Kearnes v. Montgomery

• Decision Date: 31 January 1870
• Court: West Virginia Supreme Court
• Parties: Alexander Kearnes v. William II. Montgomery,

4 W.Va. 29

Alexander Kearnes

v.William II. Montgomery,

Supreme Court of Appeals of West Virginia.

January Term, 1870.

1. The contract of a guarantor is collateral and secondary; that of a surety is

direct. The guarantor contracts to pay if, by the use of due diligence, the debt cannot be made out of the principal debtor, while the surety undertakes directly for the payment, and is so responsible at once if the principal debtor makes default.

2. M. owes a sum of money to K. M. proposes to give K. the bond of C. of

like amount and lift his own. M. produces the bond of C. payable to K., which the latter refuses to accept because it is payable to himself, unless M. will endorse it, which he accordingly does, in blank; whereupon it is exchanged for the bond of M. C. Was solvent for several years afterwards, but is insolvent at the date of the suit brought by K. against M. K., after suit brought, but before trial, writes over the name of M. that he thereby "became surety," for value received; for C, on the within bond. Held:

I. That K. could not write what he did over the name of M., as it was

not in accordance with the agreement. That M. was to assume only such liability as he would have done if the bond had been made to him as payee, and been by him transferred to K.

II. That M. Was a guarantor and not liable to the payment of the bond

of C, as maker or surety; nor until the use of due diligence against C.

III. That the facts proved showed that by the use of due diligence against C, K. might have made the money on the bond of

This action arose in Greenbrier county, in February, 1867. Kearnes was the plaintiff below, and brought the case here on a writ of supersedeas. All the facts certified in the bill of exceptions, are given in the opinion of Judge Maxwell.

Hon. N. Harrison, judge of the circuit court of Greenbrier, presided on the trial of the case.

Bcggess for the plaintiff in error.

The defendant relied mainly, in the court below, and will probably rely here, upon the authority of Nichol's ex'or v. Porter, decided bythis court, and reported in 2 W. Va. Rep., p. 13; but even a cursory examination of this case will show an entire want of analogy between it and the present case. In Nichol's ex'or v. Porter, omitting everything extraneous to the matter under consideration, A, in St. Louis, Missouri, drew a note in writing, whereby he promised to pay to the order of B, a sum of money, six months after date, for value received, negotiable and payable, without defalcation or discount. Afterwards, in Virginia, where the said note was not negotiable, B, the payee, endorsed or assigned the said note to C. These are all the material facts; and the declaration against B by C, contained an averment that the maker of the note was insolvent, or that clue diligence had been used to make the money off of him, or that due diligence would not have made the money. The court held that B, the payee, who transferred the note to C, was an assignor, not an endorser the paper being not negotiable and, as such assignor, would only be liable to C upon proof that due diligence had been used, or would have been futile, if used, against the maker. Now, had the note, in this case, been executed to C in the first instance, and then endorsed by B; or, in the case under argument, had the Creigh bond been executed to Montgomery, and had he afterwards endorsed and delivered it to Kearnes, then the ruling in the former case might be authority in the latter, and Montgomery might then, were there no other evidence but the bond and endorsement, claim to be an assignor. But how could he assign to Kearnes a bond, in which he, Montgomery, had no property, and which was already executed and made payable to Kearnes by the obligors? In addition to all this, the proof is clear that Kearnes did not refuse to accept the bond proffered, because it was not made payable to Montgomery and then assigned by him, but because a person who was relied upon, and expected to be an obligor therein, had not signed it, and that Kearnes did not intend to re-ceive any transfer from Montgomery which would release him from liability, whether due diligence was used or not.

So much for the authority of Nichols' ex'or v. Porter, and for the claim set up, without one tittle of evidence to show any such understanding or agreement between the parties, and with all the proof directly the other way, that Montgomery, by his blank endorsement upon a bond executed, not to himself, but to another person, became liable to that other person, not as surety, as is insisted upon, or even as guarantor, but as an assignor a claim that seems to carry with it its own refutation.

The principle is well settled, that the delivery of a blank signature, binds the deliverer for whatever is written over it, consistent with the face of the paper. And this principle applies to a paper not negotiable, as well as to a paper that is. 2 Dougl. R., 514; 29 Eng. C. L. R., 414; 2 T. R., 63; 4 Mass. R., 53; 5 Cranch's R., 142; 8 Leigh, 43; 5 Munf., 381. When Montgomery endorsed the bond in blank he thereby authorized Kearnes to write over his endorsement, either an absolute and direct promise to pay, or a collateral guaranty. 2 Dougl. R.; 29 Eng. C. L. E.; 5 Cranch, supra; 6 Gill, 181; 2 Gill, 340; 11 Mass., 440; 6 Conn., 315; and 19 Wend., 202. In this last case, Cowen, J., says: "When notes have been made payable to a particular person, and endorsed first by a third person, such third person has been held to be an original maker of the note, or a guarantor of payment, according to the nature of the transaction and the understanding of the parties. If such endorser put his name on the back of the note at the time it was made, according to a promise to become originally or directly responsible, or if he 'participated in the consideration for which the paper was given, he has been adjudged a joint maker."

But the opinion of the court, in the case of Orrick v. Col- ston, 7 Gratt., p. 198, is relied upon as conclusive of everything claimed by the appellant here. In this case, Starbuck and Forman had given a blank note, not negotiable, to Orrick, with a blank endorsement of Colston's. After the action was brought, Orrick wrote above the endorsement, binding Colston as a guarantor of the payment of the money loaned. In delivering the opinion of the court, Judge Daniel, in stating the weight of the New York authorities, uses the following language, altogether applicable to the case at bar: "If, by reason of the note not being negotiable, he (Colston) is not chargeable as endorser, and he made the endorsement under an agreement and with the intent to bind himself in some other form, the payee may write over the blank endorsement such a promise or guaranty as will carry into effect the intention of the parties. 13 Johns. E., 175; 17 Johns. R., 326; 2 Hill's R., 80; 4 Hill's, 420. The reasonable inference which one, about to accept a promissory note filled up as the one before us, and endorsed in blank in the ordinary course of business transactions, would draw, from a mere inspection of the instrument is, that the endorsement was made to give strength and credit to the paper. He would perceive that the person putting his name on the back of the paper, had not, from the nature of the endorsement, subjected himself to the liabilities, or entitled himself to the privileges which attach to the endorser of paper strictly commercial. And as, of the only other contracts, having reference to the note on the face ot the paper, which could be fairly predicated of the blank signature on the back, viz: an absolute and direct promise to pay, or a collateral guaranty, it would be just as fair to presume the one as the other. It would, I think, be reasonable to infer further, that the person so endorsing in blank intended to leave it in the power of the payee to elect in which of the two aspects he would hold him bound." He then adds: "Iregard the weight of authorities above referred to as in favor of these view" And further on: "It was competent for the appellant, in my view of the case, as before stated, to have charged Colston either as a collateral promissor, or as a direct and absolute surety." And it was further held in this case, that although by the terms of the endorsement, as filled up by Orrick after action brought, Colston would be a collateral promissor, and as such, not bound, because of the alleged want of proper diligence against the maker, that still Orrick would have the right to erase what he had written and fill up the blank in such a way as to conform to any of the counts in which the plaintiff had a right, upon the state of facts, to recover, (4 Pick. R., 385; 3 Mass. R., 274;) that is, to fill up in such a way as to make Colston a direct

promissor. And so entirely and merely formal did the

court of appeals regard this change, that it did not deem it necessary to send the case back for it to be made, but reversed the judgment, and entered it for the appellant. 7 Gratt., pp. 198, 199, 200. In the case at bar, no such change is necessary. The blank is already filled up so as to charge Montgomery as a direct and absolute surety as is done in the third count of the amended declaration. So pertinent and conclusive is this case, and of such binding authority here, that it has been quoted from at length, and so completely does it cover the whole ground, that nothing more would be added, but for the presumption raised by the judgment of the court below.

The only difference between the two cases is, that the present one is much stronger for the appellant; for here, Montgomery knew what Colston did not know, viz: the character of the instrument he was endorsing, the amount to be paid, and when it was to be paid. That the instrument is a bond, makes no difference, for the principles settled by Orrick v. Oolston, apply to all instruments not negotiable, and the presence of a seal does not make them less applicable.

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