Court Opinion

ID: 8315581
Source: CourtListenerOpinion
Date Created: 2022-10-17 20:00:52.216121+00
Date Added: 2024-06-11T16:44:55.456301
License: Public Domain

Cranch, C. J.,
dissented, and delivered the following opinion. The counsel for the defendant cited the following cases: — 1. Robertson et al. v. Williams and Smith, 5 Hen. & Munf. 381, which was a joint action of debt, in Virginia, against the maker, Williams, and the first indorser, Smith, of Williams’s promissory note which had also been indorsed by Lockhead and the plaintiffs, and discounted by a broker, and the proceeds received by Lockhead. The plaintiffs took it up, after protest, and recovered judgment against Williams and Smith who never received any consideration for the note, the same having been fraudulently negotiated by Lockhead, but the plaintiffs were ignorant of the fraud. The Court of Appeals gave no reason for their judgment. But Leigh and Wickham, in arguing, said,
1st. “ The risk which the plaintiffs ran by indorsing, was a sufficient consideration to vest the property in them by relation back to the time of the indorsements, if they were afterwards made liable for the contents,, and,
2d. “ The plaintiffs did actually pay the full contents of the note as a consideration for it when they retired it from the bank; and this consideration has relation to the time of their indorsement.’.’ “ Suppose the first indorser, Smith, had been the sufferer, could he not have recovered of Williams ? yet he gave no consideration for it at the time. Suppose an ordinary accommodation note protested for non-payment, as to the maker, taken up by the indorser; cannot such indorser recover of the *309maker ? yet in no case of that kind, does such indorser pay a consideration for the note at the time of indorsement.” These may be presumed to be the reasons for the judgment.
2. The next case cited is Hixon v. Reed, 2 Littel’s Rep. 174, in the Court of Appeals of Kentucky.
Ward made his note to Reed, who indorsed it to Hixon, who indorsed it to the bank, who discounted it for the accommodation of Ward, the maker, who became insolvent. The note was duly protested so as to charge both indorsers, neither of whom received any consideration for his indorsement. The note was taken up by Reed, the payee and first indorser, who brought his action against Hixon, the second indorser, for one moiety of the money paid to the bank, and recovered in the court below. 'But that judgment was reversed in the Court of Appeals. The court cited the case of Brown V. Motte, 7 Johns. 361, with approbation, and said that if the plaintiff in error, the second indorser, had discharged the whole of the note to the bank, he could have recovered the full amount against the defendant, and consequently the defendant in error having first paid it, cannot be entitled to recover any part from the plaintiff.
3. The next case cited, is Brown v. Motte, 7 Johns. 361. Dean made his promissory note payable to the order of Motte, who indorsed it for the accommodation of the maker (Dean); but the person applied to, to discount the note, refused without another indorser. The plaintiff offered to indorse it for the maker, if he would pay him, out of the money to be obtained, $250 which he owed him; which he agreed to do. The plaintiff then indorsed the note and received the $250. The note never was in the possession of the defendant, and no consideration passed between him and the maker, or the plaintiff who knew that the defendant had indorsed the note solely for the accommodation of the maker. The note was duly protested, so as to charge the defendant. Verdict for the plaintiff, subject to opinion of the court on a case stating the above facts.
The court said: — “The defence is that the defendant indorsed the note for the mere accommodation of the maker, and that this fact was known to the plaintiff when he subsequently indorsed the note. This, however; is not, of itself, a defence. The indorser cannot set up that he indorsed the note without consideration, because by sending the note into circulation, by a general indorsement, and making it thereby a negotiable bill, a consideration is implied by the law merchant, and an inquiry into that fact is precluded. If there had been any fraud in the case, or the plaintiff had not made any advance upon the note, the taking it, under the knowledge stated in the case, would let *310in a defence; or if he had pnrchased it' or taken it up at a reduced price, it would seem that he could recover only the amount paid. Wiffen v. Roberts, 1 Esp. Rep. 261; Brannan v. Hess, 18 Johns. Rep. 52. But as the drawer” (maker) “ originally raised the money upon the note, with the indorsement of the present parties, the note must have been returned to the plaintiff by the subsequent holder, and he must have taken it up for the full value. He has, then, as good a right to resort to the defendant as a prior indorser, as if he had originally received it for its value. An indorser, for the accommodation of the maker, is entitled to all the privileges of an indorser, by being fixed in due season, (2 Caines’s Rep. 243; 4 Cranch, 141; Smith v. Bechet, 13 East, 187; Brown v. Massey, 15 East, 216); and he must be equally chargeable, as indorser, to the persons standing after him on the note.” Yeaton v. Bank of Alexandria, 5 Cranch, 49; Violett v. Patton, 5 Cranch, 142. “ The cases of Smith v. Knox, 3 Esp. Rep. 46, and Charles v. Marsden, 1 Taunt. 224, show that the principles of the commercial law are settled, that where there is no fraud in the case, and the indorsee has given full value for the bill, he shall recover of the acceptor, notwithstanding the bill was accepted without consideration, and for the accommodation of the drawer, and that fact was known to the indorsee when he took the bill, and though he even took the bill after it was due. It is impossible to distinguish this case in principle from those last mentioned, and the plaintiff is entitled to judgment.”
When the court, in the above case of Brown v. Motte, said, “ or the plaintiff had not made any advance on the note,” they evidently alluded to the fact that the maker of the note was indebted to the plaintiff in the sum of $250, and gave the note in payment, to that extent; so that as to so much of the note there was a good and valuable consideration as between the maker and the plaintiff; so that the latter was a bond fide holder for a valuable consideration to that extent; and therefore the defendant who had indorsed the note generally, to give credit to the note, and had put it in circulation as a negotiable bill, could not defend himself by the want of a consideration.
It is not necessary that the indorser should have received any thing; it is sufficient if the plaintiff has parted with any thing in consequence of the credit of the defendant’s name upon the note.
This I take to be the argument of the Court upon that point. But the point in the opinion of the Court in that case which relates to the present case of Magruder v. McDonald, is, that the plaintiff, having taken up the note, had as good a rig.ht to resort to the defendant as if he had originally received it for its value.
4. The next case cited is Wood v. Repold, 3 Har. & Johns. Rep. 125.
*311Brown’s bill of exchange on Gould, indorsed by Wood and by Repold for Brown’s accommodation, and discounted by a bank in Baltimore, was taken up by Repold, the last indorser, who, by the judgment of the Court of Appeals of Maryland, (Buchan-nan, Polk, and Gantt, JJ., against Chase, C. J., and Earle, J.,) recovered the whole from Wood, the second indorser, there having been no communication between the indorsers at or before the time of indorsing.
Two grounds of defence were taken: — 1st. That they were co-sureties; and, 2d. That there was no consideration between them.
Buchannan, J., in delivering the opinion of the court, said:
“ There is no doubt that two or more may jointly indorse a bill of exchange, and in such case each would be bound to contribute his just proportion of the amount; but then the indorsement itself must be joint, and not several and distinct; or, at least, to create, between two successive indorsers, a liability to contribution, there must be a correspondent understanding between them.” “ Every man, who signs an instrument of writing, is considered as understanding the nature of the obligation or contract into which he enters; and, by his signature, subjects himself to the operation of the law governing such instruments.”
After stating that co-sureties in a bond, whether they sign at the same or at different times, are liable to contribution, says: “ But not so with respect to the indorsers of a bill of exchange. Every indorser is considered, in law, as a several and collateral security, and is as a drawer to his indorsee. An indorsement presupposes a consideration passing from the indorsee to the in-dorser, and of necessity precludes the presumption of a joint undertaking. For the law is consistent, and both presumptions cannot stand together.” “ I cannot, therefore, entertain the first objection ; but think that the indorsements of Wood and Repold must be considered as several and successive; to be operated upon by the law regulating such transactions.”
With regard to the second objection, the want of consideration between Wood and Repold, after observing that the want of consideration between immediate parties to a bill of exchange, whether for accommodation or not, is a good defence, says: — “ But that principle, when tested by the established practice and settled forms of proceedings in actions on bills of exchange, will, I think, be found applicable only to that particular stage of the negotiation at which the bill is stopped in the hands of the party suing, who having never passed it away, has, consequently, been obliged to pay nothing upon it, nor has created any liability on himself to pay,■ and therefore can only recover, in virtue of a *312consideration passed by him to the party from whom he received it; and in such case, it is that consideration alonfe which gives him a right of action. It does not apply to any party to a bill who, on its being protested, has been obliged to take it up; in which case it is not the consideration originally moving from him which entitles him to recover; but it is the subsequent payment alone on which the law raises the promise, and gives him a new cause of action; and he sues in the capacity in which he paid the bill, and not in that in which he received it.”
These cases satisfy me that this Court was wrong in refusing a new trial, at December term, 1825, in the case of McDonald v. Magruder, (see the precéding case,) where the jury gave'damages to the plaintiff for only one half of the note; the circumstances in that case being substantially the same as those in this, excepting that in that case McDonald had paid the whole, and being the last indorser, brought his action as indorsee against Magruder, his immediate indorser; whereas the present suit is by the indorser against his indorsee.
The form of the instrument is very material in determining the nature of the contract. The parties have adopted a form which, according to the law applicable to such instruments, makes the parties severally and successively, and not jointly liable, and which gives the holder a right to resort to all the preceding parties on the note. Primé facie the indorsee has a right to recover the whole amount of the note from a prior indorser, and the burden of proof is on the defendant to show a different contract, and to rebut the evidence arising from the form of the instrument. The facts in this case do not show a different contract, and do not rebut the presumption.
The circumstance that both parties are accommodation in-dorsers is not evidence of a different contract. It is now settled that the rights of .all the parties upon accommodation paper are the same as on transaction paper; with this single exception, that the person, for whose accommodation the paper was issued cannot defend himself by the want of demand and notice.
I am therefore of opinion that- the judgment upon the case stated ought to be rendered for the defendant. But the other judges being of a different opinion, the judgment must be entered upon the verdict for the plaintiff.
Reversed by the Supreme Court, 3 Peters, 470.