Bank of British North America v. Ellis

• Decision Date: 26 January 1880
• Citation: 2 F. 44
• Parties: BANK OF BRITISH NORTH AMERICA v. ELLIS and others.
• Court: U.S. District Court — District of Oregon

2 F. 44

BANK OF BRITISH NORTH AMERICA v. ELLIS and others.

United States Circuit Court, D. Oregon.

January 26, 1880

Ellis G. Hughes, for plaintiff.

George H. Durham and W. M. Gregory, for defendant.

DEADY D.J.

This action is brought to recover the sum of $2,025, on 43 promissory notes made on May 1, 1878, by as many different persons, to the order of the Dayton, Sheridan & Grande Ronde Railway Company, and by it indorsed to J. Gaston. Afterwards and before the maturity of said notes, they were indorsed in blank by said Gaston and defendants, and acquired by the plaintiff in the due course of business.

The case was before the court November 12, 1879, on a demurrer to the original answer. The demurrer being sustained, the defendants had leave to file an amended answer, containing further defences to the action, to which the plaintiff also demurs.

The complaint alleges that each of said notes contained a stipulation that, in case suit should be instituted for the collection of the same, there should be paid such sum as the court might deem reasonable as an attorney fee in said suit and that $220 is such fee.

The amended answer denies that the plaintiff is entitled to recover any attorney fee in this action; and, for a further defence, alleges that, after said notes had been indorsed in blank by said Gaston and the defendants, the said Gaston negotiated the same to the plaintiff, and it became the owner thereof; that afterwards, and before the commencement of this action, the plaintiff wrote over said Gaston's name thereon a special indorsement to itself-- 'Pay to the-- of the Bank of British North America or order'-- and 'thereby released the defendants, and each of them, from any and all liability on said indorsements.'

The answer also shows the order in which the indorsements were made on said notes, from which it appears that Gaston's name was written first, and those of the five defendants immediately thereunder, so that it was convenient, if not necessary, for the plaintiff, in writing the special directions thereon making the note payable to itself or order, to write the same as it did immediately above the name of Gaston.

This defence assumes that the holder of a negotiable instrument who makes an early blank indorsement, payable to himself thereby discharges all subsequent indorsers thereon from liability as such, the same as if he had stricken their names therefrom.

The only case cited which is directly in point is that of Cole v. Cushing, 8 Pick. 48, in which it was held that such an act did not discharge the subsequent indorsers, but they still remained liable to the holder. To the contrary of this there is a dictum or suggestion in 2 Par.on N.& B. 19, to the effect that 'it might be said in such a case that when the holder made the note payable to himself by the first indorser, he made himself indorsee of that indorser, and thereby discharged all subsequent indorsers.'

The suggestion, 'it might be said,' however distinguished the source, scarcely amounts to a quaere, and certainly cannot overcome or cast doubt upon the well considered decision in Cole v. Cushing, with which my own judgment wholly concurs.

It is not to be presumed that the holder of a note with a number of indorsers thereon will intentionally discharge any of them without some reason or consideration commensurate with the loss of security for his debt thereby sustained. The indorsers having no right to be discharged, the act of the plaintiff ought not to be construed to have that effect, unless it plainly appears that such was the intention with which it was done, than which nothing is more improbable.

The direction written by the plaintiff over the indorsements upon the notes is not...