Houck v. Graham

• Decision Date: 16 April 1886
• Citation: 6 N.E. 594,106 Ind. 195
• Parties: Houck v. Graham and others.
• Court: Indiana Supreme Court

106 Ind. 195

6 N.E. 594

Houck

v.Graham and others.^a1

Supreme Court of Indiana.

April 16, 1886.

Appeal from Sullivan circuit court.

Chas. E. Barrett and Hays & Hays, for appellant.

Beasley & Williams and J. S. Bays, for appellees.

Elliott, J.

The material allegations of the second and third paragraphs of the appellant's complaint are substantially the same, and may be thus summarized: That Hostetler and Williams were partners, and as such had executed a promissory note for $500 to the Sullivan County Bank, upon which Shields and Beasley were sureties; that on the nineteenth day of May, 1883, the note was due and unpaid; that Hostetler & Williams were then insolvent, and have since so continued; that, in renewal of the unpaid note, that set forth in the complaint was executed, payable to W. H. Crowder, president; that the note last mentioned was signed by Hostetler & Williams, and by the appellant immediately below their names; that it was then taken to the officers of the bank, who refused to accept it; that thereupon Hostetler & Williams, without the knowledge or consent of the appellant, solicited Sanford Graham to sign it; that he did sign it, and it was again presented to the bank officers, and again rejected; that, without the knowledge and consent of the appellant, Hostetler & Williams induced Ephraim Beasley and David Shields to sign the note on the back; that this was done without the consent or knowledge of the appellant, and prior to its delivery to the bank; that Beasley and Shields knew that the note was executed for the purpose of renewing the note on which they were sureties; that after the note had been thus signed on the back by Beasley and Shields it was accepted by the bank in payment of the note previously executed, and of this Beasley and Shields had notice; that after the note became due it was paid by appellant; that when he paid it he did not know that he was released, but believed that he was liable on the note. Prayer for contribution from Shields and Graham.

It is established by our decisions that, as a general rule, the addition of a name to a promissory note without the knowledge of a surety is such an alteration as releases him from liability. Nicholson v. Combs, 90 Ind. 515;Favorite v. Stidham, 84 Ind. 423;Bowers v. Briggs, 20 Ind. 139;Henry v. Coats, 17 Ind. 161;Harper v. State, 7 Blackf. 61. This, however, is a general rule, and applicable to a controversy between the payee and the makers and indorsers or sureties of the note. Even in such cases, it is not without limitations; but we need not here define those limitations, for the reason that, in this instance, the general rule can have no application at all in favor of the parties who indorsed the note after it was signed by the appellant.

The question here is very different from that presented in ordinary cases, since here the party who had a right to complain voluntarily ratified the execution of the note, and paid it in full. It seems quite clear to us that those who signed or indorsed the note after it had been signed by the appellant, and the party whose name was added as a maker without his knowledge, cannot successfully insist that he has no rights because he did not resist the enforcement of the note. We can conceive of no reason why the appellant had not a right, at least as against those who became liable on the note after he had signed it, and after the name of another maker had been affixed, to ratify the execution of the note. This he did in the most emphatic way. Our decision on this point is that the fact that the appellant might have successfully resisted the enforcement of the note does not of itself deprive him of a right to contribution from those who occupied towards him the relation of co-sureties. If the appellees were sureties on the note, they were liable to the payee, although as to some of the prior parties the note was invalid. Hunter v. Fitzmaurice, 102 Ind. 449; S. C. 2 N. E. Rep. 127; Helms v. Wayne, etc., Co., 73 Ind. 325. Their liability was therefore not affected by the fact that the appellant might, had he so elected, have defeated the collection of the note. Payment of the note did not injuriously affect the rights of the appellees, for they, as subsequent parties, were bound, although the appellant might have escaped liability had he stood upon his legal rights; and hence his adoption of the note did them no injury. Bowser v. Rendell, 31 Ind. 128. The ruling of the trial court on the demurrer to the complaint cannot, therefore, be sustained on the ground that the failure of the appellant to contest the enforcement of the note bars him of all right to sue for contribution.

A more difficult question than that decided remains, and that is this: Can the appellant be regarded as a co-surety with the appellees? It is by no means every case of suretyship in which there is a right to contribution. On the contrary, this right exists only where the relation of the parties is that of co-sureties. Brandt, Sur. §§ 220-225; Baylies, Sur. 321; Salyers v. Ross, 15 Ind. 130. If the parties can be regarded as co-sureties, then the appellant has a right to contribution; otherwise he has no such right. Very many authorities are cited by counsel to prove that the indorsement of a note cannot be so explained by parol evidence as to show that the liability assumed was that of maker or surety. These authorities would be in point if the indorsement had been a regular one, and if the controversy were between the holder of the note and the parties liable upon it; but they are not in point here, where the controversy is between the parties liable upon the note, and the indorsement is an irregular one. Counsel for appellee mistake the point of the controversy, and discuss a question entirely foreign to it; for the point upon which this case turns is whether the relation between those liable on the note may, as between themselves, and in respect to such an indorsement as that made by the appellees, be shown by parol evidence. The general rule undoubtedly is that the relation of the parties liable upon a promissory note to each other may be shown by oral testimony. Dunn v. Sparks, 7 Ind. 490;Lacy v. Lofton, 26 Ind. 324;Nurre v. Chittenden, 56 Ind. 462;Bowser v. Rendell, 31 Ind. 128;Core v. Wilson, 40 Ind. 204;Harshman v. Armstrong, 43 Ind. 126;Schooley v. Fletcher, 45 Ind. 86;Baldwin v. Fleming, 90 Ind. 177, see page 180; Wells v. Miller, 66 N. Y. 255;Blake v. Cole, 22 Pick. 97;Monson v. Drakeley, 40 Conn. 552; Craythorne v. Swinburne, 14 Ves. 160; Oldham v. Broom, 28 Ohio St. 41;Adams v. Flanagan, 36 Vt. 400;Houston v. Bruner, 39 Ind. 376, see page 383. The doctrine of the case of Norton v. Coons, 6 N. Y. 33, has been often denied, and in effect, though not in terms, is overruled by the case of Wells v. Miller, supra, so far as it decides any point relevant to the present discussion. Some expressions found in Armstrong v. Harshman, 61 Ind. 52, seem to indicate a different rule from that here stated by us, and sustained by the authorities referred to; but there was no question before the court which rendered it necessary to decide anything upon the point, for the court said: “No evidence of such contract was given in the cause. Indeed, the case was tried on the theory that such evidence was unnecessary.”

Assuming that the general rule is that the relations between the parties liable on a promissory note may, as between themselves, be shown by parol, our next inquiry is whether this case is within the operation of that rule. Prima facie the liability assumed by the appellees was that of indorsers, and the questions are: (1) Can the appellant be permitted to show that the appellees were sureties, and not indorsers? (2) Do the facts pleaded show that they were sureties?

Of these in their order. We think the appellant had a right to show that the appellees were sureties, and not indorsers. It seems clear from the authorities to which we have referred that this would be so even if the names of the appellees had followed that of the payee; indeed, this is expressly decided in some of the cases cited. Lacy v. Lofton, supra;Nurre v. Chittenden, supra. But, in this instance, the names of the appellees do not follow that of the payee, for the payee's name appears only in the body of the note. It is therefore, as we have intimated, an irregular indorsement. As between the payee and parties liable on the note, it was competent to show that the appellees placed their names upon the note as makers. In Browning v. Merritt, 61 Ind. 425, it was said, of the rule just stated, that “this is the law of this state, as settled by numerous decisions of this court.” In support of this statement the court cited the cases of Vore v. Hurst, 13 Ind. 555;Sill v. Leslie, 16 Ind. 236;Snyder v. Oatman, Id. 265; McGaughey v. Elliott, 18 Ind. 121;Drake v. Markle, 21 Ind. 433;Houston v. Bruner, 39 Ind. 376;Roberts v. Masters, 40 Ind. 461;Bronson v. Alexander, 48 Ind. 244; Nurre v. Chittenden, 56 Ind. 462. Other decisions of this court assert the same doctrine. Armstrong v. Harshman, supra;Stack v. Beach, 74 Ind. 571;Smythe v. Scott, ante, 145, (April 13, 1886.) The decision in Kealing v. Vansickle, 74 Ind. 529, does not conflict with the rule affirmed in the cases cited, as appears from what was there said in approval of Browning v. Merritt, supra, and indeed from the entire scope of the opinion.

The facts stated in the complaint, and conceded by the demurrer to be true, show that the parties to the note, except Hostetler & Williams, were sureties; for they signed and indorsed the note to give Hostetler and and Williams credit, and not in the regular mode. The rule is that where parties appear to be sureties, they will be presumed to be cosureties. In Warner v. Price, 3 Wend. 397, it was said: “They must all be considered co-sureties, unless a state of facts be shown to the court from which it shall appear positively, or by legal...