Opinion
No. 32960.
January 10, 1938.
1. BILLS AND NOTES.
As between the indorsers on a note, the indorser whose name appeared first on back of note was liable first for payment of note and his discharge by receiver of payee bank by authority of chancery court discharged indorser whose name appeared second on back of note (Code 1930, sections 2657 et seq., 2719, 2720, 2724, 2776, 2848).
2. BILLS AND NOTES.
A statute providing that in cases of joint or joint and several indebtedness creditor may settle with or release one debtor without affecting his remedy against the other debtors did not apply where bank receiver, by court's authority, released first indorser on note payable to bank and sought to collect balance due from second indorser, since second indorser was not a "joint and several debtor" (Code 1930, section 2027).
3. BILLS AND NOTES.
Where first indorser on note payable to bank paid bank receiver certain sum and receiver gave receipt releasing indorser from further liability on note and the compromise settlement was made by authority of chancery court, decree authorizing discharge of first indorser and holding of second indorser was unauthorized where made without second indorser's consent (Code 1930, sections 2657 et seq., 2719, 2720, 2724, 2848).
APPEAL from the circuit court of Yalobusha county. HON. JOHN M. KUYKENDALL, Judge.
Kermit R. Cofer, of Water Valley, for appellant.
Indorsements made without the date are presumed to have been made at the inception of the note. Indorsements made at the inception or execution of a note carry with them the same liability as attaches to the maker. In other words, indorsers at the execution of a note became liable as co-makers with the maker or as original promissors.
Lindsay v. Parrott, 108 Miss. 161, 66 So. 412.
The appellee was, therefore, a co-maker of the note with the maker and with the other indorser, and therefore was jointly and severally liable for the payment of same.
Branton v. Crittenden, 145 Miss. 531, 111 So. 150.
Since they are jointly and severally liable, the release of O.T. Hamner does not operate to release appellee, but only to cut down the liability of those remaining by one-third, there being three of them jointly and severally so liable.
Section 2027, Code of 1930; Branton v. Crittenden, 145 Miss. 531, 111 So. 150.
In the event, and only in the event, that appellant is in error about his position as shown hereinabove, upon default in the payment of the note, all the makers and indorsers thereon became at once jointly and severally liable nevertheless.
Section 2740, Code of 1930; 3 R.C.L., secs. 355, 361.
Appellee did not lose his right of recourse, because of appellant releasing O.T. Hamner.
Section 2777, Code of 1930.
The trial court should have permitted appellant to amend or to file a counter-notice setting up the fact that appellant had reserved his rights against appellee when he released O.T. Hamner on the note, for amendments are liberally allowed.
Section 567, Code of 1930; Greenwood Grocery Co. v. Bennett, 101 Miss. 573, 58 So. 482; Hall v. Stokely, 156 Miss. 673, 126 So. 475.
The court was in error when it held that the offered notice would constitute no valid answer to the claim of appellee that he had been released.
Section 2776, Code of 1930, 3 R.C.L., pages 1278 and 1279, sec. 509; 8 C.J. 616, sec. 856 (2).
Creekmore, Creekmore Capers, of Jackson, for appellee.
Appellee was an indorser only and not liable as a co-maker.
Sections 2719 and 2720, Code of 1930; Brannan Negotiable Instruments Law (3 Ed.), page 238, sec. 64; 8 Am. Juris., page 203, sec. 4521; Skinner v. Mahoney, 140 Miss. 625; Carter v. Jennings, 134 Miss. 263; Taylor v. Ross, 129 Miss. 536.
Section 192 of the Uniform Act, which is the same as Section 2848 of the Code of 1930, reads as follows: "A person primarily liable on an instrument is a person who by the terms of the instrument is absolutely required to pay the same. All other parties are secondarily liable." Of course it has been uniformly held, under this section, that an endorser is secondarily liable only.
Section 68 of the Uniform Act, which is the same as Section 2724 of the Code of 1930, reads as follows: "As respects one another endorsers are liable prima facie in the order in which they endorse."
The release of the prior endorser, Hamner, released the subsequent endorser, Gore.
Section 120, subsection 2, of the Uniform Act, being Section 2776 Code of 1930.
We contend that by the plain language of the statute the voluntary discharge of Mr. Hamner, who was a prior endorser, discharged the subsequent endorser, who was the appellee.
8 Am. Juris., sec. 803; 8 C.J., sec. 856; 3 R.C.L., sec. 509.
Complaint is made by the appellant of the refusal of the trial judge to permit the filing of an amended notice setting up a decree of the chancery court authorizing the settlement with the prior endorser, O.T. Hamner. The court declined to permit the case to be reopened because it was the opinion of the court that the matter attempted to be pleaded would not change the situation in any respect.
We respectfully submit that in this case the appellee, Gore, was liable as an endorser only. While liable as an endorser, he also had the rights enjoyed by an endorser under the Uniform Act. By the statute it is clear that the appellee was discharged from liability as an endorser on the note when the holder of the note voluntarily released a prior endorser. Subsection 5 of Section 2776 of the Code has no application because that subsection refers only to the release of the principal debtor; and for the additional reason that in the release and decree of the court there is no express reservation of the right of recourse against appellee.
Appellant, as receiver of the Peoples Bank of Water Valley, brought this action in the circuit court of Yalobusha county against J.W. Hamner, Jr., and appellee, T.O. Gore, on a promissory note in the principal sum of $3180, which note was payable and delivered to the bank; executed by J.W. Hamner, Jr., as maker, and indorsed by appellee Gore. Appellee Gore alone defended the suit. His defense was that the receiver of the bank, by order of the chancery court in which the receivership was pending, had released his coindorser on the note, O.T. Hamner, and thereby under the law he (Gore) was released. There was no controversy as to the facts. The cause was tried before the court as judge and jury, resulting in a judgment in appellee's favor, from which the receiver appeals.
The facts are that on February 15, 1932, J.W. Hamner, Jr., executed his promissory note to the bank which was then a going concern. The note was made due on November 15, 1932, and indorsed on its back there appears first the name of O.T. Hamner and under it the name of T.O. Gore. On the 29th of February, 1936, the indorser O.T. Hamner paid to the receiver the sum of $585.37, for which the receiver gave him a receipt releasing him from further liability on the note. This compromise settlement was made by authority of the chancery court. The order authorizing it provided that on the payment of that sum O.T. Hamner should be released from further liability, but that such release should not affect the rights of the receiver "as to the other makers and indorsers, nor the liability of said makers and indorsers other than O.T. Hamner."
For reversal the receiver relies on section 2027, Code of 1930, and the decision of the court in Lindsay v. Parrott, 108 Miss. 161, 66 So. 412, and other decisions of like effect. It was held in that case that, where a person places his name on a note as an indorser before its delivery, he becomes a comaker and liable to pay as an original promisor. Section 2027 provides among other things that, in cases of joint or joint and several indebtedness, the creditor may settle or compromise with and release any one or more of the debtors, and such settlement or release shall not affect the right or remedy of the creditor against the other debtors for the amount remaining due and unpaid.
The fault with that position is this: Since the adoption in 1916 of the Uniform Negotiable Instruments Act, chapter 51, Code of 1930, section 2657 et seq., a mere indorser, before delivery, is not primarily liable on a note, he is only secondarily liable. The rule, therefore, announced in the Lindsay Case was changed. Section 2719 of the Negotiable Instruments Act provides that a person placing his signature on an instrument otherwise than as maker, drawer, or acceptor, is deemed to be an indorser, unless he clearly indicates to the contrary. Section 2720 provides that a person, not otherwise a party to an instrument, who places thereon his signature in blank before delivery, is liable as an indorser. Section 2848 provides that a person primarily liable on an instrument is one who by the terms of the instrument is absolutely required to pay the same; all other parties are secondarily liable. Section 2724 provides that, as respects one another, indorsers are liable prima facie in the order in which they indorsed. Section 2776 provides among other things that a person secondarily liable on an instrument is discharged by the discharge of a prior party.
O.T. Hamner's name, as stated, appears first on the back of the instrument, appellee's under it, therefore under section 2724, as between them, O.T. Hamner was liable for the payment of the note. His discharge, therefore, under the law discharged appellee from further liability. This conclusion is supported by Skinner v. Mahoney, 140 Miss. 625, 106 So. 211; Carter v. Jennings, 134 Miss. 263, 98 So. 687; Taylor v. Ross, 129 Miss. 536, 92 So. 637; Brannan's Negotiable Instruments Law (3 Ed.), pp. 232 to 236, inclusive.
Section 2027 has no application because appellee was not a joint and several debtor. If the decree authorized the discharge of O.T. Hamner, the prior indorser, and the holding of appellee, it was unauthorized and void to that extent. The chancellor had no right to make a decree in violation of the legal rights of the appellee without his consent. There was no evidence that he gave his consent to the compromise.
Affirmed.