Stone v. Goldberg & Lewis

Decision Date12 November 1912
Citation60 So. 744,6 Ala.App. 249
CourtAlabama Court of Appeals
PartiesSTONE v. GOLDBERG & LEWIS.

On Rehearing, December 19, 1912.

Appeal from Circuit Court, Shelby County; E. S. Lyman, Judge.

Action by Goldberg & Lewis against J. D. Masters and J. H. Stone. Judgment for plaintiffs against defendant Stone, and he appeals. Reversed and remanded.

Plea 9 is as follows: "That the notes sued on were executed by one P. L. Ray, payable to Goldberg & Lewis, or order, and that the defendant signed said notes as surety for P. L. Ray and as surety only; and defendant avers that, when he signed said notes as surety as aforesaid for P. L. Ray, the name of J. D. Masters was signed to each of said notes, and P. L. Ray represented to this defendant that said J. D. Masters had signed said notes as surety, and defendant, relying upon that representation, and believing that said signatures on said notes were the bona fide signatures of said J. D. Masters signed the same as surety as aforesaid; but defendant avers that said J. D. Masters had not and did not sign said notes nor did any one with authority from the said J. D. Masters in that respect sign his said name to said note; and defendant avers that the plaintiffs are the payees of the note executed by him as such surety, and which are made the basis of this suit."

Plea 13 is as follows: "Defendant says that the notes sued on were executed by one P. L. Ray as principal debtor thereon and that defendant signed the same as surety thereon for P. L. Ray, but with the express agreement between the defendant and the said Ray that before delivering the note he would procure the signature of one G. M. D. Ray, Horace Morrell, and S. M. Cost as sureties on said note with the said P. L. Ray, and cosureties thereon with this defendant; but defendant avers that said P. L. Ray did not secure the signatures of said Ray, Morrell, and Cost, or any of them, as sureties on said note, but that he delivered the same without said signatures, and without having procured the said Ray, Morrell, and Cost to sign the same as sureties aforesaid; and defendant avers that he did not know the names of the said Ray, Morrell, and Cost had not been signed to said notes as sureties thereon until after the plaintiffs had acquired the same as set out in the complaint."

Riddle, Ellis, Riddle & Pruett of Goodwater, for appellant.

Browne, Leeper & Koenig, of Columbiana, for appellee.

PER CURIAM.

1. Under the provisions of section 4973 of the Code of 1907, the delivery of a negotiable instrument, as between the parties and all others not bona fide holders, may be shown to have been made by the maker to its payee in escrow. Bank of Cartersville v. Gunter, 58 So. 757.

As between the parties and all others not bona fide holders a negotiable promissory note occupies the same position, in a suit for its collection, as a promissory note which is not negotiable, and is subject to the same identical defenses. In fact, when the assignee of a negotiable promissory note brings a suit against its maker upon the note for its collection, and the maker pleads want of consideration breach of warranty, fraud between the original parties, or any other defense which is valid as between the maker and the payee of the note, then, if the plaintiff desires to invoke for his protection the law merchant, he must do so by special replication. Slaughter's Case, 109 Ala. 157, 19 So. 430; Craft v. Russell, 67 Ala. 9; Hodges v. Winston, 94 Ala. 576, 10 So. 535.

2. The present suit is by the payee of three promissory notes against their makers. The notes, indeed, are, in form, commercial instruments, but as the suit is between the parties to the instruments, and as the appellant is not the principal, but a mere surety on the notes, the legal principles governing this case are not so much those which pertain to the law merchant as those which govern the subject of principal and surety. The following propositions seem to be established beyond cavil by the decisions of our Supreme Court:

(A) A surety signing a note upon the representation by the principal maker of the note that the name of another whose name appears on said note as one of its obligors is the signature of such other obligor, when, in fact, such signature was forged to such note, and such surety, by reason of such forged signature, is induced to sign such note, is not, as between the parties to the note, liable thereon, unless, after a discovery of the forgery, he does something to estop himself from setting up the defense. White Sewing Machine Co. v. Saxon, 121 Ala. 399, 25 So. 784; Sharp v. Allgood, 100 Ala. 183, 14 So. 16.

(B) Sureties signing a note on condition that others shall sign it as sureties before delivery by the principal obligor are not bound by the note as between the original parties to the note, if the principal obligor delivers it without obtaining the signatures of such sureties, unless such sureties do something to estop themselves from interposing such defense. White Sewing Machine Co. v. Saxon, supra; Guild v. Thomas, 54 Ala. 414, 25 Am. Rep. 703.

The surety is under no obligation to sign the note, and as that is true, he may, to use the language of McClellan, C.J., "put such limitations and conditions upon his favor as seem to him proper or to his interest." White Sewing Machine Co. v. Saxon, supra.

3. This suit, as above stated, was brought by the payee of three promissory notes against two of their makers. One of the defendants, J. D. Masters, filed an unverified plea setting up the fact that he had filed a petition in a District Court of the United States praying that he be adjudicated a bankrupt, and that, by said court, he had been so adjudicated, and that "pending the final hearing on his discharge in said cause this court is without jurisdiction to hear and determine the same, and that the cause should be abated and all proceedings herein stayed." Thereupon, as the minute entry recites, the plaintiffs confessed the plea of the defendant J. D. Masters that he had been declared a bankrupt, and "dismiss their suit as to him and by leave of the court amend their complaint by striking out the name of the said J. D. Masters." Thereupon the other defendant, J. H. Stone--appellant here--moved the court to dismiss the suit as to him, upon the ground that the dismissal of the suit as to Masters operated as a discontinuance of the entire cause of action. While the plea setting up the bankruptcy proceedings concludes with the allegation that "this cause should be abated and all proceedings herein be stayed," it was not for the defendant, who filed that plea, to determine for the court what course should be taken by the court in dealing with the matters set up by the plea, nor the course which the plaintiffs in the case should adopt in meeting the situation presented by the plea.

It is undoubtedly the general rule that a dismissal or discontinuance of one codefendant in an action ex contractu effects a discontinuance as to the entire action. This rule is not one of universal application, however; for if there is a sufficient legal excuse for the discharge of the dismissed defendant, as where the defendant advances a personal defense such as coverture, infancy, bankruptcy, or the like, then there is no discontinuance. 6 Ency. Pl. & Pr. pp. 857, 858, 859. Where one of the defendants in such a suit advances by a plea setting up such a personal defense to the action, the plaintiff may admit the truth of the defense, and dismiss as to that defendant, and proceed against the other defendants. Reynolds v. Simpkins, 67 Ala. 378.

The plea of J. D. Masters, above referred to, was a plea of bankruptcy, and was, within the meaning of the above rule, a plea setting up by Masters a personal defense to the action. While the trial court had the right to order a stay of the proceedings against the bankrupt until the question as to whether the federal court would grant to the bankrupt his discharge had been determined, we know of no rule of law which precludes a plaintiff, upon the filing of such a plea, from accepting that plea as a defense to such action in the state court, and from submitting all of his rights against such defendant to the federal court, which, by virtue of the decree adjudicating the defendant a bankrupt, has acquired jurisdiction to administer the estate of such bankrupt. "When a plea is filed setting up infancy, bankruptcy, coverture, or other like personal defense, there can be no question of the proposition that the plaintiff can admit the truth of the plea, and, on application to the court, discontinue as to the defendant who interposes such defense, without prejudice to the status of his action against the other codefendants. Cuyler v. Coats, 10 How. Prac. (N. Y.) 141; 1 Chitty Pl. 578." Reynolds et al. v. Simpkins, 67 Ala. 378. The only facts set up by Masters in his plea are that he had been adjudicated a bankrupt, and that the federal court sitting in bankruptcy had acquired jurisdiction to settle his estate. The plaintiffs had the right to confess those facts, dismiss as to Masters, and proceed as to the other defendant. There was no discontinuance of this suit by the plaintiffs. Reynolds et al. v. Simpkins, supra.

4. Plea 9 (which the reporter will set out in the report of this case), for reasons stated by us in paragraph A of subdivision 2 of this opinion, was not subject to the plaintiff's demurrer, and the trial court committed reversible error in sustaining the demurrer to it. Pleas 3 and 4 are, in...

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  • Long v. Shafer
    • United States
    • Missouri Court of Appeals
    • December 12, 1914
    ...Ogden Negotiable Instruments, sec. 142, page 132; Daniel on Negotiable Instruments (6 Ed.), Vol. 2, sec. 1312, page 1478; Stone v. Goldberg & Lewis, 60 So. 744; Goldberg & Lewis v. Stone, 65 So. 454; Haddock Haddock, 85 N.E. 682.] In the case last cited this language appears: "There is no r......
  • Smalls v. Wells Fargo Bank, N.A., 2130665.
    • United States
    • Alabama Court of Civil Appeals
    • May 1, 2015
    ...negotiated to a person or an entity in order for the transferee to become a holder. § 7–3–302, Ala.Code 1975; Stone v. Goldberg & Lewis, 6 Ala.App. 249, 259, 60 So. 744, 748 (1912) (opinion on rehearing) ("[T]he instrument must be ‘negotiated’ to the holder in order for the holder to be a ‘......
  • Long v. Shafer
    • United States
    • Missouri Court of Appeals
    • December 12, 1914
    ...Also Ogden, Negotiable Instruments, § 142, p. 132; Daniel on Negotiable Instruments (6th Ed.) vol. 2, § 1312, p. 1478; Stone v. Goldberg & Lewis, 6 Ala. App. 249, 60 South. 744; Goldberg & Lewis v. Stone, 10 Ala. App. 485, 65 South. 454; Haddock v. Haddock, 192 N. Y. 499, 85 N. E. 682, 19 L......
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    ...to a person or an entity in order for the transferee to become a holder. § 7-3-302, Ala. Code 1975; Stone v. Goldberg & Lewis, 6 Ala. App. 249, 259, 60 So. 744, 748 (1912) (opinion on rehearing) (‘[T]he instrument must be "negotiated" to the holder in order for the holder to be a "holder in......
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