Carroll v. Nodine

• Decision Date: 03 June 1902
• Citation: 69 P. 51,41 Or. 412
• Parties: CARROLL v. NODINE.
• Court: Oregon Supreme Court

69 P. 51

41 Or. 412

CARROLL v. NODINE.

Supreme Court of Oregon

June 3, 1902

Appeal from circuit court, Union county; Robert Eakin, Judge.

Action by W.T. Carroll against Eliza Nodine. From a judgment for plaintiff, defendant appeals. Reversed.

This is an action upon an implied warranty on the sale without recourse by defendant to plaintiff of a certain promissory note made and executed by Louisa A. Hudson and Thomas R Hudson to Fred Nodine on August 21, 1878, for the sum of $150, with interest at 10 per cent. per annum, and by the latter indorsed to the defendant. The note was secured by a mortgage upon real property in the city of Union, Or. Several payments were indorsed thereon, including one of $7, of date October 25, 1893. The complaint contains appropriate allegations showing that suit was subsequently commenced to foreclose, and the defense interposed that the $7 indorsement was not a genuine payment, by reason whereof the statute of limitations had run against the note. The answer sets up among other things, that, at the time the defendant sold and indorsed the note to plaintiff, he was fully informed of all matters concerning the credit made thereon of date October 25, 1893, and that the same was a valid and genuine payment that he then guarantied that she should never at any time be held liable upon said note in any capacity, or for any part thereof; and that her indorsement of said note without recourse would, and in fact did, forever relieve and protect her from all liability thereon. The case went to trial upon the issues thus tendered, with others, and, plaintiff having recovered judgment, the defendant appeals.

Leroy Lomax, for appellant.

T.H. Crawford, for respondent.

WOLVERTON J. (after stating the facts).

There are but two errors relied upon for reversal. It is first contended that the plaintiff, at the time he purchased the note, agreed and guarantied that the defendant should never be held liable thereon in any capacity, and that such an agreement constitutes a valid defense to the action. The question arose upon an attempt to prove the express warranty set up in the answer by parol, which the court refused to permit, under the idea that the contract, being in writing could not be thus varied. The theory of the plaintiff is that the indorsement of the note fixes and determines the relation of the parties to the transfer,--that is, imports a contract in writing between them,--and that, like other contracts of the kind, cannot be varied or controlled by a contemporaneous verbal agreement, as it is presumed that the whole understanding of the parties has been incorporated in the writing. The case of Smith v. Caro, 9 Or. 278, and other cases of like nature, are relied upon in support of the contention. In the case cited the indorsers simply wrote their names upon the back of the note; and the court held that by the law merchant the indorsement imported a contract in writing, which served not only as a means of transfer, but to fix and determine the liabilities of the indorsers, and that it was not competent to vary the contract by any parol agreement that might have been entered into at the time. The liabilities of an ordinary or unqualified indorser are upon the instrument indorsed, conditioned upon demand and notice but where the transfer is by indorsement without recourse, or by delivery, the vendor's liabilities arise from the fact or contract of sale, and not upon the paper. The purpose of such an indorsement, like delivery without indorsement, is simply to carry title to the purchaser, without alone importing a contract. 4 Am. & Eng.Enc.Law. (2d Ed.) 475. The authorities are in unison, however, that where a note is thus transferred there is an implied warranty by the seller that it is what it purports to be, and, as applied to the exigencies of this case, that no payments have been made, except those that appear to have been indorsed thereon, and that such as so appear are genuine, and operate to continue the obligation in force as against the statute of limitations. Bank v. Smiley, 27 Me. 225, 46 Am.Dec. 593; Society v. Giddings (Cal.) 30 P. 1016, 31 Am.St.Rep. 181; Hannum v. Richardson, 48 Vt. 508, 21 Am.Rep. 152. There is an intimation in a note to Drennan v. Bunn (Ill.) 7 Am.St.Rep. 354, 366 (s.c. 16 N.E. 100), that the general rule that oral evidence is inadmissible to change the contract of indorsement relates to restrictive indorsements, also, and, extended, it applies to indorsements without recourse. The authorities referred to, however, as sustaining the principle, go to the proposition that it cannot be shown by parol that an unqualified indorsement was made for the sole purpose of transferring the title, and that it was agreed at the time that the words "without recourse" should be written over it. This, it appears to us, is coming back to the same question. An indorsement without recourse is a very different thing from an unqualified indorsement; and it would be just as objectionable to show an agreement by parol that the vendor should be relieved of all liability on the instrument, as it would be that the vendor agreed to waive demand and notice, which was the case of Smith v. Caro, supra. In either case there is a variance of the contract which the unqualified indorsement imports. We have been unable to find any case covering the exact point here. Where an article of personalty in the vendor's possession is sold and delivered to another, and nothing is said, there goes along with the contract an implied warranty of title, and a failure thereof renders the vendor liable. The implied warranty attending the sale of commercial paper arises upon like principle, Hannum v. Richardson, supra. It will hardly be...