Case ID: miss_18/html/0358-01.html
Source: Caselaw Access Project
Author: {"author": "Mr. Chief Justice Sharkey", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Isaac R. Wade et al. vs. John B. Thrasher.
    Where the makers of a note, payable, for value received, to the payee, pay a portion of the note to the assignee for value, of the payee, and execute a new note for the residue, payable to the payee of the first, who, by the contract of renewal, is to and does indorse it to the assignee, the payee, who is thus indorser on the second note, is not the accommodation indorser of the makers; the contract of renewal is a mere continuation of the previous liability, changed in nothing but amount; and when the payee has been compelled to take up the second note, the rights of the parties will stand as they would have stood, if the payee had taken up the original note instead of the new one.
    Where the payee of a note executed to him for value, has procured its discount by a bank in this state, and, after its maturity, since the law of 1840, prohibiting assignments by banks of their evidences of debt, the payee on default of the makers, has paid the amount of the note to the bank, and re-eeived the note hack again from the hank, the payee is remitted to his original rights against the makers of the note, and the law of 1840, referred to, has no application to the case.
    Where the payee of a note, made to him for value, assigns it for value to a third person, and the makers fail to pay it at maturity, and the payee takes it up from his assignee, it is immaterial what the payee pays to the assignee to regain the note, he is restored to all his rights as against the makers, and can recover the full value of the note from them.
    In error, from the circuit court of Jefferson county; Hon. Stanhope Posey, judge.
    John B. Thrasher sued Isaac R. Wade, Walter Wade, Wilson W. Wade, and Lawrence Wade upon this note, viz.:
    “$4,000. “ Port Gibson, Dec. 2, 1839.
    Twelve months after the 20th Dec. 1839, we, or either of us, promise to pay J. B. Thrasher, or order, for value received, four thousand dollars, negotiable and payable at the Bank of Port Gibson.
    [Signed,] Isaac R. Wáde,
    Waltee Wade,
    Wilson Wade.
    LawRence Wade.”
    Indorsed,
    “ I waive demand and notice of demand and protest,
    J. B. ThRasheR.”
    The defendants pleaded, 1st. The general issue; 2d. actio non, because they say that said promissory note, after the making thereof, to wit, on the 2d day of December, 1839, became and was the property of the Bank of Port Gibson, and a part of the bills receivable of said bank, and so remained and continued until the 27th day of October, 1842. And said defendants aver, that upon the day and year last aforesaid, at the county aforesaid, the said Bank of Port Gibson transferred the said promissory note to the said plaintiff, contrary to the statute in such case made and provided; and this they are ready to verify, wherefore they pray judgment.
    The replication to this plea was, that the Bank of Port Gibson did not assign or transfer said promissory note to the plaintiff, contrary to the statute in such case made and provided, but that the plaintiff paid and took it up, as indorser thereof.
    “ Actio non, because they say that the said promissory note, &c. was made and executed by them the said defendants for the purpose of being discounted by the bank of Port Gibson, and that they procured the indorsement of said plaintiff thereon as their security, and for their accommodation, and in order to obtain the discount of the same by (¿fié said bank, and delivered the said promissory note with the indorsement thereon as their security to said Bank of Port Gibson, to wit, on 2d December, 1839, which said promissory note, after the making and indorsement and delivery, to wit, at &c. on &c. was dis-discounted by said Bank of Port Gibson, for the benefit and on account of them the said defendants, and truly then and there became and was the property of the said Bank of Port Gibson, and due and owing to and a part of the bills receivable of said bank, and so remained and continued until the 27th October, 1842, at &c. And the said defendants aver, that on the day and year aforesaid, at &c., the said plaintiff, as the security of them the said defendants, settled, satisfied, and took up the said promissory note by delivering and transferring to the said Bank of Port Gibson, so many shares of the capital stock of said bank as were then and there of the value of $400, and no more, in consideration thereof, and upon no other consideration whatever; and the said Bank of Port Gibson, on the day and year aforesaid, at &c., delivered the said promissory note to said plaintiff, and this they are ready to verify, whereupon they pray judgment.”
    The replication to this plea traversed all its allegations; and issues to the country were tendered and joined upon both replications.
    On this state of pleading the case was submitted to the jury, who returned a verdict for $6,026.66, whereupon the defendants tendered a bill of exceptions, embodying th'e testimony and charges of the court as follows, to wit:
    The plaintiff first read in evidence to the jury the pleading and note sued on, and then rested his case:
    
      When the defendants introduced James T. Mayre as a witness, who testified that he had been a director of the Bank of Port Gibson, and that the note sued on had been the property of that bank ,• that it had been discounted by the bank in renewal of a note of the same parties for the sum of $5,488.75, payable to the plaintiff, and which had been discounted by the bank for the plaintiff in part payment for stock taken by him in said bank, which note originally belonged to the plaintiff. This last mentioned note was then offered in evidence by defendants, as follows:
    “ $5,488.75. “ Oak Hill, Nov. 29, 1838.
    “ Twelve months after the twentieth day of December next, we, or either of us, promise to pay to the order of John B. Thrasher five thousand four hundred and eighty-eight dollars seventy-five cents, for value received. Negotiable and payable at the Bank of Port Gibson.
    Isaac R. Wade,
    WalteR Wade,
    W. W. Wade.
    Laweence Wade.”
    Indorsed,
    
      “ I waive demand and notice of protest and demand,
    J. B. Thrasher.”
    Mayre testified further, that he was present at the board of directors of the bank and a member when the note sued on was discounted. He could not say at whose instance; its proceeds were passed to credit of first drawee on the books of the bank; Wade at the same time paid the bank $1,808.75 in cash, which with the proceeds of the note sued on, took up the old note of $5,488.75; the old note was then checked out by Wade, and delivered to him.
    It was the custom of the bank to pass proceeds of a discount to the credit of a party at whose instance it was discounted, but that this was an arbitrary rule of the bank without consulting either party. He does not recollect that anything was said at the board of directors at the time the note sued on was discounted, about requiring of plaintiff a guaranty, but as it was a rule of the bank never to release any security, he has no doubt that they required the indorsement of plaintiff upon the new note as a prerequisite to its being discounted at the renewal. The bank required the renewal of all the parties to the note, and an additional guaranty was given by the plaintiff in writing. The note sued on was taken up by plaintiff, who took up at the same time other notes, on which he was guarantor and indorser amounting, with the note sued on, to $12,220.78, for which he
    gave the bank in specie $2,000
    Salary due him by the bank 1,600
    Amount due him by the bank for services 2,600
    6,100
    And 180 shares of stock, which had cost him originally
    $100 per share, making in stock 18,000
    $24,100
    The guaranty by the plaintiff, in writing, of the note sued on, and seventeen other notes, was read to the jury.
    The conclusion of this guaranty was in these words, viz.
    “I, John B. Thrasher, who have indorsed and transferred the within and above described eighteen promissory notes to the Bank of Port Gibson, amounting to nineteen thousand five hundred and thirty-seven dollars, do hereby guarantee the payment of the same, together with all cost that shall accrue thereon after the parties before me on said notes shall have been prosecuted to insolvency; and in consideration that the said bank will not sue me in the first instance on said notes, I further waive any advantage which I might otherwise legally avail myself of under the consolidation loan of 1837, requiring plaintiffs to join drawers and indorsers of notes, bills, &c. in the same action, and hold myself bound as fully and effectually as if I were sued together and at the same time with the other parties to said notes.
    [Signed] “ J. B. Thrasher.”
    James J. Person deposed, that bank stock was worth $10 per share at the time the settlement was made with Thrasher.
    
      The plaintiff then introduced H. N. Spencer, who testified, that he was president of the Bank of Port Gibson, when both the notes were discounted. That the first note was the property of the plaintiff, and was discounted for him on his account and on his application. That the second note being the one sued on, Avas discounted in renewal of the first, and for the plaintiff; that the bank relied mainly on the liability of the plaintiff, and when all the parties applied for a renewal, the plaintiff Avas required to give the guaranty; that the bank always considered it plaintiff’s debt; that he made all the arrangements. Witness, in this whole transaction, looked upon plaintiff as the party responsible, and conferred with him about the renewal; that the usage of the bank was to credit the first drawer, whether he was really entitled to proceeds or not. The understanding, when a note was discounted in renewal was, that no one could draw out the money, and the transfer of the proceeds to the credit of the one or the other, depended on the usage of the bank in keeping its books.
    On cross-examination he stated, that he did know positively that the second note was discounted upon the application of the plaintiff; but did not know positively by whom the payment of $1,808.75 Avas made; that the bank would not have granted the renewal without the indorsement and guaranty of plaintiff.
    The defendants admitted that there was a full and valuable consideration passing from the plaintiff to them for the note of $5,488.75 cents, in renewal of Avhich, the note, on which -the suit was pending, Avas given. The evidence here closed, and at the request of the plaintiff, the court charged the jury,
    1. If the jury believe, from the evidence, that Thrasher was the owner of the original note, and indorsed it to the bank, and that the bank, on payment of a part, took the note sued on as a renewal of the liability of all the parties, as well indorsers as draAvers, and on their joint application, and merely as a means of prolonging the day of payment, and that on the arrival of the second note at maturity, the drawers failed to pay it, and that on their failure it was paid and taken up by the plaintiff, then the plaintiff would be remitted to his title to the note as payee thereof, and entitled to recover the amount thereof with interest.
    2. If they believe, from the evidence, that the plaintiff was the original owner of a promissory note made by defendants, payable to plaintiff for a good consideration, for a sum exceeding $5,000, which plaintiff got discounted by said Bank of Port Gibson,on his own account, and for his own accommodation on the faith of his indorsement thereof, and that said note of $4,000 was made by defendants payable to plaintiff to renew in part the original note, and that plaintiff indorsed said note of $4,000 to said Bank of Port Gibson, and has since paid and taken up said note, then the jury will find for the plaintiff the amount of said note of $4,000, with eight per cent, interest on the same from the maturity thereof.
    3. If they believe, from the evidence, that the plaintiff was the original owner of said promissory note, and that the same was discounted by the Bank of Port Gibson on the indorsement and guaranty of plaintiff, and that plaintiff has since taken up said note, then he is restored to his original rights, and the jury will find for the plaintiff without regard to the amount paid by plaintiff to take up said note.
    4. If the jury believe, from the evidence, that the plaintiff was the original owner of said note, and transferred or indorsed it to the Bank of Port Gibson, and that plaintiff has again become the owner of said note by taking up the same from said bank, then it matters not what plaintiff paid to said bank to take up said note, the plaintiff is restored to all his original rights, and the jury will find for the plaintiff the amount of the note and legal interest thereon from maturity.
    
      5. If the jury believe, from the evidence, that the plaintiff was originally the owner of a note which he had discounted in the Bank of Port Gibson, and that said note sued on was given in renewal of said original note, and in like manner discounted in said bank on the indorsement of said plaintiff, and that said note has since been taken up by said plaintiff, — then the circumstances of discounting said note in said bank does not affect the consideration of the same, and the jury will find for the plaintiff, without regard to the value of Port Gibson money, the amount of the note and interest.
    The defendants then requested the court to give the following instructions, to wit:
    1. That if the jury believe from the evidence, that the note of $5,488.75 was renewed to the Bank of Port Gibson by the makers, by their paying to the bank $1,808.75 in cash, and giving a new note for $4,000, then the transaction becomes a new one between them and the bank, and the indorsement of the new note by the plaintiff placed him only in the attitude of a security or accommodation indorser.
    
      2. If the jury believe, from the evidence, that the plaintiff was only a surety or an accommodation indorser of the note sued on, then he is only entitled to recover the amount which he actually paid to the hank for said note, with interest from the time he paid it.
    3. If the jury believe, from the evidence, that the plaintiff was only accommodation indorser or surety on said note sued on, then his taking up said note does not give him a right of action upon the note, and the jury must in this action find for the defendants.
    4. If the jury believe from the evidence, that the plaintiff was only an accommodation indorser of the note sued on, his attitude as such is not changed by his execution of the guaranty to the bank.
    Of which charges asked by defendants the court refused to give the first and third, but gave the second and fourth.
    The defendants prosecute this writ of error.
    
      TI. T. Ellett, for plaintiffs in error.
    1. There was conflicting proof upon the point, whether Thrasher was or was not an accommodation indorser on said note for the makers, they insisting that he was an accommodation indorser, and he contending that he was not. In view of this proof, the defendant’s third instruction should have been given.
    
      2. If Thrasher was a surety, he was only entitled to recover the amount paid by him for his principals. Bonney v. Seeley, 2 Wend. 481. But he could not maintain an action on the note itself. The proper form of action to enforce this implied promise, is the action of indebitatus assumpsit for money paid. Powell v. Smith, 8 Johns. 249; Chitty on Bills, (568,) (648); 1 Leigh’s Nisi Prius, 71, 485.
    
      J. B. Thrasher, in proper person.
    1. Nothing hut the charges having been excepted to, no question can be made but upon them. Wilson v. Owens, 1 How, (Mi.) R. 126.
    2. The proofs sustained the issues; and the charges asked were properly rejected, because they asked presumptions to be drawn in the face of the proof. They were, therefore, abstract, having no relation to the evidence. 11 Wheat. R. 59; 4 How. (Mi.) R. 386.
    3. It was wholly immaterial what was paid by the indorser to the bank; it could not affect the former’s rights against the maker. Turner v. Brown, 3 S. & M. 438; 6 Cow. 484.
    4. The law of 1840, prohibiting banks from assigning their notes, could not constitutionally affect Thrasher’s right to take up the note he had indorsed the bank; that right was, under the existing law, part of his contract of indorsement, and no subsequent legislation could take it from him. McCracken v. Hayward, 2 How. S. C. R. 612.
    5. But it has been expressly decided, that the law of 1840 has no application to a case of this kind. Maury v. Jeffers, 4 S. & M. 87; so, also, Terry v. Woods, 6 S. & M. 150; Bailey on Bills, 142.
    6. Even if Thrasher were accommodation indorser, he had a right, if he paid the note, to sue upon it directly. 3 Kent Comm. 86; Church v. Barlow, 9 Pick. R. 550.
    
      James H. Maury, on the same side.
   Mr. Chief Justice Sharkey

delivered the opinion of the court.

This suit was brought by defendant in error, as payee of a promissory note for $4,000, made by plaintiffs in error.

Two special pleas were filed; first, that on the 2d day of December, 1839, the note sued on became the property of the Bank of Port Gibson, and was afterwards assigned and transferred to the plaintiff below, contrary to law; and second, that the note was executed by defendants below, for the purpose of having it discounted in bank, and that they procured the indorsement of plaintiff for their accommodation.- That the note was discounted and became the property of the bank, and that on the 27th of October, !É>42, plaintiff took up the note by a transfer of certain shares of the capital stock, worth only $400. To these pleas issues were taken, and, on the trial, the defendants excepted to certain charges given to the jury for the plaintiff, and, also, because the court refused to give certain others asked by defendants, and a verdict was rendered for the plaintiff, for the amount of the note and interest.

The bill of exceptions discloses this state of facts. The plaintiff held a note made by the defendants for $5,488, given for a full consideration, which was made payable and negotiable in the Bank of Port Gibson. By indorsing this note, he procured it to be discounted in the bank, for his benefit. When this note matured, the makers paid a sufficient amount to reduce the sum due to $4000, and for that sum gave the note sued on as a renewal of the former note, payable as was the original, to the plaintiff, who again indorsed it, and it was discounted. The proceeds, according to the custom of the bank, were placed to the credit of the first maker, who gave a check for the amount, which was applied to the payment of the original note, which was given up. The makers failing to pay the second note, the plaintiff, as indorser, took it up, and has brought this suit on it. When the first note was discounted, plaintiff promised to give a separate guaranty for its payment, which he afterwards did, and made the payment of this and other notes indorsed by him, part in cash, and part in stock. The president of the bank was examined, who, in addition to the foregoing facts, stated, that the first note was discounted at the instance of the plaintiff, but as to the second, he was not certain whether it was or not, but a special guaranty was required of him, as a condition on which the new note was taken. That the plaintiff made all the arrangements in transacting the business, and was looked to as the responsible person throughout; that it was considered as his debt.

It will be sufficient to consider of the law, as applicable to these facts, without special reference to the several charges. The plaintiff was evidently not an accommodation indorser. The contrary appears from all the proof. The renewal was but a part of the original transaction. A mere continuation of the previous liability, changed in nothing except in amount. The debt was diminished by the payment, but the character of the transaction was not changed. Union Bank of Tennessee v. Govan, (ante 333,) decided at the present term. The bank was particularly careful in not changing the liability of the parties. Their respective rights then must be determined as on a note passed in the course of trade. They stand as they would have stood, if plaintiff had taken up the original note instead of the new one.

If we are right then, in considering the case in that light, it is impossible to distinguish it from the case of Maury v. Jeffers, 4 S. & M. 87. Or if there is a distinction, it does not operate favorably to the defendants. That was a case in which the indorser, who was the payee, of a business note, had negotiated it in bank, but in consequence of the maker failing to pay, was compelled to take it up. To an action brought on it, payment was pleaded, and proof made that while the note was owned by the bank, the maker held its notes to the amount due; which notes were filed in court as an offset. We decided that this did not constitute an offset; that the agreement of the indorser was to pay the note if the maker did not, and when he did pay, on the failure of the maker, his contract of indorsement was virtually rescinded, and he was restored to his original rights. In the case of Terrey v. Woods, 6 S. & M. 139, we held that the indorsement to the bank was a new, distinct and independent contract. The payment (by the indorser) to the bank was not a discharge of the bill, but of the indorsement.”

This is the case with regard to all business indorsements. The indorser becomes liable on his own contract, and it is a separate and distinct liability from that of the maker, who has no concern with the contract of the indorser. The indorser •undertakes upon condition, and if the condition fails, he becomes liable. The maker’s promise is absolute. He may pay the holder, but if he neglects until the indorser is called on to perform, the maker of course loses his privilege. The indorser is restored to all his rights. It is like the sale of a piece of property, which the vendor is compelled by his contract to take back. When he does so, the price by which he discharged his contract, is no criterion as between him and his vendor.

In the case of Turner v. Brown, 3 S. & M. 425, we held that it was immaterial what the assignee pays for a note. Such consideration does not regulate the liability of the maker, who is bound by a special contract to pay so much money. To the same point, see Murray & Murray v. Judah, 6 Cow. 484.

From the foregoing view, it is manifest that the law prohibiting banks from transferring their securities, can have no application in a case like the present.

The decisions of the court in giving and refusing the charges, was in strict accordance with the law of the case, and the judgment must be affirmed.