Grocery v. Petitioner

• Citation: 41 W.Va. 787
• Court: West Virginia Supreme Court
• Decision Date: 28 March 1896
• Parties: Roanoke Grocery & Milling Co. v. Watkins et al.

41 W.Va. 787

Roanoke Grocery & Milling Co.

v.Watkins et al.

Supreme Court of Appeals of West Virginia.

Submitted January 22, 1896

Decided March 28, 1896.

1. Negotiable Instruments Indorsement Before Delivery Parol Evidence.

Where a negotiable promissory note, made payable to a particular person or order, is first indorsed by a third person, and then delivered to the payee, such third person is^held to bean original promisor, guarantor, or indorser, according to the nature of the transaction and the understanding of the parties at the time; and this may be shown by parol proof.

2. Negotiable Instruments Understanding of Parties Original Promisor.

If it be shown that the understanding between such third person and the payee at the time of the transaction was that such third person should be bound only collaterally, in such case the payee will not have the right to hold him bound as an original promisor.

3. Negotiable Instruments Joint Promissor Instructions.

Defendant Jones was Hied only as a joint promisor, and pleaded the general issue nil debet. The court was asked on his behalf to give the following instruction: "Defendant's Instruction No. 6. The court instructs the jury that if they believe from the evidence in this case that H. C. Jones indorsed his name on the back of the note sued on in this case as indorser, and not as joint maker thereof, and that at the time the said note was delivered to the plaintiff it knew the said Jones indorsed the said note as an indorser thereon, and not as a joint promisor, and that the said plaintiff had said note regularly protested, and had notice sent to the said Jones, as indorser, of such protest, then the jury may consider said facts along with the other evidence in the case, and if therefrom they believe from the evidence that the said Jones was an indorser on the note sued on, and not a joint maker or promisor, they should find for the defendant" which, being objected to by plaintiff, was refused by the court. Held, this was error to defendant's prejudice, as the evidence tended to prove the facts upon which it was based.

Johnston & Hale for plaintiff in error, cited Barton, Law Prac. 143; 22 How. 341; 59 N. Y. 479; 19 K Y. 227; 50 K Y. 71; 56 Ind. 465; 48 Ind. 244; 4 Ind. 460; 35 K J. Law, 571; 57 Term. 421; 35 Md. 262; 68 Pa. St. 243; 10 W. Va. 470; 9 W. Va. 415.

Holt, President:

Upon a writ of error to a judgment rendered by the Circuit Court of Mercer county on the 21st of May, 1895, for eight hundred and forty two dollars and seventy eight cents in favor of the Roanoke, etc., Company against defendant H. C. Jones, who alone appeals. The suit was an action of debt, containing two counts, upon the following negotiable note, irregularly indorsed by W. P. Phillips (dead at the time of the suit) and defendant H. C. Jones, which note reads as follows: "$745.83. P. 0. Bluefield, Dec. 28, 1892. Seventy eight days after date we promise to pay to the order of Roanoke Grocery and Milling Company seven hundred and forty five dollars and 83-100. Negotiable, and payable at First National Bank of Bluefield, W. Va. Homestead and all other exemptions waived by the maker and each indorser. Value received. Watkins & Surface. No. 2, 787. 16-19 March. Due 16-19 March." Indorsement on back:" W. P. Phillips. PL C. Jones." "Protested for nonpayment, March 18, '93. Geo. C. Pollock, N. P." The process was duly served on the three defendants and returned, and the conditional judgment and judgment by default were duly entered at rules, and the case properly entered on the court docket. On the 15th day of February, 1895, defendant Jones appeared by his attorney, and demurred generally to plaintiffs declaration, and to each count, in which the plaintiff joined, and the court having overruled the same, and defendants Watkins & Surface continuing in the default, the court rendered judgment against them. Defendant Jones entered the plea of nil debet, which in debt on simple contract is still, with us, the general issue, putting the plaintiff to the proof of every material averment, where some statute does not otherwise provide. See Code, c. 125, ss. 40, 41; 5 Rob. Prac. 246-248,

And all the facts alleged must occur to prove the defendant indebted to the plaintiff. As to the demurrer, the plaintiff gave notice to the defendant that it elected to treat the defendant and all the other parties to the note sued on as joint promisors, and not to treat defendant Jones as indorser or guarantor, and that it relied upon the second count alone; therefore, at the instance of the plaintiff, the first count is to be disregarded. See Code, c. 131, s. 13.

In the second count it is averred that the said W. P. Phillips is "since deceased," and, reading that for the present in aid of the second count, it shows why such joint promisor is not also sued. See 1 Bart. Law Prac. 144. That objection being removed, the count is good against the three survivors as joint promisors. I think it is to be regretted that the doctrine has not been laid down in this state that such irregular indorser who puts his name on the back of a negotiable note before it is delivered to the payee or indorsed by him should be presumed to be a first indorser to the extent of being entitled to notice of non-payment, etc. See 1 Daniel, Neg. Inst. § 714; Pool v. Anderson, 116 Ind. 88 (18 N E. 445). It is desirable that such paper should carry its history on its face, and should be prima facie presumed to be what it appears to be, viz. an indorsement so far as the rights of a regular indorser are concerned. In this state I understand the doctrine to be that when a negotiable promissory note, payable to a particular person or order, is first indorsed by a third person, and then delivered to the payee, such irregular indorser is prima facie an original promisor or guarantor, as the payee may elect. But the true nature of the transaction and the understanding of the parties at the time may be shown by parol proof, and such proof may destroy the right of election of the payee, and such irregular indorser may be held liable only as an original promisor or as a guarantor or as an indorser, according to the nature of the transaction and the understanding of the parties to it. If it is shown that such third person signed his name on the back of the note at the time it was made as surety for the maker, and for his accommodation, to give him credit with the payee, such proof does not alter the right of the payee to hold him bound as an original promisor or as guarantor or as an indorser, as he may elect. If it be shown that the understanding between such third person and the payee at the time of the transaction was that such third person should be bound only collaterally, such understanding will destroy the right which the payee would otherwise have had of electing to hold him hound as original promisor. Burton v. Hansford, 10 W. Va. 470-481. On the other hand, if his indorsement was subsequent to the making of the note, and he put his name thereon at the request of the maker, pursuant to a contract with the payee, for further indulgence or forbearance, he can only be held as a guarantor. Bey v. Simpson, 22 How. 341. See 2 Rob. Prac. (New) p. 287 et seq.

The facts, as they appear from the testimony of plaintiff's witnesses, are as follows: The consideration of the note was an account held by the Roanoke Grocery & Milling Company against Watkins & Surface for goods sold them, and they sent out their agent from Roanoke, where plaintiff did business, to Bluefield, where defendants lived and did business, with instructions to get the money on the account or get it secured. Watkins & Surface executed the note in question with the intention of securing it by deed of trust on certain real estate in Bluefield, but when they were informed that the giving of the deed of trust would prevent them from borrowing money on the property from the loan and trust company, they declined to give the deed of trust, but proposed to get indorsers on the note. To this plaintiff's agent acceded, and agreed to give seventy eight days' time if they would get the note endorsed by those whom Mr. Mann, the bank cashier, approved of. It was then indorsed by Phillips and defendant Jones, who were approved as good and sufficient, and the transaction was thus closed. This statement of the transaction is the most favorable to plaintiff's case that can in any way be made out by the testimony. This shows that the indorsement was subsequent to the making of the note, or, if not subsequent, it was then indorsed, not to give Watkins & Surface credit with the payee, the Roanoke Company, but in pursuance of a contemporaneous agreement with the payee that such indorsers should be thus collaterally bound in consideration of further forbearance in the time of payment of a debt before that time contracted, and then past due. Under such circumstances the plaintiff had no right to elect to hold defendant Jones as an original joint promisor. Under oar cases, if the indorsment was subsequent to the making and delivery of the note, Phillips and defendant Jones were only guarantors; but if the indorsement was thus made after the note was returned for that purpose, and before it was accepted, then they were indorsers, entitled to notice of non-payment, etc. And so the plaintiffs, it may be out of abundant caution, treated them, for they had the note protested, and notice thereof given to the indorsers. Each party, at certain stages of the trial, moved the court to exclude the evidence from the jury, but, when their motions were overruled by the court, destroyed its effect as a demurrer to the evidence by introducing further evidence, so that defendant's exception to that ruling, having been thus waived, can not be considered. It would be a most unfair proceeding to give him the benefit of such a motion when he is unwilling to risk his own exception to the ruling of the court, but goes on with his...