Case Name: Carter, Rice & Co., Respondent, v. John Howard, Appellant
Court: New York Supreme Court, Appellate Term
Jurisdiction: New York
Decision Date: 1896-06
Citations: 17 Misc. 381
Docket Number: 
Parties: Carter, Rice & Co., Respondent, v. John Howard, Appellant.
Judges: 
Reporter: New York Miscellaneous Reports
Volume: 17
Pages: 381–386

Head Matter:
Carter, Rice & Co., Respondent, v. John Howard, Appellant.
(Supreme Court, Appellate Term,
June, 1896.)
1. Pleading — Answer.
A mere recital in the answer in an action against the indorser of a promissory note of a judgment upon the original debt against the maker does not present the defense that plaintiff had elected to retain the debt and surrender the note.
2. Trial — Issues not pleaded.
Consent to the litigation of issues not pleaded may be inferred from the admission, without objection, of evidence otherwise irrelevant, or acquiescence by the litigants in a charge upon those issues.
3. Res adjudieata — judgment against maker of note.
A judgment against the maker of a note on the original debt is not res adjudieata in a subsequent action against the indorser.
4. Negotiable paper — Indorser — Merger.
Where an indorsed note has been accepted in payment of an indebtedness, the creditor has no right of election, and a judgment against the maker on the original debt does not merge the note as to the indorser thereof. ■ "
Appeal from a judgment of the General Term of the City Court-of Hew York, which affirmed á judgment for the plaintiff rendered at Trial Term of the same court upon a verdict.
Action by the payee, against the indorser, upon a promissory note indorsed for the accommodation of the maker.
Spellissy & Gray, for appellant,
Howard A. Sperry, for respondent. •

Opinion:
BischoFf, J.
For the amount of his precedent debt one Mc-Munn gave to the plaintiff, a corporation, his promissory note, pay able to the latter's order, and indorsed by the defendant. At maturity the note was only partly, paid, and thereafter, in an action upon the- original debt, the plaintiff had judgment by default against McMunn for the balance due.' Failing to realize upon such • judgment the plaintiff brought this action upon the note, against the indorser only, and had judgment therein for such balance.
• The complaint contained the averments necessary to charge the defendant with liability as prior indorser, and the answer denied them. . For further defenses the answer interposed (1) a recital of' the' judgment recovered against the maker of the note upon the original debt; (-2) an alleged agreement between the plaintiff and the maker, whereby the time of payment of the note was extended without the defendant's assent; and (3) payment. ¡No evidence was given upon the trial in support of such second and third defenses; and the contention of the defendant was mainly with regard to the defense that, by proceeding against the maker upon the 'original debt, the plaintiff had elected to repudiate the note- and to discharge the maker, ¡as well as' the defendant, from all liability thereon. .
In passing, we may say that the mere recital of the judgment upon the original' debt against the maker of the note did not present' the defense that the plaintiff had elected to retain the debt and surrender the note. Such recital was no more, than a statement of evidence, and did not involve an averment of the ultimate fact,, the election. It was not for that reason issuable. Pomeroy's Remedies & Remedial Rights, § 526, 687; Bliss' Code Pl., § 206; People v. Ryder, 12 N. Y. 433. It was competent to the parties, however, to litigate a defense not pleaded, by consent, and the 'consent is in the casé at bar inferable (1) from the admission, without objection, of evidence otherwise irrelevant, the judgment, . and (2) from the charge of the trial court, acquiesced in by' the litigants. Frear v. Sweet, 118 N. Y. 454.
We assume the fact to be.as contended by the defendant, that the judgment against the maker of the note in suit included the debt for which the note was given.. But even so, it does hot follow that the recovery below was unauthorized.
When the cause was about to be submitted to the jury the defendant's counsel moved the dismissal' of the complaint and to the denial of the motion ah exception appears of record. ¡No ground for the motion was stated at the time, but thb.motion purported to be a renewal of the one made when the plaintiff had' concluded its introduction of direct evidence, and the grounds then specified were (1) that the evidence was insufficient to overcome the legal intendment of the defendant's liability as an indorser subsequent to the payee, issuing from the note itself, and (2) that the judgment against the maker for the original debt merged any cause of action upon the note.
Two of the plaintiff's witnesses, Sloat and Sperry, had given .testimony to the effect that the defendant, when he indorsed the note, knew that the maker intended to use it in settlement of his indebtedness to the plaintiff; that the defendant indorsed the note for the maker's accommodation alone; and that the latter did, iqoon the faith of the note, and its indorsement by the defendant, secure the desired credit, otherwise abundantly appeared. Within the rule adjudged in Moore v. Cross, 19 N. Y. 227, and Coulter v. Richmond, 59 id. 478, the evidence alluded to, if credited by the jury, entitled the plaintiff' to a recovery in this action (waiving for the moment the defense next to be discussed), the discharge of the maker's precedent debt, or. the plaintiff's- forbearance to collect, being each an adequate consideration for the indorsement. Mayer v. Heidelbach, 123 N. Y. 332; Traders' Nat. Bank v. Parker, 130 id. 415; Cook v. Rowell, 88 Hun, 620; Berner v. Kaye, 14 Misc. Rep. 1; 35 N. Y. Supp. 181. The first ground of the motion under review was, therefore, properly overruled.
With regard to the second ground of the motion it is. open to debate that the question of an election between .the debt and the note was thereby presented. If not so presented upon the trial it cannot be urged upon appeal. Technically the judgment against the maker of the note upon the original debt was not res judicata in this action. Eeither did it merge any cause of action upon the note, or - indorsement, given for the debt. A judgment merges only the cause of action upon which it is founded, and here the causes of action were not the same. Furthermore, the defendant was not a party to the record of the former action. Black on Judgments, vol. III, § 673, 746; 21 Am. & Eng. Ency. of Law, 128; Duchess of Kingston's Case, 2 Smith's Leading Cases (6th Am. ed.), 633; Stowell v. Chamberlain, 60 N. Y. 272; Butler v. Miller, 1 id. 497; Steele v. Lord, 28 Hun, 27.
We will, however, further assume, that the point which counsel intended to make upon the trial is the one urged upon this appeal, that by proceeding against the maker upon the original debt, after maturity of the note,-the plaintiff elected to waive any claim upon the note against both the maker and indorser. That such was the trial justice's understanding is clear from the following charge to the jury: " If you determine that this note was given for the purpose of paying a debt which the defendant's father-in-law (Mc-Múnn) owed to the plaintiffs, .or a part of a debt which he owed them, and .then that they sued upon that debt, and recovered judgment upon the same, that would release the defendant from the note in suit and the plaintiffs cannot now maintain- this- action. Therefore, there are two questions to be decided by you. As to the first one, the duty is upon the plaintiffs, as I have said, to- show by the weight and preponderance of the proof that the note was indorsed by the defendant for the purpose of giving credit to the same. If you determine that issue in favor of the plaintiffs, then you will consider the contention the defendant puts forth, that even if he did sign the note for the purpose of giving credit to the same, the plaintiffs have no cause of action because they elected to sue -upon the debt itself. If you' determine that to be so your verdict will have to be in favor of defendant."
We grant that one may not assume inconsistent positions (Bigelow on Estoppel, chap. XX, p. 578; 7 Am. & Eng. Ency. of Law, 22; Steinbach v. Relief F. Ins. Co., 77 N. Y. 498; Fay v. Muhlker, 1 Misc. Rep. 321, 323); that ordinarily the creditor's acceptance of-his debtor's promissory note for a precedent debt operates as a payment sub modo (Hughes v. Wheeler, 8 Cow. 77; Putnam v. Lewis, 8 Johns. 304; Hill v. Beebe, 13 N. Y. 556; Noel v. Murray, id. 167; Bradford v. Fox, 38 id. 289; Carroll v. Sweet, 128 id. 19); and that at maturity the creditor is put to his election of treating the note either as a.payment, thus extinguishing the precedent debt, or not as a.payment, thus retaining the debt and entitling the debtor to the return and cancellation of his note. 18 Am. & Eng. Ency. of Law, 176; Holmes v. D'Camp, 1 Johns. 34; Smith v. Lockwood, 10 id. 366; Burdick v. Green, 15 id. 247. The propositions alluded to proceed from the principles that " whenever, by law or by contract, a party has laid before- him a variety of steps, the taking of one of which excludes another, or the rest, he must' choose between them " (Bishop on Contracts, § 808; Wharton on Contracts, § 623; 6 Am. & Eng. Ency. of Law, 247, and note in 23 Abb. N. C. 145); and that the .election once made is final and irreversible. Bishop on Contracts, § 808; Morris v. Rexford, 18 N. Y. 552; Rodermund v. Clark, 46 id. 354; Moller v. Tuska, 87 id. 166. But however accurate the defend ant's contention, as embodied in the trial justice's charge, may have been as an abstract" legal proposition, it was inapposite to the facts of the particular case to which it was sought to be applied. Bo election betwéen the debt and the note was shown, since it appeared from the judgment-roll in evidence that simultaneously with the recovery of the judgment against the maker upon the original debt the plaintiff had judgment against him upon the note. At most it could be said, therefore, that the plaintiff insisted upon both the debt and the note. '
Furthermore, the plaintiff, from the facts in evidence, in one aspect thereof, had no such right of election as the defendant urges upon this appeal; and failing of the right to elect, no such election resulted. It sufficiently appeared upon the trial that the note in suit was given by the maker, and accepted by the plaintiff, under an agreement supported by,a sufficient consideration, that the debt should be thereby absolutely extinguished or discharged. It was competent to the parties so to agree (Noel v. Murray, 13 N. Y. 167; 18 Am. & Eng. Ency. of Law, 161); and if upon such a state of the facts the maker of the note in suit had undertaken to defend the action against him upon the original debt the plaintiff's recovery in that action could have been defeated to the extent of the debt. Possibly now the judgment-debtor in that action may have relief upon a proper motion. But the maker's acquiescence in the judgment against himself upon the debt cannot avail the indorser. It was competent to the former to give, and to the plaintiff to accept, any security for the note, without thereby in the least degree impairing the indorser's -liability. Quite another question would, of course, have been presented if there had been a further agreement between the plaintiff and the maker whereby, in consideration of the judgment upon the original debt, the note was to be surrendered or canceled. Bo such defense, however, was pleaded; nor was any attempt made to substantiate it upon the trial.
A creditor's right of election between the precedent debt and the debtor's note given and accepted therefor proceeds from the absence of a consideration to support an agreement that the note should be accepted in satisfaction of the debt. The note, under such circumstances, is not a new debt, but merely a new promise to pay an existing debt. The debtor thus suffers no detriment, and the creditor secures no advantage. In the case at bar, however, we have the facts that the debtor gave the note and that the creditor received it in payment of the existing debt, and that the ' amount of the note: was hy mutual consent of the parties actually carried to-the credit of the debtor in extinguishment of the debt. The consideration for the agreement to extinguish the debt was. the indorsement of the note by the defendant, a security or advantage not theretofore possessed hy the creditor. Every constituent of a valid agreement to extinguish the debt by the note was,, therefpre^ present, and from siich an agreement neither df the parties thereto ' coiild recede without the consent; of the other. Obviously, the plaintiff at maturity of the note had no such right of .election as the defendant urges in avoidance of his .liability as indorser.
In our' opinion the plaintiff was'entitled to the direction of a verdict in its favor Upon the defense that, hy the recovery of a judgment against the maker upon the original, debt, the plaintiff had' elected to waive any claim upon the note against either the maker or the indorser.. ,
Judgment affirmed, with costs.
Daí-v, P. J., and MoAdam, J., concur:
Judgment affirmed,, with costs..