Pharr v. Stevens

• Decision Date: 06 June 1911
• Citation: 139 S.W. 730
• Parties: PHARR v. STEVENS et al.
• Court: Tennessee Supreme Court

Page 730

139 S.W. 730

PHARR v. STEVENS et al.

Supreme Court of Tennessee.

June 6, 1911.

Appeal from Chancery Court, Shelby County; H. Dent Minor, Chancellor.

"To be officially reported."

Suit by Harry N. Pharr against Charles L. Stevens and another. Judgment for plaintiff was affirmed by the Court of Civil Appeals, and defendants appealed. Reversed, and bill dismissed.

Fant & McRee, for appellants. Carroll & McKellar and Hubert Fisher, for appellee.

LANSDEN, J.

This bill is brought to recover of the defendants, W. S. Biles and Chas. L. Stevens, on the following note.

                "500.00         Memphis, Tenn. 11/1/1908
                

"On or before Jan'y 5, 1909, after date I promise to pay to the order of Harry N. Pharr five hundred dollars at Chickasaw Bank & Trust Co., value received, with interest at six per cent. per annum after maturity.

                    "[Signed]        Chas. L. Stevens."
                

— and indorsed in blank before delivery, "W. S. Biles."

Stevens had borrowed from complainant Pharr $500 some time before the note in question was given. The original note was renewed at different times. At the maturity of the last renewal before the one in question, complainant demanded security of Stevens before he would permit a renewal. Stevens executed the above note, and Biles indorsed it in blank by writing his name across its back before it was delivered to the complainant, Pharr. Complainant accepted the note upon the responsibility and liability of the defendant Biles. The weight of the evidence is that complainant would not have renewed the note without the indorsement of some solvent party, and Biles' indorsement was acceptable to him. The question presented is whether Biles is entitled to notice of demand and protest at the maturity of the note, or whether he is liable as maker.

Before the passage of the negotiable instrument act (Laws 1899, c. 94), there could be no question upon our authorities that Biles' liability is that of maker. Bank v. Lumber Company, 100 Tenn. 480, 47 S. W. 85; Bank of Jamaica v. Jefferson, 92 Tenn. 538, 22 S. W. 211, 36 Am. St. Rep. 100; Assurance Society v. Edmonds, 95 Tenn. 53, 31 S. W. 168.

Indorsements of this kind are irregular, and the nature of the contract of such indorser has given rise to great divergence of opinion in the cases. There are three distinct rules prevailing in different jurisdictions respecting the nature of such an indorser's contract, known generally as the New York rule, the Pennsylvania rule, and the Massachusetts rule. It is not necessary to say more with respect to these various rules than that the liability of such an indorser has been held to be that of an indorser, maker, surety, or guarantor. The authorities are set out in 7 Cyc. 664-666. The rule prevailing in this state prior to the passage of the negotiable instrument law was at least a modified form of the Massachusetts rule, whereby such an indorser is held to be maker, if his indorsement was given in order to procure credit for the maker with the payee. Still another rule prevailing in various jurisdictions is that the contract implied by such a signature is not fixed by the law merchant (to which it was not known), but depends upon the intention of the parties. While not so stated in terms, such was manifestly the rule applied in Bank v. Jefferson, supra, and Assurance Society v. Edmonds, supra.

With respect to this particular kind of contract, the negotiable instrument law of 1899 provides as follows:

"Sec. 63. A person placing his signature upon an instrument otherwise than as a maker, drawer, or acceptor, is deemed to be an indorser, unless he clearly indicates by appropriate words his intention to be bound in some other capacity.

"Sec. 64. Where a person not otherwise a party to an instrument places thereon his signature in blank, before delivery, he is liable as indorser in accordance with the following rules:

"(1) If the instrument is payable to the order of a third person he is liable to the payee and to all...