Peterson v. Russell
| Decision Date | 15 October 1895 |
| Docket Number | 9612-(172) |
| Citation | 64 N.W. 555,62 Minn. 220 |
| Parties | JOHN PETERSON and Another v. WILLIAM RUSSELL |
| Court | Minnesota Supreme Court |
Appeal by plaintiffs from an order of the district court for Marshall county, Ives, J., denying a motion for a new trial. Reversed.
Order reversed, and a new trial granted in full.
Brown & Carr, for appellants.
Defendant by signing his name on the back of the note for the purpose of guarantying its payment, thereby authorized plaintiffs to write over it in full the guaranty, or whatever other contract was entered into; and this, when written, was a sufficient note or memorandum to take the case out of the statute of frauds. Moor v. Folsom, 14 Minn. 260 (340); McComb v. Thompson, 2 Minn. 114 (139); Pierse v. Irvine, 1 Minn. 272 (369); Tiedeman, Com Paper, § 270; Beckwith v. Angell, 6 Conn. 315; Daniel, Neg. Inst. §§ 710, 711, 717; Levering v. Washington, 3 Minn. 227 (323); Kern v. Von Phul, 7 Minn. 341 (426); First Nat. Bank v. National Marine Bank, 20 Minn. 49 (63). In case of indorsements parol evidence is admissible to explain and bring to light the actual contract that was entered into. Pierse v. Irvine supra; McComb v. Thompson, supra; Moor v. Folsom, supra; Daniel, Neg. Inst. §§ 708a, 710, et seq.; Tiedeman, Com. Paper, § 270 et seq.; Buck v. Hutchins, 45 Minn. 270, 47 N.W. 808; 1 Greenleaf, Ev. §§ 277, 282, 285, 288. Proof of the facts and circumstances which took place at the time of the transaction are admissible to aid in the interpretation of the language employed. Good v. Martin, 95 U.S. 90; De Pauw v. Bank of Salem, 126 Ind. 553, 25 N.E. 705, and 26 N.E. 151. There was sufficient consideration. Daniel, Neg. Inst. § 185, note 4; Nichols & Shepard Co. v. Dedrick, 61 Minn. 513, 63 N.W. 1110; D. M. Osborne & Co. v. Doherty, 38 Minn. 430, 38 N.W. 111; Tiedeman, Com. Paper, § 170, notes 6, 7, 8.
A. C. Wilkinson, for respondent.
The contract was one to pay the debt of another, and it, as well as the consideration, must be in writing. G. S. 1894, § 4209; Wilson S. M. Co. v. Schnell, 20 Minn. 33 (40); Church v. Brown, 21 N.Y. 315; Houghton v. Ely, 26 Wis. 181; Edwards, Bills & Notes, marginal page 231; Hall v. Newcomb, 3 Hill. 233; s. c. 7 Hill, 416; Cromwell v. Hewitt, 40 N.Y. 491; Drake v. Markle, 21 Ind. 433; Van Doren v. Tjader, 1 Nev. 380. Defendant was discharged by delay of plaintiffs in enforcing collection against the maker. 2 Daniel, Neg. Inst. § 1753; Crane v. Wheeler, 48 Minn. 207, 50 N.W. 1033.
OPINION
Action to charge the defendant as guarantor of the payment of a negotiable promissory note.
Upon the trial the plaintiffs offered evidence, and then rested, tending to establish the following state of facts: That on May 4, 1892, Thomas Connors made and delivered to the plaintiffs his note whereby he promised to pay to them or order on November 1, 1892, $ 145. After the maturity of the note, and on March 31, 1893, the defendant agreed with the payees of the note, the plaintiffs, in consideration of their extending the time of its payment to December 15, 1893, to guaranty the payment of the note, and in execution of his agreement he signed his name on the back of the note in blank, and it was returned to the plaintiffs' agent, and they, by such agent, signed a memorandum on the back of the note in these words: "In consideration of Mr. William Russell indorsing this note, payment of the same is hereby extended until Dec. 15, 1893." On January 29, 1894, the defendant refusing to pay the balance then due on the note, the plaintiffs, by their attorney, wrote over the defendant's signature the formal contract of guaranty, in these words: -- and brought this action on such guaranty.
Whether the defendant's agreement was to guaranty the note or to indorse it, in the strict sense of the term, is an open question upon plaintiffs' own evidence, but it was sufficient to warrant a finding by the jury that the contract was to guaranty the payment. The trial court dismissed the action, when the plaintiffs rested, exception by them, and from an order denying their motion for a new trial this appeal was taken.
1. What was the legal liability assumed by the defendant by signing his name in blank upon the back of this note, pursuant to his oral agreement to guaranty its payment? This is practically the only question in this case.
It is perfectly manifest that by this irregular indorsement he intended to become responsible to the payees for its payment, in some capacity, as maker, indorser, or guarantor. What liability one who is not a party to a negotiable instrument otherwise than by his indorsement of it, and who is in no manner connected with the title to it or its transfer, assumes by signing his name in blank upon the back thereof, is a question upon which there is much confusion and weighty conflict in the adjudged cases. They cannot be harmonized, and we shall not attempt any analysis of them. In some states, notably in Massachusetts, the question has been put at rest by a statute to the effect that in all such cases, whether his name is placed upon the paper before its delivery to the payee or afterwards, the party shall be charged only as an indorser. This is a certain, practical, and desirable rule; and, if it had been adopted by the courts when the question first arose, it would have saved litigation, and some lying. But we cannot now adopt the rule without disregarding well-settled principles and resorting to judicial legislation.
The position of the name of such a party upon the paper is in itself one of ambiguity. It is an irregular indorsement, and does not, without parol evidence as to when the indorsement was made and its purpose, indicate the relation of the indorser to the paper or the parties to it. He is not strictly an indorser, for the paper is not negotiated or title made through his indorsement; hence there is a pretty general agreement of the authorities that parol evidence is admissible, as between the original parties, to show the relation of such party to the paper, and to fix his liability as maker, indorser, or guarantor, according to the intention of the parties. Rey v. Simpson, 63 U.S. 341, 1 Minn. 282 (380), 22 HOW 341, 16 L.Ed. 260; Kern v. Von Phul, 7 Minn. 341 (426); Good v. Martin, 95 U.S. 90, 24 L.Ed. 341; Coulter v. Richmond, 59 N.Y. 478; Tiedeman, Com. Paper, § 270; 1 Daniel, Neg. Inst. §§ 710, 711. In case of regular indorsements -- that is, where the paper is first indorsed by the payee -- the law attaches a definite liability to the act, and parol evidence is not admissible to vary it. Knoblauch v. Foglesong, 38 Minn. 352, 37 N.W. 586; Farwell v. St. Paul Trust Co., 45 Minn. 495, 48 N.W. 326. This rule, however, does not apply to an irregular indorsement, except that this court has held that where it is once shown by parol evidence that the name of an apparent stranger to the paper was signed upon the back of it before its delivery to the payee, to induce its acceptance, he will be held as an original maker, and such evidence is not competent to show that he intended to charge himself as indorser only. Peckham v. Gilman, 7 Minn. 355 (446); Robinson v. Bartlett, 11 Minn. 302 (410). We have also held that where such an indorsement is made for a valuable consideration, after the delivery of the paper to the payee, but while it is in his hands and before its maturity, and the payee subsequently indorses it to a bona fide holder, the party making the irregular indorsement will, in favor of such holder, be held as an indorser. Buck v. Hutchins, 45 Minn. 270, 47 N.W. 808. Except as limited in these cases, the general rule that parol evidence is admissible to ascertain the intention of the parties to an irregular indorsement is in force in this state; and such evidence was properly received in this case to show the actual relation the defendant agreed to and did assume with reference to the note in question.
This leaves only the question of the statute of frauds to be considered. The defendant's contract of guaranty was a collateral one to answer for the debt of another, and must to enable the plaintiffs to enforce it, be evidenced by a note or memorandum in writing expressing the consideration. The signature of the defendant alone on the back of the note is not sufficient. Moor v. Folsom, 14 Minn. 260 (340). Assuming the facts which the evidence tends to establish, we have a case where the defendant, for a valid consideration, agreed to guaranty the payment of a note then past due, and still in the hands of the payees. His contract excludes the idea that he intended to be held only as an indorser, and, in execution of his contract, he writes his name upon the back of the note and leaves it with the payees, who overwrite his signature with the actual contract he has made, which satisfies in form the statute of frauds. The question, then, in its last analysis, is one of agency only. The actual contract is proved for the purpose of showing the authority to overwrite the signature. Were the payees authorized to thus overwrite the signature? The question is an open one in this state, for although the case of Moor v. Folsom seems to indicate that an affirmative answer should be given to the question, the opinion expressly disclaims any purpose to so decide. It was a matter of indifference who wrote out the formal contract of guaranty after the minds of the parties had met, the contract had been made, and the defendant had signed his name on the back of the note. The writing was only the evidence of what the parties had done. The defendant's...
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