U. S. National Bank v. Ewing — 28 Abb. N. Cas. 201

Majority

p. 201

U. S. NATIONAL BANK v. EWING.

N. Y. Court of Appeals;

March, 1892.

Headnote

[Reversing 14 N. Y. Supp. 662 ; s. C., 38 State Rep. 777.]

:i. Bills, notes and checks; diversion.] One bécoming a surety, or endorsing for accommodation, has a right to impose any restriction he pleases upon the use or application of the instrument as a condition; and a disregard of the condition is a diversion which exonerates him, even though the condition did not change his liability. So held, where an endorser for accommodation in New York stipulated that the paper should be negotiated in Louisville.

:2. Trial; qteestiott for juryl\ Where the testimony of a party in his own favor was to the effect that on endorsing for accommodation he imposed a condition in restriction of the negotiation of the paper; but a written memorandum of the agreement of the parties made at the same time contained no reference to such stipulation,—Held, that the conflict, if any, between his testimony and the silence of the instrument, must go to the jury ; and it was error to direct a verdict in favor of the plaintiff.^[1]

Plaintiff sued Ewing as endorser of a note made by <one Madden; and the defense was that the endorsement was given for accommodation and the note was negotiated in disregard of a restriction imposed by defendant.

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The defendant claimed that part of the arrangement under which the note was given was in writing and part, verbal.

The written memorandum was as follows:

“ Said Ewing has given me his endorsement of my note at four months, of this date, for $1,000, payable to-his order, which note I hereby agree to pay and hold him... harmless on account thereof. . .

The verbal part of the arrangement under which the-note was given is thus described by defendant: “ He-said he wanted to use the note at Louisville, and gave me-his strong and emphatic assurance that he would pay it. at maturity. ... I finally made the endorsement on (Madden’s) assurance, and relying upon it that the note-would be negotiable in Louisville, and that he would meet, it at maturity.”

The trial court directed a verdict in favor of plaintifF and denied a motion for a new trial; being of opinion, that the note was endorsed without restrictions.

The supreme court at general term were of opinion that: the written part of the agreement showed that the-endorsement was given' without restriction, and that, taking defendant’s testimony in connection with it, it was. apparent that the substance of what was said by the-maker was that he wanted the note to use in the Louisville Bank and that he would negotiate it there ; and, by-defendant, that he did not want to endorse paper that might be sued anywhere, especially in New York. And: on the authority of Powell v. Waters ( 17 Johns. 176 ) and Purchase v. Mattison (2 Robt. 76) they held that an accommodation party who has no interest in the proceeds, cannot complain of discount being made elsewhere than according to the understanding with him ; and as the note-was made and endorsed with the intention that the maker-should have the use of the note for his own purposes, am

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agreement that it was to be used in Louisville instead of New York did not increase the endorser’s responsibility, nor did it limit the use which the borrower could make of the proceeds ; for if not paid at maturity the defendant being in New York his liability would be enforced here no matter where the note was used (Reported in 38 State Rep. 777).

The defendant appealed to the court of appeals.

Benjamin L. Fairchild, for defendant, appellant.

John Notman (Butler, Stillman & Hubbard, attorneys), for plaintiff, respondent.

The note sued upon was made by Madden and endorsed by Ewing for the accommodation of the maker, and by him was transferred to the plaintiff as-added security upon a precedent debt. The holder parted with nothing upon receiving it, surrendered no right and no security, and made no new agreement in reliance upon* it. In its hands it was, therefore, open to the defense that made for one purpose it had been used for another, and that its diversion had served to discharge the endorser.

The trial court held that no such legal diversion had been established, and the contention here is that the evidence on that subject should have been submitted to the jury as requested by the defendant.

The endorser testified that he gave his name upon the express assurance of the maker that the note would be-negotiated in Louisville, Kentucky, in answer to the endorser’s objection that he did not wish to put his name to paper which might be sued in New York. He added ; “ I finally made the endorsement on his assurance, and relying upon it that the note would be negotiated in Louisville, and that he would meet it at maturity.”' There is no contradiction of this evidence, unless it be in

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the silence of the written cotemporaneous memorandum which provided some security for the endorser. If that raised a question of fact as to the existence of the agreement, it should have been decided by' the jury.

The answer made by the general term is in substance that the writing contained no restriction upon the use of the note, and the parol proof showed only a remark by the maker as to its intended use, which did not amount to a restriction; that if negotiated in Louisville the endorser could and would have been suéd in New York; and the place of discount was immaterial. But we held in Benjamin v. Rogers ( 126 N. Y. 70 ) that “ the surety jhas the right to impose any limit he may choose upon his liability, and that he may always fix the precise terms upon which he is willing to become a surety, whether those terms seem to be material or immaterial.” The restriction here does not seem to be material, and yet may have been so in the mind of the endorser, and for reasons sufficient to him. He swears that he lent his name upon condition that the note should be negotiated in Louisville. If his testimony, read in connection with the writing, left possible the inference that no restriction was intended, the inference was one of fact, and not of law, and should have been left to the judgment of the jury.

The judgment should be reversed, and a new trial .granted, costs to abide the event.

All the judges concurred, except ANDREWS and GRA"^ JJ„ not voting.

Cases cited

Powell v. Waters 17 Johns. 176 N.Y. Sup. Ct. p. 202