Lumbermen's Nat. Bank of Portland v. Campbell

• Decision Date: 20 February 1912
• Parties: LUMBERMEN'S NAT. BANK OF PORTLAND v. CAMPBELL.
• Court: Oregon Supreme Court

121 P. 427

61 Or. 123

LUMBERMEN'S NAT. BANK OF PORTLAND v. CAMPBELL.

Supreme Court of Oregon

February 20, 1912

Appeal from Circuit Court, Multnomah County; J.P. Kavanaugh, Judge.

Action by the Lumbermen's National Bank of Portland against H.C Campbell. From a judgment for plaintiff, defendant appeals. Affirmed.

This is an action to recover money. It is alleged in the complaint in effect, that plaintiff is a corporation; that Halliday Witherspoon and the defendant, H.C. Campbell, issued to plaintiff a promissory note, of which the following is a copy: "$1,500.00. Portland, Oregon, August 24, 1909. Ninety days after date, I promise to pay to the order of Lumbermen's National Bank of Portland, fifteen hundred dollars for value received, with interest from maturity payable on demand, at the rate of eight per cent. per annum until paid, principal and interest payable in U.S. gold coin, at Lumbermen's National Bank of Portland, Oregon; and in case suit or action is instituted to collect this note or any portion thereof, I promise to pay such additional sum of money as the court may adjudge reasonable as attorney's fees in such suit or action. [ Signed] Halliday Witherspoon. H.C. Campbell. No. 3,252. Due Nov. 22, 1909"--that no part of the note had been paid, except the interest to December 22, 1909; and that $250 was a reasonable sum as attorney's fees. Campbell, alone answering, denied the material averments of the complaint. For a further defense, he alleged, in substance, that at plaintiff's request, expressed by its cashier, and at Witherspoon's solicitation that defendant would indorse the note and become liable only as an indorser, he consented to sign the writing, but in doing so inadvertently wrote his name on the face of the instrument; that he had no interest in and never received any part of the money advanced by plaintiff, as it well knew; that as such indorser he had the right to require, and it was incumbent upon plaintiff, when the note matured, to present it to and demand payment from Witherspoon, and if the instrument was dishonored immediately to notify the defendant, which duty plaintiff failed to perform; and that by reason thereof he was discharged from all liability on account of the indorsement. The reply put in issue the allegations of new matter in the answer, and the cause having been tried without a jury resulted in a judgment for plaintiff for the amount of the note and $150 as attorney's fees, and the defendant appeals.

Rufus Mallory (Dolph, Mallory, Simon & Gearin, on the brief), for appellant.

H.G. Platt (Platt & Platt, on the brief), for respondent.

MOORE J. (after stating the facts as above).

At the trial the defendant undertook to prove the averments of new matter in the answer, and also to introduce a letter written to him by plaintiff's proper agent, wherein it was said in part: "Referring to Mr. Witherspoon's note for $1,500.00, indorsed by you," etc. Upon objection, the court refused to receive the proof so offered, and exceptions were allowed.

It is maintained by defendant's counsel that the rule established by this court makes parol evidence admissible to show that a party who subscribed his name to a joint and several, negotiable promissory note as an apparent maker was only a surety, when such fact was known to the payee or to a holder, and any act of either of the latter that prejudices the rights of the surety discharges him from liability. Based on this legal principle, it is argued that where a person indorses such paper it is immaterial whether he writes his name on the face or the back of the instrument; for, under the same circumstances, parol evidence is admissible to prove the intention of the parties, and such being the case errors were committed in rejecting the proof offered. It has been determined by our decisions that any person, other than a maker, who writes his name on the back of a negotiable promissory note at the time of its execution, or before delivery, is prima facie a second indorser, whose liability as such entitles him to require the making of demand and the giving of notice. Kamm v. Holland, 2 Or. 59; Cogswell v. Hayden, 5 Or. 22; Deering v. Creighton, 19 Or. 118, 24 P. 198, 20 Am.St.Rep. 800; Wade v. Creighton, 25 Or. 455, 36 P. 289.

Where, however, the name is so appended to nonnegotiable instruments, such irregular indorser is held liable as a maker, and not entitled to insist that demand be made or notice given. Barr v. Mitchell, 7 Or. 346; Osborne v. Hubbard, 20 Or. 318, 25 P. 1021, 11 L.R.A. 833. If several parties sign a negotiable promissory note as makers, but some of them are sureties only, their true relations may be established by parol evidence as against the payee or a holder of the instrument with knowledge of the facts. Findley v. Hill, 8 Or. 247, 34 Am.Rep. 578; Brown v. Rathburn, 10 Or. 158; Baker v. Elgin, 11 Or. 333, 8 P. 280; La Grande National Bank v. Blum, 26 Or. 49, 37 P. 48; Montgomery v. Page, 29 Or. 320, 44 P. 689; Hughes v. Pratt, 37 Or. 45, 60 P. 707; Hoffman v. Habighorst, 38 Or. 261, 63 P. 610, 53 L.R.A. 908.

Quite a diversity of judicial opinion exists respecting the liability of a party who, as an apparent stranger to a negotiable instrument, writes his name on the back of it, as to whether he is a joint maker, a guarantor, or an indorser. The question has generally been determined by considering the intention of the parties at the time the signature was thus affixed. The weight of authority seems to support the rule that if, when the instrument was issued, the name was so written for the purpose of procuring credit for the maker, or if the person so signing received part of the consideration for which the obligation was given, he is regarded as an original promisor. After delivery of a negotiable instrument, if he append his name to the back of it at the request of the maker, and by agreement with the payee that the time for the payment will be extended, or for any other leniency, he is considered a guarantor. If, however, the note was intended to be discounted, and he puts his name on the back of it, pursuant to an agreement with all the parties that his signature will be inoperative until indorsed by the payee, he is accounted as a second indorser. He can, according to commercial usage, legally urge the making of demand and the giving of notice when either of such relations necessitates a compliance with such requirements. Rey v. Simpson, 22 How. 341, 16 L.Ed. 260. As between the parties themselves, parol evidence is admissible to show that the liability of an irregular indorser is not that which it appears from his signature, but depends upon the intention of such parties. 1 Am. & Eng.Ency.Law (2d Ed.) 343; 7 Cyc. 669.

Under our decisions, if a party, in order to loan credit to the maker of a negotiable promissory note, sign his name on the back of the instrument before it is delivered, is to be regarded as a second indorser, who incurs no liability until the note is assigned, the security thus attempted to be furnished would appear to be of little value. In such case, unless the payee indorsed "without recourse," the second indorser, if compelled to liquidate the note, could recover from the payee, as the first indorser, the sum of money he had been obliged to pay, in order to discharge the debt. Transferring commercial paper with such restrictions tends to impair its value; and hence it would seem that the conclusion heretofore reached by this court with respect to the rights of a surety for the maker as a second indorser was wrong in principle.

Defendant's counsel, invoking the rule stated by a text-writer, to wit "The indorsement, as its derivation and meaning would indicate, is generally made by writing the transferror's name on the back of the paper, but it may be written, although unusual and irregular, on any other portion of it, even on the face and under the maker's name" (1 Daniel, Neg. Insts. [5th Ed.] § 688), insists that, notwithstanding Campbell wrote...