Case ID: ad_138/html/0208-01.html
Source: Caselaw Access Project
Author: {"author": "Scott, J.:", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Elizabeth W. George, as Committee of the Person and Property of Clara G. Barnabee, Respondent, v. Charles R. Bacon, Appellant.
    First Department,
    May 20, 1910.
    Bills and notes — liability of indorsers as among themselves — when prior indorsers can hold subsequent indorser for contribution.
    While indorsers of a negotiable instrument, as respects one another, are prima facie liable in the order in which they indorse, it may be shown that they agreed otherwise. Such agreement need not be established by proof of a formal contract. It is sufficient if the surrounding circumstances indicate that the indorsements were made upon an understanding that all indorsers should ■ participate in the liability.
    Thus, where several parties indorse a. promissory note to enable a stranded theatrical company to get home, and to give the instrument credit with a bank, so that all are equally benefited, a prior indorser who has been compelled to pay may maintain an action against a subsequent indorser for contribution.
    Appeal by the defendant, Charles R. Bacon, from a judgment of the Supreme Court in favor of the plaintiff, entered in the ..office of the clerk of the county of New York on the Ith day of January, 1910, upon the verdict of a jury rendered by direction of the court, and also from an order entered in said clerk’s office on the 16th day January, 1910, denying the defendant’s motion for a new trial made upon the minutes.
    
      
      Jacob Klein, for the appellant.
    
      Harry D. Kims, for the respondent.
   Scott, J.:

This is an action for contribution by one indorser upon a promissory note against a subsequent indorser. The defendant appeals from a judgment upon a verdict directed by the court. The note was signed in the name of The Bostonians Incorporated,” by its president. The corporation whs engaged in giving operatic performances. Its principal office was in the city of New York, at the office of Loudon G. Carleton (also an indorser), who was an officer and general director of the company. The defendant Bacon was manager of the company and acted as treasurer while the company was traveling. Barnabee, the president, was one of the performers, as was also McDonald, an indorser. The incompetent plaintiff was the wife of Barnabee, and it was she who ultimately paid the note. The company appears to have been stranded in. Pittsburg and needed money to get home. The note, after it had been indorsed by all of the indorsers was discounted at the New Amsterdam Bank, and the proceeds were checked out by the defendant Bacon in pursuance of the purposes for which the note was made. Bacon made the arrangements with the bank for the discount of the note and procured it to be signed by the president. It does not appear whether or not the incompetent signed at liis request. The incompetent’s indorsement is the third in order and Bacon’s is the fifth. The defendant relies solely upon section 118 of the Negotiable Instruments Law (Gen. Laws, chap. 50; Laws of 1897, chap. 612; now Consol. Laws, chap. 38; Laws of 1909, chap. 43), which reads as follows: “Order in which indorsers are liable.— As respects one another, indorsers are liable prima facie in the order in which they indorse; but evidence is admissible to show that as between or among themselves they have agreed otherwise. Joint payees or joint indorsees who indorse are deemed to indorse jointly and severally.”

If there was sufficient evidence in the case to justify a finding that the parties had otherwise agreed among themselves, thq prima facie presumption disappears, and the indorser who actually pays the note is entitled to contribution. And it is not necessary that there shall be proof of an actual formal contract in so many words.

It is sufficient if the surrounding circumstances indicate that the indorsements were made upon the understanding that all the indorsers should participate in the liability.

“ Their Lordships see no reason to doubt that the liabilities inter se of the successive indorsers of a bill or promissory note must, in the absence of all evidence to the contrary, be determined according to the ordinary principles of the law-merchant. He who is proved or admitted to have made a prior indorsement must, according to these principles, indemnify subsequent indorsers. But. it is a well-established rule of law that the whole facts and circumstances attendant upon the making, issue and transference of a bill or note may be legitimately referred to for the purpose of ascertaining the true relation to each other of the parties who put their signatures upon it, either as makers or as indorsers; and that .reasonable inferences, derived from these facts and circumstances,, are admitted to the effect of qualifying, altering or even inverting the relative liabilities which the law-merchant would otherwise assign to them.” (Macdonald v. Whitfield, L. R. 8 App. Cas. [H. of L.] 733, 744.) “ It was not necessary that there should be a contract in so many words to sign as co-sureties. It was sufficient if it appeared, taking all of the circumstances into account, that that was the nature of the liability which, as between themselves the parties intended to assume and did assume.” ( Weeks v. Parsons, 176 Mass. 570, 575.) The significant circumstance in the present- case is that all of the indorsers were engaged in a common enterprise; that the money to be raised on the note was for the furtherance of that enterprise, and, so far as appears, that one indorser was as much interested in the enterprise, and as much to be benefited by raising the money, as was any other. It is likewise a very significant circumstance, as bearing upon the mutual obligations of the indorsers to each other, that all the indorsements were put on the note before it was issued, and solely to give it credit with the bank, and that no indorser gained any profit or advantage from the iiote except such as was shared by all in the pursuit of the common enterprise. (Hagerthy v. Phillips, 83 Maine, 336.)

“ The indorsements upon bills of exchange or promissory notes. rest upon the theory that the liability of indorsers to each other is regulated by the position of their names, and that the paper is transferred from the one to the others by indorsement. But this rule has no practical application to accommodation indorsers, where neither of them has owned the paper and no such transfer has been made.” (Easterly v. Barber, 66 N. Y. 433, 437.)

We are, therefore, of the opinion that enough appeared to justify a finding that the indorsers upon the note, as between themselves, became joint sureties for the payment of the note, and that the incompetent, having paid it, was entitled to contribution from her coindorsers. The defendant offered no evidence and made no request to go to the jury, contenting himself with a motion to dismiss the complaint upon the plaintiff’s proofs.

It follows that the judgment and order appealed from must be affirmed, with costs.

Ingraham, P. J., Lahghlin, Glares and Miller, JJ., concurred.

Judgment and order affirmed, with costs.