Opinion
January, 1904.
I.L. Brayman, for the appellant.
Eugene H. Hanford and Charles H. Seeley, for the respondents.
The plaintiffs are copartners doing business under the firm name of M. Phillips Co. The plaintiffs sold property to one Roe and also to the defendant. On February 20, 1900, Roe signed a note for $200, payable to the order of defendant, and it was indorsed by defendant and delivered to the plaintiffs, in payment of an indebtedness of Roe. The plaintiffs indorsed that note, and it was discounted at the Sidney National Bank. On May 28, 1900, this note was renewed. The amount of the renewal note was $206, payable one month from date, and it was signed by Roe and indorsed by defendant and plaintiffs. On April 18, 1900, the defendant signed a promissory note for $200, payable one month from date to the order of M. Phillips Co., and delivered the same to the plaintiffs in payment for horses purchased by him, or in renewal of a previous note so given. This note was indorsed by the plaintiffs and discounted at said bank. On June 25, 1900, the note of April eighteenth was in said bank past due, and the note of May twenty-eighth was in said bank, but not then due. A note was then signed by the defendant for $206.50, payable on or before July tenth to the order of Roe, which note was indorsed by Roe and by the plaintiffs and delivered to said bank, and the note of May twenty-eighth was delivered to Roe. When said note became due Roe signed the defendant's name to a note of $186.50, which note he then indorsed and the plaintiffs indorsed the same and it was used in part renewal of the $206.50 note of June twenty-fifth, Roe paying the balance thereof in cash. The note of June twenty-fifth was somewhat mutilated, as is the custom of said bank when a note is paid, and it was then delivered to Roe by the bank. When the note of July tenth became due it was not paid, and plaintiffs paid the bank the amount due thereon and took the note and subsequently sued the defendant thereon. The defendant by an answer interposed in that action denied the making of said note, and the trial of that action resulted in a judgment in favor of the defendant. In December, 1901, the plaintiffs demanded of Roe the note of June 25, 1900, and Roe delivered it to the plaintiffs and they thereupon commenced this action thereon.
The defendant alleges that the plaintiffs are not the real parties in interest, and that the note of June twenty-fifth was signed by him for the purpose of renewing his note of April eighteenth and for no other purpose, and that said Roe and plaintiffs diverted the note in suit from the purpose for which it was given to them. On or about the 17th day of July, 1900, the amount of defendant's note of April eighteenth was paid to the bank and said note was transferred to and is now the property of the wife of said Roe. The defendant admits that he signed the note in suit, and it was concededly so signed for the purpose of renewing either the note of Roe dated May twenty-eighth or the note of defendant dated April eighteenth. The court at the conclusion of the trial said to the jury: "It appears from the evidence in this case that this note in question was executed for the purpose of renewing a note signed by Hewitt Roe or a note signed by the defendant, in either event the plaintiffs are entitled to recover, so you are directed to render a verdict in favor of the plaintiffs for the sum of $207.26."
The defendant asked to go to the jury upon the questions: First. Whether the plaintiffs at the time they took the $186.50 note on the 9th or 10th of July, 1900, knew it was not signed by the defendant. Second. Whether the plaintiffs are the real parties in interest. Third. Whether the note in suit was diverted by plaintiffs and Roe from the purpose for which it was executed.
The court in refusing to submit the issues to the jury evidently assumed that the defendant in any action hereafter brought against him upon the note of April eighteenth could allege and prove that he gave a note to Roe and plaintiffs for the purpose of renewing said note of April eighteenth, and the court must also have assumed that such proof together with proof that a judgment had been rendered against the defendant on said note so given for the purpose of renewing the note of April eighteenth, notwithstanding such note had been diverted from the purpose for which it was given, would be a complete defense to any action so to be brought upon said note of April eighteenth. The bank was not in any way a party to the alleged diversion of said note of June twenty-fifth, and the note of April eighteenth was not paid or in any way affected by the alleged unauthorized and fraudulent diversion of such note by Roe and the plaintiffs. If an action had been brought by the bank against the defendant on the note of April eighteenth, the facts as claimed by the defendant herein would not have been a defense to such action, and if not a defense in an action by the bank such facts would not be a defense in an action brought by Mrs. Roe if she obtained her title in good faith directly from the bank. The parties to this action are directly concerned in the question of the diversion of the note. If the plaintiffs fraudulently diverted the note from the purpose for which it was given, they should not be allowed to recover against the defendant thereon, and the question of the diversion of the note should have been submitted to the jury.
A serious question also arises as to whether the plaintiff can in any event recover on this note which was paid by Roe, the principal debtor thereon, in the manner stated. It may be assumed that the bank on discovering that the defendant did not sign the note of July tenth, could have required Roe to return the note of June twenty-fifth in exchange for the note then in their possession. That was not done. The note of July tenth was paid to the bank by the plaintiffs who had by their indorsement guaranteed the genuineness of the maker's signature thereto. The plaintiffs are the original creditors, and Roe, the original debtor, had given the note for which the note in question was used as a renewal, in payment of his indebtedness to them. As the note of June twenty-fifth was used the defendant was an accommodation maker thereof, of which fact the plaintiffs had knowledge. Whether the plaintiffs have, on their evidence, any legal claim against the defendant on the note which was so taken from the bank and held by the principal debtor for over a year before it was redelivered to the plaintiffs, is doubtful. Even if the note of June twenty-fifth was not diverted from the purpose for which it was given, if the plaintiffs when they indorsed the note of $186.50 knew that Roe had signed the defendant's name thereon, and they also knew the extent of Roe's authority from the defendant to sign his name to or on notes, and all the circumstances connected with the same, they should not now be allowed to say that the note of June twenty-fifth was not paid as against the defendant. The defendant at least should have an opportunity to have the questions of fact, the determination of which is vital to the maintenance of this action, submitted to and decided by a jury. The judgment and order should be reversed and a new trial granted, with costs to the appellant to abide the event.
All concurred.
Judgment and order reversed and new trial granted, with costs to appellant to abide event.