Callahan v. Bank of Kentucky
| Decision Date | 23 September 1884 |
| Parties | Callahan, & c., v. Bank of Kentucky. |
| Court | Kentucky Court of Appeals |
1. The law presumes that a note in the hands of the maker of it indorsed by the payee, has been paid.
2. But if the indorsement has been made for the accommodation of the maker, by the payee, in order to enable the former to have it discounted, this presumption does not apply.
3. The contract of an indorser is, that the maker will pay if the paper is presented at maturity and payment demanded, and it is not paid.
4. Notice of the dishonor of a bill to one who is the assignee of the payee (for the payment of his debts) is sufficient.
APPEAL FROM LOUISVILLE CHANCERY COURT.
LANE & HARRISON AND BIJUR & DAVIE FOR APPELLANT.
An accommodation indorser of commercial paper, to be held liable thereon, must be given due notice, if it dishonor and protest; and a notice to one to whom such indorser has made an assignment of the larger portion of his estate for the benefit of his creditors, will not bind the indorser.
GOODLOE & ROBERTS FOR APPELLEE.
1. That appellant was an accommodation indorser of the bill for the benefit of Weller & Son is beyond question.
2. Appellant, having made so strictly an assignment for the benefit of his creditors and for the payment of his debts, notice of the dishonor of the bill to the assignee, instead of appellant, is sufficient to hold him bound as indorser.
The firm of W. L. Weller & Son, on November 15, 1877, executed a note for $3,500, payable to the order of James Callahan, at the Bank of Kentucky, four months thereafter. The latter indorsed it in blank and delivered it to said W. L. Weller, who also indorsed it in blank, and discounted it to the appellee before its maturity, thereby putting it upon the footing of a foreign bill of exchange.
The proceeds were drawn out of the bank by W. L. Weller, but for the use of said firm--in fact the entire transaction was for its benefit, Callahan being merely an accommodation payee and indorser.
Before the maturity of the note W. L. Weller & Son had been adjudged bankrupts, and the appellant, Callahan, being heavily embarrassed, but not in fact insolvent, made an assignment of property for the benefit of his creditors to the appellant, Harry Stucky. The deed described certain realty embraced by it, and apparently conveyed the entire estate of the grantor to the assignee.
It expressly so stated as to his personalty, save the portion that was by law exempt to him as a housekeeper; and provided that after the payment of all his debts and liabilities and the expenses of the trust, the trustee should transfer any balance of the trust property left in his hands to Callahan's wife.
The testimony shows, however, that the deed of trust did not cover two tracts of land, then owned by Callahan, and that after the payment of all his indebtedness there will be left at least $40,000 in the trustee's hands.
The note not having been paid at maturity was protested for non-payment, and notice of protest duly given to Stucky, as assignee; but none was given or sent to Callahan, although he continued to reside and transact business at the same place, and in fact he does not seem to have had any notice or knowledge of the dishonor of the paper until long after its maturity.
The assignee, Stucky, brought this suit to settle his accounts, making the appellee a defendant; and it having by its answer, counter-claim and cross-petition, asserted the note both against Callahan and the trust estate, the court below rendered a personal judgment for it against the one, and adjudged that it be paid pari passu out of the other, with the general debts of the estate.
Two questions are presented for our decision:
First. Did the indorsement by Callahan and the delivery of the note by him to W. L. Weller, one of its makers, extinguish the debt?
Second. Was the notice to Stucky sufficient to charge Callahan, or was the latter released as indorser because notice of protest was not given or sent to him?
The law presumes that a note in the hands of the maker of it, indorsed by the payee, has been paid, and one to whom the maker has discounted it can not recover against the indorser, unless it was indorsed for the maker's accommodation. ( Callahan v. First National Bank of Louisville, 78 Ky. 604.)
Weller & Son, however, did not indorse this note to the appellee. It never came to the hands of the makers after its indorsement by Callahan, but to that of W. L. Weller alone, and he alone indorsed it.
The firm had an account at the bank, but the proceeds of the note were placed to his individual credit, and drawn out upon his individual check.
The firm account was distinct from his individual account.
If, however, the possession of the note and its being discounted by one of the makers after its indorsement by Callahan could be considered as equivalent in law to such possession and action by the firm, or even if it had then come to the possession of the firm and been indorsed in its name, the debt would not have been extinguished in this instance, as it was not so intended.
When the answer of the appellee was drawn, the words, " Pay the within to the order of W. L. Weller," were written over the indorsement of Callahan, and the words, " For value received, pay to Prest., Direc. & Co., of Bank of Louisville," over that of Weller.
It alleged that the note was indorsed in blank by Callahan and given to W. L. Weller with authority to discount it for the use of W. L. Weller & Son; that Weller indorsed his name on it and discounted it for value to the bank in the usual course of business, and before maturity, and that the proceeds were paid to said Weller.
But by an amended petition it was stated that the note was made payable to Callahan and indorsed by him for accommodation, and, as he then knew, to enable Weller & Son to discount it to the appellee; that the name of W. L. Weller was indorsed upon it simply for convenience, and in order that the money might be placed to his credit in bank, and drawn out upon his check, thus saving the trouble of placing it to Callahan's credit and then procuring his check upon which to draw it; and that the bank discounted it upon the faith of Callahan's indorsement. These allegations are fully sustained by the testimony; and the court therefore correctly permitted the appellee, upon the trial, to strike out said assignments over the names of Callahan and Weller, and to write over the name of Callahan an assignment of the note to the bank; and did not err in deciding that the possession and indorsement of it by W. L. Weller, after its indorsement by Callahan, did not extinguish the debt. (Long & Robertson v. Bank of Cynthiana, 1 Littell, 290.)
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