Wilson v. Hendee

• Decision Date: 12 March 1907
• Citation: 74 N.J.L. 640,66 A. 413
• Parties: WILSON v. HENDEE.
• Court: New Jersey Supreme Court

66 A. 413

74 N.J.L. 640

WILSON

v. HENDEE.

Court of Errors and Appeals of New Jersey.

March 12, 1907.

(Syllabus by the Court.)

Error to Supreme Court.

Action by Charles W. Wilson against Harry C. Hendee. From a judgment in favor of defendant, plaintiff brings error. Reversed, and a venire de novo awarded Henry S. Alvord and J. Boyd Avis, for plaintiff in error. Henry C. Bartlett and Royal P. Tuller, for defendant in error.

PITNEY, J. On May 12, 1904, one Walter D. Wilson made his promissory note for $920 payable to the order of the Vineland National Bank. Prior to its delivery to the payee the note was indorsed successively by Charles W. Wilson, the plaintiff herein, and by the defendant Hendee, for the accommodation of the maker. The paper having gone to protest at maturity, the plaintiff was obliged to pay, and did pay, the whole amount of it to the bank.

The present action is based upon an alleged agreement made between Hendee and the plaintiff prior to the indorsement of the note by either of them, to the effect that, if plaintiff would become indorser, Hendee would likewise indorse, and would pay the note at maturity, and indemnify the plaintiff and save him harmless against all loss by reason of his indorsement, in consideration of certain valuable personal property to be placed in his hands by the maker. At the trial plaintiff introduced evidence tending to show the making of such an agreement, and that on the strength of it the note was indorsed by the plaintiff; that before its delivery to the bank the maker gave to Hendee a bill of sale for certain personal property of the estimated value of $1,000 as a mortgage to secure its payment; and that Hendee at once took possession of this personal property and afterwards disposed of some or all of it. The learned trial justice granted a nonsuit upon the authority of the decision of this court in Hartley v. Sandford, 66 N. J. Law, 627, 50 Atl. 454, on the ground that Hendee's promise to the plaintiff to indemnify him was within the statute of frauds, as being a promise to answer for the debt, default, or miscarriage of another person, and therefore was unenforceable because not made in writing. It is contended by counsel for the plaintiff in error that the case is not controlled by Hartley v. Sandford, but is rather within the principle of the earlier decision of this court in Apgar v. Hiler, 24 N. J. Law, 812.

In order to determine the controversy, it is important to consider precisely what was decided in these two cases, and also to note certain changes made in the law of negotiable instruments by P. L. 1902, p. 583, which enactment antedated the making of the note in question. In the case in Apgar's Adm'rs v. Hiler, 24 N. J. Law, 812, there was a joint and several promissory note, payable to the order of one Melick, and signed by one Fisher, by Apgar, and by Hiler as makers. Opposite to the names of Apgar and Hiler the word "sureties" was written by Apgar. Apgar solicited and procured Hiler to sign the note as surety, saying, "If you will sign it, it will be a great accommodation to us, and you shall never pay one red cent." Apgar and Fisher were partner's in business. Hiler, having been obliged to pay the note, sued the administrators of Apgar in the Supreme Court to recover the amount thus paid, and obtained a judgment against them, which, upon writ of error, was sustained by this court. Chief Justice Green, in his opinion, said that upon the face of the note, and in the absence of extrinsic evidence, Apgar and Hiler would be regarded as co-sureties, but that it was competent for the plaintiff to show in what relation the several signers stood to each other; that their relation to each other depended, not upon the form of the note nor upon whether their names were signed first or last, but upon the character in which they became parties and the agreement or contract made among themselves at the time of signing. "This," he said, "was matter in pais, proper to be proved by parol." And, though the memorandum "imports prima facie that Apgar and Hiler were joint securities, it was competent for the plaintiff to show whether they were securities for Fisher alone or for each other also," citing cases. And, again: "If the evidence was believed, it showed either that Fisher and Apgar were the principal debtors and Hiler alone the security, or, if Apgar was security for Fisher, still that Hiler signed, not as joint security with Apgar, and liable with him to contribution, but as security for Apgar also. He stands to Hiler in the relation of principal to surety. It is clear from the evidence that in any event Apgar was to stand between Hiler and loss. If the jury believed that the note was the debt of Fisher and Apgar, and that Hiler alone was security, he is entitled to recover from his principals the amount paid for their benefit. * * * If, on the other hand, the jury believed that Fisher alone was the original debtor and Apgar his surety, but that Hiler became surety at Apgar's request, and upon his promise of indemnity, still the plaintiff was entitled to recover in this action. The evidence was not offered to show an independent contract of guaranty against loss, but simply the character in which Hiler became a party to the note. This, as has been shown, may be proved by parol. Nor was the evidence offered to prove a promise by Apgar to pay the debt of a third person, and which must therefore be in writing. It was designed to show an original, equitable obligation on the part of Apgar to refund the money, growing out of the circumstances under which Hiler became a party to the instrument, and consequently liable to pay the debt."

It will be observed that, is this reasoning, the court dealt with two legal rules that had been suggested as obstacles to the plaintiff's recovery. The one was the common-law rule that rejects parol evidence of an antecedent or contemporaneous understanding that tends to modify the effect of a written instrument. The effect of this rule was excluded on the ground that the memorandum appearing upon the face of the note did not clearly show the relation of the one surety to the other. The other obstacle suggested was the statutory rule found in that section of the statute of frauds (now in Gen. St. p. 1603, § 5, par. 2) which declares that no action shall be brought to charge the defendant upon any special promise to answer for the debt, default, or miscarriage of another person unless the agreement shall be in writing, etc. This the court disposed of upon the ground that the parol evidence was not offered to prove Apgar's promise to pay the debt of a third person, but to show his original equitable obligation to indemnify Hiler.

Before coming to Hartley v. Sandford, 66 N. J. Law, 627, 50 Atl. 454 (which deals only with the statute of frauds), it will be well to consider whether either the common-law rule or the negotiable instruments act (P. L. 1902, p. 583) excludes the parol evidence upon which alone was rested the proof of the agreement for whose breach recovery was sought in the present case. The note in question was made by Walter D. Wilson to the order of the bank, and was indorsed by the parties to this suit prior to its delivery to the bank. As the law stood in this state before the enactment referred to, their signatures would per se have created no implied or commercial contract whatever, their liability to the payee would have depended upon extrinsic evidence to show the intent with which they became parties, and parol evidence would have been competent for the purpose of showing such intent. Chaddock v. Vanness, 35 N. J. Law, 517, 10 Am. Rep. 256. Had the payee afterwards indorsed the note, and had it come to the hands of a bona fide holder before maturity, the irregular...