Case Name: Cady vs. Shepard
Court: Wisconsin Supreme Court
Jurisdiction: Wisconsin
Decision Date: 1860-06
Citations: 12 Wis. 639
Docket Number: 
Parties: Cady vs. Shepard.
Judges: 
Reporter: Wisconsin Reports
Volume: 12
Pages: 639–644

Head Matter:
June Term, 1860.
Cady vs. Shepard.
Where a promissory note is indorsed by the payee, and also by another party, the legal inference from the instrument itself, is that the payee is the first in-dorser.
Parol evidence is admissible to prove the circumstances attending the indorsement by such other party, which may give him the character of a prior in-dorser in respect to the payee.
A made and delivered to B his promissory note, payable to the order of B, and indorsed in blank by C; said note being given for goods sold and delivered by B to A upon the faith and credit of C’s indorsement, which C then agreed to give for that purpose, and which he did give in pursuance of such agreement, with intent to become liable to B in the amount of the note. Demand at maturity, protest for non-payment, and notice to C, were duly made and given. Held, that by commercial usage 0 was liable, as a prior indorser, to B.
The proper mode of pleading in such a case, is to state in the complaint the facts which make the defendant liable in the character of a prior indorser.
EKROB. to the Circuit Court for Milwaukee County.
This action was brought before a justice of the peace, and came to the circuit court by appeal. The complaint alleged that, on &c., one Swaney made his promissory note, whereby he promised to pay to the order of Shepard, [the plaintiff below,] at the Farmers and Millers’ Bank, ninety days after date, $34 48, with interest, &c.; that said Swaney, being at that time desirous to purchase of said Shepard goods, on credit, to the am01int $$4 48> a8'ree(l Shepard to procure said note be indorsed by Cady, [tbe defendant below,] for tbe fur-tber security of tbe plaintiff, and accordingly tbe plaintiff agreed with said Swaney to sell and deliver him said goods upon receiving from said Swaney such note, so indorsed, whereupon tbe defendant did, at tbe request of Swaney, indorse said note, with intent to give credit to said Swaney, and to make himself liable, with said Swaney, to tbe plaintiff for tbe price of said goods; that tbe plaintiff sold and delivered said goods to Swaney upon sucb agreement, and received from bim tbe said note, so indorsed; that said' note, when it became due, was duly presented for payment at said bank, and payment thereof refused, whereof tbe defendant had due notice; and that tbe plaintiff was tbe legal owner and bolder of said note, &c.
Tbe defendant answered: 1. By a general denial. 2. By an allegation that bis nanie was not indorsed upon said note at tbe date thereof, nor at tbe time of tbe purchase and delivery of tbe goods mentioned in the complaint, nor till a long time thereafter; wherefore he says that tbe credit given by the plaintiff to said Swaney “was not by virtue of tbe name of tbe defendant being written on tbe back of said note, but that said credit was given without tbe knowledge of the defendant.” 3. By an allegation “that tbe complaint does not state facts sufficient to constitute a cause of action against the defendant, for that its whole allegations seem to make tbe defendant responsible for the agreement and debt of another, without stating tbe consideration upon which said liability arose, and therefore tbe defendant says that be is not legally bound to pay said note, or any part thereof, and that he has not agreed to answer to tbe plaintiff for tbe debt of said Swaney,” &c.
On tbe trial by tbe court, a jury being waived, tbe plaintiff offered in evidence “the promissory note and indorsement specified in tbe complaint, in connection with other oral evidence, whereupon tbe defendant objected to tbe admission of tbe same in evidence, for tbe reason that there is no cause of action stated in the complaint, to which said note and indorsement are applicable. The court overruled tbe objection, and admitted said note and indorsement in evidence,” tbe defendant excepting.
Tbe finding of tbe circuit court is stated sufficiently in tbe opinion of tbis court.
Tbe defendant moved an arrest of judgment, “for tbe reason that, upon tbe pleadings in tbe case, and upon tbe whole record thereof, tbe plaintiff was not entitled to a judgment in bis favor;” but tbe court overruled tbe motion, tbe defendant excepting, and judgment was rendered for tbe plaintiff.
George W. Lcilcin, for plaintiff in error,
contended that tbe name of a person not a party to a note, indorsed upon it, does not render him liable to tbe payee; that tbe payee is to be regarded as tbe first indorser, and tbe party whose name is so indorsed as a second indorser; that if it is alleged that be intended by such indorsement to be responsible to tbe payee for payment of tbe note by tbe maker, parol evidence of such an intent is not admissible, tbe statute requiring a written note or memorandum, expressing tbe consideration. Heath vs. Van Cott, 9 Wis., 516; Taylor vs. Pratt, 3 id., 674; Brewster vs. Silence, 4 Seld., 207; Brown vs. Curtís, 2 Corns., 225.
Smith & Salomon, for defendant in error,
contended that in a case like tbis the indorser is liable to tbe payee, and cited 3 Mass., 274 ; 5 id., 358, 545; 6 id., 519; 7 id., 233; 9 id., 314; 11 id., 436; 4 Pick., 311, 385; 17 id., 244; 19 id., 2G0; 24 id., 64; 7 Cush., Ill; 9 id., 104; 31 Me., 536; 36 id., 147, 265; 3 Met., 275; 5 id., 201; 8 id., 504; 7 Foster, 366; 11 N. H., 385; 6 Yt., 642 ; 9 id., 345 ; 12 id., 219; 15 id., 161; 16 id., 554; 17 id., 285; 20 id., 355 ; 4 Conn., 389; 6 id., 315 ; Kirby’s R, 393 ; 4 Watts, 448; 11 Penn. St., 460; 1 Spencer (N. J.), 256; 6 Gill (McL), 181; 7 Gratt. (Ya.), 189; 10 Richardson’s L. R. (S. C.), 17; 2 McMullan, 313; 3 Ala., 610; 1 La. Ann. R., 248; 9 Texas, 615; 14 id., 275; 2 Gal., 485, 605; 18 Mo., 74, 140 ; 20 id., 571; 1 Greene (Iowa), 331; 13 Ill., 682; 7 id., 459; 3 Scam., 437; 7 Blaekf., 35; 6 Ind., 478; 9 Ohio, 139; 17 id., 42; 3 Ohio St., 415; 2 Mich., 555; and in New York, 12 John., 159, 160; 13 id., 175; 14 id., 349; 17 Wend., 214, 215,221; 1 Hill, 91; 2 id., 84; 3 id., 233 ; 7 id., 416-420; 4 Duer, 45; 1 Barb. (S. G), 158; 10 Barb., 402, ’4, ’5; 23 id., 534; 26 id., 455; 1 Corns., 321; 16 How. Pr. R, 329; 19 N. Y., 227. Most of tbe N. E. courts bold sucb an indorser liable as joint promisor; in some states be is treated as guarantor; and in others as an indorser. In New York be was formerly-treated as a guarantor. Tbe true rule probably is tbat established in tbe later N. Y. cases, found in the five authorities last above cited, where he is held to be liable to tbe payee, as indorser, on demand and notice.
November 19.

Opinion:
By the Court,
Cole, J.
This action is upon a promissory note, made by one George Swaney, paymble to tbe order of tbe defendant in error, and indorsed in blank by tbe plaintiff in error. It was proven on tbe trial, and tbe circuit court found as facts, tbat tbe note was executed by Swaney and indorsed by Cady, and afterwards delivered to Shepard; tbat tbe note was given for goods sold and delivered by Shepard to Swaney, upon tbe faith and credit of Cady's indorsement, which Cady then agreed to give for this purpose; tbat Cady executed tbe indorsement in pursuance of this agreement, with intent to become liable to Shepard in tbe amount of tbe note, and to give credit on tbe same; and tbat Shepard was tbe owner and bolder of tbe note. It was also admitted upon the trial tbat due demand of payment of tbe note bad been made at its maturity, and that it was duly protested for non-payment, and notice thereof properly given to Cady. Tbe evidence íd respect to tbe attending circumstances under which tbe indorsement was made, was objected to as being incompetent.
Now tbe legal inference from tbe face of tbe note mentioned in this case would be tbat Cady was second indorser. Tbe note being payable to the order of Shepard, in tbe ordinary course of business be would be tbe first indorser; and unless be indorsed the note without recourse, be could not maintain an action upon it — if tbe note afterwards came to his bands — against tbe second indorser, because if be recovered, tbe second indorser would have an immediate right of action against him on his earlier indorsement. It would be, in effect, tbe case of a prior indorser maintaining an action against a subsequent one. The note being payable to the order of Shepard, he must indorse it before it could come to the hands of Gady to be indorsed by him. This would be the legal intendment as to the chain of title, and the relative situation and rights of the parties., But notwithstanding this would seem to be the situation of the parties, and the natural construction of the contract from the face of the note, yet parol proof has been admitted to show what contract the parties intended to make, and then courts have resorted to one expedient and another to charge a party indorsing a note under such" circumstances. Sometimes they have said he was to be charged as a maker, sometimes as a guarantor, and sometimes as an indorser. " Whatever diversities of interpretation may be found in the authorities, where either a blank indorsement or a full indorsement is made by a third party on the back of a note payable to the payee or order, or to the payee or bearer, as to whether he is to be deemed an absolute promisor or maker, or guarantor or indorser, there is one principle upon the subject almost universally admitted by them all, and that is, that the interpretation of the contract ought in every case to be such as will carry into effect the intention of the parties; and in most cases it is conceded that the intention of the parties may be made out by parol proof of the facts and circumstances which took place at the time of the transaction. Story on Prom. Notes, sections 58, 59, and 479." Rey et al. vs. Simpson, 22 How. (U. S.), 349, 50. Under the decisions in this state, a party indorsing a note under those circumstances would undoubtedly be holden as an indorser, if at all. In Hall vs. Newcomb, 7 Hill, 416, Chancellor Walworth suggests the following method by which the indorsements on the note may be made to correspond to the intention of the parties when they made the contract, and consistency in the relations of the parties preserved. He says: "If the object of the second indorser is to enable the drawer to obtain money from the payee of the note upon the credit of the accommodation indorser, he may indorse it without recourse; and by such indorsement may either make it payable to the second indorser, or to the bearer; and such, original payee may then, as legal bolder and owner of the note, recover thereon against such second indorser, upon a declaration stating such special in-dorsement by Mm and subsequent indorsement of the note to him by the second indorser." However necessary and proper this course might be to avoid any difficulty in framing a declaration under the old practice, I can hardly think it would be proper under the Code, which requires a party to state in his complaint the facts constituting the cause of action. It seems to me that the complaint was properly framed in the present case, and that we must hold that by commercial usage, a party indorsing a note under the circumstances therein stated, is bound as an indorser. TMs is the most rational ground upon which to place the party's liability, and is most in harmony with the contract actually made by the parties. And whether parol testimony should be admitted to explain the facts and circumstances under wlrich the indorsement was made, does not seem 'to me now to be an open question. The authorities are too decided in favor of the admission of such testimony to be disregarded. See authorities cited on briefs in Rey et al vs. Simpson, supra; Moore vs. Cross, 19 N. Y., 227.
The judgment in this case must be affirmed.