Fawsett v. the Nat'l Life Ins. Co. of The United States

• Decision Date: 31 October 1879
• Citation: 5 Ill.App. 272,5 Bradw. 272
• Parties: ASBURY F. FAWSETTv.THE NATIONAL LIFE INSURANCE COMPANY OF THE UNITED STATES ET AL.
• Court: United States Appellate Court of Illinois

5 Ill.App. 272

5 Bradw. 272

ASBURY F. FAWSETT

v.THE NATIONAL LIFE INSURANCE COMPANY OF THE UNITED STATES ET AL.

Appellate Court of Illinois, First District.

October Term, 1879.

OPINION TEXT STARTS HERE

APPEAL from the Superior Court of Cook county; the Hon. S. M. MOORE, Judge, presiding. Opinion filed March 2, 1880.

August 27, 1872, the South Chicago Land and Building Association made a series of six promissory notes, amounting in all to $48,000, payable to the order of Asbury F. Fawsett, with interest at 8 per cent., and secured the same by deed of trust upon its real estate. Two of these notes, for $8,125.00 each, payable one in six and the other in seven years from date, were respectively indorsed by Fawsett, the payee, thus:

“Pay to the 2d National Bank of Monmouth for collection for account of George F. Harding, executor of Abner C. Harding, deceased.

A. F. FAWSETT.”

The notes thus indorsed were delivered to the bank without recourse. George F. Harding, having them in his possession thus indorsed, before maturity, in the usual course of business, and for full consideration, sold and indorsed them to the National Life Insurance Co. of the United States of America, the latter taking them without any notice of any claim on the part of Fawsett other than may be imported by the form of his indorsement to the bank. A controversy having arisen between Fawsett and said Life Insurance Company respecting the ownership and right to receive payment of said notes, the Land and Building Association, the maker, filed a bill of interpleader, and said respective claimants of the notes came in and interpleaded. On the hearing upon pleadings and proofs, a decree was passed finding the Life Insurance Company a bona fide holder for value, without notice, and as such entitled to receive payment of said notes. From that decree Fawsett appealed to this court.

Messrs. GARDNER & SCHUYLER, for appellant; that assignment of negotiable paper is purely a statutory regulation, cited Ryan v. May, 14 Ill. 49; Fortier v. Dorst, 31 Ill. 212; Badgley v. Votrain, 68 Ill. 25.

The note in question was not legally transferred: Best v. Nokomis Bank, 76 Ill. 608; Barker v. Prentiss, 6 Mass. 430; Potter v. Mer. Bank, 28 N. Y. 641; Reanur v. Bell, 79 Pa. St. 292; Lawrence v. Russell, 77 Pa. St. 460; Rock Co. Bank v. Hollister, 21 Minn. 385; Merritt v. Duncan, 7 Heisk. 156; Atkins v. Cobb, 56 Ga. 86; Caldwell v. Evans, 5 Bush, 380; Payne v. Flournoy, 29 Ark. 500.

Where a principal directs his agent to pay money to a third party, the direction may be countermanded before it is executed: Evans on Agency, 327; Williams v. Everitt, 14 East. 582; Scott v. Porcher, 3 Merivale, 652; Brend v. Hampshire, 1 M. & W. 365; Wedlake v. Hurley, 1 C. & J. 83; Yates v. Bell, 3 B. & Ald. 643; Barker v. Prentiss, 6 Mass. 430; Potter v. Mer. Bank, 28 N. Y. 641.

An indorsement of a note for collection is restrictive, and suspends negotiability: Ancher v. Bank of England, Doug. 637; Sigourney v. Lloyd, 8 B. & C. 622; Sigourney v. Lloyd, 5 Bing. 525; Snee v. Prescott, 1 Atk. 245; Treuttal v. Bavandon, 8 Taunt. 100; Blaine v. Bourne, 11 R. I. 119; Sweeney v. Easter, 1 Wall. 166; Lee v. Chillicothe Bank, 1 Bouv. 387; Leary v. Blanchard, 48 Me. 269; Cecil Bank v. Farmers Bank, 22 Md. 148; Power v. Finnie, 4 Cal. 411; Brown v. Jackson, 1 Wash. C. C. 512; Best v. Nokomis Bank, 76 Ill. 608; Lock v. Leonard Silk Co. 37 Mich. 479.

An assignor of a note taking it by an equitable title, takes it with all the equities existing against it: Olds v. Cummings, 31 Ill. 189; Fortier v. Darst, 31 Ill. 212; Peck v. Bligh, 37 Ill. 319; Walker v. Dement 42 Ill. 272; Sumner v. Waugh, 56 Ill. 531.

Messrs. HUTCHINSON & LUFF, for appellees; as to the rights of a purchaser of negotiable paper in good faith before maturity, cited Johnson v. Way, 27 Ohio St. 374; Shreeves v. Allen, 79 Ill. 553; Comstock v. Hannah, 76 Ill. 530; Hamilton v. Marks, 63 Mo. 167; Hotchkiss v. National Bank, 21 Wall. 354.

The endorsements are not restrictive: Buckley v. Johnson, 3 Exch. 135; Murrow v. Stewart, 8 Moo. P. C. 267; Byles on Bills, 157; Edie v. East India Co. 2 Burrows, 1216; Rev. Stat. Ch. 98; §§ 3, 4, 5.

A note endorsed for collection and afterwards returned to the owner may be negotiated by him: McLemore v. Hawkins. 46 Miss. 715; Atkins v. Cobb, 56 Ga. 86.

MCALLISTER, J.

The principal, and I may say controlling question for decision in this case is: Was the endorsement of the notes in question by the payee Fawsett such an absolute assignment of them as passed their negotiable quality to the indorsee? It reads: “Pay to the Second National Bank of Monmouth, for collection, for the account of George F. Harding, executor of Abner C. Harding, deceased.”

The solution of that question involves a consideration of some of the rules of law respecting the nature of negotiable instruments, and their transmission from one to another, with the incidents attending such transfers. Kent says: “If a bill or note be absolutely assigned, so as to pass the whole instrument to the indorsee, its negotiable quality would pass with it; and the better opinion would seem to be that its negotiability could not be impeded by any restriction contained in the indorsement. But where the indorsement is a mere authority to receive the money for the use or according to the directions of the indorser, it would be evidence that the indorsee did not give a valuuable consideration, and was not the absolute owner.” 3 Com. 92.

The rule embraced in the last branch of that quotation, is expressly recognized in Best v. The Nokomis National Bank, 76 Ill. 608, where the court in the most guarded language says: “Where the indorsements on the bills are shown to have been for collection merely, and for no other purpose, they will not transfer the title.”

It will be borne in mind that the original contracts, the notes, are in legal effect to pay such person or persons as the payee, or his assignee or their assignees, shall direct; and there is as much privity between the last indorser and the last assignee as between the maker and the first payee. Where the payee assigns over a promissory note, he does it by the statute; being a chose in action, it is not assignable by the general law, and the indorsement is a part of the original contract, and is incidental and appurtenant to it in the nature of it, and must be understood and interpreted to be made in the same manner as the original note was made; and the indorsee holds it in the same manner, and with the same privileges, qualities and advantages as the original payee held it; that is, as an assignable negotiable note, which he may indorse over to another, and that other to a third, and so on, at pleasure. Wilmot, J., in Edie v. East India Co., 2 Burrows, 1226, a case in which it was held that where the payee omitted from his indorsement the word “order,” such an omission would not affect the subsequent negotiability of the bill or note.

The act of endorsement is something to which the law attaches certain effects. It has a two-fold operation: First, it operates as an assignment; and, upon delivery, the contract is executed and the transfer complete, if the assignment be of the payee's entire interest in the note. Secondly, it has a certain executory operation from which arises a liability not necessary here to be specified.

We now recur to the question whether the negotiable qualities of the notes above alluded to, passed by the assignment under consideration. It makes no difference that the endorsement to the bank omits the words “or order”; but the true question is: Did that assignment pass all of Fawsett's interest in the notes; or, in other words, does it show any other intention on its face? For that is really what is meant by Kent, when he says: “If the bill or note be absolutely assigned, so as to pass the whole instrument to the indorsee, its negotiable quality would pass with it.” What is there on the face of that indorsement to show that the indorser reserved any interest in the note to himself? It says: “Pay to the 2nd National Bank, etc., for collection.” But ““for collection” for whom? Not himself; but for account of George F. Harding. ““““For account of” is synonymous with “for the use,” or “for the benefit” of George F. Harding. 2 Parsons on Bills and Notes, 21. This is far different from a mere authority to receive the money for the indorser's own benefit. Let us recur again to the observations of Justice Wilmot, in the case from Burrows, above referred to. He said: “There is a great deal of difference between giving a naked authority to receive the money and transferring the note over by indorsement, and I doubt whether he can limit his indorsement of it by way of assignment or transfer to another so as to preclude his assignee from assigning it over as a thing negotiable. For the assignee purchases it for a valuable consideration; and therefore purchases it with all its privileges, qualities and advantages, one of which is its negotiability. To be sure he may give a mere naked authority to a person ‘to receive it for him.’ He may write upon it: ‘Pray pay the money to my servant for my use’; or use such expressions as necessarily import that he does not mean to indorse it over, but is only authorizing a particular person to receive it for him and for his use. In such case, it would be clear that no valuable consideration had been paid him. But at least that intention must appear upon the face of the indorsement.” 2 Burr. 1226.

Instead of it appearing on the face of this indorsement that Fawsett's...