WILLIAM VAN DOREN, Respondent, v. A. W. TJADER, J. D. WINTERS et al., Appellants
Van Doren v. Tjader
WILLIAM VAN DOREN, Respondent, v. A. W. TJADER, J. D. WINTERS et al., Appellants.
WILLIAM VAN DOREN, Respondent, v. A. W. TJADER, J. D. WINTERS et al., Appellants.
There can be no strict indorsement of a negotiable promissory note, except by the payee or indorsee.
The contract of guaranty to be effectual must be in writing, and must express the consideration upon which it is based. Where, therefore, a stranger to a promissory note endorses it in blank at the time of its execution, though he be a guarantor of the note, yet he cannot be holden upon it where there is no such contract in writing expressing the consideration for his undertaking.
A guarantor of a promissory note will not be discharged by the failure of the holder to demand payment and give strict notice of non-payment. Reasonable notice of the dishonor of the note is all that he is entitled to.
A contract of guaranty, though made at the time of the principal contract and upon the same consideration, must, nevertheless, be in writing, signed by the party to be changed, and must express the consideration which sustains it.
If an appellate Court finds in the investigation of a case that the facts stated in the complaint, with all legal intendments in its favor, will not support the judgment, the Court can do no less than reverse such judgment, although counsel may not have hit on the proper grounds for asking a reversal.
Where the terms and conditions of an agreement are set out in a complaint, and the violation of that agreement is charged against the defendant; if it is such an instrument as the law requires to be in writing and the complaint is silent as to whether it was oral or written, Courts will presume it to be a lawfubor written agreement until the contrary is shown.
The party demurring admits the truth of whatever is contained in the complaint and nothing more. A demurrer does not admit new facts.
The promise to answer for the debt of another, and the consideration for that promise, need not be contained in the same paper, provided the signature of the guarantor can be connected with both.
A note imports consideration to the maker, but it does not import a consideration for a guaranty of its payment by a third party.
The intent of the statute of frauds seems to be that the writing itself, without extraneous evidence, should show the consideration for the guaranty.
Appeal from tbe District Court of tbe Second Judicial District, State of Nevada, Ormsby County, Hon. S. H. Weight presiding.
On tbe 27th. day of January, A. D. 1864, tbe defendant Tjader, executed and delievered bis promissory note to tbe plaintiff, Yan Doren, by which, in thirty days after date, he promises to pay the sum of three hundred dollars.
Before tbe delivery of this note tbe defendants, Hopkins and "Winters, for tbe accommodation of Tjader, indorsed it in blank. Tbe plaintiff brought this action against tbe defendants, and claims that defendants Hopkins and Winters are holden as joint makers of note witb Tjacler. It is alleged in tbe complaint “that the defendants J. D. "Winters and Peter Iiopkins, signed said note as sureties théreon, and became and were original parties thereto, and joint makers, by the indorsement of their names upon the back thereof at the time of the execution thereof, and before the delivery .of the same to the plaintiff.” The defendants Winters andjHopkins demurred to the complaint, which being overruled and judgment entered in favor of the plaintiff, they appeal.
Atwater c& Flamd/rea/a, Attorneys for Appellants.
The Court below erred in overruling the demurrer to the complaint in this.
It appears upon the face of the complaint that the defendants Hopkins and Winters were not primarily liable on the note, but only liable, if at all, in the secondary and conditional character of endorsers or guarantors. Their names were written on the back of the note, which in itself is conclusive of their intention to assume the ’character of endorsers. The fact that they placed 'their names there before the note was delivered to the payee, makes no difference in the secondary character of their obligation. ■
They had no notice of the dishonor of the note.
This has been the uniform ruling in California, and is the most consonant with law and reason. That State holds that a party bearing such relation to commercial paper is a guarantor, and that a guarantor is entitled "to the same notice of dishonor as an indorser. And we would ask why should he not have the same notice? He certainly is but a surety, and equally interested in securing himself against the insolvency of his principal. A contrary doctrine is unphilisophical. Upon this point see the following cases in California: {Biggs v. Waldo, 2 Cal. 485; Gla/rTi v. Smith et al. 2 Cal. 605; Lawrence v. Lightstone, 4 Cal. 217; Bryan v. Berry, 6 Cal. 394; Pieree v. Kennedy, 5 Cal. 138; Brady v. Reynolds, 13 Cal. 31; Geiger v. Olmda, 13 Cal. 579; Reves v. Howe, 16 Cal. 152.)
A great deal of legal chicanery has been indulged in by the Courts to change the character of contracts entered into by parties into something they never designed. But the State of California took a just view of the subject at the outset, and has steadily adhered to it ever since. Where the paper imports a secondary or conditional obligation, they do not permit it to be changed by parol, and vice versa. {Hritser v. Mills, 9 Cal. 21; JlaslceTl v. Cornish, 23 Cal. 256.)
We are free to admit that cases may be found in several of the States that hold the contract of indorsement may be changed by parol into that of maker, but we deny that these cases rest upon any principle or reason, and insist that they contravene the most familiar rule of law, to wit: that a written contract cannot be varied by parol.
This legal heresy had its origin in the case of Josséhyn v. Ames (3 Mass. 274), and has been followed in some of the States. New York was led into the error in a few of her early decisions, but in her more recent and better considered cases the doctrine has been utterly repudiated as unsound and dangerous. {Seabury v. Hwngerford, 2 Hill, 80; Hall v. Newcomb, 7 Hill, 416; Ellis v. Brown, 6 Barb. 282; Ellis v. ■ Brown, 23 Barb. 534; Spies v. Cilmore, 1 Comst. 321.)
In this last case Justice Bronson disposes of all the cases in which endorsers have been held as makers in the summary manner which they deserve, and shows that the State of New York has returned to the first and correct principles.
See also Story on Promissory Notes, section 133, and cases cited, where a party signing as the appellants did, is held to be a guarantor.
The insolvency of the maker of the note, set up in the complaint, is no excuse for not notifying the indorsers. (1 Parsons on Bills and Notes, 528; Mecha/nics’ Brnikr. Griswold, 7 Wend. 165-9; Jackson v. Richa/rds, 2 Caine’s R. 343.)
The judgment should be reversed.
Clazyton c& Cla/rke, for Respondents.
The contract of an indorser is as follows:
Fi/rst — That the instrument indorsed and the antecedent signatures are genuine.
Second — That he, the indorser, has good title to the indorsement.
Third — Tbat lie is competent to bind himself by the in-dorsement, as indorser.
Fourth — That the maker is competent to bind himself to the payment, and will, upon due presentment of the note, pay it at maturity.
Fifth — That if when duly presented it is not paid by the maker he, the indorser, will, upon due and reasonable notice given him of the dishoner, pay the same to the indorsee or holder. (Story on Promissory Notes, sec.' 135.)
The contract of Hopkins and Winters is entirely different in all essential particulars from that of an indorser. They were not parties to or holders of the note. Their undertaking was not collateral but original. It was supported by the original consideration. It was made before the instrument was delivered to the payee. It differs in no particular from the contract of a joint obligor, except in the place of signing, which we have seen is not material. (Story on Promissory Notes, sec. 121.)
The contract of a guarantor differs from that of an indorser in this: “ Punctual presentment for payment and punctual notice of dishonor are not indispensable to charge him whereas, both are ordinarily indispensable to charge the indorser.” (Story on Promissory Notes, sec. 460.)
The contract of surety is entirely different from that of an indorser or guarantor. His undertaking is original and not collateral, absolute and not conditional.
Winters and Hopkins were original parties to, and several makers of, the instrument. (Storey on Promissory Notes, sec. 473, and note 1; 3 Mass. 273; 11 Mass. 436; 9 Mass. 314; Parsons on Contracts, 206, vol. 1; 3 Met. 275; Parsons on Notes and Bills, vol. 2, p. 3,119 to 126; Storey on Notes, secs. 58, 59; 13 Metcalf, 262; 1 Hill, N. T. R. 256; 4 Hill, 420 ; 19 Wend. 202; 24 Wend. 35; 26 Wend. 430.)
The transaction under consideration is not uniformly held to be an original undertaking. The Courts are divided upon the question. California at an early day held it a guarantee .requiring demand and notice; but subsequently, while confirming the ruling, conceded it not well supported in reason. (2 Oal. 486; 5 Cal. 138; 13 Cal. 579.) Notwithstanding the diversity of opinion the principle is clearly settled by the weight of authority. (3 Kent, 124; 1 Parsons on Contracts ; Story on Notes.)
Where at the maturity of a promissory note the maker is insolvent (as is alleged the maker in this case was), demand of payment and notice of dishonor are not necessary to charge a guarantor. (Story on Notes, sec. 460; 8 Pickering, 423; Parsons on Notes and Bills, 136, 137, 138, 139, note C, p. 137; 2 American Leading Cases, 112, 113, 118, 120, 121; Douglas v. Reynolds, 9 Peters, 113 to 129.)
Failure to make demand of payment and give notice of dishonor to a guarantor will only avail the guarantor as a defense when he has sustained actual loss or injury by reason of the laches of the holder, and then only to the extent of the loss or injury. (2 American Leading Cases, 118, 119,120, 121; 25 Alabama, 139 ; 11 Metcalf, 563; 10 Howard, 461.)
Opinion by
Lewis, C. J.,
full Bench concurring.
This action was brought to recover the sum of three hundred dollars on a promissory note, which it is alleged in the complaint was on the 27th day of January, A. L>. 1864, executed and delivered by the defendants to the plaintiff.
It is further alleged in the complaint that the defendants, Winters and Hopkins, signed the note as sureties; that they became and were original parties thereto, and joint makers by the indorsement of their names upon the back thereof, at the time of its execution and before the delivery of the same to the plaintiff.
It is also alleged that the defendant Tjader, at the time of making the note, and continuously since that time, has been, and now is, wholly insolvent, and that there is now due plaintiff from the defendants on said note the sum of three hundred dollars.
To this complaint the defendants, Winters and Hopkins, interpose a demurrer, assigning as grounds therefor that the complaint does not state facts sufficient to constitute a cause of action against them, in this:
First — That it appears by the complaint that they are not primarily or originally liable on tbe note, but only secondarily and conditionally liable tbereon as sureties for tbe maker, and bave not been notified of tbe presentment to, demand of payment of, and refusal of payment by tbe maker.
Second — That it appears from tbe complaint that tbe defendants, Winters and Hopkins, are indorsers, and not original makers of tbe note, and that no demand and notice is alleged.
Tim'd — That it appears from the complaint that they signed tbe note as guarantors, and not as makers, and that it is not alleged that they bave ever been notified of tbe non-payment and dishonor thereof by tbe maker, A. W. Tjader.
Two points are presented for investigation in this case:
First — What character does an irregular indorser in blank, of a negotiable promissory note, who signs bis name upon tbe back at the time of tbe execution and delivery, occupy— whether he is to be treated as an original maker, a strict indorser, or as a guarantor; and
Second — -What are his responsibilities %
Tbe authorities, it must be admitted, are irreconcilably conflicting, and it cannot be said that any rule is now definitely settled; indeed, tbe only fact fully determined by tbe authorities is, that nothing at all has been settled. The earlier decisions in New York uniformly held an irregular indorser liable as the maker of the note. (Marrow v. Durham, 3 Hill, 584; Seguor v. Prosser, 1 Ib. 256; 4 Ib. 420; Miller v. Gaston, 2 Ib. 188; Hough v. Gray, 19 Wend. 202; Kitchell v. Burns, 24 Ib. 456; Allen v. Rightmire, 20 John. 365.) But all these cases have subsequently been overruled, and an irregular indorser in blank, signing his name upon the back of a negotiable note at the time of its execution, is now held in that State to be an indorser, entitled to strict notice, and discharged by the failure to present for payment, and to give strict notice of non-payment. (Spies v. Gilman, 1 Comst. 321; Ellis v. Brown, 6 Barb. 282; Waterbury v. Sinclair, 26 Ib. 425; Cottrell v. Conklin, 4 Duer, 45.)
This same doctrine has been recognized in some other States, but no satisfactory reason is given for holding that an entire stranger to a note, and one wlio never bad an interest m it, should be held only as an indorser.
These decisions are also in direct conflict with the general rule that there can be no strict indorsement of a negotiable promissory note, except by the payee or an indorsee.
The rule requiring the presentment for payment to the maker,' and strict notice of non-payment to the indorser, in general embodies no principle of justice to recommend it to the favorable consideration of the Courts. And as the strict legal rules governing the duties and liabilities of indorsers often work hardship and injustice, they should not be extended so as to embrace cases not already clearly within their scope. To extend it, therefore, to a class of cases not clearly within its scope would be abandoning the manifest purpose and spirit of the law for its rigorous rules.
The general rule governing the responsibilities of guarantors, on the other hand, is founded upon the clearest principles of equity, and has that at least to recommend its adoption where any doubt exists as to what rule should be followed.
In many of the States an irregular indorser in blank is prima facie, regarded as a guarantor. (Klein v. Currier, 14 Ill. 237; Webster v. Cobb, 17 Ib. 459; Carroll v. Weld, 13 Ib. 682; Camden v. McKey, 3 Scam. 437; Cushman v. Demrut, Ib. 497; Smith v. Finch, 2 Ib. 321; Carr v. Rowland, 14 Texas, 275; Cook v. Southwick, 9 Ib. 615; Watson v. Hart, 6 Gratt. 633; Clark v Melvain, 25 Conn. 576; Beckwith v. Angell, 6 Ib. 315; Perkins v. Cutler, 11 Ib. 213.) And this certainly seems to be much the most reasonable rule. The intention of the parties to a contract is always the object which is to govern the Court in its interpretation, and in ascertaining the rights and obligations of the parties to it. If this rule should be recognized in these cases it would be difficult to see how a person not a party to a negotiable note, signing his name upon the back of it, could be treated as a maker. The very fact of the name being indorsed upon the back would be some evidence at least against the presumption of his intention to become primarily liable as a maker of the note. Deeming the position of guarantor in a case of this kind most consonant with justice, reason and the intention of tbe parties, we feel bound to follow the rule as laid down in Klein v. Currier (14 Ill.) and tbe eases ab.ove cited; though under tbe statute of this State a mere indorsement in blank is not sufficient to establish tbe liability of such guarantor.
Tbe authorities in California which bold that a guarantor is entitled to strict notice as an indorser are counter to tbe long and well established rules in all tbe other States, and we have, therefore, no disposition to follow them.
With the exception of the decisions of that State, it is uniformly held that reasonable notice of demand and non-payment only is required, and even that is not required where the maker is insolvent at the time the note becomes due. (Lewis v. Brewster, 2 McLane's Rep. 21; Fooot & Bowles v. Brown, Ib. 369; 3 Kent, 121.)
The contract of guaranty is a separate and independent contract involving duties and imposing responsibilities very different from those created by the original contract, to which it is collateral.
It is a promise " to answer for the debt, default or miscarriage of another," and by the statute of frauds it is made void unless there be some note or memorandum thereof in writing, expressing the consideration upon-which it is based; and for those reasons it has frequently been held that a guarantor cannot be jointly liable with the maker of a note, nor joined in the same action; but section 15 of our Practice Act ignores this rule, and expressly authorizes the joinder of a guarantor and the original obligor in the same action.
The contract of guaranty must, however, be in wilting, signed by the party to be charged, and must express the consideration. A mere indorsement in blank is not sufficient, nor are any words which do not express the consideration upon which the agreement rests. It has frequently been held by some of the highest Courts of this country, that when the guaranty of a promissory note is simultaneous with the making thereof, that the consideration of the note will sustain the guaranty: and as the holder of the instrument has the right to fill up the contract in accordance with the intention of the parties, an irregular indorsement in blank was sufficient to answer the requirements of the' statute. Whether those decisions were correct or not, under tire statutes upon which .they were based, is a question of no consequence here, for the same* Courts which established that rule have subsequently, upon the amendment of the statute so as to make it like ours, held that the strict letter of the statute 'must be followed; that the contract of guaranty, though made at the time of the principal contract, and upon the same consideration, must be in writing, and must express the consideration which sustains it. These authorities are directly in point here, and clearly follow the plain letter of the statute. (Brewster v. Silence, 11 Barbour, 144; Glen Cove Mutual Insurance Co. v. Harrold, 20 Barbour, 298.) There are cases in California where it is held that the consideration expressed in the original obligation is sufficient to sustain the contract of guaranty made simultaneously with it, but none of them go so far as to hold that a mere indorsement in blank answers the requirements of the statute.
The complaint in this action clearly shows that there was no' such agreement or memorandum in writing as the law requires on the part of Winters and Hopkins, but only that' they indorsed their names upon the back of the note at the time of its execution.
The demurrer is therefore well taken, and the judgment of the Court below must be reversed.