Opinion
(January Term, 1868.)
1. A note payable at, or one day after date, is not within the principle which excepts from the rule as to bona fide endorsees for value such as take notes that are overdue.
2. A bona fide endorsee for value of a note so payable obtains a good title against all previous parties, although when endorsed it was overdue, and had been obtained by a fraud upon some of those parties, committed by one through whom the endorsee claims title.
( Haywood v. McNair, 2 Dev. Bat., 283, cited and approved.)
DEBT, tried before Barnes, J., at Fall Term, 1867, of the Superior Court of PERQUIMANS.
Smith for appellant.
W. A. Moore, contra. (592)
The paper sued upon was as follows:
One day after date, with interest from date, we or either of us do promise to pay Henry E. Stallings or order the just and full sum of two hundred and eleven dollars and thirty cents, for value received. As witness our hands and seals.
(Signed) JAMES M. STALLINGS. [SEAL] ASA R. STALLINGS. [SEAL]
Indorsed: "Pay to J. P. Jordan." (Signed) Henry E. Stallings [s]; also, "Pay to D. Parker or order." (Signed) J. P. Jordan [s].
The suit was brought against all the parties to the paper.
It was shown that Henry E. Stallings had carried the note to Jordan, an attorney, in order to have it collected, and had indorsed it in blank upon being told by Jordan that it was necessary for him to put his name on the back of it to enable the latter to collect it by suit. Jordan afterwards sold the note to the plaintiff, first filling up to himself the indorsement of Stallings, and indorsing the bond himself in blank. (591) This latter indorsement was filled up at the trial. There was no evidence that the plaintiff knew anything of the circumstances under which Stallings had placed his name upon the bond.
The plaintiff objected to the admission of testimony as to what passed at the time when Stallings indorsed the bond; but it was admitted by the court.
His Honor charged the jury that if the evidence satisfied them that Stallings placed his name upon the bond under an impression that it was necessary to enable him to institute suit, and not for the purpose of indorsing it and transferring the title, that was not such an indorsement as rendered him liable.
Verdict accordingly. Rule for new trial discharged. Judgment and appeal by the plaintiff.
1. The case shows an indorsement in fact and a delivery to Jordan, and parol evidence is incompetent to vary or diminish the legal obligations of the contract of indorsement; ex. gr., as here to show that a general indorser was in fact an indorser without recourse, to the prejudice of a subsequent indorsee without notice and for value. Marston v. Allen, 8 M. W., 504.
2. The rules applicable to over due and dishonored paper, do not apply to an indorsement made after the paper was due, where inquiry would have developed no facts prejudicial to the claim.
3. Every indorsement is presumed in law to have been made before the debt falls due. Byles on Bills (61 L. L., 152.)
The question presented by the pleadings and bill of exceptions is one of much practical importance, though of no great difficulty. The principal upon which the decision must turn is clearly stated by the Court of Exchequer in the case of Marston v. Allen, 8 M. W., 494. It is there said that" the law merchant, for the purpose of currency and the advantages flowing from an unchecked circulation of bills of exchange, no doubt provides that a bona fide holder for value shall not be affected by an intermediate fraud. We do not indeed adopt the proposition that the previous party to the bill is estopped from setting up the defense of fraud against the claim of a bona fide holder for value. We think it better to say that, by the law merchant, every person having possession of a bill has (notwithstanding any fraud on his part, either in acquiring or transferring it) full authority to transfer such bill, but with this limitation that, to make such transfer valid, there must be a delivery, either by him or by some subsequent holder of the bill, to some one who receives such bill bona fide, and for value received, and who is either himself of the holder of it, or a person through whom the holder claims." Promissory notes are, by the 3 and 4 Ann in England, and here by our act of 1762 (Code, ch. 13, sec. 1), assignable and indorsable in like manner as bills of exchange, 2 Bl., 467; and there can be no doubt that the principles above enunciated, as to the transfer of bills of exchange, apply equally to the indorsement of promissory notes. As it appears from the testimony set forth in the bill of exceptions, that the plaintiff took the note in controversy, under the indorsements of the defendants Henry E. Stallings and John P. Jordan, bona fide and for full value paid to Jordan, the last indorsee, he cannot be affected by any fraud practiced by Jordan upon the other indorser. The latter, by placing his name upon the back of the note, and handing (593) it to Jordan, enabled him to transfer it to the plaintiff, who being an innocent purchaser for value "shall not be affected by an intermediate fraud."
But it is objected further that the plaintiff received the note from Jordan after it was due, and was therefore, bound by any defense which was good against Jordan in favor of his indorser. The rule of law thus invoked by the defendant Henry E. Stallings is one which interposes for the protection of the maker, when sued by an indorsee of a note which was over due when he received it. The ground of it is, that when a note falls due, the maker ought to provide for the payment of it in money or counter demands. "It is a presumption that he will do so, and that he has done so; and after it is due that he has paid it, or is not bound to pay. The dishonor of the note puts every one on his guard, and, he who takes it in that state, without communication with the maker, takes it at his own risk, and ought to stand in the shoes of the former holder. Haywood v. McNair, 2 Dev. Bat., 283. It is manifest that the principle of this defense cannot apply as between indorsers and indorsee in a case like the present, where the note was made payable one day after date with interest from date, and both the indorsements were made after the note became due. It was certain that the parties to the note intended that it might circulate after it was due, and the payee who put it in a situation to be circulated by putting his name on the back of it, ought no more to be protected from the claim of a subsequent bona fide purchaser for value, than would be the indorser of a bill or exchange not yet due, as against an innocent holder for value. If over due promissory notes be assignable at all by indorsement, as they undoubtedly are, then the unchecked circulation of them must be upheld by the same principles of policy as we learn from the case of Marston v. Allen are applied to bills of exchange.
(594) For the reasons stated above, we are of opinion that his Honor erred in admitting the testimony of what passed between the defendants Henry E. Stallings and John P. Jordan for the purpose of affecting the claim of the plaintiff, and for this error there must be a venire de novo. This renders it unnecessary to notice the other points made on the argument by the plaintiff's counsel. The judgment must be reversed and a new trial ordered.
PER CURIAM. Venire de novo.
Cited: Hill v. Shields, 81 N.C. 253; Bradford v. Williams, 91 N.C. 9; Adrian v. McCaskill, 103 N.C. 187.
(595)