Pease v. Dwight/Opinion of the Court

We think that the only point presented by the record in this case for the decision of the court was rightly ruled by the Circuit Court.

That point is, whether a promissory note payable to the order of several persons, one of whom inceptively refused to be a payee of it, and who was treated by the drawer and other payees, both in the delivery of the note and in its negotiation, as no party and having no interest in it, can be transferred by the indorsement of the real payees, so as to give the ownership of it to the indorsee, and a right of action upon it ex directo, under the statute of 3 & 4 Anne, c. 9.

The statute is, that 'any person, to whom a promissory note that is payable to any person or his order is indorsed or assigned, or the money therein mentioned ordered to be paid by indorsement thereon, shall and may maintain an action for such sum of money, either against the person signing such note, or against any of the persons who indorsed the same, in like manner as in cases of inland bills of exchange.'

The statute requires a transfer to be made by the indorsement of the person to whom the note is payable, and the interpretation of it is, that, where a note is payable to the order of several persons not in partnership, all must separately sign their names as indorsers. The object being, that, before an indorsee shall recover the contents of the note in his own name, he shall show he has acquired a property in it, by a transfer from those who were the original payees, or from others who were their indorsers. The statute is not merely a form, requiring all the payees in indorse, but a substantial requisition, upon the presumption that all the payees upon the face of the paper have an interest in it, and that they have indorsed it. We have, then, the rule, and the reason of the rule. And it seems to us, that to permit it to comprehend a case of an undertaking between the real parties, because a name had been mistakenly inserted, or had been inadvertently left upon the face of the paper, when the note was delivered to the real payees by the drawee, would be to wrest the statute out of its meaning, and to sacrifice the substantial intention of it merely to form. The statute meant to deal with real parties. The omission to erase the name in such a case does not lessen the drawer's obligation to pay his not to the real payees, or their right of action upon it against the drawer as a note of hand. If, then, the real payees shall indorse the note to a third person, they are within the words of the statute as indorsers, and the indorsee, in an action against them or the drawer, may be permitted to prove the real character of the undertaking, by showing that the name of a person had been inadvertently left upon the paper as a payee, who had refused to be such, and who had been waived as a party to the note, both by the drawer and the real payees, when the contract had been completed between them by the delivery of the note. In the case before us, the declaration recites the particular circumstances under which the note was made and indorsed. The demurrer admits them. That is, that the paper had been indorsed by the real payees of it, but not by the nominal payee, who never was an actual payee nor ever had any interest in the note by being in any way a party to it. It would really be going very far to say, that the statute giving the indorsee a right of action for such sum of money, either against the person signing such note or against any of the persons who indorsed the same, did not mean it to be exercised because a person's name was upon the face of the paper who never had been a party to it. No such decision has been made. It may be because no case of this kind has ever occurred before. We can find none like it. In the absence of all authority against our conclusion, we must take upon ourselves the responsibility of announcing it as an original application of the statute to this case, and for any case of a like kind which may occur, without intending it to go further. We think, however, that the interpretation is sustained by what has been the practice under the statute in some other particulars,-that it is within the spirit of the principle upon which the statute has been administered. For instance, the statute requires the indorsement of a note to be made by the person to whom it is payable, and one of several partners may indorse in the partnership name; but though a note be made payable to a partnership, a transfer in the name of one partner alone will pass the partnership interest, if it be proved that it has been the practice of the firm to indorse for them in the name of one only. South Carolina Bank v. Case, 8 Barn. & Cres. 436. So if one partner transfer in the name formerly used by the partnership. Williamson v. Johnson, 1 Barn. & Cres. 146; 2 D. & R. 281.

Also, where a bill is drawn upon a firm, and one partner writes 'Accepted,' adding only his own name, it will bind the firm, if they were in partnership at the time of the acceptance. An indorsement by the cashier of a bank of a note payable directly to the bank is good, upon the ground that he represents the interest of the bank in it, though he is not officially or otherwise a payee upon the face of the note. In Goddard v. Lyman, 14 Pick. 268, it is said, a negotiable note payable to three persons may be legally transferred by indorsement by two of them to the third payee and a stranger, and, if this were doubtful, the indorsement of the third payee to the stranger will clearly pass the property to him. In Snelling v. Boyd, 5 Monroe, 173, it is said, one of several joint holders of a bill of exchange may transfer the whole interest in it by indorsement. Where the maker of a promissory note indorsed the same, for his own benefit, in the payee's name, by virtue of a parol authority for that purpose communicated to him by the payee, it was held to be well indorsed, and that the payee was liable upon such indorsement in the same manner as if it had been made by himself in his own hand. Turnbull v. Trout, 1 Hall, 336. The foregoing, it will be perceived, are all of them cases in which parol proof has been admitted to show the character of the agencies by which notes or bills have been transferred or accepted, without any one of the notes having been indorsed within the exact letter of the statute, though all of them are within its spirit.

But we rely altogether in this case upon the fact, that the note was transferred by the indorsement of those who were its real payees,-by those who had the absolute property in it. We think the true meaning of the statute is, that such as have the property in the note have the right to indorse, though there shall be a name upon the paper of another person, which was inserted by mistake as a payee, or inadvertently left in when the note was delivered, and that in an action by the indorsee he should be permitted to prove such a fact. Upon this point of the right of those to indorse who have the absolute property in a bill or note, we will cite what was said by the learned Chief Justice Willes in the conclusion of his opinion in the case of Stone v. Rawlinson, Willes, 562:-'On the strength of this case I think I may make a syllogism, which will be conclusive in the present case. Whoever has the absolute property in a bill, made payable to one or his order, may assign it as he pleases, within the provision of the statute, and such assignee may maintain an action in his own name; the executor or administrator of a person to whom such bill is made payable has the absolute property in it, and therefore he may assign it to whomsoever he pleases, and such assignee may maintain an action in his own name.' This was said in answer to an objection, that an executor or administrator cannot assign a promissory note made payable to a person or order, so as to enable the indorsee to bring an action in his own name. So, a bill or note made payable or indorsed to a feme sole, who afterwards marries, or where it is made during the coverture, the right of transfer vests in the husband, so as to give his indorsee a right of action upon it in his own name, and the husband may be sued as an indorser. Neither the case of the executor nor that of the husband is within the letter of the statute, but both are according to the spirit and intention of it, to permit indorsements to be made by those who have a property in promissory notes, so as to enable their indorsee to maintain an action in his own name.

The judgment of the Circuit Court is affirmed.

This cause came on to be heard on the transcript of the record from the Circuit Court of the United States for the District of Michigan, and was argued by counsel. On consideration whereof, it is now here ordered and adjudged by this court, that the judgment of the said Circuit Court in this cause be and the same is hereby affirmed, with costs and damages at the rate of six per centum per annum.