Rosson v. Carroll

• Citation: 16 S.W. 66,90 Tenn. 90
• Parties: ROSSON v. CARROLL.
• Decision Date: 14 April 1891
• Court: Supreme Court of Tennessee

16 S.W. 66

90 Tenn. 90

ROSSON v. CARROLL.

Supreme Court of Tennessee.

April 14, 1891

Appeal from chancery court, Gibson county; HENRY J. LIVINGSTON Chancellor.

Neil & Deason, for appellant.

Cooper & Harwood, for appellee.

CALDWELL J.

This is an action in the chancery court by an indorsee against the indorser of an overdue promissory note. His bill being dismissed by the chancellor, complainant appealed. The substance of the pleadings is well stated in the assignment of errors and brief by complainant's counsel, as follows "On the 29th day of October, 1887, the complainant, M Rosson, filed his bill in the chancery court at Trenton against the defendant, John R. Carroll, in which bill he charged that on the 25th day of December, 1886, the Paragould Stave Manufacturing Co. of Paragould, Ark., executed to the firm of Ware, Bittick & Co. a promissory note for the sum of $2,087, with interest at 10 per cent. per annum, and payable one day after date. That said Ware, Bittick & Co., on the 1st day of April, 1887, indorsed and transferred said note to the complainant, and that he was the holder and owner of the same. That on the 12th day of April, 1887, the said note was duly presented for payment to the said Paragould Stave Manufacturing Co. by John M. Davis, a notary public, and payment refused, and due protest thereof made by said notary and on the same day due notice was given to said Ware, Bittick & Co.,

and to all the parties. That the said Ware, Bittick & Co., at the time of said indorsement and said demand and notice and these transactions, was a partnership composed of Ware, Frank Bittick, and John R. Carroll. That Bittick died insolvent in Arkansas, and the residence of Ware was unknown to complainant, and that he sued the defendant, John R. Carroll, alone. That said John R. Carroll had due notice of said protest and of said demand and failure to pay, both as a member of the firm of Ware, Bittick & Co. and otherwise, and that he is bound upon said indorsement personally and as a member of the firm of Ware, Bittick & Co., and that he is bound in solido to the complainant. That said defendant, John R. Carroll, likewise received reasonable notice of said demand and failure to pay outside of and in addition to said protest and notice thereof by said notary. That the said note was overdue when indorsed to complainant; and the home of the Paragould Stave Manufacturing Co. was in the town of Paragould, Ark., and complainant's home was in Obion county, Tennessee; and demand was made and notice given within a reasonable and lawful time. That said note was an Arkansas contract, and bears ten per cent. by special stipulation upon its face, and that such was the lawful rate in Arkansas. That John R. Carroll was a citizen of Gibson county, Tenn." The prayer was for judgment, etc., in the usual form, and the oath to the answer was waived.

On the 24th of February, 1888, the defendant filed his answer. In this answer he admits that complainant is the holder and owner of the note described in the bill, and also admits the indorsement, and also admits that the home of the maker was in Paragould, Ark., and also admits that the note bears 10 per cent., as charged; but insists that the maker was a corporation, and submits the question to the court whether the note would be usurious for that reason. He denies that on the 12th day of April, 1887, demand and notice and protest were made, as charged in the bill; denies that either he or Ware, Bittick & Co. received any notice; denies that due demand was made and notice given; denies that he received legal notice in any manner; denies that "demand was made and notice given in a reasonable and lawful time," as charged; and avers "that the first that respondent ever heard of the fact that the maker thereof had failed to pay the said note was some months after it was indorsed to complainant," etc. He admits that the members of the firm of Ware, Bittick & Co. were correctly set forth in the bill, and states his own residence as at Kenton, Tenn. The answer also pleads as an offset a note of $50, which he held against the complainant, which he asks be set off against complainant's recovery if complainant shall succeed in holding him, defendant, liable as indorser, etc. The note was payable to "Ware, Bittick & Co., or order," and when indorsed was three months and five days past due. The transfer was negotiated and made by the defendant for his firm, in these words: "For value received, we transfer this note to M. Rosson. This 1st day of April, 1887. [Signed] WARE, BITTICK & CO."

Before referring further to the facts of the case, the principal legal questions involved will be considered. What duties, with respect to demand and notice, does the indorsee of an overdue note owe to his indorser? or what legal steps must he take to convert the conditional liability of the indorser into an absolute obligation to pay the debt? The distinguishing feature of the liability of an indorser of any negotiable paper is that such liability is contingent upon due presentment for payment and notice of dishonor. Though a note transferred after maturity "comes disgraced to the indorsee," (as said by Lord ELLENBOROUGH in Tinson v. Francis, 1 Camp. 19,) and is, in his hands, subject to all equitable defenses attaching to it and existing between the maker and payee at maturity, it is nevertheless negotiable; and, in order that the indorser may be held liable, demand must be made of the maker and notice of non-payment given. Tied. Com. Paper, § 336; Chit. Bills, 159, 160; Byles, Bills, 168, 169; Rand. Com. Paper, §§ 674, 675; 2 Amer. & Eng. Enc. Law, 399, 407, 408; Story, Prom. Notes, § 178; Daniel, Neg. Inst. § 996; Leavitt v. Putnam, 3 N. Y. 494; Berry v. Robinson, 9 Johns. 121; Kirkpatrick v. McCullough, 3 Humph. 171; Duffy v. O'Conner, 7 Baxt. 500; Poole v. Tolleson, 1 McCord, 199; Ecfert v. Des Coudres, 1 Mill. Const. 69; Nash v. Harrington, 2 Aikens, 9; McKinney v. Crawford, 8 Serg. & R. 353. Yet the same strictness as to time of demand and notice is not in all particulars required with respect to such a note as must be observed in case of one indorsed before due. As between indorser and indorsee, a note transferred after maturity is deemed equivalent to a note payable on demand, and is subject to the same rule of diligence in the matter of presentment for payment and notice of dishonor. To bind the indorser in such a case it is incumbent on the indorsee to see that due demand is made in a reasonable time and that notice is promptly given, if payment be refused. Rand. Com. Paper, §§ 671, 672, 1046, 1098; Daniel, Neg. Inst. §§ 611, 996; 2 Amer. & Eng. Enc. Law, 396, 397; 1 Pars. Notes & B. 381, 382, 519, 520; Byles, Bills, (7th Ed. by Sharswood,) 211, 212, and note 169, 170; Colt v. Barnard, 18 Pick. 260; Jones v. Robinson, 11 Ark. 504; Graul v. Strutzel, 53 Iowa, 712, 6 N.W. 119; Bank v. Ezell, 10 Humph. 386, Patterson v. Todd, 18 Pa. St. 426.

The point most contested in argument at the bar--one ably and learnedly debated on both sides--concerns the time in which notice of the dishonor of a note indorsed when overdue shall be given to the indorser. It is urged for complainant that the indorsee of such an instrument should have reasonable time in which to make demand, and like time in which to give notice. For defendant it is conceded that reasonable time is permitted for demand, but as to notice it is contended that it must be given with the same promptness as is required in case of indorsement before maturity. The authorities are somewhat in conflict, but we think the great weight of juridical opinion, as expressed in the text-books and in judicial decisions, is in favor of the rule we have just stated, and sustains the proposition that the same diligence must be used in giving notice of dishonor to the indorser of an overdue note as is required by the law-merchant in notifying one who indorses before maturity. In our opinion, the rule as to notice of non-payment to indorsers of time notes before due and of demand notes is and should be the same. We have seen no difference stated as to that matter in any authority, and do not perceive how a sound distinction could be taken; the reason for the notice being the same in each case. Then, if it be true, as announced by numerous authorities already cited, that indorsed demand notes and time notes indorsed after maturity are governed by the same rule in regard to notice of non-payment, it follows that one and the same rule of notice is to be applied to all the three classes of notes mentioned,--time notes indorsed before due, notes payable on demand, and time notes indorsed after maturity. Why should not this be so? It simplifies the law-merchant and facilitates transactions in commercial paper, in respect to which simplicity and uniformity in the rules of law are all-important and conducive to the prosperity and welfare of every community, especially of commercial people. Why should one who acquires an overdue note have or need more time to give notice of non-payment than the indorsee of a note acquired before maturity? He is justly allowed more indulgence in demanding payment of the maker, because the indorser knew at the time of the transfer that the maker was then in default; but when he has had all reasonable time for that purpose, the reason is not so satisfactory for extending the same indulgence with respect to notice. Certainly no more time for notification is needed by the one indorsee than by the other. We quote the language of some of the writers on this subject:

"If a negotiable note is indorsed after maturity it becomes in effect a demand note, and payment must be demanded within a reasonable time, and notice of dishonor at once given to the

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