Pahlman v. Allan H. Taylor.

• Citation: 75 Ill. 629,1874 WL 9313
• Parties: HERMAN J. PAHLMAN et al.v.ALLAN H. TAYLOR.
• Decision Date: 30 September 1874
• Court: Supreme Court of Illinois

75 Ill. 629

1874 WL 9313 (Ill.)

HERMAN J. PAHLMAN et al.

v.ALLAN H. TAYLOR.

Supreme Court of Illinois.

September Term, 1874.

OPINION TEXT STARTS HERE

APPEAL from the Circuit Court of Cook county; the Hon. JOHN G. ROGERS, Judge, presiding.

This was an action of assumpsit, brought by Allan H. Taylor against Herman J. Pahlman and D. G. Rush. The opinion of the court states the facts of the case. The defendants bring the record here by appeal.

Mr. ALLAN C. STORY, and Mr. RUFUS KING, for the appellants.

Mr. JOHN LYLE KING, and Mr. JAMES FRAKE, for the appellee.

Mr. JUSTICE SCHOLFIELD delivered the opinion of the Court:

This was an action of assumpsit, by appellee against appellants as guarantors of a promissory note executed by one Charles Welsh to appellee, on the 13th day of June, 1870, payable fourteen months after date, for $5,000, with interest at the rate of ten per centum per annum. Appellants' names were indorsed in blank before the note was delivered, and the first question presented is, did they thereby assume the liability of guarantors, or only that of successive indorsers?

The decisions of the Supreme Court of Indiana, referred to by appellants, seem to sustain the position for which they contend, but in so far as they do so, they are in conflict with previous decisions of this court. It is there held that an indorsement in blank of an instrument not negotiable, made at the date of the contract, and unexplained by extrinsic evidence, confers upon the payee authority to hold the indorser liable, on the original contract, as surety, but that a similar indorsement of negotiable paper renders him liable only as indorser, with the ordinary rights and privileges incident to that character.

Promissory notes are made, by our statute, negotiable instruments, yet this court has never held, where they were indorsed by a third party before delivery, in the absence of an agreement to that effect, that the rule recognized by the Indiana cases applied to them.

Bogue v. Melick, 25 Ill. 93, also referred to by counsel, is not in point. In that case the note was executed by the firm of Dorsett, Bro. & Co., of which firm Folsom Dorsett, the payee of the note, was a member. It was then indorsed in blank by Folsom Dorsett and Abr'm Melick. Under this state of facts it was said by the court: “Here the payee of the note is also one of the makers. It was impossible, therefore, that the defendant put his name upon the note for the security of the payee, which is indispensable to create a suretyship. All the parties knew that the note, while in the hands of the payee, was a mere nullity -- without vitality -- creating no right or liability whatever. It could never become an operative instrument except by the indorsement of the payee. He would then become the first indorser, and his name would precede that of the defendant.”

In the present case, appellants are neither makers nor payees of the note. They are merely indorsers in blank before delivery.

Appellants' plea, verified by affidavit, imposed upon appellee the burden of proving the liability of the defendants in the capacity in which they are sued. We think these facts are sufficiently proved by the evidence in the record: 1st. That appellants' signatures on the back of the note are genuine. 2d. That they were placed there before the note was delivered. 3d. That there was no agreement between the parties, at or before the indorsement was made, as to what character of liability appellants thereby assumed. 4th. That the note did not, at any time, pass to either of the appellants by assignment, nor was either of them, at any time, the holder thereof.

The legal conclusion from these facts is, we think, clear. Commencing with Cushman v. Dement, 3 Scam. 497, and running through a series of cases down to, and including Lincoln v. Hinsey, 51 Ill. 435, this court has uniformly held that where the name of a person, not a party to a note, is indorsed upon it before delivery, the presumption is, in the absence of evidence to the contrary, that he indorsed as guarantor, and the rule thus declared has been too long and too firmly adhered to, to be now changed, unless it shall be done by legislative enactment. In our opinion, the evidence before us utterly and entirely fails to show that the parties intended, by the indorsement, a liability other or different than that which the law would imply from the act under the circumstances.

We fail to appreciate the force of the argument of counsel, that although Pahlman may be considered as a guarantor, yet that the liability of Rush can only be that of a second indorser. Who, then, was the first indorser in this sense? No names are indorsed, save those of Pahlman and Rush, and so far as we have been able to discover, they occupy the same relation precisely to the note. The money borrowed by Welsh, for the payment of which the note was given, was ostensibly for the firm of Pahlman & Co., which firm was composed of Pahlman, Rush and Welsh. The interest of one was the interest of all, and this fact materially strengthens the legal presumption, if indeed any is needed, that the parties intended that appellants should be Welsh's sureties for the payment of the note.

It is contended, however, that whatever may have been the original liability of appellants, they are discharged from that liability by reason of a material alteration of the note by appellee after their indorsement, and without their knowledge or consent.

The special verdict finds that the words “Payable at 53 Lake street,” in the note in evidence, were written by appellee after the appellants had indorsed the note, without their knowledge or authority, but with the knowledge and authority of Welsh, the maker of the note.

It is provided by the 139th section of the Practice Act (2 Gross, 289), that “when the special finding of facts is inconsistent with the general verdict, the former shall control the latter, and the court shall give judgment accordingly.”

That the alteration was material, and, if done without the knowledge or consent of the guarantors, express or implied, it operates to discharge them, seems to be well settled by the authorities. Chitty on Bills, 203; 2 Pars. on Bills and Notes, 546, 547; Woodworth v. Bank of America, 19 Johns. 420; Nazro v. Fuller, 24 Wend. 374; Southwark Bank v. Grosse, 35 Penn. St. 82; Chappel v. Spencer, 23 Barb. 584; Bank of Limestone v. Penick, 5 T. B. Monr. 25.

It only remains, then, to determine whether the special finding of facts is, under the evidence, inconsistent with the general verdict.

Preliminary to an examination of the law and the evidence applicable to this branch of the case, it is well to note that express knowledge and express authority are questions of fact, but implied knowledge and implied authority are conclusions of law. The finding of the jury must, therefore, be understood to have reference only to express knowledge and express authority, and in that sense it was undoubtedly authorized by the evidence.

Although authority to make the alteration was not expressly given by appellants to appellee, yet if Welsh had implied authority for that purpose and gave his consent, it was sufficient.

Every partner possesses full and absolute authority to bind all the partners by his acts or contracts, in relation to the business of the firm, in...