Pearl v. Cortright

• Citation: 81 Miss. 300,33 So. 72
• Court: United States State Supreme Court of Mississippi
• Decision Date: 15 December 1902
• Parties: BENJAMIN PEARL v. IRA A. CORTRIGHT

33 So. 72

81 Miss. 300

BENJAMIN PEARL v. IRA A. CORTRIGHT

Supreme Court of Mississippi

December 15, 1902

October 1902

FROM the chancery court of Sharkey county HON. WILLIAM C. MARTIN Chancellor.

Pearl appellant, was complainant and Cartwright, appellee, was defendant in the court below. From a decree in defendant's favor the complainant appealed to the supreme court. The question of jurisdiction was not raised in the court below, on the contrary defendant made his answer a cross bill and sought affirmative relief. Of course the jurisdiction of the chancery court could not (constitution 1890, sec. 147) be raised in the supreme court. The facts are stated in the opinion of the court.

Reversed.

R. L McLaurin and Green & Green, for appellant.

The original consideration existing between Pearl and Marriott is the consideration that makes Cortright's signature binding on him. His signature relates back to the original making and delivery of the notes, and this too whether he knew of this agreement or not, especially so since Marriott told him when he endorsed the note that he, Marriott, had promised Pearl that he, Cortright, would endorse at the time the notes were made and delivered. Clopton v. Hall, 51 Miss. 482.

It is perfectly evident from the evidence in this case that although Cortright endorsed subsequent to the making of the notes and the delivery, that it was done in pursuance of an agreement and arrangement for the credit of the maker and for the security of the payee; therefore it was not necessary for it to rest upon a consideration of its own.

It cannot be contended that, if there was any fraud practiced on Cortright, Pearl was a.party to it, because he was not present when Cortright signed and had no conversation with him. He did not know what Marriott told Cortright about retaining the security. 1 Am. & Eng. Ency. Law., 337, and note; Anderson v. Norvill, 10 Ill. App. , 240; Tiedman on Commercial Paper, 256; Williams v. Perkins, 21 Ark. 18; Harrington v. Brown, 77 N.Y. 72; 1 Brant on Suretyship and Guaranty, sec. 15, and cases cited.

Even if Pearl, the creditor, had notice of Cortright's agreement with Marriott, Cortright is not discharged by reason of the cancellation, except to the extent of the value of the property released. Picard v. Shantz, 70 Miss. 381; 2 Brandt on Suretyship and Guaranty (2d ed.), 343. See Dunn v. Parsons, 40 Hun. (N. Y.) 77, which says: "But an accommodation endorser is held not absolutely discharged by the holder releasing real estate of the maker from the lien of a judgment on the note."

In Payne v. Bank, 6 Smed. & M., 38, it is said: "A creditor who takes collateral security for his debt, is bound to hold it impartially and justly and if it be lost by his negligence or improper conduct, the surety on such debt may bar the creditor of so much of his demand as he may have received from such collateral."

Wright v. Watt, 52 Miss. 637, decides that "There is a class of cases to the effect that the creditor is bound to deal with all collateral securities given him by the principal debtor impartially, and if by his negligence or improper conduct they are lost or surrendered, the surety is released at least to the extent that these securities might have been available, and for the obvious reason that the surety has a right to pay the debt, and be subrogated on payment to these rights of the creditor. Citing Payne v. Commercial Bank, 6 Smed. & M., 38.

The fraud of Marriott, if there was fraud in securing the endorsement of Cortright, cannot be availed of by Cortright in an action against him by the payee, if Pearl, the payee, was not a party to the fraud and paid value for the notes. Hoffman & Co. v. Bank of Milwaukee, 12 Wallace ( U.S.), 192; United States v. Bank of the Metropolis, 15 Peters, 393.

There was no necessity for notice, demand or protest in this case. Cortright was only entitled to reasonable notice. If entitled to notice and protest, the failure in this respect only applies to the first note. Ireys v. Wallace, 76 Miss. 277; Bryant on Suretyship and Guaranty, sec. 202; Ray v. Simpson, 22 How., 250; Tiedman on Commercial Paper, sec. 421; Montgomery v. Kellogy, 43 Miss. 486; Brandt Suretyship and Guaranty, vol. 1, sec. 97.

Monroe McClurg and McLaurin & Clement, for appellee.

1. The difference between guaranty and suretyship is: "A surety is generally a co-maker of the note, while the guarantor never is a maker; and the leading difference between the two is, that the surety's promise is to meet an obligation which becomes his own immediately on the principal's failure to meet it, while the guarantor's promise is always to pay the debt of another." Dan. Neg. In., vol. 2 sec. 1573 (1891).

2. The difference between guaranty and endorsement is "The liability of a guarantor also differs materially from, and is more onerous than that of an endorser. The endorser contracts to be liable only upon condition of due presentment of the bill or note on the exact day of maturity and due notice to him of its dishonor. And he is absolutely discharged by failure in either particular, although he may suffer no actual damage whatever. The guarantor's contract is more rigid, and he is bound to pay the amount upon a presentment made, and notice given to him of dishonor, within a reasonable time. And in the event of a failure to make presentment and give notice within such reasonable time, he is not absolutely discharged from all liability, but only to the extent that he may have sustained loss or injury by the delay." Ib., sec. 1754.

3. The rules announced in Rey v. Simpson, 22 How. (U.S.), 241, reported with copious notes in Book 16, Law Ed. Mar., p. 260, are stated as follows: "When a promissory note, made payable to a particular person or order as in this case, is first indorsed by a third person, such third person is held to be an original promisor, guarantor or indorser, according to the nature of the transaction and the understanding of the parties at the time the transaction took place."

(a) If he puts his name at the back of the note at the time it was made, as surety for the maker and for his accommodation, to give him credit with the payee, or if he participated in the consideration for which the note was given, he must be considered as a joint maker of the note.

(b) On the other hand, if his indorsement was subsequent to the making of the note, and he puts his name there at the request of the maker, pursuant to a contract with the payee for further indulgence or forbearance, he can only be held as a guarantor.

(c) But if the note was intended for discount, and he puts his name on the back of it with the understanding of all the parties that his indorsement would be inoperative until it was indorsed by the payee, he would then be liable only as a second indorser in the commercial sense, and as such would clearly be entitled to the privileges which belong to such indorsers."

This last authority also states the rules for admitting parol testimony to show the intention of the indorser, guarantor or surety. See, also, Good v. Martin, 95 U.S. 90; Moses v. Nat. Bank Lawrence County, 149 U.S. (Law Ed., 37), p. 743); 1 Dan. Neg., sec. 720 and notes.

4. Upon a long list of authorities Mr. Story, in sec. 133 of his work on Promissory Notes, says: "But, suppose he is not the payee of the note, but he indorses it, what is the nature and effect of such an indorsement? If he signs it at the time when the note is made, then he will ordinarily be deemed a guarantor of the note upon the footing of the original consideration, and if he indorses it subsequently, not being a regular indorsee from or under any of the antecedent parties, he will, in like manner, still be deemed a guarantor, if there be a sufficient consideration for his indorsement, but not otherwise."

5. In Holcombe & Gholson's American Notes to Smith's Mercantile Law, at p. 265, the American doctrine is stated as follows: "A blank indorsement, made after...