Hughes v. Nichols, 5640

Decision Date27 May 1931
Docket Number5640
Citation50 Idaho 722,300 P. 361
PartiesE. B. HUGHES, Respondent, v. GEORGE H. NICHOLS and ED WARNER, Appellants
CourtIdaho Supreme Court

MUNICIPAL CORPORATIONS-WARRANTS-LIABILITY OF INDORSER.

1. Village warrants created no indebtedness against village, but merely created obligation to diligently collect assessments and apply proceeds to redeeming warrants, in order issued.

2. Village warrants held not "contracts for payment of money," making indorsers thereof liable to tranferee upon village's failure to pay (C. S., secs. 6063, 6064).

APPEAL from the District Court of the Fourth Judicial District, for Gooding County. Hon. D. H. Sutphen, Judge.

Action by E. B. Hughes against George H. Nichols and Ed Warner, as endorsers of village warrants. Judgment for plaintiff. Reversed.

Judgment reversed; costs to appellants. Petition for rehearing denied.

Bissell & Bird, for Appellants.

The warrants involved in this suit, being merely orders on the village officials to deliver to the payee named certain sums of money "from the St. Imp. Dist. No. 2 Fund" if and when any moneys should be in such fund, are not "written contracts for the payment of money or personal property," as the latter expression is used in C. S secs. 6063, 6064, and therefore such statutes do not fix the rights and liabilities attendant upon the indorsement and transfer of said warrants. (Hughes v. Village of Wendell, 47 Idaho 370, 275 P. 1116; Dana v. San Francisco, 19 Cal. 486; 15 C. J. 598; 19 Cal. Jur. 807; Martin v. San Francisco, 16 Cal. 285; Radke v Liberty Ins. Co., 37 Idaho 436, 216 P. 1040.)

In the absence of such statutes the common-law rule, and the rule which properly applies to the indorsement and transfer of said warrants from appellants to respondent, is that such assignment and transfer do not imply a warranty that the warrants will be paid or performed. (Bigelow on Bills, Notes and Checks, 3d ed., sec. 15; 5 C. J. 969; 8 C. J. 57; Newer v. First Nat. Bank, 74 Mont. 549, 241 P 613-615.)

A. F. James, for Respondent.

An assignor of a non-negotiable written contract for the payment of money is liable to the assignee in case of non-payment if the assignee has unsuccessfully used due diligence to collect from the maker, and in any event, if the institution of such suit would have been unavailing. (C. S., secs. 6063, 6064.) Section 6064, C. S., is merely a legislative adoption and enactment into law of a rule of law which existed and still exists in a number of states independent of statute. (Goff v. Miller, 41 W.Va. 683, 56 Am. St. 889, 24 S.E. 643; 5 C. J. 969, notes 59, 60, and on page 970: also, Welsh v. Ebersole, 75 Va. 651 at 657.)

The due diligence required by C. S., sec. 6064, is the institution and prosecution of a suit against the maker of the instrument and the statute does not require the indorsee to resort to any other proceeding or to look to any other person other than the maker.

BABCOCK, District Judge. Budge, Givens, Varian and McNaughton, JJ., concur.

OPINION

BABCOCK, District Judge.

This action was brought by respondent, Hughes, against appellants, Nichols and Warner, as endorsers, to recover the amount paid by him to them for certain warrants issued by the village of Wendell.

In September, 1920, the village of Wendell created Local Improvement District No. 2, and entered into a contract with appellants for the construction of sidewalks and curbings in said district, and the warrants in question were given to them in part payment for their work. The warrants were dated September 10, 1921, signed by the proper village officials and directed the village treasurer to pay appellants the several amounts specified therein, "from the St. Imp. Dist. No. 2 Fund."

Respondent alleged that the funds collected by reason of assessments levied against property in said improvement district had all been paid out upon warrants prior in time to the warrants in question. The complaint showed that no further funds can be realized by reason of the special assessments, and that the city used due diligence in respect to the making and collection of the assessments and application of the money.

Appellants filed general and special demurrers, all of which were overruled by the trial court. Upon their refusal to plead further, default judgment was entered against them, from which this appeal is taken.

Appellants assign as error the action of the trial court in overruling their general demurrer, for the reason that the instruments so transferred are not contracts for the payment of money, as contemplated by C. S., secs. 6063, 6064; and in overruling their special demurrer. C. S., sec. 6063, provides:

"A nonnegotiable written contract for the payment of money or personal property may be transferred by indorsement, in like manner with negotiable instruments. Such indorsement transfers all the rights of the assignor under the instrument to the assignee, subject to all equities and defenses existing in favor of the maker at the time of the indorsement."

C. S., sec. 6064, provides, in part:

"Every assignor, his...

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