Case ID: ohio_11/html/0088-01.html
Source: Caselaw Access Project
Author: {"author": "Wood, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

William Parker v. Thomas J. Riddle.
    The indorsement of a note, not negotiable, is not an original undertaking between the indorser and indorsee; but it is collateral, and payment must be demanded, and notice given to the indorser, as upon negotiable paper.
    The indorsement of such note, by a person not a party to it, is a guaranty. Upon such guaranty, demand of payment must be made when the note becomes due, and notice given to the indorser before suit.
    This is an action of assumpsit, from Hamilton county.
    The declaration contains three counts. In the first, it is averred that, on September 17, 1839, to wit, at, etc., one T. L. Hilton /made his certain promissory note, in writing, etc., and thereby, then and there, promised the said defendant, ninety days after date, to 'pay him the sum of $152 ; and the said defendant, then and there, indorsed the said note to the plaintiff; and the plaintiff avers, that afterward, when the said note became due and payable, according to the effect thereof, to wit, on December 10, 1839, the same note was duly presented to said Hilton for payment, and payment thereof demanded, but neither the said Hilton, nor any person or persons on his behalf, did, or would, pay said note, or any part thereof, etc.; of all which premises, the said defendant, on the same day and year, had notice, etc.
    The second count sets out the making and delivery of the said note to the defendant, as in the first, and then avers, *that> in consideration that the plaintiff, at the special instance and request of the defendant, would receive the said note in payment of so much money as therein specified, then due by the defendant to the plaintiff, the said defendant, by his certain memorandum, in writing, on the back of said note, agreed to guaranty the payment of the said note to the plaintiff, when the same should become due, according to the tenor and effect thereof; and the plaintiff avers that, on December 10, 1839, when the note became due and payable, the same was duly presented to said Hilton, and payment thereof demanded, but neither the said Hilton, nor any one on his behalf, did, or would, pay the same, etc.; of all which said several premises, the said defendant had due notice, whereby the defendant became liable to pay said note, and afterward, in consideration thereof, promised to pay it; etc., when thereunto afterward requested.
    The third count describes the said note as made by the defendant to the plaintiff, and that the defendant thereby promised the plaintiff to pay to him the said $152, ninety days after the date, and avers the non-payment, etc.
    The declaration contains also the common counts. To this ■declaration the defendant filed the plea of non assumpsit, and the noté is now offered as the only evidence of his claim to recover by the plaintiff; and the question raised is, whether the note .alone, under the averments contained in the declaration, is sufficient proof to entitle him to judgment.
    Charles Fox, for plaintiff:
    I contend, that whenever a man transfers a note, not negotiable, or if he transfers a note, negotiable, after the same has become due, he does, by the act of indorsing, promise to pay the note. The indorsement, in such case, is equal to the making of a new note, and may be declared upon as such. In 3 Mass. 274, the party was permitted by the court, to insert, over the signature, “for value received I undertake to pay the money within mentioned to the plaintiff.”
    *This last was a case in which John Ames made a note to Olin Ames, not negotiable, and the latter indorsed it, in blank, to the plaintiff, so that the same is identically the present case.
    In 8 Wend. 421, it is held, that “ the indorsement and transfer of such an instrument is good, so as to make the indorsers liable to the indorsee, although it will/not give the indorsee a right of action, in his own name, against the maker. Again, the indorsement, in such a case, is equivalent to the making of a new note. It is a guaranty that the note will be paid; it is a direct .and positive undertaking, on the part of the indorser, to pay the note to the indorsee, and not a conditional one to pay, if the maker does not, upon demand, after due notice. The indorser, in such a case, I apprehend, is not entitled to the usual privilege of an indorsee of negotiable paper. He stands in the relation of principal, and not surety, to his indorsee, and has no right to insist upon a previous demand of the maker and notice of non-payment. An absolute guaranty may be written over his indorsement, upon which a recovery may be had against him.
    
      The same doctrine may be found in Bayley on Bills, 65, and in Byles on Bills, 84.
    Such I take to be the opinion of this court in 9 Ohio, 139. The principle of all these decisions I take to be this: The man, by indorsing the note, must be understood to moan something by so doing. As the note is not negotiable, his indorsement is not necessary to transfer the property in the note. To give effect to the indorsement, it must be construed into some sort of a contract. What contract can it be unless that of a promise to pay the note or a guaranty that the note shall bo paid ? Any other construction would render such an indorsement perfectly nugatory. If this indorsement is a guaranty of its payment, as held in 8 Wend. 421, of course no notice was necessary.
    Riddle & Roll, for defendants :
    We contend that the authorities cited by plaintiffs counsel are not applicable to the *case now before the court, as will appear by reference to the cases themselves.
    The note itself shows the character of the transaction. It was, no doubt, passed in the course of trade by Riddle to Parker, who unquestionably was to use due diligence to collect the same of T. L. Hilton, the maker. This is evident from the fact of the delivery of the note to Parker ; for it can not be presumed that Riddle would pass the note to Parker, merely1' to hold in his hands, without any exertion to make the money off the maker of the note. If this was not the intention of Riddle, it seems difficult to determine what induced the transfer to Parker, except- it was done in absolute payment of some debt that might have been due from Riddle to Parker, and taken by Parker as absolute payment. Had it been otherwise, it is quite reasonable to believe that Riddle would have executed his own individual paper to Parker without reference to the note in question. There is no evidence, then, going to controvert the above conclusions. It does not appear that Parker used the slightest diligence to collect the same from the maker; nor is there any evidence that the defendant was notified of the nonpayment of said note after the same became due, which, by the laws of the land, should have been done in order to fix the liability of the defendant. Nor does it appear, in evidence, that the plaintiff ever considered the defendant liable on said note until suit was brought in this ease. We contend that the defendant', in this case, can not be treated by the plaintiff as an original promisor on said note ; for there is no testimony showing that the defendant put his name on said note when it was made, which is necessary to fix the defendant, either as a joint maker or original promisor, or as a surety for the payment of the same. In this-opinion we are sustained by the decision of the court in 9 Ohio, 139, cited by plaintiff’s counsel. It is clear, then, in order to fix the liability of the defendant on this note, that the plaintiff should have notified him of the non-payment by the maker, as we regard that to be the true light in which this transaction is to be viewed, and contend that the settled principles *of law governing [106 negotiable paper and liability of indorsers, must likewise govern this ease.
    We rely on the case of Green v. Dodge and Cogswell, 2 Ohio, 439, in connection with the uniform decisions on the same question, to sustain the defendant in this case.
   Wood, J.

The first count is on a note, not negotiable, being-made payable to Hilton, without the words order or bearer, indorsed before due, and presented for payment on the 10th of December, six days before due, and of which payment was refused, and notice thereof on the same day given to the defendant. The introduction of the note, the only evidence offered, proves only its execution and indorsement. This is clearly insufficient under theaverments in this count. It proves neither the presentment of the note, and demand of payment of the maker when the note became due, nor in a reasonable time thereafter, in the language of the statute, nor notice to the indorser, which is required by all authority, as the indorser’s undertaking is collateral, to pay only in default of the maker, and due notice thereof. But, if the introduction of the note proved every averment made in this count, the plaintiff would be in no better condition ; for the presentment for payment to the maker, refusal, and notice thereof, are laid six days before the note became due, and when there was neither-legal nor moral obligation to pay.

The second count is against the defendant as a guarantor; sets out the consideration of the guaranty, and avers that the defendant thereby agreed to guaranty the payment thereof to the plaintiff, when the note should become due and payable, etc.; and again avers the presentment to the maker for payment, on-the same December 10,1839, and that the defendant afterward had due notice. Here are the same objections to the proof, and if proved, the averments show no right of recovery.

The third count describes the note as made by the defendant to the plaintiff; lays the promise as an original undertaking *to pay the plaintiff $252, ninety days after date; and it is to this count our attention has been specially directed.

The authorities cited, show that it has been held, in some of the states, that where a note, not negotiable, or a note negotiable, by its terms, after due, is transferred, the act of indorsing is a promise to pay the note; that it is, in effect, the creation of a new note between the indorser and the indorsee, and may be declared on .as such. Though the transfer of such note does not give a right of action against the maker, in the name of the indorsee, it is good against the indorser, and is a guaranty that the note will be paid. It is a positive undertaking, and not conditional, to pay, if the maker does not, on demand, 'and notice to the indorser. 8 Wend. 421. There are also other authorities, to the same import, to be found in the books, where such contract has been held to be an original, and not a collateral undertaking.

In Vermont, a different rule prevails. It is there held that the indorsee of a promissory note, not negotiable, follows the law merchant, in making demand of payment, and giving notice of non-payment to the indorser. 1 Vt. 136.

When the decisions of the highest judicial tribunals of our sister states are found to conflict with each other, this court must, of necessity, be left to select from the one or the other, or to prescribe for itself the rule, in our opinion, most conformable to reason and justice, most applicable to our local enactments, in .analogy with our own and the general opinion of the profession, .and, in eases of this kind, with the sense of the mercantile or business community.

In this, however, it would, perhaps, be as difficult to unite our opinions as to reconcile decisions in direct conflict. One member of the court holds the promise as original, as set forth in this count. The majority, however, hold it to be collateral, and subject, in .some degree, to the usages of mercantile law, as applied to the indorsee of negotiable paper; and this opinion is decisive against the plaintiff on this count. It is holden by two of the judges that .a demand upon the maker, when such note becomes due, and rea sonable notice to the indorser, *or notice before suit b rought,' would be necessary to charge the defendant as a guarantor, as. declared against in the second count.

All unite in the opinion, that the name of the payee, in blank, appearing upon the note, is not a guaranty, but an indorsement, while the name of a person, out of the note, appearing upon it,, would be a guaranty. In such case, a majority of the court are of opinion to charge the guarantor. Demand of payment must be-made when the note becomes due, and notice, before suit brought, given to the guarantor; while one member holds that the guarantor is not liable, unless the maker be prosecuted to insolvency, and notice thereof given to the guarantor; and we are unanimous in opinion that such prosecution, though a majority hold it unnecessary, and notice thereof, will enable the plaintiff to sustain the action.

The two first counts were disposed of, in the outset, on different grounds, however. The third is disposed of by the opinion of a majority of the court, that the promise therein laid is not, as-stated, an original undertaking, and is therefore not sustained by the introduction of the note; and there is no evidence to apply to the common counts. Judgment for the defendant.