Case Name: S. E. Middleton vs. Geo. B. McCartee, Wm. McMurtrie et al.
Court: Supreme Court of the District of Columbia
Jurisdiction: District of Columbia
Decision Date: 1883-05-07
Citations: 2 Mackey 420
Docket Number: Law. No. 22,171
Parties: S. E. Middleton vs. Geo. B. McCartee, Wm. McMurtrie et al.
Judges: } The Ohikf Justice and Justices Hagner and Gox sitting.
Reporter: Reports of cases argued and determined in the Supreme Court of the District of Columbia (District of Columbia - reported by Mackey)
Volume: 13
Pages: 420–428

Head Matter:
S. E. Middleton vs. Geo. B. McCartee, Wm. McMurtrie et al.
Law. No. 22,171.
5 Decided May 7, 1883.
} The Ohikf Justice and Justices Hagner and Gox sitting.
Where by a resolution of a stock company a promissory note is issued to pay an indebtedness of the company, the note .being signed by the treasurer and endorsed by the directors as such, and afterwards the paper is taken up by one of them, this is nothing more than an advancement by him in behalf of his co-obligors, and entitles him to a contribution for the money thus advanced; he cannot pick out one of the endorsers and charge him with the whole liability, as in the case of an ordinary endorsement. .
STATEMENT OE THE CASE.
Motion for new trial on exceptions.
The plaintiff declared upon the following paper made by the secretary and treasurer of the Ellis Gold Mining and Reduction Company, to the order of Geo. B. McCartee, and endorsed by him, to Wm. McMurtrie, C. H. Parsons and. others in the.order named, to the plaintiff, the plaintiff being the'last endorser and holder : \
“ $2,200. Washington, D. C., July 21, 1877. • -
“ Thirty days after date, the Ellis Gold Mining and Reduction Company promise to pay to Geo. B. McCartee, or order, twenty-two hundred dollars, value received, with interest until paid, at the rate of eight (8) per cent, per annum, payable at the National Meti'opolitan JBank.
S. E. Middleton, Treasurer,
“A. TJ. Wyman, Secretary,
“ Ellis Gold Mining and Reduction Company.”
To the declaration were added the common counts.
The.defendant, McMurtrie, pleaded as follows :
1. That the note on which the suit was brought was a company note, signed by the secretary and treasurer officially, and endorsed by him (the defendant), he being the vice-president of the company, all in pursuance of a resolution of said company.
2. That he, the defendant, McMurtrie, was merely an accommodation endorser, and received no personal benefit or profit from the transaction.
3. That the plaintiff', Middleton, was one of the persons constituting the said company, and, therefore, in effect, both plaintiff and defendant.
4. That he, the said McMurtrie, endorsed the note in suit at the special instance and request of the plaintiff, Middleton ; that upon first being requested to endorse the said note by Middleton, he objected and refused, but after being assured by the plaintiff' that he should and would not be held responsible on the note or for it, and that his signature was simply wanted because the bank where the note was negotiated wanted the names of all the officer’s of the company, and that the defendant’s name was necessary, he being the vice-president of the company ; and that his (McMurtrie’s) endorsement of the note was solely and exclusively made upon this promise of the plaintiff, Middleton.
Issue being joined on these pleas, and the case coming on for trial, the plaintiff gave in evidence the note endorsed in the order stated.
The execution of the note, the protest, and notice of protest to the defendant were admitted.
■ The defendant then, in support of his pleas, and for the purpose of showing, as he contended, “ the true relations between the plaintiff and defendant, and to show the true purpose and proper liability of the immediate parties and. original signers,” made the following offers of proof, each of which were successively rejected by the court:
1. To prove by the record of the official action of the board of directors of the Ellis Gold Mining and Reduction Company, that at a meeting of the directors, on the 1st of April, 1876, the plaintiff and defendant, McMurtrie, both being present, the following resolution was adopted, authorizing the making of the note in question.
“Resolved, That the secretary and treasurer be authorized to make two promissory notes on behalf of the company— one for $2,000, payable in three months, and one for $2,000, payable in four months, with interest at not exceeding 10 per cent, per annum — said notes to be endorsed by the board of directors and negotiated, and the proceeds applied to the payment of the debt of the company, and that payment of the notes shall be made from the first revenues accruing to the company from any source whatever.”
2. To prove by the said records of the company, that at a certain other meeting of the board of directors of the company, February 24,1876, a certain other note was authorized to be made and negotiated on behalf of the company, whereby it was resolved to borrow one thousand dollars at sixty or ninety days, by giving a corporate note, to be endorsed by two of the directors individually.
8. To prove by the same record book that the note in suit was a renewal, by authority of the said board of directors, by resolution dated April 27, 1877, of the note as originally authorized by the resolution of April 1, 1876.
4. To prove that at the time of the endorsement of the note by the defendant, McMurtrie, the plaintiff promised and agreed to and with the defendant, that if he would endorse the note that he should not be held personally liable on it ; that his (McMurtrie’s) signature was wanted simply because he was one of the board of directors and vice-presi dent of the company, and that he endorsed the note in consideration of the plaintiff’s promise, and because he was a director and officer of the company.
5. To prove that the plaintiff and defendant were both stockholders or partners in the said company, as well as directors, at the time of the resolution authorizing the original making and renewal of the note in suit, and were both present at the meeting of the board of directors when the said resolutions were considered and passed upon.
6. To prove that as between the plaintiff and the defendant there was no consideration for the said endorsement from the plaintiff to the defendant, McMurtrie, or to any other person at the defendant’s instance or request, and that the endorsement was simply an accommodation one, as above recited.
7. To prove that at the time the defendant signed the aaid note as an endorser, all of the signatures of the other endorsers were already on the note, and a place left for the defendant’s name between the names of McCartee, president, .and Wyman, secretary of the said company.
Each of these offers being rejected and exceptions taken, the court, the case being closed, instructed the jury that the plaintiff was entitled to recover, and that they should find for him the full amount of the face value of the note in suit, with interest according to its terms. A verdict and judgment having been accordingly entered in favor of the plaintiff, .the defendant, McMurtrie, moved this court for a new trial ■on the exceptions taken.
Linden Kent for plaintiff':
It is submitted that no one of the pleas constitute any -defence to the action.
The first, merely in different language, reasserts the allegations of the declaration that the note was that of the company and was executed in accordance with authority •especially given.
The second, that the defendant, McMurtrie, was an ac-commodation endorser, and not liable. The answer is, that accommodation endorsers are liable unless the circumstances bring them within some rule of exemption, which this plea does not attempt to do.
As to the third plea, that the plaintiff, Middleton, was •one of the persons constituting the said company, and therefore, in effect, both plaintiff" and defendant, no comment need be made. Twin Lick Oil Company vs. Marbury, 1 Otto, 587.
The fourth plea undertakes (but imperfectly) to set up a verbal agreement contemporaneous between MeMurtrie and Middleton, which would not only vary the terms of the instrument, but makes it absolutely null and void as to the defendant MeMurtrie.
The doctrine on this subject, especially as applicable to negotiable paper, and as between the immediate parties thereto, is so well settled by the Supreme Court of the United States, that we rest it with a reference to the following cases: Goodman vs. Simonds, 20 How., 343; Brown vs. Wiley, 20 How., 443; McDonald vs. Magruder, 3 Peters, 474; Forsythe vs. Kimball, 91 U. S., 291; Bank U. S. vs. Dunn, 6 Peters, 57; Thompson vs. Insurance Co., 104 U. S., 252; Martin vs. Cole, 104 U. S., 30.
In Specht vs. Steward, 16 Wallace, 564, Mr. Justice Swayne, •delivering the opinion of the court, quotes from Parsons on Notes and Bills, 507, “ that it is a firmly settled principle ■that parol evidence of an oral agreement alleged to have been made at the time of the drawing, making, or endorsing of a bill or note, cannot be permitted to vary, qualify, or contradict, to add to or subtract from the absolute terms of the written contract; ” and Mr. Justice Mathews, in the case of Martin, vs. Cole, supra, quoting this, says, that “ the question, as it arises in this case, cannot now be considered an open one in this court.”
Under these authorities, the evidence offered was inadmissible-in any view, but if the circumstances justified it,, in no aspect could it have been admitted under the pleadings in this suit.
J. W. Douglass for defendant:
1. The defendant offered to prove that, “at the time of the endorsement of the note by the defendant, McMurtrie, the plaintiff promised and agreed to and with the defendant, that if he would endorse the note, he should not be held personally liable on it; that his (McMurtrie’s)' signature was wanted simply because he was one of the board of directors and vice-president' of the company, and that he endorsed the note in consideration of the plaintiff’s ^promise and because he was a director and officer of the company.” This evidence should have been heard under the familiar principle that “ any facts constituting fraud or misrepresentation, may be set up as a defence to a note, the burden of proof .being on the party alleging it.” And that this principle has uninterrupted play between the immediate parties to a note. Chitty on Bills, 70; Byles on Bills, 243 (150); Parson’s Mer Law, 124; Kerr on Frauds and Mis., 91-99; 21 Pick., 195; 1 Conn., 329; Abbott’s U. S. Dig., 1st Series, 868; 1 Daniel on Neg. Inst., sec. 710; 22 Wis., 21.
2. The defendant offered to prove by the official record of the board of directors, that the note was a company note, for the company’s use alone, and was made in pursuance of certain resolutions passed at certain meetings of the board, at which meetings both the plaintiff' and defendant were present and taking part as members of the board and officers of the company. The resolutions' referred to show beyond doubt, as the note itself does on its face, and by the arrangement .pf names (endorsers) on its back, that the transaction was corporate and not individual. This, being a simple question of fact, without the slightest admixture of legal 'controversy, should have been left to the jury'to determine. To take it from the jury, as was done, was fatal error.
3. The defendant “ further offered to prove that the plaintiff' and the defendant were both stockholders or partners in the said company as well as directors at the time 'of the resolution authorizing the original making and renewal of the note in suit,, and were bath present at the meeting of the board of directors when the said resolutions were considered and passed upon.” This offer was refused, however, and constitutes another grave error, as it robbed the defendant, when considered in connection with the other offers in the case, of the benefit of that principle of law which holds, that “ in no case can a man sue when he is both entitled and liable to contribute, though such liability appear neither on the instrument nor on the record.” Byles on Bills, 76 (31) and 157 (130); 6 Pick., 316; 27 Barbour, 552; Parson’s Mer. Law, 128; 1 Daniel on Neg. Inst., § 703.
4. The “ defendant further offered to prove that as between the plaintiff and the defendant there w’as no consideration for the said endorsement from the plaintiff to the defendant, McMurtrie, or to any other person at the defendant’s instance or request, and that the endorsement was simply an accommodation one, as above recited.” This offer •was rejected, and the defendant deprived of the benefit of the principle applicable to such cases, that “ in the case of .an accommodation endorsement there is an implied engagement on the part of the person requesting the accommodation, that he will indemnify the endorser to the extent of the sum payable on the bill.” Chitty on Contracts, 438; 1 Greenleaf’s Evidence, §284; 2 Greenleaf’s Evidence, § 171; 1 Daniel on Neg. Inst., § 679.
5. The “ defendant further offered to prove that at the time the defendant signed the said note as an endorser, all of the signatures of the other endorsers were already on the note, and a place left for the defendant’s name between the names of McCartee, president, and Wyman, secretary, of the said company.” The object of this offer, which was rejected, was to show to the jury that the endorsement by McMurtrie was merely an official act as director and vice-president, and by consequence that he was not individually liable on the note — at least as between him and the immediate parties to the note. The offer was of great importance on this point, when considered. in connection with the language of the resolutions authorizing the making of the notes, as it showed with strong inference that all of the parties to the transaction recognized that the defendant’s signature was to be, and was merely official.
6. The bills of exception further show that “ the court rejected all of the evidence offered by the defendant to show the true relations between the plaintiff and defendant, and all evidence tending to show the true purpose and proper liability of the immediate parties and original signers of the said note in suit.” The defendant claimed at the trial, as he claims now, that as between the immediate parties to a note, the obligation is one of ordinary contract, and not to be tested by those more stringent rules, in the interest of trade, that prevail when the controversy is about the rights of third or innocent parties. As between the immediate parties to a note, as the plaintiff and defendant were in this case, in a most striking and emphatic manner, the following rule, taken from one of the latest and ablest authors on the subject, is the true and just measure of responsibility : “ As between the immediate parties, the interpretation ought to be in, every case such as will carry their intention into effect, and that their intention may be made out by parol proof of the facts and circumstances which took place at the time of the transaction.” 1 Daniel on Neg. Insts., secs. 174 and 740.

Opinion:
Mr. Chief Justice Cartter
delivered the opinion of the court.
On the trial of this case an offer was made to show that these parties were directors of the company named in the. paper sued on, and that the company being indebted, the directors, at a meeting held by them, at which the plaintiff' and defendant McMurtrie were both present, resolved to issue two promissory notes of $2,000 each, the notes to be endorsed by the directors and negotiated, and that- the note in suit was a renewal of one of the notes made by virtue of this authority, and further, that at the time of the endorsement Middleton told the defendant that if he would endorse the note he would not be held personally liable on it, that his (McMurtrie's) signature was wanted simply because he was one of the board of directors and vice-president of the company, and that he, McMurtrie, endorsed the note in consideration of the plaintiff's promise, and because he was a director and officer of the company.
The question arises, what kind of a paper, as between the parties to it, did these directors get up ? Did they make an ordinary piece of commercial paper that left liability to follow in the order of signatures? Or was it the simultaneous and concurrent act of all the parties. It seems to us that this resolution was a part of the written obligation which issued out of it, and that this was a paper concerted in the interest of all the parties. They were all involved in the indebtedness of the company, and they were all desirous of getting rid of that indebtedness, and they were all together when they passed the resolution creating this paper. Now we are asked to change the relative position of the parties to that transaction, and to make one of them the beneficiary of the whole of it, and the remainder of them, or one of them, the bearer of the onus of the obligation which they all united in. Can we do it ? Ought we to do it ? The plaintiff, Middleton, in common with the other parties to this suit, are obligated to protect the paper and see that it is paid. ITis act in taking up the common obligation was nothing more than an advancement by him in behalf of his co-obligors, and entitles him to a contribution for the money that he thus advanced, and no more.
There is some difficulty about the pleadings which can be easily remedied on another trial. A recovery could be had, however, under the common counts. This paper is declared on as if it were an ordinary promissory note. The pleas, too, are misconceived — this is not a case of accommodation endorsement. The case is remanded for a new trial, with leave to the parties to amend as they may feel advised.