Bills and Notes, Liability of indorser, Accommodation paper, Payment. Practice, Civil, Exceptions. Evidence, Presumptions and burden of proof. Fraud. Payment.
It is not necessary, in order to charge an indorser of a promissory note which the maker failed to pay when it became due, to prove a formal protest by a notary; it is enough to prove that there have been proper demand upon the maker and a refusal by him to make payment, and that seasonable notice of these facts has been given to the indorser.
Exceptions by the defendant in an action upon a promissory note, brought against an indorser by one alleged to be a holder in due course, to rulings of the judge presiding at the trial permitting the notary who protested the note to "extend" his record of protest while on the witness stand by affixing his seal to the certificate of protest, and then allowing the certificate to be introduced in evidence, will not be sustained where the defendant, in the course of the trial, admitted that he had received from the plaintiff a proper notice of the maker's default in payment, the defendant not being harmed by the rulings.
In an action by one alleged to be the holder in due course of a negotiable promissory note against an indorser, the defendant's answer alleged that the plaintiff was not a holder in due course, and that the defendant's signature was procured by false pretenses. At the trial, the plaintiff testified that he purchased the note from one C. and that, before purchasing, he made diligent search to investigate the authenticity of the note, but did not inquire of the defendant, and that he did not know that the defendant was an accommodation indorser until after the note went to protest. The presiding judge refused to allow the defendant to show that he was an accommodation indorser, and the defendant excepted. In cross-examination the defendant stated that he procured the note from a person not the maker or an indorser and paid nothing for it, that he indorsed it and gave it to one R., who was to negotiate it and give a portion of the proceeds to him. It appeared that R. indorsed the note and gave it to C. The judge, at the request of the defendant, ruled as a matter of law that the jury must be satisfied, in order to find for the plaintiff, that at the time he bought the note he had no notice of any infirmity in it or defect in the title of C. and no knowledge of such facts as to make his action in taking it bad faith, but ruled that there was no evidence that would warrant a finding that any defense to the action was made out, and directed a verdict for the plaintiff. Held, that there was error both in the exclusion of evidence that the defendant was an accommodation indorser and in ruling that there was no defense made out and directing a verdict for the plaintiff, since the jury were not bound to believe the plaintiff, but should have been allowed to determine whether the note had been put into circulation fraudulently, and, if so, whether the plaintiff had sustained the burden of showing himself to be a holder in due course.
The answer of the defendant in an action against an indorser of a negotiable promissory note set up payment. At the trial there was evidence that the plaintiff had received from another indorser, to apply toward liquidation of his liability, notes signed by the H. company, which was not the maker of the note in suit, that he had sold the H. company's notes to a person who gave him certain stock in a corporation which was to be the plaintiff's if such person was able to recover anything on the H. company's notes, but that nothing had been realized upon such notes. The defendant introduced no evidence of payment, but requested a ruling that he was entitled to a credit for all that the plaintiff had received on the H. company's notes. The request was refused. Held, that the request was refused rightly, since there was no evidence tending to show any payment of or on account of the note, the burden of showing which was on the defendant.
SHELDON, J.
The defendant contends that the averment in each count of the declaration that the note there mentioned "was duly protested" was a descriptive averment which must be proved as made. But at common law and under our statute no formal protest was needed to hold the indorsers; it was enough if there had been proper demand upon the maker, a refusal by him to make payment, and seasonable notice of these facts given to the defendant. R.L.c. 73, §§ 83, 87, et seq. And both parties agree that in this respect the law of New York is the same as our own. But the only ground suggested by the defendant or mentioned in the decisions for holding that in an action of this kind an averment of protest can be treated as sufficient is, that due presentment and non-payment may be inferred from the fact of a protest having been made. Woodbury v. Sackrider, 2 Abb. Pr. 402. Adams v. Sherrill, 14 How. Pr. 297. Burgess v. Vreeland, 4 Zabr. 71. Nailor v. Bowie, 3 Md. 251. Rudd v. Owensboro Bank, 105 Ky. 443. Battle v. Weems, 44 Ala. 105. Eastman v. Turman, 24 Cal. 379. The reason of this rule is that the word "protest" is used in a popular sense to include all the steps necessary to charge an indorser; Coddington v. Davis, 1 Comst. 186; and manifestly the word can be construed with no greater stringency for the purpose of limiting the evidence to be introduced at the trial than for the purpose of determining its sufficiency as a matter of pleading. And, as the mere fact of a protest is not conclusive upon the dishonor of the instrument and due notice to the indorsers, these questions must be left to the jury; and other evidence upon them must be competent. Way v. Butterworth, 106 Mass. 75. This declaration not having been demurred to, the real issue was not whether a formal protest had been made, but whether there had been a proper presentment of the note for payment and due notice given to the defendants of its dishonor. Farnum v. Davidson, 3 Cush. 232. No question seems to have been made upon this issue at the trial; the defendant Brazier, who is the sole excepting party, testified that he received notice of dishonor and understood that the plaintiff would seek to hold him as indorser; he did not ask to have this question submitted to the jury; and he has not complained before us that it was not so submitted. Under these circumstances he was not aggrieved by the action of the presiding judge in allowing the notary to amend his certificate of protest by affixing his notarial seal thereto, or by the admission of his certificate in evidence. This evidence simply tended to prove a fact the existence of which was afterwards conceded by the defendant.
The defendant has also excepted to the ruling by which the judge excluded evidence offered by him that he was merely an accommodation indorser of the notes sued on. The admissibility of this evidence depended upon the question whether the notes had been fraudulently put into circulation, in which case the burden would be upon the plaintiff to show that he took them in good faith and was entitled to the rights of a holder in due course, and this question must then be left to the jury. Merchants' National Bank of Lowell v. Haverhill Iron Works, 159 Mass. 158. The defendant's contention was that, having obtained these notes from a third party, he indorsed them and gave them to one Robinson, who was to negotiate them and give him the proceeds up to a fixed amount; and that he never received any part of such proceeds. There was evidence that the plaintiff bought the notes soon after from one Collins, the last indorser upon them. From this evidence, the jury might have found that Robinson either had negotiated the notes himself and appropriated the proceeds, or had turned them over to Collins without authority. In either event, the jury might have drawn the inference that the note had been fraudulently put into circulation. Shattuck v. Eldredge, 173 Mass. 165. If it is argued that in selling or procuring Collins to sell the notes to the plaintiff, Robinson was doing exactly what the defendant desired him to do, and that if he subsequently embezzled the money obtained from the plaintiff, this was an independent wrong in no way connected with the plaintiff's purchase, except as that may have given to Robinson the opportunity to commit the subsequent wrong, the answer is that this was a question for the jury. The plaintiff would be entitled to recover if the jury took this view of the facts. Indian Head Bank v. Clark, 166 Mass. 27. But the jury also might have found that Robinson acted from the beginning with the fraudulent intent, which he afterwards carried out, of embezzling the note or its proceeds, and therefore that the note was fraudulently put into circulation. It was not an unnatural inference that he had acted fraudulently throughout. Hall v. Featherstone, 3 H. N. 284. Smith v. Braine, 16 Q.B. 244. And see the cases cited in 4 Am. Eng. Encyc. of Law, (2d ed.) 321, 322, notes. Accordingly the evidence offered should have been admitted.
The judge appears to have given the third ruling asked for by the defendant, so that he was credited with the sum of $2,000 paid upon these notes by their maker. He claims that the jury might have found that he was entitled also to a further credit for all that the plaintiff had received upon certain notes of the Hurd Lumber Company given to him by Robinson But there was no evidence that the plaintiff had received any money upon these other notes. There was nothing to control the plaintiff's testimony to this effect; and the burden was upon the defendant to establish the payments which he contended had been made.
It follows from what has been said that the defendant's first, second and fourth requests for rulings were rightly refused. But, after giving the fifth request, the judge should have submitted the case to the jury to determine the questions whether the note had been fraudulently put into circulation and, if so, whether the plaintiff was a holder in due course. The jury were not bound to believe the plaintiff's story, although there was no evidence to the contrary. See the cases cited in Lindenbaum v. New York, New Haven, Hartford Railroad, 197 Mass. 314.
Exceptions sustained.