Moorman v. Wood

• Court: Indiana Supreme Court
• Writing for the Court: Elliott, C. J.
• Citation: Moorman v. Wood, 117 Ind. 144, 19 N.E. 739 (Ind. 1889)
• Decision Date: 29 January 1889
• Docket Number: 14,140
• Parties: Moorman v. Wood

19 N.E. 739

117 Ind. 144

Moorman v. Wood

No. 14,140

Supreme Court of Indiana

January 29, 1889

From the Jay Circuit Court.

The judgment is reversed.

W. A Thompson, A. O. Marsh and J. W. Thompson, for appellant.

E. L Watson and J. S. Engle, for appellee.

OPINION

Elliott, C. J.

The first paragraph of the appellant's complaint counts on a promissory note, in which the appellant is the payee. The second charges that the defendant so negligently and unskilfully conducted an action in which he was employed as an attorney by the plaintiff as to cause the plaintiff great loss. The second paragraph of the answer is addressed to the first paragraph of the complaint. This paragraph of the answer alleges that the defendant endorsed the note for the accommodation of the makers; that the appellant sued on the note and recovered judgment against the makers; that, at the time the judgment was entered, Jacob B. Blazer, one of the makers, was the owner of two hundred acres of land of the value of ten thousand dollars, and that the judgment became a lien on this land; that the land, over all encumbrances, far exceeded in value the amount of the judgment; that the land was ample security for the judgment obtained on the note; that while the judgment was still in full force the appellant assigned all of his interest in it to Cornelius Corwin.

The assignment of the judgment transferred the lien to Corwin and it seems clear that Moorman could not enforce payment from the endorser after parting with the judgment against the makers of the note. As to the makers, the note was unquestionably merged in the judgment. Bowen v Eichel, 91 Ind. 22, and authorities cited.

We confess that we are unable to perceive how the assignee could hold the judgment against the makers, and the assignor still have a right of action against the endorser. The assignment of the judgment carried the note bound up in it, and if there is any right of action against the endorser it must be in the assignee of the judgment. The assignee became the exclusive owner of the judgment, and as such owner he was invested with all its incidents. We can not conceive upon what principle it can be held that one party may have a right of action against an endorser, while another has the whole claim against the makers. One incident of the judgment was the lien, and as this lien was in the assignee of the judgment, Moorman did not, and could not, control the security which it afforded. The right to this security being in Corwin, there was nothing to which the endorser could have resorted if Moorman had enforced payment from him. In the event that the endorser should pay the note, he would unquestionably be entitled to be subrogated to the rights of the creditor of the principal, and might take, as an indemnity, the security held by the creditor. Sheldon Sub., sections 119-123; Brandt Sur., sections 370-373; Sample v. Cochran, 82 Ind. 260.

But Moorman, although he once held a judgment lien, holds no security, for the lien of the judgment has passed from him to his assignee, and it must follow that the only privity of contract is that which exists between the assignee of the judgment and the appellee.

We agree with the appellant's counsel that a pleading must proceed on a definite theory, and that it must be sufficient on the theory adopted. Mescall v. Tully, 91 Ind. 96, and cases cited; Lane v. Schlemmer, 114 Ind. 296, 15 N.E. 454, and cases cited. We also recognize and approve the doctrine declared in the cases cited by appellant, that a party will be held to the theory he assumes to develop. Graham v. Nowlin, 54 Ind. 389; Reissner v. Oxley, 80 Ind. 580; Carver v. Carver, 97 Ind. 497, 516; Buchanan v. State, ex rel., 106 Ind. 251, 6 N.E. 614; Louisville, etc., R. W. Co. v. Wood, 113 Ind. 544, 564, 14 N.E. 572. But we can not agree that the opposing counsel may assume, without proof, what the theory of a pleading is, and this we think the learned counsel of the appellant have done in this instance.

We can not see that the decision in Rodenbarger v. Bramblett, 78 Ind. 213, supports appellant's contention. It may be that if Moorman had remained the owner of the judgment he could have maintained an action against the appellee, but he divested himself of all right in the judgment, and thus transferred the security. If Wood should pay the note to Moorman, the payment would not destroy the rights of Moorman's assignee; he might still enforce his judgment. This must be true, or else it must be true that a payee may obtain judgment against the makers of a note, assign that judgment, then accept payment from an accommodation endorser, and thus extinguish the judgment as in favor of his assignee, although the assignee had the prior right and ample security. This result can only be avoided by holding that the entire debt evidenced by the note passes, as against a surety or an endorser, to the assignee of the judgment. This conclusion is the only one which will preserve the endorser's right of subrogation, and, as this right must be preserved, this is the only valid conclusion. The note is not the debt, it is simply the evidence of the debt, and when the debt passed to Corwin, Moorman was no longer in a situation to extinguish it, or to impair his assignee's lien, or to destroy the endorser's right of subrogation.

The case of Noble v. Merrill, 48 Me. 140, is not in point, for what was there held is, that the assignment of a part of a judgment does not extinguish the part not assigned. There is no such question here. The question here is, can a creditor, who has assigned the whole judgment taken on a promissory note, recover judgment against an endorser?

An entire demand, such as a promissory note constitutes, can not be split into parts, and, as the answer avers that the judgment was taken on the note, it is made to appear, prima facie, at least, that it was for the entire demand. Especially is this so, for the reason that the answer avers that the judgment was rendered on the note for $ -----, since the most that can be said, in any event, is that there is some uncertainty in the pleading. The remedy for such a defect is by motion.

The name of the payee is written in the body of the note, and Wood's name is written on the back. Prima facie, the situation of Wood is that of an endorser, as the note is negotiable by the law merchant. The law imports into the endorsement of a promissory note governed by the law merchant, a contract which, as a general rule, can not be contradicted by parol evidence. Pool v. Anderson, 116 Ind. 88, 18 N.E. 445; Knopf v. Morel, 111 Ind. 570, 13 N.E. 51; Stack v. Beach, 74 Ind. 571; Kealing v. Vansickle, 74 Ind. 529.

We need not here inquire whether there are, or are not, exceptions to the general rule, for all that we are required to decide is that the endorsement created, prima facie, the liability of an endorser. We are not concerned with a question between the debtors themselves as to their respective rights against each other, but our investigation relates solely to the rights of an endorser against the payee. The question is, therefore, essentially different from what it would be if the case were one between the makers and the endorser. Knopf v. Morel, supra.

The appellee occupied a position so far analogous to that of a surety as to be entitled to be subrogated to the securities held by the creditor. Pownal v. Ferrand, 13 Eng. C. L. 230; Carter v. Black, 4 Dev. & Bat. 425.

The note on its face informed the payee of the contract of the appellee, and that it was that of an endorser. Hoffman v. Butler, 105 Ind. 371, 4 N.E. 681. This information charged the payee with notice of the rights of the appellee under that contract, and he was, therefore, bound to know that the relinquishment or transfer of a lien which secured the payment of the note relinquished his right to enforce payment from the endorser. This must result, if it be true, as it certainly is, that an endorser is entitled to be subrogated to the security held by the creditor. Commercial Nat'l Bank v. Henninger, 105 Pa. 496; Union Nat'l Bank v. Cooley, 27 La. Ann. 202; Stallings v. Bank of Americus, 59 Ga. 701; Crawford v. Logan, 97 Ill. 396; Pacific Bank v. Mitchell, 9 Metcf. 297; Trimble v. Thorne, 16 Johns. 152; Wallace v. McConnell, 13 Peters, 136.

The endorser who pays a note is undoubtedly entitled to his recourse against the makers, and this recourse he can not have where the judgment against the makers has been assigned.

The question here is not whether the judgment taken against the makers extinguished the debt, but the question is, what was the effect of the assignment of the judgment upon the right of Moorman to sue the endorser? Such cases as Perry v. Saunders, 36 Iowa 427, and Shields v. Moore, 84 Ind. 440, can, therefore, exert no controlling influence in the case. The payee of the note by assigning the judgment stripped himself of all right, and made it impossible that the endorser should, as against him, assert the right of subrogation, thus making it evident that there is no right of action in him. What the rights of Corwin, the assignee, are, against the endorser, is quite another question.

The ingenious argument of appellant's counsel rests on an illicit assumption; they assume that Wood can not defeat Moorman unless he shows a full and consummated right to subrogation. This assumption is utterly indefensible. It was enough for the endorser to show that Moorman had made it impossible that the right of subrogation could ever exist. This rule is asserted in the almost countless cases where it is held that the release of any security or right of recourse releases the endorser. Moorman certainly released these rights so far as he could, and in him, at...