Ehrlich v. Mulligan

• Decision Date: 06 February 1928
• Docket Number: No. 73.,73.
• Parties: EHRLICH v. MULLIGAN et al.
• Court: New Jersey Supreme Court

140 A. 463

EHRLICH

v. MULLIGAN et al.

No. 73.

Court of Errors and Appeals of New Jersey.

Feb. 6, 1928.

(Syllabus by the Court.)

Appeal from Supreme Court.

Action by David Ehrlich against William G. Mulligan and another on a note. From a judgment for plaintiff, defendants appeal. Affirmed.

Seufert & Elmore, of Englewood, for appellants.

Cohen & Klein, of Newark, for respondent.

KATZENBACH, J. On November 15, 1914, William G. Mulligan and Agnes K. Mulligan made their joint and several promissory note for the sum of $840, payable to Edward F. McDermott and Elizabeth F. McDermott six years after the date thereof. The note was delivered to the payees, who were husband and wife. On February 1, 1917, Edward F. McDermott died. Elizabeth F. McDermott later indorsed the note and delivered it to one, David Ehrlich, who paid no consideration for the transfer of the note to him. The note was not paid on presentment when it fell due. Ehrlich, after he acquired the note, instituted in the Supreme Court a suit against the makers. The answer of William G. Mulligan set up payment and a discharge in voluntary bankruptcy proceedings from payment of the obligation. The answer of Agnes K. Mulligan set up payment of the note. The trial resulted in a verdict in favor of the plaintiff. The defendants below have appealed from the judgment entered upon the verdict against them.

The facts respecting the transaction between the Mulligans and McDermotts with reference to the note were intricate and involved. We are not, however, concerned with these, as no question is raised on the appeal respecting the propriety of the trial judge having submitted the case to the jury. Each defendant filed a separate appeal. The grounds of appeal are the same with the exception that the appeal of William K. Mulligan includes a point not involved in the appeal of Mrs. Mulligan. The points common to both appellants are: (1) Did Elizabeth F. McDermott have legal title to the note on which suit was brought at the time she transferred the same to David Ehrlich, the plaintiff? (2) Could the plaintiff maintain this suit for the use and benefit of Elizabeth F. McDermott?

These questions will be considered first and in the order set forth. Taking up the first question, we find that the authorities generally hold that a note payable to husband and wife jointly belongs in the event of the death of either to the survivor, and that an action brought on the note after the death of one must be instituted by the survivor. In 8 Corpus Juris, p. 341, it is stated:

"If one of two joint payees dies, the papers should be transferred by the survivor."

"The right to enforce payment of a promissory note made to joint payees or endorsees docs not descend to representatives, but passes on or is transferred to the survivor who has title to it." Daniels on Negotiable Instruments, §§ 1182, 1183, and 1183A.

"The note being payable to husband and wife jointly, belonged to the wife as survivor." Sanford v. Sanford, 45 N. Y. 723.

"When one or more of several obligees, covenantees or others having a joint legal interest in the contract dies, the action must be brought in the name of the survivor, and the executor or administrator of the deceased must not be joined." Chitty's Pleadings (Ed. 1859) p. 19.

In the case of Llppincott v. Stokes, 6 N. J. Eq. 122, at page 153, Chancellor Halsted said:

"Hannah Lippincott is surviving obligee of the securities taken to her and Hope Haines; and it is claimed that she is entitled to the possession of them. I think this is so. * * *"

The defendants-appellants contend that both at common law and under section 41 of the Negotiable Instruments Act the plaintiff did not have title to the note. Section 41 (3 C. S. 1910, p. 3740) provides as follows:

"Where an instrument is payable to the order of two or more payees or indorsees who are not partners, all must indorse, unless the one indorsing has authority to indorse for the others."

This section has no application to an instrument in which the payees have the right of survivorship. Upon this point the defendants-appellants further insist that if Elizabeth F. McDermott could receive payment of the note as the survivor of the joint payees she could not by her individual indorsement transfer the title to the note to the plaintiff. This is a unique proposition, unthinkable and insupportable. If Elizabeth F. McDermott was entitled to sue and collect the note she could transfer that right to the plaintiff, for the note was a chose in action and expressly assignable at law under section 19 of the Practice Act of 1903 (3 C. S. 1910. p. 4056).

The second question above set forth must also be answered in the affirmative.

"The holder of the legal title may sue, although not the full owner, if the maker is not thereby prejudiced in his defense. Especially is this so, where such suit is at the request or with the consent of the owner, as well as for his benefit. * * * The holder of the legal title may sue, although he has no beneficial interest in the instrument, as where a third person is entitled to the proceeds or holds the equitable title. Defendant cannot question plaintiff's title, except on the ground of bad faith in the plaintiff or prejudice to defendant's rights." 8 Corpus Juris, p. 822.

It is no ground of defense that the plaintiff has no beneficial interest in the note sued on, and will be bound to account to the real owner for the proceeds of any judgment recovered on it. National Pemberton Bank v. Porter, 125 Mass. 333, 28 Am. Rep. 235.

"When the owner of a note, for reasons satisfactory to himself, assigns it to another, thereby vesting in him the full legal title, the assignee becomes, so far as the debtor is concerned, the real party in interest. The original owner is still the person to be finally benefited by the litigation, but his legal demand is no longer against the maker of the note, but against the person to whom he has assigned it. When the obligor is sued by such assignee (no claim as innocent purchaser being involved), he can make any defense he could have made against the assignor; he is fully protected against another action; and in no way is it a matter of the slightest concern to him what arrangement between the plaintiff and the original creditor occasioned the assignment. This being true, it would be a sacrifice of substance to form to permit the defendant to defeat the action by showing a failure of consideration for the transfer, or that the plaintiff was bound to account to his assignor for a part or all of the proceeds. We hold that the objection to the judgment urged on the ground that the plaintiff was not the real party in interest is untenable." 8 Corpus Juris, p. 823. and cases cited.

In R. M. Owen & Co. v. Storms & Co. et al., 78 N. J. Law, 154, 72 A. 441, Mr. Justice Trenchard, speaking for this court, said:

"We think that the plaintiff company was the holder of the note and was entitled to maintain suit upon it. This right is expressly given by statute (Pamph. L. 1902, p. 583 [3...