Haddock, Blanchard & Co. v. Haddock

• Decision Date: 29 September 1908
• Citation: 85 N.E. 682,192 N.Y. 499
• Parties: HADDOCK, BLANCHARD & CO., Inc., v. HADDOCK.
• Court: New York Court of Appeals Court of Appeals

192 N.Y. 499

85 N.E. 682

HADDOCK, BLANCHARD & CO., Inc.,

v.HADDOCK.

Court of Appeals of New York.

Sept. 29, 1908.

Appeal from Supreme Court, Appellate Division, Third Department.

Action by Haddock, Blanchard & Co., Incorporated, against John C. Haddock. From a judgment of the Appellate Division (103 N. Y. Supp. 584), affirming a judgment for plaintiff, defendant appeals. Affirmed.M. Edward Kelley, for appellant.

Israel T. Deyo, for respondent.

CHASE, J.

The plaintiff is a foreign corporation authorized to do business in this state and engaged as a wholesale dealer in coal at Binghamton. The Plymouth Coal Company, a corporation, was engaged in the operation of coal mines in Pennsylvania prior to March, 1902, at which time it went into the hands of a receiver. The defendant was the president and manager of said coal company and the owner of substantially all of its stock. The defendant was, until May, 1902, the president of the plaintiff, and during all the times herein mentioned had charge of plaintiff's New York office. At the time when the note and bills hereinafter mentioned were given the plaintiff was engaged in selling on commission at wholesale the coal mined by the Plymouth Company or its receiver, under a contract made with said coal company. One B., the vice president of the plaintiff prior to May, 1902, and its president thereafter, passed upon the financial responsibility of persons seeking credit with the plaintiff, and he arranged with a trust company at Binghamton to discount commercial paper of the plaintiff's customers. The Lenape Coal Company, the Living Stone Coal Company, and the Montauk Coal Company were severally organized as corporations and engaged in the business of retailing coal in or near the city of New York, and the defendant was the owner of substantially all of the stock of each. Soon after the organization of such corporations to retail coal, they sought credit with the plaintiff, and their financial responsibility was investigated by B. The responsibility of each was found to be unsatisfactory, and B. so reported to the defendant, and the defendant replied that said companies were his companies and he would guarantee their credit by indorsing their paper.

On February 13, 1902, said Lenape Coal Company, for value received, executed and delivered to the plaintiff, as payee, its certain promissory note for $880.96, dated on that day, payable four months after date at a bank in the city of New York. On and between January 27, 1902, and May 13, 1902, the plaintiff, for value received, made 30 several drafts each on either said Lenape Coal Company, said Living Stone Coal Company, or said Montauk Coal Company, payable to the order of itself as payee, which drafts aggregated $26,833.15, each of which drafts was, for value received, accepted by the coal company on which it was drawn, payable at a place and on a day in each respectively specified. The drafts or bills were all similar in form, and the following is a copy of one of said bills: ‘1327 41/100. Coal Office of Haddock, Blanchard & Co., Incorporated, New York, Apl. 28, 1902. Four months after date pay to the order of ourselves thirteen hundred twenty-seven and 41/100 dollars, value received, and charge the same to account of Haddock, Blanchard & Co., Incorporated. C. N. Blanchard, Asst. Treas. To Montauk Co., Brooklyn, N. Y.’ Indorsed across the face: ‘Accepted. Payable at the Binghamton Trust Co., Binghamton, N. Y. The Montauk Coal Co., Chas. B. Smith, Treas.’ Indorsed on the back: ‘Haddock, Blanchard & Co., Incorporated. C. N. Blanchard, Assistant Treasurer. John C. Haddock.’

Said note after it had been signed by said Lenape Coal Company, and each of said bills after they had been accepted by the corporation on which they were severally drawn, were indorsed by the defendant before delivery, and thereafter each of them, so indorsed, was before maturity delivered to the plaintiff as payee, and the plaintiff thereafter and prior to their maturity severally indorsed and procured them to be discounted at a trust company at Binghamton. Said note and each of said bills were given and delivered to the plaintiff for the purchase price of coal sold and delivered by the plaintiff to the acceptors, respectively, of said bills and the maker of said note, or in renewal in whole or in part of prior notes or bills given or accepted for the purchase price of coal so sold and delivered. Said note and each of said bills were so indorsed by the defendant for the accommodation of the maker of said note and the acceptor of said bills, respectively, and for the purpose of giving such maker and acceptors credit with the plaintiff, and in pursuance of an agreement between the defendant and the plaintiff by which the plaintiff agreed to sell coal on credit to the acceptors of said bills and to the maker of said note upon the defendant's guaranteeing the credit of said companies respectively, and the plaintiff was induced to take said accepted bills and said note, and each of them for such coal by reason of the indorsement of the said defendant and pursuant to said agreement that the defendant would be liable thereon to the plaintiff in case the respective corporations primarily liable thereon should make default in payment thereof. The proceeds of said bills and note were remitted to the defendant at the New York office of the plaintiff to provide funds to pay for coal and other current expenses. At the time when said note and bills respectively became due they were presented for payment at the place where they were respectively made payable, and payment duly demanded, which was refused, and thereupon each was duly protested for nonpayment, and notice thereof given to the plaintiff and to said defendant. Thereafter the plaintiff was compelled to take up said note and drafts and pay the amount due thereon, respectively, and became the owner and holder thereof and of each of them.

This action is brought to compel the defendant to pay to the plaintiff the amount of said note and bills pursuant to his said agreement with the plaintiff when they were severally indorsed by him, and the facts upon which the plaintiff's claim is based are stated in the complaint. The defendant denies that he indorsed the note and bills for the accommodation of and as surety for the retail coal companies, respectively; but the evidence is sufficient to sustain the findings of the court from which the statements of fact in this opinion have been taken. As the facts are found, if the intention of the parties is to prevail, the defendant should be required to pay to the plaintiff the amount of such note and bills as established by the judgment. The defendant contends that the position of his name upon the note and bills conclusively establishes that he indorsed the several instruments without liability to the plaintiff, and that parol evidence should not have been received to affect or overcome the alleged conclusive presumption arising from his indorsements as made.

In the early decisions by the courts in this state there was some confusion relating to the liability of a person who indorsed a note or bill prior to its delivery. Labron v. Woram, 1 Hill, 91;Herrick v. Carman, 12 Johns. 159;Hall v. Newcomb, 3 Hill, 233, s. c. 7 Hill, 416, 42 Am. Dec. 82;Hahn v. Hull, 2 Abb. 352.This court, in Moore v. Cross, 19 N. Y. 227, 75 Am. Dec. 326, referring to a case of a person who for the accommodation of a maker indorsed a note payable to a third person, say: ‘Some confusion has been thrown around this subject from what has been finally settled to have been an error, treating such an indorsement as a guaranty and charging the indorser as a maker or guarantor. This doctrine was advanced in Herrick v. Carman, 12 Johns. 160, and was adjudged in Nelson v. Du Bois, 13 Johns. 175, and Campbell v. Butler, 14 Johns. 349. It was attacked in Dean v. Hall, 17 Wend. 214, and in Seabury v. Hungerford, 2 Hill, 80, and was finally overthrown in Hall v. Newcomb, 3 Hill, 233, and the same case in error, 7 Hill, 416. The Chancellor, in his opinion in the latter case, says: ‘If the object of the second indorser was to enable the drawer to obtain money from the payee of the note upon the credit of the accommodation indorser, he may indorse it without recourse, and by such indorsement may either make it payable to the second indorser or to the bearer; and such original payee may then, as legal holder and owner of the note, recover thereon against such second indorser, upon a declaration stating such special indorsement by him and subsequent indorsement of the note to him by the second indorser.’' The court further say: ‘If a note be made and indorsed for the accommodation of A., who indorses it to another person, and afterward in the course of trade again becomes the holder, he could maintain no action against the maker and indorser for his accommodation, notwithstanding their apparent liability to him on the face of the paper. The fact of the accommodation making and indorsing might be proved to defeat the action, and it would establish that the agreement of the parties, contrary to the legal inference from the face of the paper, did not impose a liability on the maker and indorser to pay the party suing.’

There has always been conflict among the courts of the several states both in asserting the principles upon which irregular indorsers upon commercial paper are to be held and in the conclusion arrived at in particular cases litigated. The number of cases is so great, and the possibility of even a partial reconciliation of them so remote, that we will confine our citation of authorities wholly to those in this state. It was well settled in this state for many years prior to the enactment of the negotiable instruments law that a person who puts his name on the back of a bill or note before its delivery is presumably a second indorser and not liable to the payee, but the presumption...