Farwell v. St. Paul Trust Co.

• Decision Date: 09 March 1891
• Citation: 45 Minn. 495,48 N.W. 326
• Parties: FARWELL ET AL. v ST. PAUL TRUST CO.
• Court: Minnesota Supreme Court

45 Minn. 495

48 N.W. 326

FARWELL ET AL.vST. PAUL TRUST CO.

Supreme Court of Minnesota.

March 9, 1891.

(Syllabus by the Court.)

1. The indorsee of a negotiable promissory note cannot show, as against the indorser, that at the time of the indorsement it was verbally agreed that presentment for payment at maturity, notice thereof, and notice of non-payment need not be made or given.

2. When a place of payment is designated in the note, the indorsee is not relieved of the duty of presenting the same for payment at such place by reason of the insolvency of the maker, or because he has removed from the state.

3. One partner cannot, without the consent, express or implied, of the other members of the firm, use the funds or the property of the firm to pay, or settle, or cancel his individual liabilities; and a creditor receiving such funds or property, having knowledge of the misapplication, cannot retain the funds or the property. Further, the burden is on the creditor to show consent of the other partners.

4. The finding of the trial court that appellants received from their debtors certain notes of third parties in payment of an account due appellants was justified by the testimony.

Appeal from district court, Ramsey county; KELLY, Judge.

Howard L. Smith, for appellants.

John B. & W. H. Sanborn, for respondent.

COLLINS, J.

In the consideration of this case it will be assumed without discussion, and without deciding the point, that Ettelsohn, who attempted to become a special partner in the firm of E. Allen & Co., (see In re Allen, 41 Minn. 430,43 N. W. Rep. 382,) possessed either the power and authority of a general partner or that of an agent, when transacting the business with appellants out of which arise their claims against respondent as receiver in insolvency. This assumption brings us at once to a brief statement of the facts surrounding the transaction, and to the merits. Allen and Levinson were general partners, looking after a mercantile business in St. Paul. Appellants were engaged in the wholesale trade in Chicago, where Ettelsohn resided. The insolvents were dealing quite extensively with appellants, and Ettelsohn was attending to nearly all of their part of the business. E. Allen & Co. had an opportunity to sell a bill of goods to Long & Glennon, traders at Mankato, Minn., upon time. Ettelsohn called upon appellants in reference to such a sale, and it was agreed that if the sale was made the latter would take Long & Glennon's notes upon account when indorsed by Ettelsohn personally, and by his firm. The sale was made, and the purchasers executed 13 promissory notes, bearing date April 9, 1888, payable to their own order at intervals of 15 days, the first, 235 days from date. These notes were then indorsed by Long & Glennon, delivered to Allen & Co., and immediately forwarded to Ettelsohn, who at once placed his own name and that of the firm upon the back of each, and delivered them to appellants, with the understanding that they should be discounted. This was done by appellants, and the trial court found as a fact that the proceeds were applied by the latter in payment of the balance then owing appellants by Allen & Co. on account of goods sold between September 1 and December 31, 1888. These notes were made payable at the office of the makers at Mankato, but were not presented there or elsewhere for payment as they matured. On January 19, 1889, Long & Glennon made an assignment under the insolvency act, and then removed from the state. To avoid the effect of a failure to present the notes at maturity, to give notice thereof, and of the makers' default, appellants offered to prove on the trial that, at the time of the indorsement, demand upon the makers at maturity, notice thereof, and of non-payment, were verbally waived by the indorsers, Allen & Co. The question is by no means a new one, and goes to the competency, as between indorser and indorsee, of testimony tending to show that, contemporaneously with the indorsement, there was a parol agreement which materially changed the contract from what it appeared to be, and relieved one of the parties from the performance of certain acts otherwise resting upon him; to put it in other words, the object of their proposed testimony was to transform the contract from one of conditional, to one of absolute, liability.

From the earliest history of the state this court has steadily resisted the attempts which have frequently been made to vary or explain by parol the ordinary indorsement of a promissory note, by means of which the usual liability and contract of the indorser might be enlarged or diminished, made greater or less, as interest demanded. The most notable of the earlier cases was that of Kern v. Von Phul, 7 Minn. 426, (Gil. 341,) where a regular indorser in blank sought to show that he was an indorser without recourse. We do not feel called upon to review this line of cases, but content ourselves by saying that, while this precise question was in neither, it was practically settled by the reasoning and conclusion in the cases of First Nat. Bank v. National M. Bank, 20 Minn. 63, (Gil. 49;)Barnard v. Gaslin, 23 Minn. 192; and Knoblauch v. Foglesong, 38 Minn. 352,37 N. W. Rep. 586. The contract of indorsement is twofold,-that of sale and transfer, and that of conditional liability. When in blank, as in the case at bar, all of the authorities concur in saying that a well-defined contract has been made, as full and complete as if explicitly expressed in writing. On what principle can it be urged, then, that testimony which would be incompetent and inadmissible to vary, alter, or control a written agreement can be receivable to vary, alter, or control, and even to destroy, the contract entered into by the regular indorser in blank? And if there is any rule of evidence, save in a few exceptional cases referred to in First Nat. Bank v. National M. Bank, supra, whereby parol testimony may be received to vary or alter the contract, at what point short of that which may totally destroy it can the line be drawn? The contract is admittedly of the same force as though it were reduced to writing, and for that reason it can only be limited or enlarged or impeached with safety by the same class of testimony. If the indorser wishes to qualify his liability, apt words are in common use which he must adopt, or he must in some other manner clearly indicate that his indorsement is limited to a transfer of the paper, and nothing more. If a transfer of title is desired, with a complete and unconditional assumption of liability by the indorser, equally as apt and common phrases are at hand which may be written above the indorser's signture, and the indorsee must see to it that they are used, thus relieving the transaction of its doubt and uncertainty. We regard it as of great importance that the rules respecting negotiable paper should be clear, and the whole story of its obligation...