Hopkins v. Farwell

Bell, J. It is contended that a surety who has paid and taken up his note may again negotiate it, so as to render himself liable to the purchaser. Various authorities are cited to the point that an indorser of a note, who has paid it to a subsequent holder, may transfer it, and the purchaser may recover it against the indorser, and against any party who is liable over to him. They seem to us fully to sustain this position, and we do not understand it to be contested. This principle as to the right of an indorser is asserted to be true as to a surety upon a note, because it is said that on principle the case of an indorser cannot be distinguished from that of a surety. But we are unable to adopt this opinion. The case of the surety seems to us essentially different in this respect from that of the indorser, and the distinction is clearly recognized in Davis v. Stevens, 10 N. H. 186. It is there said by the learned judge who delivered the opinion of the court, “ where a note is taken up by an indorser, who is not directly liable on the note, it may be again put in market. The promiser is not in such case prejudiced by such a transfer, and the note remains good against him. Where a note is taken up under such circumstances, it is not in fact paid. An individual discharges his liability as guarantee merely, but the general promise of the note remains unextinguished. But where one of two joint promisers, who is liable directly upon the note for its whole amount, pays such note, the note is necessarily extinguished. Whenever he discharges himself from the note by such payment, the payment goes to the whole promise of the note ; and when the whole promise of the note is met and [430] extinguished, it cannot afterwards be revived as a subsisting contract against a co-signer. New rights and liabilities arise betwixt the co-signers, but the original contract is at an end.” That this is the true general rule as to the effect of payment - by a surety, is conclusively shown by the cases which recognize an exception to it. A surety who pays a debt is entitled to be subrogated to all the collateral securities for the debt which the creditor holds; and the debt will be held a subsisting debt, for the purpose of upholding those securities, whether they have been assigned by a decree of a court of equity, or voluntarily, and m many cases where no assignment has been made. Low v. Blodgett, 1 Foster 121; Edgerly v. Emerson, 3 Foster 555, and cases there cited. There being in the present case no evidence of any concurrence or assent of Farwell to any reissuing or negotiation of this note, the evidence only showing it paid-by Scott alone, and last in his possession, it must follow that any transfer or negotiation of this note by Scott only, would operate to bind himself alone. To render the note, when reissued, after payment by a surety, valid as a joint note, it must be proved that the note was reissued by the assent of both. But it is said that Farwell, the principal, makes no defence, and the only controversy is with the surety, who, as it is said, reissued the note ; so that the real question in that case would be, whether the maker of a note, after payment, may again give it currency. Admitting the right of a party thus to reissue a note he has once paid, so as to bind himself, there are two answers to this view. The action is founded upon an alleged joint and several note, and is brought against both the alleged signers as defendants. Now it is clear that no recovery can be had against either on any several note. The recovery must he had against them, or either of them, upon a joint cause of action, or not at all. A valid cause of action against either would not support the action, because of the variance. The default of Farwell is evidence against himself that he is liable on this note, but it is not evidence of that fact against Scott. [431] This question is, however, of no importance, if the plaintiff’s principal position, which was adopted by the court, was well founded. The court ruled that Scott could reissue the note, so as to make himself liable on it to the holder, and that the possession of the note by the plaintiff was prima facie evidence, as against Scott, that he had reissued it. The first of these positions we regard as correct in the manner it is stated. But it is merely immaterial in the case, unless it is understood as applying to the existing circumstances of the case, in effect that Scott could reissue the note, so as to make himself liable to the holder in that action. If it is to be so understood, we think the statement entirely incorrect, and that the authorities cited show that the action could not be maintained against both or either of the signers, as upon a joint contract, unless the note was reissued by both, or by the assent of both. The second position is equally immaterial, unless a similar rule of interpretation is applied to it, so that it may be understood that possession of the note by the plaintiff was prima facie evidence, as against Scott, that he had rightfully reissued it as a valid note against both the signers; and we see no reason why this extension should not be given to the rule, if true at all. If possession of the note alone is evidence of any thing against Scott, we see no reason why it is not equally evidence against Farwell. There is no doubt of the general rule, that the possession of negotiable paper, either payable to bearer, or indorsed in blank if payable to order is prima facie evidence of title to the note. When the plaintiff produces the note and proves its execution, he has the benefit of the presumption that the title to it has been duly and regularly assigned to him. But the presumption resulting from possession, as well as from the proof of the defendant, is completely met and answered by proof that the note has been once paid and discharged by a party liable to its payment. If, then, the holder asserts that, notwithstanding it has been once paid, it has been again reissued and put in circulation, it is incumbent on him to produce evidence of that fact. He has already had the benefit of the presumption of title resulting [432] from possession. He cannot have it a second time. The position of the security is essentially changed. Before payment, every presumption is in favor of the holder. After payment, the natural presumption is otherwise. Presumptions in cases of this kind rest on the customs and usages of business. It is not in the ordinary course of business that a note which has been once paid is again put in circulation. It is not ordinarily to be supposed that a party will accept, as a valid security, a note which has been paid. The natural presumption, if any were allowed, is that a note once paid has been delivered to a third person for some other purpose than as a valid security. The burden of proof must consequently be on the party who asserts an unusual transaction, to introduce evidence sufficient to prove it. It is not necessary to assume that the holder has come to the possession of the note wrongfully, since it may have properly come to his hands for a variety of other entirely lawful purposes. To hold that possession alone was prima facie evidence of a rightful reissuing and negotiation of a note once paid to the holder, would render the proof of payment entirely immaterial, since the same proof which was sufficient to establish the title of the plaintiff at first, would be sufficient to meet the defence of payment. Had this ever been held or supposed to be the law, it could hardly have failed to have a place in some case or book to which we could have been referred, but we are aware of no such dictum. Upon these views of the law there must be A new trial.