Shutts v. Fingar

• Decision Date: 24 November 1885
• Citation: 3 N.E. 588,100 N.Y. 539
• Parties: SHUTTS v. FINGAR.
• Court: New York Court of Appeals Court of Appeals

100 N.Y. 539

3 N.E. 588

SHUTTS

v.FINGAR.

Court of Appeals of New York.

Filed November 24, 1885.

John V. Whitbeck for appellant, German Fingar.

Samuel Edwards, for respondent, Elizabeth Ann Shutts.

RUGER, C. J.

We think the court below erred in applying the doctrine of Merritt v. Todd, 23 N. Y. 29, to the facts of this case, and that its true solution is to be found in the rules prescribing the duties and obligations of a creditor to his surety. This court, in the case of Parker v. Stroud, 98 N. Y. 379, following Merritt v. Tood, expressly reserved from the effect of the decision the question as to the liability of the indorser when the maker had been released from liability by the laches of the holder. The doctrine of Merritt v. Todd has been so long acquiesced in, and has been followed and approved in so many cases, that it would be impolitic now to permit the rule there laid down to be questioned or disturbed, and it must therefore be considered as settled law in this state that a note payable on demand, with interest, is a continuing security against an indorser until after actual demand.

The defendant is here sued as the indorser of a demand note dated March 19, 1866, made by Jacob Niver, James Ham, and Norman Niver, payable, with interest, to Francis O'Coner or bearer. The defendant afterwards became the owner and holder of the note, and in April, 1868, transferred it to one Potts, and, at the request of Potts, then indorsed it. Potts held the note about one year, when he sold it to the plaintiff, who has ever since remained its owner. Jacob Niver paid interest on the note annually until March, 1875, since when no payments have been made thereon. Jacob Niver died in 1876, and administrators of his estate were then appointed. In March, 1877, the plaintiff, after demanding payment of the note of the makers, James Ham and Norman Niver, and also of the personal representatives of Jacob Niver, and failing to collect it, notified the defendant of the fact, and of his intention to hold him for its payment, and thereupon commenced this action in June, 1878.

The authorities now uniformly hold the statute commences to run upon a note payable on demand, in favor of the maker, at its date, (Herrick v. Woolverton, 41 N. Y. 581;Wheeler v. Warner, 47 N. Y. 519;Parker v. Stroud, 98 N. Y. 379,) and that the expiration of six years from such date constitutes a bar to any action thereon unless a renewal of the cause of action has been effected by partial payments or otherwise. The makers in this case were not partners, and occupied no such relation to each other as constituted the party making payment in any sense the agent of the other for such purpose, and it necessarily follows that the payment made by Jacob Niver did not renew the note as to the other makers, and they were therefore discharged from liability thereon several years prior to any demand of payment from them. Van Keuren v. Parmelee, 2 N. Y. 524;Shoemaker v. Benedict, 11 N. Y. 176.

It must also be conceded, upon settled principles of law, that the defendant, after payment of the note, would have no recourse for indemnity against any of the parties thereto, except upon the note itself; and if any of such parties were relieved from liability thereon either by the act or laches of the holder, the indorser lost his right of action against such party. The rule which, upon payment of a note, implies a promise by the maker to repay to the indorser the amount paid by him, proceeds upon the theory that the payment has been made at the request of the maker, and the cause of action arising in favor of the indorser is based upon the act of payment, and not upon the note. Brandt, Sur. §§ 176, 179. Where, however, commercial paper is indorsed after its execution, to subserve the interests of the indorser, no such promise of repayment can be implied, and the only remedy for indemnity from the prior parties is by resorting to the paper itself. Brandt, Sur. § 180. Upon payment of such obligation an indorser is entitled to demand its possession from the creditor, with the right of subrogation to all securities and remedies possessed by him against the prior parties thereon, unimpaired by any act or laches of such creditor. Goodyear v. Watson, 14 Barb. 481;Clason v. Morris, 10 Johns. 524;Beardsley v. Warner, 6 Wend. 613; Daniel, Neg. Inst. § 1306; Townsend v. Whitney, 75 N. Y. 432. The obligation which a party assumes upon indorsing a note is, among other things, to pay it in case the parties primarily liable thereon, after demand, neglect or refuse to do so. The demand stipulated for is an essential part of the indorser's contract, and the same considerations which induce its requirement also require that it shall be made upon an existing cause of action, and of parties who are legally liable to respond in damages for its non-performance. Daniel, Neg. Inst. § 1308. The contract, except in the case of parties originally incompetent to contract, is predicated upon the assumption that there is a legal liability against parties upon whom the demand is to be made. A demand upon a party, after he has ceased to be liable, would be an idle ceremony and a fraud upon the meaning and spirit of the indorser's contract. Except in the case of a partnership note, the demand must also be made upon each of the several makers, at the maturity of the note. Gates v. Beecher, 60 N. Y. 518. It would be quite absurd to claim that a note could mature after the parties thereto had been discharged by the expiration of the period of limitation; and a demand upon such parties, after the bar of the statute had fallen, would not, therefore, be a compliance with the conditions of the indorser's liability. It was held, in the case of an indorser of a note secured by mortgage upon real estate, the lien of which was lost by the neglect of the creditor to record it, that the surety was discharged; the court saying that it worked a change in the terms of the surety's undertaking. ‘He only guaranties the note as secured by the mortgage; and when the mortgage was destroyed, his contract was no longer existent.’ Atlanta...