Case ID: tenn_15/html/0477-01.html
Source: Caselaw Access Project
Author: {"author": "Catkon, Ch. J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

James Smith and Wm. Farrar vs. John McManus.
    The plea of non-assumpsit by an endorser, does not put in issue tlu execution of the note nor the endorsement, unless sworn to.
    The protest of a Notary, with a copy of the note declared on, thereto attached, and his certificate that he had given due notice, is sufficient evidence upon which to charge the endorser under the plea of non-assump-sit.
    When the holder of a note endorses his name upon the same for the purpose of discount, or collection, if the custom of the bank require such endorsement, it does not in case of non-payment, or when he has to take up the note, divest him of the legal title of the note, but he may strike out the same or not as he pleases and sue in his own name, the possession of the note being prima facie evidence of his right thereto.
    This was an action of assumpsit brought against Smith and Farrar as the endorsers of a note under seal, drawn by John Gordon, payable to James Smith at the office of discount and deposit of the Bank of United States at Nashville. The declaration is in proper form. The defendants pleaded, First, non-assumpsit. Secondly, that they had not been regularly and legally notified of the demand and refusal of Gordon to pay the note sued on. Thirdly, after craving oyer of the note sued on, and the several endorsements thereon, and it appearing upon oyer that the note was signed by John Gordon and endorsed by James Smith, William Farrar, and by John McManus, they pleaded, “that the said note was endorsed by said McManus in blank, and delivered to the President, Directors & Co. of the Bank of the United States, and that, by virtue of said endorsement,. the property and right in said note was in the President, Directors & Co. of the Bank of the United States, and that the right to sue thereon was in the said President, Directors & Co. of the Bank of the United States, and not in the said John McManus; and that said McManus had no right or interest in said note, and that he had no to sue thereon,” concluding with a verification, &c. Fourthly; that previous to the transfer of the note to the plaintiff, McManus, Gordon the maker, for whose accommodation the note was endorsed by Smith and Far-rar, in consideration that they would not require indemnity for said accommodation endorsements, agreed to cancel said note, and called witnesses to the fact that said note was agreed to be cancelled, and that he, Gordon, agreed that all the interest that he had in the note was then vested in Smith and Farrar, and that he, Gordon, had no interest therein; concluding with a verification. Fifthly; that the note sued on had been made to be used in bank, but that not being done,-it was agreed by Gordon to be can-celled, and was left in the drawer of Gordon until the key could be found and the same delivered to Smith and Far-rar; that after the same had fallen due, Gordon passed the note to one Wheatly without endorsement, that Wheatly passed the same to McManus; that McManus knew of the rights of Smith and Farrar when he procured the same, and that Wheatly was only the agent of McManus; that McManus obtained the note by deceit and in fraud of the rights of Smith and Farrar, and had no right to sue thereon; concluding with a verification. -Sixthly; that the note was obtained by Wheatly from Gordon by force and duress, and that McManus received the same from Wheatly with a full knowledge of the manner in which said Wheatly had procured the same; concluding with a verification. Seventhly, that the note was endorsed by the defendants for the accommodation of Gordon, to be discounted and passed to the Bank of the United States at Nashville, and that if the same was not passed to and discounted by said bank, then said endorsements were to become inoperative and void; that the note was not so passed to the bank, and that said Gordon agreed to and did cancel the same; that afterwards, McManus, the plaintiff, obtained the same with a knowledge of all the circumstances, and that therefore said endorsements are not their acts and deeds. This plea was sworn to by the defendants. The plaintiff replied to the first, second, third, fifth, sixth and seventh pleas, and the defendants took issue upon the replication. The plaintiff demurred to the fourth plea, in which defendants joined. The jury found the issues in favor of the plaintiff, and the court sustained the plaintiff’s demurrer to the fourth plea. On the trial, the plaintiff below produced the note sued on, which was for five hundred and fifty dollars, and proved the hand writing of the defendants upon the back of the note. The note and the endorsements were offered to be read by the plaintiffs to the jury, to which the defendants objected, but the court ordered them to be read to the jury. The endorsements as read to the jury upon the note were “pay the within to William Farrar, James Smith,” “pay the within to John McManus, William Farrar,” and “JohnM cManus” inblank. The plaintiff then offered to read the protest of the Notary Public attached to the note, and the certificate of the Notary stating he had given due notice, as evidence of demand and notice of non-payment, to-which the defendants objected, but the court permitted the protest and certificate to be read, to which defendants excepted. The plaintiff’ then proved by E. H. Chaffin that it was the custom of the United States Bank at Nashville, when a note was presented either for discount or collection, to require the holder to endorse his name upon the note, and if discounted or paid, the proceeds were entered to his credit, and if not, the note was returned to him. To this evidence the defendants also objected-, but the objection was overruled and the evidence permitted to go to the jury. The plaintiff then proved that the Post Office at Columbia, to which the Notary had certified he had sent notice of non-payment, was the nearest office to defendants’residence, and the one at which they usually did their business. This was all the testimony introduced in the cause by the plaintiff.
    The defendants then proved by Kennard, that the note was an accommodation note; that about the 16th of December 1832, he was at the house of Goidon when he was about to sign a deed of trust to indemnify the defendants. That the defendants were then reading over a 'deed of trust which Gordon was about to sign to indemnify Smith, Farrar and Rainey as his securities, among other claims in notes, mentioned in the deed of trust, was one drawn by Gordon for five hundred and fifty dollars, payable to James Smith in the United States Bank at Nashville, payable twelve months after date, and dated in October 1832, and endorsed by James Smith and William Farrar; when this note, in reading the deed of trust was mentioned, Gordon said, that they might strike that note out of the deed, as he then had the note in his secretary and would hand it over to them, and got up and started to his secretary as if to get the note, but stopped, saying, the note was locked up in the secretary, and his son Newton had the key, but as soon as Newton came home, and brought the key, the note should be given up, or destroyed. Witness, did not see any note at the time, nor any other, nor was the note then stricken out of the deed of trust. Defendants then introduced Jesse G. Rainey, who was also present and heard the facts stated by Kennard, and was also present next morning at Gordon’s, when defendant Smith again applied to Gordon for the note. Gordon said Newton had not yet returned with the key. Smith proposed to break open the secretary, and pay for the lock, to which Gordon objected, saying, the moment he could put his hand upon the note it should be cancelled and delivered up to defendant. Both these witnessesjinderstood from all the parties, that the note was an accommodation note, and endorsed by defendants without any consideration. Defendant then introduced John Gordon Jr., who said that on the 29th of December 1832, he was at the house of John Gordon Sr., (who was his father) and in looking over his papers with his father, he saw the note in controversy, in the secretary of his father. Defendant’s counsel then asked witness if his father did not on that occasion, tell him the note was cancelled by agreement with defendants, and was to be given up to them, and did not further say that he had once given the note to Lorenzo Dowell to deliver it to defendants; which question was objected to by plaintiff, and excluded by the court; to which defendants excepted. Witness then proved that on the 10th of October 1832, and for sometime afterwards, John Gordon was in good circumstances and solvent, and was asked if he had not become insolvent before the note in controversy left his possession; which question was objected to and sustained by the court, and the proof excluded, to which defendants excepted. Defendants introduced Wheatly, who said that on the morning of the 27th of December 1832, sometime before day, he went to the house of John Gordon, and told Gordon he must have some money or something to indemnify him against the claims for which he was bound as his security. Gordon gave him the note in controversy, and said it was as good as the bank of Ophir. Witness was bound as Gordon’s security to an amount larger than this note. Witness, sometime in February 1833, let McManus have the note in payment for debts for which he was bound to McManus. Witness told McManus that he got the note of Gordon and refused to endorse the note to plaintiff, and to be in any shape responsible for or on account of the same. Plaintiff has since told witness, (since the pen-dency of this suit) that he had seen the note before in Gordon’s-possession, and had refused to buy it from Gordon. Gordon broke and left the country on the 30th of December 1832, and has since died.
    The judge charged the jury, if they should believe that plaintiff put his blank endorsement on the note, to enable him to draw the money from the bank for the note, and for the purpose of complying with the rules of the bank, where the note had been made payable by its terms, and that the note had not been paid at maturity but protested for non-payment, and by the bank rc-turned to plaintiff as his note, then the law would under that state of facts, presume the legal right to be in the plaintiff, and he would, in presumption of law, in absence of other proof be the owner, and this would not be altered though the blank endorsement should still remain on the back of the note. Ifthejury shouldbelieve from the proof that the note was an accommodation note, and while in the possession of Gordon and owned by him, and subsequently to defendants endorsement, but before it was put into circulation by Gordon, that.all the parties then concerned, cancelled the same and agreed and promised each other it should not be negotiated but delivered up to defendants, and that Gordon, after in violation of that agreement, did let Wheatly have it, and he let plaintiff have it, with a knowledge of the facts by plaintiff at the time he got it, this would contaminate the note with fraud even in the hands of plaintiff, though the note was not then due. But the law goes further. If plaintiff should have gotten the note under such circumstances as would puta prudent man on the enquiry as to the fairness of the manner of making the note, and he bought it under circumstances shewing suspicion if he desregarded such suspicious circumstances and buys the note notwithstanding, then the law would put him in no better condition than the original parties, though the note is not yet due. But whether there be such circumstances in this case or not, or if any, whether they are sufficient to put plaintiff on his guard and affect him thereby, is a fact tobe decided by the jury. But if there is not proven before you (and you cannot presume it without proof) such suspicious circumstances fixed on plaintiff,- then, though they might have existed and well known to others, yet, if plaintiff bought the note before it was due, he could not be affected by it if he purchased it in a due course of trade, and without any knowledge of any thing wrong in regard to the note as between the original parties; even if it had been , , - . , . stolen and came to plaintiff m lair course of trade, before it was due, that would not affect his right to recover. The Court also told the jury that if a note was made payable in the United States Bank and defendants endorsed it after it was made, they would be bound to a compliance with the rules of said bank. If the note had been regularly demanded and protested at maturity by the Notary Public agreeably to the Rules of said bank for non payment, and notice put into the post office nearest to the residence of the defendants, unless it was proven that they did their business at some more distant office, and that the Notary Public put notices into the next mail after the note was demanded, then the defendants would be fixed with the notice, and so far as that matter was concerned, the plaintiff would have a right to recover, and that the protest and certificates thereon made in this cause was prima facie evidence of the facts of demand and notice as therein stated; and such notice,’if properly made by the Notary Public, would be evidence for the plaintiff in this cause without giving it again. No other part of the charge was excepted to or called for in this cause.
    The jury found a verdict for the plaintiff and the defendants moved for a new trial which was refused by the court, and the defendants thereupon appealed in the nature of a -writ of error to this court.
    
      Gideon J. Pillow, for plaintiffs in error.
    Cobbs, for defendant in error.
   Catkon, Ch. J.

delivered the opinion of the court.

The court is again called upon to say what the effect of the plea of non-assumpsit is in cases where endorsers of a note are sued, and the plea is not sworn to as required by the act of 1819, ch. 42.

The act declares no endorser of a note or endorser of a bond, shall plead any plea denying directly or indirectly such endorsement, unless the plea is accompanied with an affidavit of the truth thereof and subscribed by the party.

In this State we have two descriptions of negotiable notes, one a bill single with a seal, and the other an undertaking in the same form but without a scroll to it. If the former before the passage of the act of 1819 was sued upon the obligor could not plead non est factum, but upon oath; every other plea admitted the execution of the instrument. No reason could be imagined save immemorial usage, why a scroll should give dignity to the the paper. When an actual seal was affixed there was in fact a great difference, as in England where the seals and armorial bearings of families were generally known and hardly capable of being counterfeited; and this continues to be the case in that country. The Legislature of this State believing that to require proof of the execution of an instrument not having a scroll to it, incumbered the ‘administration of justice without cause where the maker of the instrument would not deny it on oath, dispensed with such proof. But i t often happened that although this fact was undisputed, yet that demand had been made of the maker, and notice given to the endorser, was most seriously litigated, and must be put in issue. Then again, in very many cases growing out of the failures of 1819, usury was relied upon as a defence. It soon became a question with the bar how these defences should be made: as to signing or endorsing the paper, not one in a thousand disputed that, but to be driven to a special plea that demand was not made, or that notice was not given, or that usury had been taken, and how much, was most inconvenient, and in case usury was the matter of defence, and very often it was, to prove the plea precisely to meet the proof was next to impossible. The consequence was, the old defence and general issue of non-assumpsit was adhered to. The plea was filed not on oath, and no the trial the courts ruled, and most correctly, that the plea did not apply to a denial ol the making of the note or its endorsement; that these were admitted but that the other defences could be made under the plea. If the suit was upon the note against the maker, no proof was required on part of the plaintiff, if the plea of non-assump-sit was filed, the defendant was holden to admit the prima facie cause of action, as if payment had been pleaded to an action of debt upon a bill single; and so when an endorser was sued, no proof was required but demand and notice to fix him. The existence of the paper as described in the declaration was admitted by the plea, and to-establish the demand and notice, it furnished no evidence if produced, and therefore its production became unnecessary upon the trial. The same legislature, (1819 ch. 48,) declared that the protestation of Notaries Public should be evidence. This however not-being sufficiently explicit, at the next session, (1820, ch. 25, sec. 4,) it was enacted that the protest of the Notary of nonacceptance, or non-payment of negotiable paper, and his certificate that he had given notice to the endorsers, should be prima facie evidence of the fact of notice, as well as of demand. The note was copied out in the protest and given in that form in evidence in this cause; and which protest was sufficient evidence of demand and notice. It was precise in its character, and the production of the original note could not have been of the least aid to the jury.

The second objection is, that the note had two endorsements, and that the plaintiff also put his name on the paper when he deposited it in the United States Bank where it was payable. The endorsements were all in blank up to the trial when the two first were filled up, the second of course to the plaintiff. It is insisted the third endorsement vested the title of the note in the Bank. Mr. Chaffin proves the rule of the Bank is to require of those who deposite notes there for collection to endorse their names on them, and for the very plain reason that if the note is paid, the Bank must know who is the owner, as she is not. To the last endorser the Bank pays the money, and to him if the payment is not made, the note is returned. Had the Bank discounted the paper and the last endorser been compelled to take it up, an , occurrence of every day, no necessity rested on him to prove the want of integrity and failure to pay of the maker and previous endorsers, his having possession of the paper would be sufficient to authorise him to fill up any previous endorsement to himself on the trial of the cause and strike out subsequent or intermediate ones. Chitty ons Bill 370. The plaintiffs right to sue was clear both upon the fact that the Bank have had title, and upon the law grounded on the prima facie evidence of title, that the possession confers on the holder of negotiable paper endorsed in blank or payable to bearer. These being the-only objections to the proceedings below, the judgment must be affirmed.

Judgment affirmed.