Pool v. Anderson

• Decision Date: 23 October 1888
• Citation: 116 Ind. 88,18 N.E. 445
• Parties: Pool v. Anderson.
• Court: Indiana Supreme Court

116 Ind. 88

18 N.E. 445

Pool

v.Anderson.

Supreme Court of Indiana.

October 23, 1888.

Appeal from circuit court, Rush county; S. A. Bonner, Judge.

Ewing & Ewing, for appellant. Smith & Henley, for appellee.

Mitchell, J.

This was an action by Thomas A. Pool against William F. Spradling, Daniel G. Neff, and James W. Anderson, to recover the amount due on a promissory note, dated August 14, 1884, calling for the payment of $850, with 8 per cent. interest, due 12 months after date. The note was in the ordinary form of paper not negotiable by the law-merchant, and was payable to the plaintiff at Greensburgh, Ind. Spradling and Neff signed their names as makers on the face of the note, in the customary manner, while the name of Anderson was written across the back, before it was delivered to the payee, who brought the suit. Beyond the fact that the paper was signed in the manner described, there is nothing to indicate the relation of Anderson to the note or to the other defendants. Assuming that it was necessary to show an excuse for not having used diligence by bringing suit in the first term of court after the maturity of the note, in order to hold Anderson, the plaintiff adapted the first paragraph of his complaint, so as to rely upon a stipulation such as is usually found in mercantile paper, whereby the drawers and indorsers agree to waive presentation for payment, and protest and notice of non-payment, etc., as an excuse for not having sued. The court below was of the opinion, nevertheless, that the complaint did not state facts sufficient to constitute a cause of action against Anderson, and gave judgment accordingly upon a demurrer filed by the latter. The conclusion at which we have arrived renders it unnecessary that we should examine any other question than that which arises upon the ruling on the demurrer to the first paragraph of the complaint. Counsel seek to maintain the judgment appealed from upon the assumption that the unexplained signature of a third person, placed upon the back of non-mercantile paper, or paper negotiable under the statute merely, before it is delivered to the payee, imposes, prima facie, the liability of an indorser upon the person whose name is so signed, and that a waiver of notice of non-payment contained in the body of the note is not an available excuse for failing to use the diligence required, in order to hold an indorser of such paper liable. Drake v. Markle, 21 Ind. 433;Dale v. Moffitt, 22 Ind. 113;Roberts v. Masters, 40 Ind. 461;Pennington v. Hamilton, 50 Ind. 397, and other decisions of this court, are relied on as sustaining the view contended for. The law-merchant attributes to the act of one who indorses a negotiable instrument in blank an intent thereby to warrant the payment of the note, provided it is presented to the maker at maturity, and due notice of the fact of non-payment is given to the indorser. Ordinarily, and in the regular course, the indorsement of a note or bill by one not a party thereto follows the indorsement of the payee, and in such a case little difficulty is experienced in determining the liability assumed by the indorser to the person into whose hands the note may thereafter come. The present case involves the liability of a stranger, who signed his name upon the back of a paper not negotiable by the law-merchant, before it was delivered to the payee, who held the same when the suit was commenced. The inquiry is, what is the liability or obligation of one who thus signs, to the payee? The decisions of different courts present an irreconcilable conflict of views upon the general subject under consideration. It will be noted, however, that the cases in other jurisdictions relate almost exclusively to notes negotiable as inland bills of exchange. Whatever diversity exists in the decided cases, it cannot be doubted that a stranger who writes his name on the back of a promissory note before it is delivered, whether it be negotiable or non-negotiable, according to the law-merchant, does so in order to give the maker credit or the note currency, and with the intention to pledge himself in some shape for its payment. Eilbert v. Finkbeiner, 68 Pa. St. 243. All the authorities concur in holding that the act constitutes a contract, which is to be construed in such a way as to render it available to carry into effect the intention of the parties, consistent with settled rules of law. Good v. Martin, 95 U. S. 90;Rey v. Simpson, 22 How. 341. The rule, as established by the decisions of this court, is to the effect that one who writes his name upon the back of a negotiable promissory note, of which he is neither the payee nor indorsee, before it is delivered, in the absence of extrinsic explanatory evidence, thereby assumes the liability of an indorser. Kealing v. Vansickle, 74 Ind. 529, and cases cited; Houck v. Graham, 106 Ind. 195, 6 N. E. Rep. 594; Knopf v. Morel, 111 Ind. 570, 13 N. E. Rep. 51. Presumptively, his contract with the payee is that of an indorser of mercantile paper. Without regard to the decisions in some of the other states, this rule, as applied to paper governed by the law-merchant, must now be accepted as no longer open to question in this court. As respects paper of that character, the rule above stated has been uniformly applied for nearly a half century; and, as stability and certainty in the law are of the first importance in commercial transactions, it is far better that a rule once settled should remain than that it should be so clearly right as to be beyond criticism. The earlier decisions made a distinction between negotiable and non-negotiable paper. Thus in the case of Wells v. Jackson, 6 Blackf. 40, Dewey, J., stated the rule in the following language: “The deduction which we draw from the authorities is that the blank indorsement of unnegotiable paper, made at the date of the contract, and unexplained by extrinsic testimony, confers upon the payee the authority to hold the indorser liable on the original contract as a surety, and that a similar unexplained indorsement of negotiable paper renders the indorser liable only as an indorser, with the ordinary rights and privileges incident to that character; but that in either case the liability designed to be assumed, and the authority intended to be given, by the indorsement, may be explained by the attendant circumstances, and the prima facie responsibility be changed into one of another kind.” The terms “unnegotiable” and “negotiable” were employed by the learned judge, who wrote the opinion from which the above quotation is taken, advisedly, and in the light of a statute not materially different from that now in force, regulating the assignability of promissory notes, and providing that notes drawn payable in a specified manner, at a bank in this state, should be negotiable as inland bills of exchange. The statute now in force, or one substantially like it, concerning promissory notes and bills of exchange, has been in existence in this state ever since the enactment of the law approved January 29, 1818, which was passed by the second legislative assembly convened in the state. See Acts 1818, p. 223. This statute, although less comprehensive in its scope, has occupied, and still supplies, substantially the place in our commercial system as does the statute of Anne in the commercial law of England. 1 Daniel, Neg. Inst. § 5; Mix v. Bank, 13 Ind. 521. So far as the statute places promissory notes upon the footing of inland bills of exchange, it subjects them to the law-merchant, and all its incidents; that law having been incorporated into our system as part of the common law. Bullitt v. Scribner, 1 Blackf. 14;Holloway v. Porter, 46 Ind. 62. While it is true the statute makes all promissory notes “negotiable by indorsement thereon, so as to vest the property thereof in each indorsee successively,” only notes payable to order or bearer in a bank in this state are negotiable as inland bills of exchange. Melton v. Gibson, 97 Ind. 158.

It is clear, therefore, that the effect of the rule laid down in Wells v. Jackson, supra, was that where one, not the payee of a note not negotiable as an inland bill of exchange, wrote his name upon the back of the paper prior to or at the time of its inception, without any extrinsic agreement expressing the real nature of the obligation intended to be assumed, he thereby conferred authority upon the payee to hold him liable on the original contract as a...