Case ID: tenn_27/html/0216-01.html
Source: Caselaw Access Project
Author: {"author": "GReen, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Mitchell vs. Planters Bank.
    1. An endorsement made on an executed consideration, is void, and no action lies oil it; where, however, anoto was directed to be discounted, upon condition, that a particular individual should endorse it, and such individual afterwards endorsed it, he would bo liable on his endorsement, though the money may have been obtained thereupon before he endorsed.
    2 A declaration made by the cashier to the directors of a bank in session, that a particular person would endorse a note offered for discount, and upon which understanding it was discounted, is held to be competent testimony.
    Galbreath, Cromwell & Co. was indebted by note to the Planters Bank $5000. They wished to renew the note on the payment of $500. Accordingly a new note for $4500, with Terry and McKeage, was offered. The directors regarded the endorsers as unsatisfactory, and declined discounting it. It was then stated to the directory that Mitchell would endorse the note. The board then directed that the note be discounted, upon condition, that Mitchell would endorse it for the applicants. This statement was made to the board by the cashier, McLain. The sum of $500 was paid. The amount of the note for $4500 was drawn out by check of Terry, last endorser on the note as offered to the directors, and paid to the bank, and thdhote for $5000 surrendered. Subsequently Mitchell endorsed the note. The entries on the books of the bank showed an unconditional discount of the note on the 2nd of February. On the 5th Mitchell endorsed the note for $4500.
    The bank sued Mitchell in assumpsit in tbe circuit court of Montgomery county, and on the plea of non-.assumpsit the matter was submitted to a jury on the above facts. Martin, judge, .presiding, charged the jury, “that if the books of the bank showed that the note sued upon was discounted before. Mitchell endorsed the note, and the proceeds drawn out upon tbe check of Terry, still tbe bank might show that tbe directors discounted it upon condition, that Mitchell’s endorsement was had, and that it was competent for the bank, through its directors, to discount it conditionally. And if the note was discounted upon condition, that Mitchell’s endorsement was procured upon it, Mitchell would be bound upon his endorsement made after the proceeds was checked by Terry’s check, whether he knew or not, that his name was promised upon the note.”
    The jury rendered a verdict for the plaintiff, and judgment was rendered thereupon. The defendant appealed.
    Shackleford, for plaintiff in error.
    We think the court below erred in the charge to the jury, wherein it charged, “that if the books of the bank show, that the note sued on was discounted before Mitchell endorsed the note-, and the proceeds drawn out upon the check of Terry, still the bank might show that the directors discounted it upon the condition,that Mitchell’s endorsement was had; and that Mitchell would be bound upon his endorsement made, after the proceeds of the note was checked by Terry’s check, whether he knew or not that his name was promised upon the note.” -
    The endorsement of Mitchell, in this case, was subsequent to the creation of the debt, and was not the inducement to it. To bind him there must be some further consideration shown, having an immediate respect to such liability, for the consideration of the original debt will not attach to this subsequent promise, and falls within the principle of the second class of cases, in Hill and Rogers, 7 Humph. R. 540..
    If Cromwell did promise the bank Mitchell’s endorsement, he was no party to it, and was not informed his name had been-promised to the bank, and the note'having been negotiated before his name was put on it, his was an endorsement without any consideration, for the bank parted with nothing valuable upon his endorsement, the contract having already been executed before Mitchell endorsed the note. 7 Humph. Rep. 540. 4 Pickering’s Rep. 386. 6 Yerger’s Rep. 418-8 Johnson’s Rep. 39. Where the promise is grounded on a past consideration, all the authorities agree it must be al-ledged to be done on the request of the party promising, or at least it must appear the party promising was under a moral obligation to do the act himself, or cause it to be done. 7 Johnson’s Rep. 88. 1 Saunders, 264, note 1. 2 Cow. Rep. 404. Story on promissory notes, 587.
    In the case of an endorsement after a note is made and discounted, the plaintiff must prove a consideration to bind the endorser. See the cases above referred to. 4 Pickering, 386. Story on promissory notes, 587.
    The court also erred in admitting the declarations of McLean, which are merely hearsay, and inadmissible.
    
      E. II. Foster, jr., for defendant in error.
    It is not necessary that the proceeds of accommodation 'paper shall be applied to the check of the last endorser, but it is sufficient to apply them to the paper of the drawers without a check.
    But it is said; that because defendant’s endorsement .was made after the proceeds were applied by the cashier, that the contract was already executed, and there is no consideration for his endorsement.
    The board authorized the cashier to discount the note, with the addition of another name — Mitchell’s name — and the note could not have been discounted by' the cashier until the name was procured, and if he chose to apply the proceeds of this note, and deliver up the $5000 to G., C. & Co. before he obtained defendant’s endorsement, the bank is not bound by his act, because he transcended the authority delegated to him. It is neither the duty nor the privilege of cashiers to discount paper; it is the duty of aboard of directors, and if they del-, egate this power, the terms of their order must be strictly pursued. Banks are not bound by the acts of their agents, out of the scope of their employment. 2 Cranch, 127. 2 Black. R. 475. 5 Wheat. R. 326. 17 Massachusetts R. 510.
    The cashier must have informed the parties of the order of the board; if not, why does the name of Mitchell appear on the paper? _ An agent who departs from the conditions of an authorized duty cannot bind the corporation. See 10 Mass. 397.
    The note was not regularly discounted before Mitchell’s name was procured, and G., C. & Co. were liable to be sued’ upon the $5000 note in their possession. Was not this sufficient consideration for Mitchell’s endorsement?
    Although the endorsement was made afterwards, it becomes an original promise. See 11 Mass. 436, Moses vs. Bird.
    
    Meigs, for plaintiff in error.
    The fact does not seem to admit of doubt, that this vote was discounted by the bank, and the money paid on the check of the last' endorser,—
    1. Before Mitchell endorsed it;
    2. Without any previous promise by him that he would endorse it.
    An executed consideration is not sufficient to- support a subsequent promise, unless the service was done, or act performed at the request of the party promising; in that case, the request precedes and induces the act or service, and the promise becomes connected with it. Comyn’s Digest, action on the case upon assumpsit, B. 12; Payne vs. Wilson, 7 B. & C., 426. Burge on suretyship, 14. Story on contracts, section 469-475’.
    Negotiable paper does not form an exception to this rule, unless it has passed into the hands of an innocent holder. The immediate parties to a bill or vote, equally with parties to other contracts, are affected by the want of consideration'; and it is only as to third persons, who come to the possession of the paper in the usual course of trade, and for a fair and valuable consideration, without notice of the original defect, that the want of consideration cannot be alleged.
    “Unless the holder received the paper, not only without notice, but in the course of business, and for a fair and valuable consideration given or allowed on his part, on the strength of •that identical paper, he is as liable as any other claimant under a simple contract,'to have the consideration impeached. Bay vs. Coddington, 5 J. C. R., 56-7; 2 Kent’s Com., 463-4.
    In this case the bank did not let Galbraith, C. & Co., have the money on the strength of the identical paper, now sued on; the money was lent not in consideration of Mitchell’s endorsement, nor in consideration of his promise to endorse it in future, nor in consideration of his request that the bank would discount the paper.
    On the contrary, the bank discounted the note in consideration of the making and endorsement of others; and gave nothing for Mitchell’s endorsement, — neither money, forbearance, or aught beside.
    2. But, indeed, Mitchell is a guarantor of the payment of this previously existing debt of others; in which case, the consideration must appear in proof as part of the collateral undertaking. Now, there is no proof of any consideration between Mitchell and the Bank to sustain his guaranty.
   GReen, J.

delivered the opinion of the court.

This is an action of assumpsit against the plaintiff ,as the endorser of a promissory note for $4500.

The note on which this suit is founded, was made by Gal-breath, Cromwell & Co., and endorsed for the accommodation of the makers, by John McKeage, Wm. M. Terry, and the plaintiff in error, R. B. Mitchell. The same makers, had a note for $5000, endorsed by McKcage and Terry, which fell due at the branch of the Planters Bank at Clarksville, the 2d of February, 1842. This note for $4500 and $500 in cash, paid by the makers were applied to the discharge of said $5000 note. The note for $4500, when first presented to the bank, was endorsed by McKeage and Terry only: and a check signed by Terry, was handed to the cashier at the time- the note was placed in his hands, the note and check both bearing-date, the 2d of February, 1842, and the date of this note, (on which the name of Mitchell, appears as an endorser) on the books of the bank appears to have been made the 2d of February, 1842.

The defendant below, proved by B. H. Logan, a member of the firm of Galbreath, Cromwell & Co, that on Saturday, the 5th of February, 1842, McLean, then cashier of the bank took the note to the warehouse, where witness was, and stated that Mitchell’s name had been promised on it. A short time thereafter, the witness presented the note to Mitchell, and obtained his endorsement on it — Mitchell did not hear McLean state that his name had been promised on the note. A. H. Cromwell, provéd that he did the business of the firm in bank; that he handed to the cashier, McLean, the note, and check, the 1st or 2d of February; — that nothing was said about an additional endorser, and that he had never said anything to Mitchell about endorsing the note, nor did he promise McLean, that it should be endorsed by Mitchell.

William Broadus proved that he was a director of the bank, when the note was discounted, and he thought the note was presented to the board at a called meeting, on the 1st of February, that McLean said Cromwell had assured him, Mitchell’s name should go on the note, that the board instructed McLean to take the note, provided Mitchell’s name should be put on it; — that the regular meeting of the board was on Thursday, the 3d of February, at which time, witness saw the note, and thinks Mitchell’s name was on it.* James McClure proved that he was a director of the bank in February, 1842; that when the note was offered for discount, the 1st of February, he was present; that the directors refused to discountit; that the board was told that Mitchell would endorse the note, and they instructed McLean, the cashier, to receive the note, and pay over the proceeds in so 'much discharge of the $5000, if Mitchell should endorse it. There was no rule of the bank, authorizing the cashier to receive a note in payment of a debt due the bank unless it was first presented to the board. The note was discounted on condition that Mitchell would endorse it. The defendant objected to the witness’ statement, as to the statement of McLean to the board, that Cromwell had promised that Mitchell should endorse the note.

The court charged, “that if the books of the bank show that the note sued upon was discounted before Mitchell endorsed it; and the proceeds were drawn out on the check of Terry, still that the bank might show that the directors discounted it upon condition that Mitchell’s endorsement was had, and that it was competent for the bank through its directors, to discount it conditionally; — and if the note was discounted upon condition that Mitchell’s endorsement was procured upon it, Mitchell would be bound upon his endorsement made after the proceeds was checked out by Terry, whether he knew or not, that his name was promised upon the note.” The jury found for the plaintiff, and the defendant appealed to this court.

1. It is now insisted that the court erred in charging the jury that Mitchell was bound by his endorsement, made after the note was discounted, whether he knew his name was promised or not, — if the note was discounted upon condition that Mitchell’s endorsement was procured upon it. We do not think his honor erred in his instruction to the jury. He left the question of fact, whether the original contract was complete before the plaintiff in error, endorsed the note, — fairly to the jury, to be decided by them, upon the evidence. And we think he stated the law correctly, upon the hypothesis suggested in the instruction. It was unquestionably, competent for the board of directors to agree to~ accept the note offered, pn condition the name of Mitchell should be procured upon it. And unless this condition were complied with, the note could not be regarded as having been discounted, and the bank might .proceed upon the old note. If for want of demand and notice, the endois-ers upon the old note were not fixed — the bank might have elected to sue the drawer of that note forthwith; or the note as offered, with the two endorsers only might have been re-* ceived, unconditionally, as the best that could be done.

But whatever course the bank might have pursued, in case Mitchell’s name had not been obtained, is a matter of no consequence, in considering the character of the contract, as it was actually made. If the note was discounted, upon condition that Mitchell would endorse it, and in pursuance of this arrangement, he did endorse it, his endorsement would constitute a part of the original contract, which contract was not complete, until the name of Mitchell was placed upon the note. Nor was Mitchell at all injured by this arrangement. The fact, that the directors were told he would endorse the note, and their agreement to discount it on that condition, could not affect his perfect freedom of will, either to endorse it, or not, as he might choose. Nor could the absence of knowledge on, his part, that his name had been promised, in the least degree, influence his conduct. The suggestion, therefore, that this conditional arrangement, was a fraud upon Mitchell, is without foundation.

The authorities cited for the plaintiff in error, establish, beyond doubt, that a promise must have a consideration to support it: — ^nd that if a party agree to be liable for an obligá-lion already existing between other parties, there must be a new consideration, passing at the time. But that question does not arise in this case. Iiis honor told the jury, that if the directors discounted the note, on condition, Mitchell’s name should be obtained upon it, he would be bound by his endorsement. ' In the case put by the court, Mitchell’s endorsement constituted part of the contract, by which the proceeds of this note were to be applied to the credit of the makers. That contract was not complete, until the condition was performed; and when his endorsement was made, the makers were to be entitled to the proceeds of the note; so, that the proceeds of the note, received by the makers, constituted the consideration for Mitchell’s endorsement, made for their accommodation.

2. It is objected, that the court permitted the plaintiff to prove that at the time the note was offered for discount, McLean, the cashier, informed the directors, that Cromwell had promised Mitchell’s name on the note. It is insisted, this is hearsay testimorfy, and therefore incompetent-.

We think this evidence was clearly admissible. It was part of the res gesta, and is necessary for explaining the character of the contract, and the consent of the directors, that the note should be discounted, on condition, the promise so communicated to them should be fulfilled.

There is no error in the record, and the judgment will be affirmed.