appellee contends that appellants are in no position to take advantage of the failure of appellee’s declaration to state a cause of action against appellants, because the only plea interposed by appellants Avas the general issue, and, appellants having failed to interpose a plea verified by oath as provided by section 1977, Code of 1906 — 36 — (Hemingway’s Code, section .1637), denying dishonor by the makers and notice thereof to appellants, it was not necessary for appellee to prove such dishonor and notice. That statute provides as follows: “When the drawer or indorser of ■ any bill of exchange, or the indorser of a promissory note, is sued thereon, it shall not be necessary to prove notice of the dishonor of the bill or note to such drawer or indorser, or a waiver of notice, unless the same be specially denied by plea, verified by the oath of the party pleading the same.” If appellee had set out a cause of action in its declaration — that is, if there had been added to the declaration an allegation of dishonor and notice to appellants as indorsers ■ — the appellee would be right in its contention. Without such a plea under oath by appellants the appellee would have made out its case by simply introducing the note. But that is. not the case we have. Instead we have a declaration that states no cause of action. Appellants were not required to respond to it by any kind of a plea. No recovery could be had thereon; it was simply a suit on a promissory note against two makers and appellants as indorsers without any allegation that appellants had become liable as such indorsers on account of the dishonor of the note and notice of such dishonor to appellants. The declaration in this case falls as far short of stating a cause of action against appellants as it would have fallen short of stating a cause of action against the makers if it had simply stated that the makers executed the note sued on for the consideration therein named, which note was overdue, without alleging further that it had not been paid. The agreement of indorsers under the decisions of this court is simply a contract to become charged with the payment of the indebtedness represented by the note upon condition of dishonor and notice, as we have said, must be alleged and proven by the plaintiff, and if that is not done indorsers are not required to file any plea whatever. And, furthermore, the statute last above quoted does not change the burden of proof where the plea therein provided for is — 37 — interposed. The plea provided by the statute, of dishonor and want of notice, simply leaves the burden of proof where it stood at common law — upon the plaintiff. What was said by the court to the contrary in Taylor v. Ross, supra, was not involved in that case, and therefore was not decision. In that case the indorsers in their answer expressly set up and proved as a defense against liability dishonor and want of notice. It follows from these views that the trial court erred in directing a verdict for appellee. Reversed and remanded.