Hall v. Newcomb — 3 Hill & Den. 233

Majority

p. 233

Hall vs. Newcomb.

Headnote

The rule allowing a blank endorsement of a note to be construed into a guaranty, only applies where suóh a construction is necessary to prevent an entire failure of the contract.

Hence, one endorsing a note in blank cannot be treated as guarantor, if he could possibly have been charged as an endorser had the proper steps been taken.

The question whether such endorsement may be treated as a guaranty, depends wholly upon the character of the note. If it be negotiable, the contract of the endorser can in no case enure as a guaranty, though he were privy to the consideration.

Where F. made a promissory note payable to H. or order, and N. endorsed it in blank for F.’s accommodation; Held, in an action by H., that as N. might have been charged as second endorser had the proper steps been taken, he could not be made liable as guarantor.

Certain dicta in Herrich v. Carman, ( 12 John. Rep. 161 ,) together with the cases of Campbell v. Butler, (14 id. 349,) and Nelson v. Dubois, (13 id. 175,) commented on, and disapproved.

Error, to the New-York C. P. The action in the court below was by Hall against Newcomb ; and the declaration charg

p. 234

ed the defendant in one count as maker, and in another, as guarantor, of a promissory note made by Peter Farmer, payable to the plaintiff. The case was this : The note in question was made payable to the plaintiff or order, and was endorsed by the defendant for the accommodation of Farmer, the maker. It was given to the plaintiff in part renewal of a note held by him against Farmer, which was also endorsed in like manner by the defendant. The defendant knew what use was to be made of the note in question, when he endorsed it. No demand of payment had been made, nor had notice of dishonor been given to the defendant. These facts appearing in evidence on the part of the plaintiff, the court below directed a nonsuit. The plaintiff excepted, and, after judgment, sued out a writ of error.

J. 1. Ring, for the plaintiff in error.

C. Sandford, for the defendant in error.

J. We think the plaintiff below was rightly nonsuited. The note in question was payable to the plaintiff or order; and there was nothing in the endorsement by the defendant below to indicate that he meant to be considered liable in any other character than that of a strictly commercial endorser. True, he knew the use which was to be made of the note : he was privy to the consideration. But so is every accommodation endorser who becomes a party with intent to raise money at a particular bank. This takes nothing from his right to require presentment and notice, provided the note be negotiable. The question depends entirely on the fact of negotiability. The true rule is laid down by Mr. Justice Bronson in Seabury v. Hungerford, (2 Hill's Rep. 84.) I know Mr. Justice Spencer conceded enough in Herrick v. Carman, ( 12 John. Rep. 161 ,) to maintain this action. But the concession was made on the authority of Josselyn v. Ames, ( 3 Mass. Rep. 274 ,) which was the case of a note not negotiable.

p. 235

The case of Campbell v. Butler, ( 14 John. Rep. 349 ,) went on Herrick v. Carman, and another case, Nelson v. Dubois, ( 13 John. Rep. 175 .) The latter case was reconsidered in Seabury v. Hungerford, where it was denied that the mere endorsement of negotiable paper can be turned into an absolute guaranty from the circumstance of its being intended to give the maker credit with the holder. The intent to give credit must be taken with the usual qualification which attaches to other accommodation endorsements. These are also made with the intent to give credit. (Vid. Hough v. Gray, 19 Wend. 202 , 203.)

That the plaintiff below might have put the note in such a form by endorsing it himself as to charge the defendant below in the character of second endorser, there is not the least doubt. This was conceded in Herrick v. Carman. And see Dean v. Hall, ( 17 Wend. 221 .) The note being entirely available to the holder in that form, the giving it effect in any other would, therefore, be going beyond the principle which makes a contract enure as having a different effect from what its direct words import. Such a forced construction should never be made except to prevent a failure of the contract altogether; ut res magis valeat quam pereat. This maxim was agreed upon in Seabury v. Hungerford, as furnishing the only ground for changing a simple endorsement into a guaranty or an absolute promise. Being on a note payable to the holder, not negotiable, and so no possibility of raising the ordinary obligation of endorser, there is then room to infer that a different obligation was intended, whether the endorsement be for the purpose of giving the maker credit on a future advance or not.

Nelson, Ch. J. dissented.

"Judgment affirmed.

Cases cited

Hough v. Gray 19 Wend. 202 N.Y. Sup. Ct. at 203 p. 235