Chalmers, Jones & Co. v. M'Murdo.
Decided Nov. 27th, 1816.
[7 Am. Dec. 684.]
1. Chancery Practice — Suit on Promissory Note, — On a Bill exhibited by the holder of a Promissory Note against the maker and all the endorsers: to avoid circuity of action, the Court of equity may fix the debt on the person first responsible.
See Rev. Code, 2d vol. ch. 108. sect. 3, p. 135, 136.
2. Promissory Note — Primary Liability. — The first endorser of a Note in point of time, is not, of course, first responsible.
3. Same — Liability of Payee. — If the payee of a note write his name over that of a person who endorsed *422it in blank, bnt refused to do so except upon tbe ground of the responsibility of the payee as first endorser; he thereby makes himself responsible, as such, in point of contract, though second in point of time.
4. Same — Endorsement by Agent for Principal — Equitable Liability. — An Agent endorsing a Note for the benefit of his principal, who assures him that he shall not be held responsible, ought not to be compelled to pay the money at the suit of a person, to whom the Note is endorsed, with notice of such equity; bnt the Decree should be against the principal. And, it seems, if the endorsee had no such notice, yet, if the principal be solvent, the Decree ought still to be against him in the first place.
The Appellee exhibited his Bill on the 29th May 1811, in the Supreme Court of Chancery for the Richmond District, against the Appellants, with Chepmel, Da Serre & Co. John Bell, surviving partner of John and William Bell, and Conway and Rortescue Whittle, defendants; setting forth, that the defendants, Conway and Rortescue Whittle, in payment of a Debt due to the plaintiff, endorsed to him two notes negotiable at the Office of Discount and Deppsit of the Bank of Virginia at Petersburg, one for $1500, the other for $1063,55, executed by the defendants Chepmel, Da Serre & Co., and endorsed by John and William Bell, and Chalmers, Jones & Co. ; that, “on receipt of them, without notice of any equitable circumstances which any of the said parties, except the said John and William Bell, might have against any others,” the plaintiff applied for payment, first at the Counting House of Chepmel, Da Serre & Co., (the makers of the Notes,) but found that they had failed and left the country; next to John and William Bell, but they replied that Chalmers, Jones & Co., exclusively, ought to pay the said Notes, because they averred that the same were executed by Chepmel, Da Serre & Co. as a payment from them to Conway and Rortescue Whittle, to whom they were indebted, and that, immediately after being so executed, they were endorsed by Chalmers, Jones & Co., and, with the endorsement of the latter on them, (and the said John and Wm. Bell had previously, on behalf of the said Whittles, insisted on a good endorser,) they were delivered to the said John and Wm. ''Bell, who, having long- acted as the friends of the said Conway and Rortescue Whittle in Petersburg, and having the highest opinion of their credit and punctuality, as well as of their honor, did not except to the circumstance of the said Notes being made payable to themselves, but, indiscreetly, as they alleged, endorsed their names above those of Chalmers, Jones and Co., and remitted the said Notes to the said Whittles, on their positive promise that they would never consider the said John and William Bell, liable in consequence of such endorsement. Dastly, the plaintiffs applied to Chalmers, Jones and Co. who did not admit the statement of John and William Bell to be correct.
On the ground that Chepmel, Da Serre & Co. might be sued in equity as absent defendants, and to avoid circuity of action, the plaintiff prayed the Court to fix the debt on the person in truth first responsible for it.
The Bill was regularly taken for confessed as to the defendants Chepmel, Da Serre & Co. and Conway and Rortescue Whittle.
The defendant Bell answered, that John and Wm. Bell, being requested by Conway and Rortescue Whittle to collect a Debt due them from Chepmel, Da Serre & Co., applied to the latter for the same; when it was agreed that the said debtors should give their negotiable notes, with one or more approved endorsers; and, accordingly, the next daj', they sent the two Notes in question, with the endorsement 'of Chal-mers, Jones and Co. thereupon, but made payable to John and Wm. Bell; that this defendant disapproved of their being made so payable, and sent them back, to be executed anew, and made payable to Chal-mers, Jones & Co., by whom they might then be endorsed; but Chepmel, Da Serre & Co. returned them afterwards to this defendant, assuring him “that they must be taken as they were, or that none could be obtained, for they could not procure any others, nor these in any other form;” that this defendant then received the Notes, and wrote the name of “John and Wm. Bell” over that of “Chalmers, Jones and Co.” in order to make them negotiable, without consideration, and purely to oblige Conway and Rortescue Whittle; of which the said Whittles, being apprised, assured him that John and ^William Bell should never be held by them responsible, or words to that purport.
Chalmers, Jones & Co. also answered, and admitted that they were in point of time the first endorsers, but insisted that, in point of contract, and in the very nature of the transaction, John and William Bell, the payees, were obliged to be the first endorsers, and themselves only second endorsers; and, but for their knowing that John and William Bell must endorse before them, they would not have endorsed at all.
The Notes were the only exhibits, and no depositions were taken in the cause.
Chancellor Taylor, “being of opinion that, in a Court of Equity, a remote endorser of a Promissory Note may be made liable, in the first instance, under proper circumstances, to the claim of the holder, so as to avoid that circuity of action, which such holder, according to the forms of the Common Daw, would be compelled to undergo by prosecuting the drawers and endorsers thereof according to their priority and succession; and being farther of opinion, from the facts disclosed by the *423defendants, Bell, and Chalmers, Jones and Co. in the present case, that the latter, though apparently remote endorsers on the Notes in the Bill mentioned, did in fact endorse the same before the former, and as securities to the same,” therefore decreed, that the said defendants Chalmers, Jones 6 Co. pa3' to the plaintiffs the amount of the said Notes, with interest and costs.
From which Decree they appealed.
Leigh for the Appellants
admitted that the Court of Equity had jurisdiction in this case; but contended that, from the nature of the contract, the payees, John and William Bell, were necessarily the first endorsers; and that, without a special contract, that the Appellants would be responsible as first endorsers, (which is not pretended) they could only be held responsible as second endorsers.
Call for the Appellee.
Chalmers, Jones & Co. were first endorsers in fact. They state themselves that their names were first written. A man who does so subjects himself to any superscription *lhe holder of the Bill may write, Their answer shews that they agreed to endorse without any intervention of Bell, who knew nothing of the terms between them and the makers of the Notes. The nature of the transaction proves, and, in effect, they confess, that they undertook as Sureties ; because Bell negotiated for surety from Chepmel, Da Serre & Co. ; and, as the Whittles did not distrust Bell, there was no motive for the endorsement by Chalmers, Jones & Co., unless they endorsed, as sureties to the Notes.
Mr. Bell is at liberty to shew that, though apparently the second, they were in fact the first endorsers, For it would be a direct fraud on the world for them to write their name in blank on the Bill, with an intention not to be responsible primarily. How did they know that Bell would superscribe his name? It is evident that they trusted to those desperate men, Chep-mel, La Serre & Co., and must take the consequence.
If Bell had kept the Notes, he might have charged the endorsers: and, since he acted as Agent, and his own endorsement was formal only, it makes no difference: for Whittle, or his assignee, has the same right.
Leigh in reply.
Mr. Call says that the person, who appears to be the second endorser, may be proved to have been in fact the first in point of time. I contend that the first endorser in point of time is not of course the first in point of contract. It is a question, which to me does not bear argument.
November 27th, 1816,
JUDGE BROOKE
pronounced the Court’s opinion:
The Court, admitting that a second endorser may, by agreement, become a first endorser in point of contract, which seems to have been relied on by the Chancellor, is of opinion that the Appellants Chalmers, Jones and Co. do not appear to have placed themselves In that situation. On the contrary, it is admitted by John Bell the surviving partner of John and William Bell, in his answer, that they were apprized, by Chepmel, La Serre and Co., that the Appellants refused to endorse the notes in question, unless there was some previous responsible endorser; which admission accords with the answer of the Appellants, in which they allege that they refused to endorse, unless *’the Bells, who were the Payees, were the first endorsers. Nor does it appear that the Appellants had notice that the Bells were only the agents of Conway and Portescue Whittle in that transaction, as is alleged in the answer of John Bell. In this aspect of the case, the Court is of opinion that no Decree ought to have been made either against the Appellants, or John Bell the surviving partner of John and William Bell; because the Equity of the latter, until disproved in a controversy with Conway and Portescue Whittle, would follow their endorsement, and affect the claim of the Appellee; of which Equity, if it were material, he admits in his Bill he had notice.
The Decree of the Chancellor is therefore reversed; and this Court proceeding, &c., it is Decreed and Ordered that Chepmel, La Serre and Co. pay to the Appellee the sum of $1500, the amount of the first note, with interest thereon from the 23d day of October, 1810, until paid, and the farther sum of $1063,55, the amount of the second note, with interest thereon from the 30th day of October, 1810, until paid ; and, it appearing to the Court that Chepmel, La Serre and Co. have removed from this Commonwealth to parts unknown, the Court is of opinion, that the Appellee is entitled to a Decree against Conway, and Portescue Whittle his immediate endorsers. It is therefore farther Decreed and Ordered that Conway, and Fortescue Whittle, as to whom the Bill of the Appellee is taken for confessed, pay to the Appellee the sum of $1500, being the amount of the first note, with interest thereon from the 23d day of October, 1810, until paid, and the farther sum of $1063,55, with interest thereon from the 30th day of October, 1810, until paid, being the amount of the second note, and costs. But this Decree is to be without prejudice to the claim of the said Conway, and Portescue Whittle against Chepmel, La Serre and Co.