Court Opinion

ID: 6233324
Source: CourtListenerOpinion
Date Created: 2022-02-17 20:26:54.504343+00
Date Added: 2024-06-11T08:57:57.255859
License: Public Domain

The opinion of the court was delivered, May 11th 1869, by
Sharswood, J.
In what light one who endorses a promissory note before the payee is to be regarded has long been a much vexed question in the American cases. Their name is legion. More than fifty are cited in a note to Byles on Bills 144, 5th American edition, without pretending by any means to give a catalogue of all. In some he is treated as a joint and several promissor with the maker; again, as a guarantor to the payee, and all others who may lawfully be possessed of the note, each holder having a right to fill in such undertaking over his name; in others as a second endorser, the payee having the right at any time to restrict his own prior endorsement by the words “ without recourse;” and in others, still as a second endorser merely under an implied engagement by the payee to assume the position and all the responsibilities of first endorser. In a large majority of them he is treated as an original promissor or a guarantor, according as the evidence may show the original contract of the parties to have been. It will be sufficient to refer simply to the cases in this state. In Leech v. Hill, 4 Watts 448, this court declined to say what would be the effect of such an endorsement, unaccompanied by evidence dehors, and declared that there was no other rule by which it is to be construed than according to the understanding of the' parties. In Taylor v. McCune, 1 Jones 460, however, it was decided that in the absence of any such evidence his position was that of second endorser. The opinion of the court, as delivered by Mr. Justice Bell, adopts Herick v. Carman, 12 Johns. 159, as a sound exposition of the law; for the reason that otherwise there would be no case where a note is innocently endorsed by a second endorser previously to endorsement by the payee in which, without his knowledge, his responsibility *149might not he varied. It is difficult, indeed, to see how any other construction can he put on the mere face of the paper. In Kyner v. Shower, 1 Harris 446, Chief Justice Gibson evidently misapprehended the decision in Taylor v. McCune, which had not then been reported, though he took part in it. He relies on it as establishing not merely that it might be shown by extrinsic evidence what the agreement was, but that when there is no evidence it is an authority to the payee to write over the name of the endorser any form of engagement he may see proper. Taylor v. McCune, on the contrary, expressly repudiated such a doctrine. In Schollenberger v. Nehf, 4 Casey 189, and Fagenbush v. Lang, Id. 193, which were both of them actions by the payee, the same principle was reasserted. In Barto v. Schmeck, Id. 447, which was a suit by a third person as endorsee or holder, the rule was reconsidered and reaffirmed. It was held that it was equally available as a defence against a third person as the original party; that it was a fraud for the payee to negotiate the note without himself assuming the responsibility of first endorser, and that whoever took the paper did so with enough upon its face to put him upon inquiry for the special agreement, if there was one. This case was again followed in Shenk v. Robeson, 2 Grant 372.
These determinations, however, all admit that when there is eyidence of what was the special agreement or understanding of the parties, such an irregular endorser may be held liable according to its terms. “He means,” says Chief Justice Gibson, in Kyner v. Shower, “ to give credit to the paper as an original promissor; but in what character or how far, whether as a surety absolutely bound for the redemption of it, or as a guarantor contingently bound, depends on circumstances.” The cases thus far referred to were on transactions before January 1st 1856, when the Act of April 26th 1855, entitled “ A Supplement to the Act for the prevention of Prauds and Perjuries, passed 21st day of March 1772” (Pamph. L. 308), went into effect. That act following the 4th section of the English statute, 29 Car. II., c. 3, provided that no action shall be brought “ whereby to charge the defendant, upon any special promise to answer for the debt or default of another, unless the agreement upon which such action shall be brought, or some memorandum or note thereof, shall be in writing and signed by the party to be charged therewith, or some other person by him authorized.” The question of the liability of a party upon such an anomalous endorsement since the statute arose in Jack v. Morrison, 12 Wright 113, which was an action by the payee. He declared upon a contract of guaranty by the defendant, and that he had endorsed the note in pursuance of it. It was held to be within the provision of the statute, and that the defendant’s signature was not the requisite note in writing, for it imported only an endorsement of commercial paper, and *150made him liable as endorser only to subsequent and not to prior holders.
In view of the importance of the question, especially since the Act of 1855, we ordered it to be reargued as an open one before a full bench. Our unanimous conclusion is to adhere to these decisions. In settling, finally, what shall be the rule in this state there are, undoubtedly, considerations which weigh on either side. That the endorser c^id mean to assume a responsibility, and that not of a primary but secondary character, is to be deduced from the very act of writing his name on the back of a negotiable note. Nothing else can be inferred. He must be presumed to be acquainted with the law merchant, at least so far as to know that the name of the payee would also be necessary in order to transfer the title to a purchaser, and that regularly his name would stand first on the paper. This presumption might be rebutted by evidence if it was not for the statute. But as the statute imperatively compels the' court to shut out any parol testimony of a guaranty or engagement to be liable to the payee for the payment of the note, which is the primary debt of the maker, and thereby “to answer for the debt or default of another;” the only conclusion which can be drawn from the circumstance of endorsement before the payee, is that the party intended to occupy the position of second endorser. He might well argue: this note cannot be discounted without the name of the payee upon it; and if it be written after my name it will not be an assignment to me, but to some subsequent holder. No bank or other cautious party will take it upon my responsibility, without an explicit understanding with me on the subject. In Herrick v. Carman, 12 Johns. 160, Spencer, J., said: “ The fact of his endorsing first in point of time can have no influence, for he must have known, and we are to presume that he acted on that knowledge, that though the first to endorse, his endorsement would be nugatory unless preceded by that of the payee of the note.”
It' is said that the signature is an authority to the holder to write any engagement above it which is consistent with the agreement of the parties. But the question recurs, what was that agreement, and if oral, is it such as can be supported consistently with the provision of the statute ? If there was express evidence of authority to the payee to endorse “ without recourse,” then, indeed, the prima fades arising from the signature would be rebutted. If the second endorser allowed the paper to pass from his hands in such a condition that these words might be written with the endorsement of the payee above his name, then as to bond fide holders for value without notice, he would certainly be conclusively bound to answer as second endorser, but if sued by the payee in the character of a subsequent endorser, he undoubtedly could show that in fact such restricted endorsement was not made *151until after he had signed, and as to any liability to-the payee it may well be questioned whether it would not be a mere evasion of the statute that was intended to prevent perjuries as well as frauds; and it would fail to accomplish this aim if the mere form in which the oral engagement is expressed should be allowed to make a distinction when the substance of it is still merely “ a special promise to answer for the debt or default of another.” To quarrel with the result in any case as unjust and contrary to the honest contract of the parties, is to quarrel with the policy and justice of the law. We are bound to execute the statute in good faith, and warned by the beacons, which stand all along the coasts of English jurisprudence, to beware of beginning to evade or make nice exceptions to the enactments of the legislature, which have led the English courts, both on the Statute of Frauds and Perjuries, and the Statute of Limitations, so far astray. Obsta principiis is the true rule. We have begun in this spirit in regard to the Act of 1855. We must be careful not to be tempted to turn aside from it by the hardship of any particular case. Hard cases, it is often said, make bad precedents. But were there more doubt as to the soundness of the principle settled in Barto v. Schmeck, and Jack v. Morrison, than there is, we ought not now to depart from them. The commercial community, especially that part which deals in negotiable paper, will soon understand how the law is settled on this subject, and will govern themselves accordingly. To overrule these cases and establish any other rule would lead to worse consequences by creating the feeling that the point was still unsettled. “The traditional experience of the courts,” as has been said by Lord Eldon, “ does not furnish a wiser maxim than that which is contained in the short precept stare decisis1 Bligh 24.
The only other question which we deem it our duty to consider, is as to the competency of the witness Jacob Schafer, Jr., one of the payees of the note, who had also subsequently endorsed it. It is unnecessary to discuss his interest in the suit, as, interested or not, he was incompetent. It is now settled by Baily v. Knapp, 7 Harris 192, Katz v. Snyder, 2 Casey 511, and Foreman v. Ahl, 5 P. F. Smith 825, that the rule furnished by Post v. Avery, 5 W. & S. 509, is applicable to payees, who have transferred negotiable paper by endorsement. This renders immaterial all the questions which arose upon the testimony of the witness, who ought not to have been heard. Besides which, not one of the assignments of error is in accordance with the rules of court, and might, with propriety, be dismissed on that ground alone.
Judgment reversed, and venire facias de novo awarded.