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ing that further attempt to enforce the collateral, under agreement that the collateral because of the insolvency of collateral shall be exhausted before the estate constituting it is useless, his liability will attach, as to the time in case he relies upon such fact to sus- when the estate will be settled, is imtain his action against the indorser. material, as a mere matter of opinion Fraud - opinion statements as to in the absence of fraud, especially settle ent of estate.
where delay in settlement is due to 16. The statement of one indorsing
the fault of the indorsee. a note with liability of an estate as [See 12 R. C. L. 244 et seq.]
APPEAL by defendant from a judgment of the Superior Court for Durham County (Lyon, J.) confirming the report of the referee in favor of plaintiffs in an action brought to recover an amount alleged to be due upon four several notes indorsed in blank by defendant. Reversed. Statement by Walker, J.:
F. A. Moore in his share and por. This action was brought to recov- tion of the estate of John Annin of er the sum of $10,144.50, as due up New York city. This assignment, on four several notes indorsed in which was deposited with R. O. blank by the defendant. The case Everett as collateral for the paywas referred to Honorable Howard ment of said notes, in addition to A. Foushee, who made his report, transferring and assigning an inin which, after finding the facts terest to secure said note, constiand stating his conclusions of law tuted and appointed the defendant, therefrom, he recommended that R. O. Everett, or any person whom judgment be rendered in favor of he might substitute, as his lawful the plaintiffs, and against the de- attorney to collect said interest in fendants, for $10,144.50, the amount said estate and apply the same to due on the notes, with interest on the discharge of said indebtedness. $7,144.50 from 20 March, 1911, and On 8 April, 1911, Louis Moore on $3,000 from 8 April, 1911, until executed and delivered to R. O. paid, together with the costs of the Everett and G. C. Farthing his action; and further recommended promissory note for $3,000, paythat no execution be issued on said able on 1 September, 1911, and, to judgment until 1 May, 1915, and secure
said indebtedness, transthat the three F. A. Moore notes, ferred and assigned to R. O. Everett and the assignment from him secur- an interest in the estate of John ing the same, and the Louis Moore Annin, and appointed R. O. Everett, note with the assignment securing or any person whom he might subthe same, should all be delivered by stitute, as attorney to collect the the said trustee to the clerk of the same and discharge said indebtedsuperior court of Durham county, ness.
ness. The Louis Moore note and state of North Carolina, to be held the assignment appear in the recby him until such time as said R. O. ord. On or about 11 April, 1911, Everett pays said judgment, at R. O. Everett, by indorsement, duly which time the same shall be de- transferred and delivered to G. C. livered to him. Defendant except- Farthing, for valuable consideraed to the conclusions of law of the tion, the four notes above referred referee.
to, together with his interest in said The material facts are as follows: assignments, which were given as On 20 March, 1911, F. A. Moore collateral therefor. At the time executed and delivered to the de- these four notes were so indorsed fendant, R. O. Everett, three de- and transferred to G. C. Farthing, mand notes aggregating $7,144.50, there was an agreement between R. and the same are set out in the rec- 0. Everett and G. C. Farthing that ord. As stated, the notes were pay- if F. A. Moore and Louis Moore did able on demand, and were secured not pay, and the money was not by an assignment of an interest of realized on the assignments of
(167 N. C. 600, 83 S. E. 685.) their interest in the Annin estate, sixty or ninety days, and that the R. O. Everett would be ultimately notes were perfectly good. That responsible for the payment of
of Farthing relied upon the represensaid notes; but he would not be tations of R. O. Everett, and took called upon to pay the same until over said notes without investigathe estate of John Annin had been tion. exhausted. G. C. Farthing held 9. That at the time said Louis the notes so indorsed to him from 11 Moore note was transferred to G. April, 1911, until 23 August, 1912, C. Farthing, as aforesaid, to wit, 16 when the said Farthing executed April, 1911, it was agreed between and delivered to R. H. Sykes and W. Farthing and Everett that he P. Clements, trustees, a deed of (Everett) would be ultimately retrust conveying his property to sponsible for the full face value of them, and, among other things, all said note, but that Farthing should the right, title, and interest of G. not call on him to pay the same until C. Farthing in and to the above the collateral was exhausted, and described notes and collateral as- that if any attorney was needed to signments, and on said date the collect the Louis Moore note, that trustees took possession of said he (Everett) would pay_the expapers and retained them until the
and Farthing commencement of this action. Said should be held harmless by reason trustees of G. C. Farthing made de- of any litigation concerning the mand upon F. A. Moore and Louis same. Moore, but they failed to pay said 10. That said estate of John Annotes, and the estate of John Annin nin has not been wound up; that R. has not been wound up. Demand O. Everett has employed counsel, was then made by the plaintiffs, and has made repeated trips to New Sykes and Clements, trustees, upon York to see said attorneys, and to R. O. Everett for payment, and he expedite the winding up of said esdeclined to pay, upon the ground tate of John Annin; but so far the that he was not liable until the end is not in sight, and no one Annin estate had been exhausted. knows when the suits incident to
The referee made the following the winding up of said estate will be findings of fact, among others : ended.
7. That at the time said three F. The exceptions coming on to be A. Moore notes were indorsed to G. heard before Judge C. C. Lyon, the C. Farthing, to wit, 11 April, 1911, following judgment was entered it was done upon an agreement be- thereon: tween R. 0. Everett and G. C. “This cause coming on now to be Farthing that he would be ultimate- heard upon the report of Honorable ly responsible for the payment of H. A. Foushee, referee, and the exsaid notes, but that he (Everett) ception filed thereto by the defendwould not pay the same until the ant, after hearing argument of estate of John Annin had been ex- counsel, it is ordered, considered, hausted. In the event there was and adjudged that the report of the any trouble about the collection of referee be and the same is hereby said notes, that he (Everett) would in all respects confirmed, and it is procure and pay for the services of further ordered, considered, and adan attorney, and that he (Everett) judged, in accordance with said rewould hold Farthing harmless port, that the plaintiffs, R. H. Sykes against the cost and expenses of any and W. P. Clements, trustees of G. litigation incident to the collection C. Farthing, as such trustees, reof said notes. That Farthing did cover of the defendant, R. O. not know anything about the Annin Everett, the sum of $10,144.50, estate, and that Everett told Farth- with interest on $7,144.50 from 20 ing he had been to New York and he March, 1911, until paid, and with expected the same to be closed up in interest on $3,000 from 8 April,
1911, until paid, together with the 284; Cobb v. Clegg, 137 N. C. 153, 49 cost of this action to be taxed by S. E. 80; Smith Premier Typewriter the clerk of this court; and in ac
Co. v. Rowan Hardware Co. 143 N. C. cordance with said report, that no
97, 55 S. E. 417; Woodson v. Beck, 151 execution issue on this judgment N. C: 148, 31 L.R.A. (N.S.) 235, 65 S.
E. 751; Baxter Nat. Bank v. Talbot, until 1 May, 1915. It is further ad
154 Mass. 217, 13 L.R.A. 52, 28 N. E. judged that the three F. A. Moore 163; Fullerton v. Hill, 48 Kan. 558, notes, as set out and described in
18 L.R.A. 36, 29 Pac. 583; Johnston v. the report of said referee, together Schnabaum, 86 Ark. 82, 17 L.R.A. with the assignment securing the (N.S.) 838, 126 Am. St. Rep. 1082, 109 same and the Louis Moore note, as S. W. 1163, 15 Ann. Cas. 876; 2 Parset out and described in the report
sons, Bills & Notes, § 520; Pike v. of said referee, together with the Street, 1 Moody & M. 226; Riley v. Gerassignment securing the same,
rish, 9 Cush. 104; Hays v. May, Wright
(Ohio) 80; Houck v. Graham, 106 Ind. should all be delivered by said trustees to the clerk of the superior Drummond v. Yager, 10 Ill. App. 382;
198, 55 Am. Rep. 727, 6 N. E. 594; court of Durham county, North First Nat. Bank v. Crabtree, 86 Iowa, Carolina, to be held by him until 731, 52 N. W. 559; Forepaugh v. Delasuch time as the said R. O. Everett warė, L. & W. R. Co. 128 Pa. 217, 5 pays this judgment, at which time L.R.A. 508, 15 Am. St. Rep. 672, 18 Atl. the said notes and assignments 247 Roads v. Webb, 91 Me. 414, 64
503; Tankersley v. Graham, 8 Ala. shall be delivered to the said R. O.
Am. St. Rep. 246, 40 Atl. 128; Taylor Everett."
v. French, 2 Lea, 257, 31 Am. Rep. 609; From this judgment defendant Goodrich v. Stanton, 71 Conn. 419, 42 appealed to this court.
Atl. 74; Hirsch v. Kaufman, — R. I.
- 81 Atl. 66; Chapeze v. Young, 87 Messrs. Bryant & Brogden and Win
Ky. 480, 9 S. W. 399; True v. Bullard, ston & Biggs, for appellant:
45 Neb. 412, 63 N. W. 824; Doll v. Plaintiffs, as trustees of G. C. Farth
Getzschmann, Ann. Cas. 1913A, 882, ing, stand in his shoes and have no
and note, 90 Neb. 370, 133 N. W. 417; rights superior to the rights which he
2 Randolph, Com. Paper, 8 778. had as the holder of said paper.
Mr. P. C. Graham, for appellees: 3 Am. & Eng. Enc. Law, 2d ed. 46; The conclusions of law by the ref23 Am. & Eng. Enc. Law, 2d ed. 492; eree were correct, and the judge was 4 Cyc. 218, 219; Wallace v. Cohen, 111
not in error in affirming the same and N. C. 106, 15 S. E. 892; Southerland v. in signing the judgment as set out in Fremont, 107 N. C. 565, 22 Am. St. Rep. the record. 900, 12 S. E. 237; Causey v. Snow, 122 Jones, Collateral Securities, $$ 589, N. C. 326, 29 S. E. 359; Battery Park 590, 685, 720; Barnard v. Martin, 112 Bank v. Loughran, 126 N. C. 814, 36
N. C. 754, 17 S. E. 536; Hinsdale v. S. E. 281; Taylor v. Lauer, 127 N. C. Jerman, 115 N. C. 152, 20 S. E. 294; 157, 37 S. E. 197; Brooks v. Sullivan, Silvey v. Axley, 118 N. C. 959, 23 S. E. 129 N. C. 190, 39 S. E. 822; Davidson
933; 7 Cyc. 879, 889, 900; First Nat. v. Powell, 114 N. C. 575, 19 S. E. 601; Bank v. Lineberger, 83 N. C. 455, 35 Mendenhall v. Davis, 72 N. C. 150; Am. Rep. 582; Carter v. Duncan, 84 N. First Nat. Bank v. Pegram, 118 N. C. C. 676. 674, 24 S. E. 487; Lockhart v. Ballard,
Walker, J., delivered the opinion 113 N. C. 292, 18 S. E. 341; Bresee v. Crumpton, 121 N. C. 122, 28 S. E. 351.
of the court: Parol evidence is admissible to ex
The larger part of the argument plain a blank indorsement as between before us was taken up with a full the first indorser and first indorsee. discussion of the question whether
Hill v. Shields, 81 N. C. 254, 31 Am. a blank indorsement by the payee, Rep. 499; Davis v. Morgan, 64 N. C. or one of the payees, to a third 570; Mendenhall v. Davis, 72 N. C.
party, can be explained by oral evi150; Evans v. Freeman, 142 N. C. 67,
dence showing what the special con54 S. E. 847; Iredell County v. Wasson, 82 N. C. 309; First Nat. Bank v.
tract between them was, and that it Pegram, 118 N. C. 671, 24 S. E. 487;
was different from the one implied Adrian v. McCaskill, 103 N. C. 186, 3 by law from the mere indorsement L.R.A.759, 14 Am. St. Rep. 788, 9 S. E. of the paper. This is a question of
(167 N, O. 600, 83 8. E. 585.) evidence, and the admission of the whole (except the signature, which oral proof could only be incompe- by itself does not make a contract) tent on the ground that it would exists in parol, and must be estabvary, alter, or contradict the terms lished by such proof.” The court
" of a contract which the parties have then proceeds
proceeds to Evidencereduced to writing as the only ex- say that the pre- plain endorsepression of their agreement, and sumption that one ment. would violate the general rule of who indorses a note after its delivevidence prohibiting the introduc- ery by the maker is a guarantor tion of such evidence. But there (under the law as it then existed) was no exception to the evi- is not one of law, but one of fact dence, as there should have been only, and may be rebutted; so that if that rule was relied upon; but it does not affect injuriously the
the evidence Evidence
was right of a subsequent bona fide fallure to object admitted without holder. Several cases are cited to -waiver.
any objection, SO support the position, in which the far as appears, and the referee
the referee rule was applied.
rule was applied. Love v. Wall, 8 found the facts in regard to the N. C. (1 Hawks) 313; Gonez v. special contract. Besides, if plain- Lazarus, 16 N. C. (1 Dev. Eq.) 205; Appeal-failure
tiffs had objected, Davis v. Morgan, 64 N. C. 570, and
they have not ap- Sylvester v. Downer, 20 Vt. 355, 49 effect.
pealed, and the ex- Am. Dec. 786, where Judge Redception to the admission of the field said that in the particular case evidence would not now be open to there was a legal implication that them.
the indorser was a joint promisor, But waiving, for the present, this but the signature being blank, he view of the record, and considering may undoubtedly show that he was the other question argued, we are of not understood to assume any such the opinion that by our decisions, obligation;" and to the same effect although there is some conflict in are these cases: Clapp v. Rice, 13 other states, the evidence is compe. Gray, 403, 74 Am. Dec. 639; Pertent. In Mendenhall v. Davis, 72
kins v. Catlin, 11 Conn. 213, 29 Am. N. C. 150, this court, after stating Dec. 282; 2 Parsons, Bills & Notes, that when a payee or regular in- p. 121, and notes (1871 ed. p. 517),
where numerous like cases will be dorsee thereof writes his name on the back of a note, as between him established by a long series of de
found. This doctrine is so firmly and a bona fide holder for value and
cisions in this state that it is far without notice, the too late now to question it, as will Bills and notesindorsement- law implies that efleet.
presently appear. In the more rehe intended to as
cent case of Hill v. Shields, 81 N. C. sume the well-known liability of an
250, 31 Am. Rep. 499, Justice Dillindorser, and he will not be per- ard, who was always careful and mitted to contradict this implica- accurate in the statement of legal tion; "but this rule does not apply principles, said: “The indorsement between the original parties to a being in blank, and the contract contract which is not in writing, al- implied by law with his inthough there may be the signature dorsee and subsequent holder, givof one or more parties to authenti- ing such unqualified power [to discate that some contract was made. pose of the same] as we have seen, In such cases, it must always be a it has been much debated and variquestion of fact what contract the ously decided as to the competency signature authorizes to be written of the indorser, by parol proof, to above it; in other words, what was rebut the implication of the law, the agreement of the parties at the and to annex a qualification when time it was written. There is no none is expressed. It is settled in written contract to be altered; the this state, however, that parol testi
mony may be adduced under a blank contract as between immediate parindorsement to annex a qualifica- ties; but between an indorser in tion or special contract as between blank and remote parties without the immediate parties. Davis V. notice such parol proof is inadmisMorgan, 64 N. C. 570; Mendenhall sible, and the contract implied by v. Davis, supra. But between in- law stands absolute."
The court dorser in blank and remote parties cites and approves Hill v. Shields, without notice the weight of au- Davidson v. Powell, and Mendenthority is that parol proof is inad- hall V. Davis, supra; and, admissible, and the contract implied mitting a conflict in the decisions of by law stands absolute. 2 Parsons, other courts, it states that here the Bills & Notes, 23; Hill v. Ely, 5 Serg. matter has been settled and closed & R. 363, 92 Am. Dec. 376; 1 Dan by numerous
numerous decisions. It then Neg. Inst. $$ 699 and 719.” The fol- cites Bruce v. Wright, 3 Hun, 548, lowing cases recognized and applied and refers to it in the following the principle in a general way: language: "It was held that in an Iredell County v. Wasson, 82 N. C. action against any indorser by his 309; Adrian v. McCaskill, 103 N.C. immediate indorsee it is a good de183, 3 L.R.A. 759, 14 Am. St. Rep. fense that there was a verbal agree788, 9 S. E. 284; Smith Premier ment at the time of the indorsement Typewriter Co. v. Rowan Hardware that the indorsee should not sue the Co. 143 N. C. 97, 55 S. E. 417; indorser, and that the contract beWoodson v. Beck, 151 N. C. 148, 31 tween the two consists partly in L.R.A.(N.S.) 235, 65 S. E. 751. the written indorsement, partly in
Two cases, which are apparently the delivery of the bill to the inrelied on by appellee, should be no- dorsee, and partly in the actual unticed. Davidson v. Powell, 114 N. derstanding and intention with C. 575, 19 S. E. 601, is one; but a which the delivery was made, and close reading of that case will show that the intention of the parties may that it is a clear authority in sup- be gathered from the words of the port of our view, as Justice Mac- parties, either spoken or written?" Rae, in the opinion written by him In commenting upon the very infor the court, says: “In the hands structive case of Baxter Nat. Bank of the original payee an indorse- V. Talbot, 13 L.R.A. p. 52, the ment may be shown to be upon cer- learned annotator says: "While it tain conditions; but a bona fide is elementary law that parol eviholder for value, before maturity dence is incompetent to vary the and without notice, is not affected terms of a written instrument, still by any equities existing between the it is equally well settled that, as be original parties. The same rule will tween the original parties to comapply between the last payee and all
mercial paper, such proof is admis
sible as will have a tendency to subsequent indorsers."
establish the character in which an The other case is First Nat. Bank
indorser intended that he should be v. Pegram, 118 N. C. 671, 24 S. E. 487. This is a still stronger case,
bound; and proof of this intention as there it was proposed to show by
will countervail the prima facie parol evidence that the cashier of presumptions which the law inthe plaintiff bank had informed the dulges with reference to the paper,” indorsee that the maker had suffi
citing Riley v. Gerrish, 9 Cush. cient funds in the bank to pay the 104; Sylvester v. Downer, 20 Vt. note, and that he would not be held 355, 49 Am. Dec. 786; Owings v. responsible upon it, his signature on
Baker, 54 Md. 82, 39 Am. Rep. 353; the back of the note being a mere
Nurre v. Chittenden, 56 Ind. 465; form. The first syllabus of the case
Pierse v. Irvine, 1 Minn. 369, Gil. is this: “Parol testimony may be 272; Strong v. Riker, 16 Vt. 555; adduced under a blank indorsement Quin v. Sterne, 26 Ga. 224, 71 Am. to annex a qualification or special Dec. 204; Good v. Martin, 95 U. S.