Rothschild v. Grix

• Decision Date: 19 January 1875
• Citation: 31 Mich. 150
• Court: Michigan Supreme Court
• Parties: Sigmund Rothschild v. George Grix

31 Mich. 150

Sigmund Rothschild v. George Grix

Supreme Court of Michigan

January 19, 1875

Heard October 15, 1874

Error to Superior Court of Detroit.

Judgment affirmed, with costs.

Don M Dickinson and F. A. Baker, for plaintiff in error.

Moore & Griffin, for defendant in error.

Graves Ch. J. Campbell, J., Cooley and Christiancy, JJ concurred.

OPINION

Graves, Ch. J.:

This is a writ of error to the superior court of Detroit. The defendant in error recovered under the money counts on a promissory note dated October 16th, 1871, given for two thousand dollars, by the late Arnold Kaichen, and payable one year after date, at the Germania Bank in Detroit, to the order of the defendant in error, with interest at ten per cent., and signed on the back by the plaintiff in error.

No steps were taken to hold Mr. Rothschild as endorser or guarantor, and the real question in the case concerns the legal nature of his undertaking. The parties were both sworn, and their accounts respecting this and some other features of the transaction were repugnant.

Mr. Grix testified that he agreed with Mr. Kaichen to loan him two thousand dollars on his note, if signed by either Mr. Kanter or Mr. Rothschild; that Mr. Kaichen thereupon drew up this note, and the next morning handed it, with the name of Mr. Rothschild on the back, to the defendant in error as payee, at the latter's shop, and that he, the defendant in error, at once gave his check to Mr. Kaichen for two thousand dollars; that about the close of the year specified, Mr. Kaichen paid two hundred dollars for interest, but as he wished to have the note remain, it was allowed to run.

Mr. Rothschild testified that he did not put his name on the note until after its delivery to and discount by the defendant in error.

In charging the jury the judge properly noticed the contradications in the testimony in regard to this and some other points, and stated the rules of law applicable to the different versions; and when he came to advise upon the effect of their finding to be true the explanation given by the defendant in error, he in substance laid it down, that if the note at its inception, and before being uttered, and before any advance on it by Mr. Grix, was backed by Mr. Rothschild, at the instance of Mr. Kaichen, the plaintiff in error became as to Mr. Grix an original promisor, and bound to him as principal and maker, when he, Mr. Grix, received it in the shape it bore, and advanced the money on it.

As the cause was submitted by the judge, it must be taken that the jury found against the version of Mr. Rothschild and in favor of that of Mr. Grix, and so regarding it, the plaintiff in error questions the soundness of the legal proposition which the judge said would follow in case Mr. Grix's explanation should be considered true.

This ruling of the court below was based on Wetherwax v. Paine, 2 Mich. 555, and the counsel for the defendant in error maintain that the decision there given fully covers the present question and supports the ruling.

On the other hand, the counsel for the plaintiff in error observe that in Wetherwax v. Paine the note was in terms non negotiable, and they urge that this circumstance was sufficient to subject that case to principles inapplicable to one like this, where the note contains words of negotiability. And after insisting that the point now made is still an open one in this state, they claim that on principle, and according to the best considered cases, Mr. Rothschild, on the state of facts contemplated by the court and found by the jury, was either an endorser or guarantor, and not a party primarily and absolutely liable on the note.

In view of these opposing positions, we are first to see whether Wetherwax v. Paine is applicable, because if it is, we think it should stand as authority and decide the question before us. That case was decided more than twenty years ago, and it has long been cited and understood, abroad as well as here, as settling the rule in this state. And it is fair to presume that it has been so received and acted on, and is now so considered in commercial circles. Any serious disturbance of it would be confusing and mischievous; and if any further reason were needed against re-opening the question there decided, the prevalence of conflicting opinions and theories elsewhere would afford it. When we turn to the books, we find the cases too numerous to warrant full citations, and we also find a discordance of opinion and judgment scarcely exceeded in case of any other legal subject.

By many courts it has been held that where a stranger signs the note on the back before delivery to the payee, he is prima facie liable as an original promisor.--Sylvester v. Downer, 20 Vt. 355; Schneider v. Schiffman, 20 Mo. 571, Childs v. Wyman, 44 Me. 433; Perkins v. Barstow, 6 R.I. 505; Currier v. Fellows, 7 Fost. 366; Carpenter v. Oakes, 44 S.C. L. 17, 10 Rich. 17; Cecil v. Mix, 6 Ind. 478; Carr v. Rowland, 14 Tex. 275; Peckham v. Gilman, 7 Minn. 446; Collins v. Trist, 20 La.Ann. 348; and see likewise Rey v. Simpson, 63 U.S. 341, 22 HOW 341, 350, 16 L.Ed. 260; Vore v. Hurst, 13 Ind. 551, 556; Orric v. Colston, 48 Va. 189, 7 Gratt. 189, 199.

The decisions in Massachusetts, and possibly in some of the courts just mentioned, indicate a somewhat more stringent rule in favor of holding the backer in such a case to the liability of an original promisor.--Chaffee v. Jones, 19 Pick. 260; Bryant v. Eastman, 7 Cush. 111; Bickford v. Gibbs, 8 Cush. 154; Mecorney v. Stanley, 8 Cush. 85; Riley v. Gerrish, 9 Cush. 104; Benthall v. Judkins, 13 Met. 265; Essex Co. v. Edmands, 12 Gray 273; Brown v. Butler, 99 Mass. 179; Wright v. Morse, 9 Gray 337.--See, however, Clapp v. Rice, 13 Gray 403; Patch v. Washburn, 16 Gray 82; Way v. Butterworth, 108 Mass. 509.

Other courts have determined that one so signing is prima facie a kind of guarantor; but they do not seem to be entirely agreed as to the full sense of the guaranty.--Camden v. McKoy, 3 Scam. 437; Webster v. Cobb, 17 Ill. 459; Blatchford v. Milliken, 35 Ill. 434; Ranson v. Sherwood, 26 Conn. 437; Riddle v. Stevens, 32 Conn. 378; Rhodes v. Seymour, 36 Conn. 1; Seymour v. Leyman, 10 Ohio St. 283, 286; Greenough v. Smead, 3 Ohio St. 415; see, also, Sturtevant v. Randall, 53 Me. 149; Lowell v. Gage, 38 Me. 35.

Some other tribunals have taken a position different from either, and have decided that one backing a note as supposed, contracts, only as endorser.--Ellis v. Brown, 6 Barb. 282; Spies v. Gilmore, 1 Comst. 321; Cottrell v. Conklin, 4 Duer 45; Moore v. Cross, 19 N.Y. 227; Bacon v. Burnham, 37 N.Y. 614; Phelps v. Vischer, 50 N.Y. 69; Slack v. Kirk, 67 Pa. 380; Clouston v. Barbiere, 4 Sneed 336; Fear v. Dunlap, 1 Greene 331; Pierce v. Kennedy, 5 Cal. 138; Jones v. Goodwin, 39 Cal. 493; Jennings v. Thomas, 13 Smedes & M., 617.

The courts of New York now make a distinction between cases where notes have words of negotiability and where they have not, and whilst admitting the signer's liability as original promisor in the latter, they maintain that in the former he is only chargeable as endorser.--Richards v. Warring, 1 Keyes 576; Cromwell v. Hewitt, 40 N.Y. 491; Phelps v. Vischer, 50 N.Y. 69.

It is somewhat noteworthy that in that state, where has sprung up this distinction excluding liability as original promisor in case the note has words of negotiability, the very cases in which the courts first dealt with such contracts, and first recognized and affirmed the liability as original promisor, were exclusively cases where the notes contained negotiable terms.--Herrick v. Carman, 12 J. R., 160; Nelson v. Dubois, 13 Id. 175; Campbell v. Butler, 14 Id. 349; Labron v. Woram, 1 Hill 91.

It was not, it would seem, until Dean v. Hall, in 1837, (17 Wend. 214), that it was judicially suggested that the right to charge the backer as an original promisor applied only to nonnegotiable paper. But Judge Cowen, who gave the opinion in that case, noticed the previous decisions and proceeded to remark, that in his judgment they went no further than to establish that where the defendant was privy to the consideration and indorsed the note, "it being non-negotiable, or at most one payable to order, or to the plaintiff or bearer and not negotiated, the declaration might charge the defendant directly as the maker."

In Seabury v. Hungerford, 2 Hill 80, a majority of the court proceeded ostensibly on the distinction thus broached by Judge Cowen, but appear to have gone somewhat further; and at length in Hall v. Newcomb, 7 Hill 416, the court for the correction of errors, by a vote of seventeen to eight, took the final step, and decided that the undertaking of the backer of paper having negotiable terms was that of endorser merely. The proposition was strongly contested by members of the court, and only prevailed after a second argument.

Passing from this reference to the course of decision in New York, where the distinction we are considering appears to have originated, or at least to have acquired importance, it is best to glance at the ground on which it is based. The whole matter is made to turn upon the form of the paper as drawn, and not upon the true legal relations which immediately arise between the backer and payee in the condition the note then is.

It is said that paper having no negotiable words is not in legal shape to admit the ancillary contract of endorsement, and yet the backer must be conclusively presumed to have intended to bind himself to the payee in some legal form in connection with the note, and there being no other form, he must be supposed to have designed to stand as original promisor or guarantor.-- Richards v. Warring; Seabury v Hungerford...