First Nat. Bank v. Lock-Stitch Fence Co.

• Decision Date: 01 May 1885
• Citation: 24 F. 221
• Parties: FIRST NAT. BANK OF WORCESTER, MASSACHUSETTS, v. LOCK-STITCH FENCE CO. and others. CENTRAL NAT. BANK OF MASSACHUSETTS v. SAME.
• Court: U.S. District Court — Northern District of Illinois

24 F. 221

FIRST NAT. BANK OF WORCESTER, MASSACHUSETTS, v. LOCK-STITCH FENCE CO. and others.

CENTRAL NAT. BANK OF MASSACHUSETTS v. SAME.

United States Circuit Court, N.D. Illinois.

May, 1885

These were two suits upon promissory notes, one for $2,121, and the other for $1,123.59, both dated January 1, 1884, due 12 months after date, and payable to the order of Washburn &amp Moen Manufacturing Company, at the First National Bank of Joliet, Illinois. The plaintiff in each case is a banking corporation, organized under the laws of the United States and located in Massachusetts. The defendants are citizens of Illinois, the defendant Lock-Stitch Fence Company being a corporation, having its principal office and place of business at Joliet. The declaration in each case contained a single count, in which the defendants were charged as joint makers of the note set out in the declaration, and as such jointly liable to the plaintiffs thereon. To each declaration there was originally a plea of the general issue. Amended pleas were subsequently filed, in which it was averred that the defendants were not and never were jointly liable in respect to the several supposed causes of action in the declaration mentioned, or any or either of them, which pleas were duly verified.

It is provided by section 36 of the practice act of Illinois (chapter 110, Cothran's Annotated Ed. 1883, Rev. St Ill.) that 'in actions upon contracts, express or implied, against two or more defendants as partners or joint obligors or payors, whether so alleged or not, proof of the joint liability or partnership of the defendants * * * shall not, in the first instance, be required to entitle the plaintiff to judgment, unless such proof shall be rendered necessary by pleading in abatement, or unless the defendant shall file a plea in bar denying the partnership or joint liability, or the execution of the instrument sued upon, verified by affidavit. ' The notes in suit were executed and were payable in Illinois. On the face of each note appeared the signature of the defendant Lock-Stitch Fence Company, by L. E. Dillman, treasurer, as the maker thereof; and on the back of each were the following indorsements in the following order: L. E. Dillman, A. H. Shreffler, A. N. Kleinfelter, A. Dillman, Washburn & Moen Manufacturing Co., P. L. Moen, Treasurer.

These cases came on for trial together, before the court and jury, and the plaintiff in each case, in the first instance, offered in evidence the notes sued on, with the indorsements thereon in the order stated. Objection was made to the introduction of the notes in evidence unless they should be supplemented by affirmative proof that the defendants were joint makers, it being contended by counsel for the defendants that the notes themselves were not to any extent evidence of joint makership. The court admitted the notes in evidence, but without then passing upon the question of their sufficiency as proof of the defendants' alleged joint liability. The plaintiff then called as a witness the defendant Andrew Dillman, by whom it was shown that on January 1, 1884, all the defendant indorsers were stockholders of the Lock-Stitch Fence Company; that the witness was president, the L. E. Dillman was treasurer, that A. H. Shreffler was vice-president, and that A. N. Kleinfelter was secretary, of the company. The witness also testified that these parties held all the stock of the company, and constituted its officers at the time of the execution of the notes. This testimony was all objected to, and taken subject to the objection.

On cross-examination of the witness, it was shown that the debt for which the notes were given was one owing by the Lock-Stitch Fence Company to the payee of the notes. Upon the conclusion of the examination of this witness, the plaintiffs rested, and the defendants then moved the court that the jury be instructed to render a verdict in their favor, on the ground that the defendants were not shown to have been joint makers of the notes. The court reserved its ruling on this motion for the time being; and it appearing that the cases really involved no controverted issues of fact, but that their determination turned upon the view which the court should take of the legal principles invoked upon the question of liability, it was stipulated by the parties that the trial should proceed before the court, without the intervention of a jury, with the understanding that the defendants should have the same benefit of the motion for a peremptory instruction to the jury in their favor that they would have if a jury were still present. Certain of the defendants were thereupon called as witnesses, and testified that at the time these notes were given the Lock-Stitch Fence Company was solvent; that the notes were given in part settlement of an indebtedness then owing by the company to the Washburn & Moen Manufacturing Company, and not for or on account of the individual debt of the defendant indorsers, or any of them; that the president of the company negotiated the transaction, and he testified, to use his own language, that 'Mr. Washburn said after we had settled the differences and got through, before we executed the papers, that he didn't know much about the corporation, and as we owned all the stock, he required as a favor that we should-- that I should-- become personally responsible; I should guaranty the debt; he wanted I should guaranty it. He said it was all right if I would guaranty that debt, and I said I agreed to that. ' The same witness testified that he requested the other defendants L. E. Dillman, Shreffler, and Kleinfelter to indorse the notes, and it was admitted that both notes were indorsed by the defendants, except the Lock-Stitch Fence Company, after the company had executed the notes and before their delivery to the payee.

Hawley & Hanchett and Geo. C. Christian, for plaintiffs.

Geo. S. House and Geo. C. Fry, for defendant.

DYER J.

Upon the argument it was contended in behalf of the defendants that the burden of proof to show that the defendant indorsers were co-promisors with the Lock-Stitch Fence Company upon the notes, and therefore jointly liable as makers, was upon the plaintiff; that the notes themselves were not evidence of such joint liability; that the liability of the defendant indorsers, if any, was that of guarantors, and that therefore they could not be sued with the maker of the notes as jointly liable thereon; that for these reasons the court should have instructed the jury, when requested so to do at the close of the plaintiff's case, to return a verdict for the defendants, except the Lock-Stitch Fence Company; and that in any event upon all the facts shown, considered in connection with the principles of law which it was claimed must control the disposition of the case, there should be a judgment in favor of the defendants L. E. Dillman, Shreffler, Kleinfelter, and A. Dillman.

Stating the grounds of the defendants' contention more in detail, it was urged that the effect of the plea of non-joinder, verified by affidavit under the statute which has been quoted, was to cast upon the plaintiff the burden of providing joint liability; and that under the decisions of the supreme court of Illinois, where a third party, not the payee, writes his name on the back of a note in blank, it is presumed in law-- First, that the party wrote his name at or prior to the delivery of the note, and as a part of the transaction, to give the note credit with the payee; second, that such party thereby assumed the liability of a guarantor; that this presumption, however, may be overcome by parol evidence showing the actual contract of the parties as they intended it should be, so long as such contract is not inconsistent with that created by law. And it was then further insisted that the rule for determining the liability of the indorsers on the notes in suit must be that established by the law of Illinois where the notes were executed and were made payable. All this was controverted by counsel for the plaintiffs, who contended that the relation of the defendant indorsers to the note was such as to make them liable thereon as co-makers with the Lock-Stitch Fence Company; that the notes themselves were evidence of such liability; and that upon all the facts elicited, judgment should go in favor of the plaintiff against all the defendants.

Shortly stated, the controversy between the parties involves this question: What liability is assumed by a third party who places his name upon the back of a negotiable promissory note at the time of its execution by the maker, and before its delivery to the payee; and must liability in such case be determined in this court according to the course of judicial decision in the state where the obligation was incurred? Whether, in the case stated, the liability is that of original promisor, indorser, or guarantor, has been a question upon which great diversity of opinion has existed in many of the courts of the states. But the growing current of authority, even before Good v. Martin, 95 U.S. 90 seemed to tend towards the view that the liability assumed by a third party who thus indorsed a note in blank was that or original promisor, although a different rule was, and is yet, adhered to in some of the states. In New York it has been held, in a long line of cases, of which Haviland v. Haviland, 14 Hun, 627, Phelps v. Vischer, 50 N.Y. 69, and Coulter v. Richmond, 59 N.Y. 478, are examples, that presumptively such a party stands to the paper in the relation of indorser, but that this presumption may be rebutted by parol proof that the indorsement was made to give the maker credit with the payee. The same rule of liability prevails in Wisconsin. Cady v. Shepard, 12 Wis....