Case ID: ala_98/html/0484-01.html
Source: Caselaw Access Project
Author: {"author": "COLEMAN, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Hood v. Robbins & Smith.
    
      Action on Promissory Note by Payee Against Accommodation Indorsers.
    
    1. Alteration of indorsement, changing the UahiUtg of indorser. — The owner of indorsed paper, indorsed' in blank, may write above the name of the indorser whatever is necessary to invest him with the legal title, or confirm his ownership, but not to change the liability of the indorser, or take away any legal defense to which he may be entitled.
    2. Accommodation indorser, when not liable. — The original payee of a note made and indorsed purely for his accommodation, cannot maintain an action against the drawer, nor against such indorser, there being no consideration moving to or from the payee. A plea of want of consideration, in an action against such accommodation indorser, is a full answer to the suit.
    3. Irregular indorsement,. — A promissory note, or bill, in the hands of the original payee, indorsed for his accommodation, after its execution and delivery to him, by indorsement without new consideration moving to or from the payee, is, as -to such holder, an “irregular indorsement,” and no more than an undertaking by such indorsers, “to answer for the debt, default or miscarriage of another,” and void under the statute of frauds in failing to express the consideration.
    4. Hamit; bona fide holder, who is not. — Such holder of such irregularly indorsed paper, is not entitled to the protection of the commercial law, and cannot be considered as an innocent bona fide purchaser.
    Appeal from Selma City Court.
    Tried before the Hon. J ON. HaralsoN.
    This action was brought to the June Term, 1891, of the City Court, against Robbins & Smith, a partnership, as in-dorsers of a promissory note made by the H. C. ICeeble Company, a corporation, payable to the plaintiff on demand, at the Commercial Bank of Selma, and which bore date, November. 18th, 1890. The complaint alleges demand upon the maker, refusal of payment, protest and notice to tbe defendant indorsers. Tbe defendants answered by pleas setting np a failure by tbe payee to give due notice to defendants of tbe refusal of payment by tbe maker, and tbat defendants were accommodation indorsers of said paper, wbicb was known to tbe plaintiff, wbo extended tbe time of payment in consideration of a partial payment by tbe maker ; and tbat tbe indorsement of -^defendants was an undertaking by tbem to answer for tbe debt or default of another without expressing any consideration therefor. Issue was joined on these pleas, and tbe cause was submitted for judgment to tbe presiding judge, without a jury.
    On tbe trial it was aclmitted tbat tbe note sued on was made by tbe H. 0. Keeble Company, and delivered to tbe plaintifí on tbeTBtb of November, 1890, and tbat it was endorsed by tbe defendants in their firm name about a month afterwards while it was in tbe possession of tbe plaintiff as a valid evidence of debt against tbe said Keeble Company. Tbe plaintiff offered in evidence tbe note sued on wbicb bad tbe following endorsement thereon : “In consideration of tbe postponement of demand of payment of tbe within note we hereby endorse tbe same,” signed: “Bobbins & Smith.” Thereupon tbe defendants examined J. B. Satterfield, as a witness, in order to lay a predicate for an objection to tbe introduction of tbe evidence offered. It was shown by this witness tbat said above writing on tbe back of tbe note, above tbe name of Bobbins & Smith, was written since tbe commencement of this suit; tbat there was no writing above tbe endorsement prior to tbat time. Then tbe defendants made objection to said writing being offered in evidence, (1), because tbe same was written there without tbe consent of defendants, and objected to tbe whole note ; (2), because said writing changed tbe contract of said endorsers, tbe defendants. .The court sustained tbe first objection and refused to allow said writing, above tbe endorsement, to be read, but overruled tbe objection to tbe other portions of tbe note being given in evidence.
    Tbe defendants then showed by H. C. Keeble, that tbe defendants, did not owe this debt, or any part of it, originally, nor did they receive any part of the consideration, but tbat they indorsed it for tbe accommodation of tbe H. C. Keeble Company. On cross examination this witness testified tbat tbe H. C. Keeble Company owed tbe plaintiff before any note was given; tbat in tbe fall of 1890, tbe plaintiff said be wanted tbe money, and tbat if witness would give him a demand note with indorsers be would accept it as cash; tbat witness saw Bobbins & Smith,,wbo agreed to endorse tbe note; that tbe note was made, and indorsed by Robbins & Smith, and was given to plaintiff, wbo went off with it. Tbe plaintiff would not take tbe note of tbe H. C. Keeble Company, without indorsement. There was evidence of partial payments made, about which there was.no conflict of testimony. '
    The - plaintiff, testifying in rebuttal, said that the indorsement of the note by Robbins & Smith, was made about the 18th of December, 1890 ; that the note had been made by the H. C. Keeble Company, about the 18th of November, 1890 ; that on the former date he saw H. C. Keeble, of the H. C. Keeble Company, and told him that I would like to have the money on the note; Keeble said he had some heavy payments to make, and that he would be glad if I could wait. I told him if I deferred the payment I must have security. He asked what security I wanted, and I told him a good indorsement. He then asked me if Robbins & Smith, were good enough, I said they were. He asked me to go and get James Craig Smith, to come down. X found Mr. Smith, and he and I went together to the H. C. Keeble Company’s Store. Mr. Bennett asked me for the note which I handed him. He had some conversation with Mr. Smith, and handed him the note, which Mr. Smith indorsed. Mr. Bennett brought the note to me, I thanked him, and walked out. There was a payment made by the H. C. Keeble Company on the note, on the 80th of December, 1890. There was a demand made for the balance on the 7th of May, 1891, which was refused, and the note was thereupon protested. This was all the material evidence. The court rendered judgment on the evidence in favor of the defendants, and the plaintiff excepted, and brings this appeal! The errors assigned are, that the court erred in rendering judgment for the defendants; and, in refusing to allow the plaintiff to read in evidence the writing on the back of the note, above the names of Robbins & Smith.
    Satterfield & Young, for appellant.
    1. The statute of frauds does not apply to commercial paper. 1 Dan’l on Neg. Insts. § 567; Throop on Verbal Agreements p. 159, § 85; Chitty on Bills, 4; Butler v. Prentiss, 6 Mass. 430; Taylor v. French, 2 Lea (Tenn.) 260. 2. That the holder of a note indorsed in blank, may make the blank indorsement a special one, and such indorsement then becomes a contract in writing within the meaning of the Statute of frauds, Randolph on’ Com. Paper, Vol. 2, § 708; 1 Dan’l Neg. Ins. § 144.
    
      Pettus & Pettus, for appellees.
    [No brief came into tbe bands of tbe Beporter.]
   COLEMAN, J.

It appears to,us that a mere statement of tbe facts of this case is sufficient to justify tbe ruling of tbe trial court upon tbe questions assigned as error.

H. C. Keeble & Co., for a past due indebtedness, executed tbeir negotiable promissory note to plaintiff, Hood, payable on demand, for tbe amount of said past indebtedness. Some thirty days after tbe execution of tbis note, tbe defendants, Bobbins & Smith, indorsed tbe same in blank, and when thus indorsed, tbe note was re-delivered to plaintiff. There was no consideration for tbe indorsement of tbe note by Bobbins & Smith, and none expressed, and tbe terms of tbe note remained as when executed by Keeble & Co., a note payable on demand. Tbe note was never negotiated, but remained in tbe bands of tbe payee, who instituted tbe present action against tbe indorsers. After tbe suit was brought, tbe plaintiff wrote across tbe hack of tbe note, over tbe signature of tbe indorsers, as follows : “In consideration of tbe postponement of demand of payment of tbe within note, we hereby indorse tbe same.” It is admitted that - the in-dorsers, tbe defendants, knew nothing of tbe writing of tbis assumption above tbeir names, and .that it was made in tbeir absence, and without tbeir knowledge, and was never ratified by them.

Appellant contends that, as tbe indprsement was in blank, tbe bolder was authorized to fill out the blank in such manner as be saw proper. Tbis is an entire misapprehension of tbe rule, which permits tbe bolder of indorsed paper to fill blanks in tbe indorsement. Tbe owner of indorsed paper may write over tbe name of an indorser, who has indorsed a note in blank, whatever may be necessary to invest him with tbe legal title, or confirm bis ownership, but no rule of law will authorize' tbe bolder, by an indorsement on tbe back of tbe note, to change tbe liability of tbe indorser, or take away any defense which legally pertains to tbe indorser. With equal propriety, a bolder who bad neglected to protest or give notice of protest, might, deprive the indorser of such a defense, or be could write any statement to destroy any other legal defense of tbe indorser. Tbe plaintiff misapprehended tbe principle of law invoked by him. Principles of law which protect commercial paper apply after it has been negotiated, for tbe protection of innocent bona fide purchasers. Gilman v. New Orleans & Selma R. R. Co. 72 Ala. 583; Connerly v. Planters Ins. Co., 66 Ala. 432.

As between tbe original parties to tbe note, those wbo are fully advised of all tbe circumstances attending its making and indorsement are not regarded as innocent bona fide purchasers. Tbe payee of a note made purely for bis accommodation can not maintain an action against tbe drawer, nor against tbe indorser wbo indorses it purely as an accommodation for tbe drawer, there being no consideration moving to or from tbe payee. In the present case, tbe note was given to Hood for a past due indebtedness to him, and it was made payable on demand. In this condition, and without an extension of time, or any other consideration, some thirty days after its execution by tbe maker, it was indorsed by tbe defendants purely as an accommodation to tbe drawer, all of which was fully known to tbe plaintiff. Tbe plea of want of consideration, predicated upon these facts, was an answer to tbe suit.

We further bold that, as to the payee, under tbe facts, tbe indorsement was “an irregular indorsement,” and was no more than an undertaking “to answer for tbe debt, default, or miscarriage of another,” and is void under tbe statute of frauds, in failing to express tbe consideration.

We do not decide that tbe statute of frauds applies to commercial paper, but we have said no paper- is entitled to tbe protection of the commercial law, not held by an innocent bona fide purchaser. In tbe bands of tbe payee, wbo has parted with nothing, wbo has neither assumed any obligation, nor parted with any right, wbo received tbe paper with a full knowledge of all the defenses against its binding-force, a paper, however strictly commercial in form, is not entitled to tbe privileges and protection accorded to such an instrument after it has been negotiated, and thereby made commercial paper in its true sense. Dunbar v. Smith, 66 Ala. 490. Tbe evidence fully sustains tbe pleas of tbe defendants.

There is no error in tbe record, and tbe judgment must be affirmed.

Affirmed.