McKenzie v. Harris , 2 Posey 180 ( 1880 )

Opinion.— The liability which McKenzie, the payee of the draft sued on, by writing his name on the back of the instrument, incurred, was that of indorser. The contract of indorsement is as fully expressed by his signature as if it were written out in full above it. There is no ambiguity about it. He contracts to pay the draft himself if Hawkins, the treasurer of Marion College, does not pay it, and suit is instituted thereon at the first term of the court after the right of action against Hawkins accrues, or at the second term if good cause is shown wiry suit was not instituted before the first term after the right of action accrued, or if he will have the draft duly honored for payment. Daniels on Neg. Inst., 498; Story on Bills, 103.

“ The receipt of a bill implies an undertaking on the part of the indorsee or other holder to every party on the bill who would be bound to pay it ... to allow no extra time and grant no indulgence for payment, and to take all the proper steps and do all the proper acts required by law upon its dishonor to verify and establish the same. A default in any of these respects will discharge the party who would otherwise be bound to pay the same from all responsibility on account of its non-payment, and will operate as a satisfaction of anydebt or demand for which it was given.” Story on Bills, 135.

There was nothing, then, ambiguous in the character of McKenzie’s undertaking, as expressed by his indorsement; and where there is no ambiguity to explain, parol testimony is not admissible to vary or to contradict the agreement. It is inadmissible for the purpose of qualifying or modifying the contract. Wharton on Evidence, 1058; Daniels on Keg. Inst., 533.

The court erred, therefore, in permitting Stroop to testify’', so far as his testimony went to establish that McKenzie’s liability was not that of an indorser but of an original promisor or grantor.

We think, also, that the court erred in permitting parol testimony to show that McKenzie had requested Stroop not to sue upon the draft, and of his subsequent promise to pay it.

The statute of 20th January, 1840, “An act to dispense with the necessity of protesting negotiable instruments for dishonor, and of giving notice thereof, and to regulate assignments of all written instruments,” by the first section provided “ that it shall not be necessary for the owner, as holder of a - bill of exchange, promissory note, check, or draft, or other mercantile negotiable instrument, to have any of these instruments protested for non-acceptance or non-payment, nor shall it be necessary to give notice of such dishonor to any drawer, indorser or assignor of the same, and every such party shall, without any protest or notice whatever, be held responsible or security for the final payment of every such instrument; provided, however, that in all cases in which either a protest or a notice was hitherto necessarj7, the partythat would have been released from responsibility by a failure to make such protest, or to give such notice, shall hereafter be released from all responsibility unless the owner or holder of such instrument shall use due diligence to collect the same; and every holder or owner shall be adjudged not to have used due diligence who shall not have instituted suit against the drawer or maker of such instrument before the first term of the district court after the right of action accrued, or shall not institute such suit before the second term of said court, and also show good cause why he did not institute his suit before the first term.”

The third section of this act applies to the assignment of bonds or other .written instruments, and provides that “ to hold the assignor as security for the payment of the instrument, the assignee shall use due diligence to collect the same.”

Here, then, we 'have a legislative construction of what due diligence means. It is the institution of suit before the first term of the court after the right of action accrued, or at furthest before the second term, if good cause be shown, why it was not instituted at the first term.

And although this first section of the act of 1840 was repealed in 1848, and a provision made by the act of 1848 permitting the liability of indorsees to be fixed as well by protest as by suit, in certain cases, yet it has been held that the term “ due diligence ” meant the same thing in both instances, viz., by suit or by protest.

Chief Justice Hemphill says, in Thompson v. Payne: The statute changed the acts, which would fix the liability of the drawer or indorser of negotiable instruments, and substituted suit, styling such suit diligence. We think it plain that the legislature intended to give the same meaning to the term due diligence in this connection that was applied to it in the first section of the act (of 1840), viz., the bringing suit at the first term, and if not at the first, at the second term after the accrual of the cause of action, with good cause shown.” 21 Tex., 625.

By the seventh section of the act of 1840 (article 206, Paschal’s Digest), it is provided “ that parol testimony shall be inadmissible to prove that the assignor, drawer or indorser released the holder of any of the aforesaid instruments from his obligation to use due diligence to collect the same.”

And this embraces every class of instruments negotiable or assignable by law. It would seem very clear, then, that the testimony of Stroop was inadmissible to prove that McKenzie had released Stroop from his obligation to sue at the first or second term of the court after the assignment of the draft to him, and consequently that, suit not having-been brought, McKenzie’s liability upon "the draft ceased. He was no longer bound upon it, nor was it his debt; it remained the debt of Marion College only.

It is insisted, however, that, by McKenzie’s promise to pay after his liability had been, discharged by the failure to sue the college and by his subsequent payment of interest, he is estopped from availing himself of that as a defense.

Without doubt these circumstances have been almost universally held in other states, where no such provision exists in regard to the admissibility of parol evidence of release, as admissible to excuse the want of diligence and to prove a waiver of the necessary diligence, or rather as an acknowledgment that the necessary steps had been taken to hold the indorser liable. Daniels on Neg. Inst., 2d vol., 167; Story on Notes, 274. And it is said that where he promises to pay the bill or note such promise imports an unconditional assumption of it and a dispensation with whatever preliminary evidence might be necessary to charge him with its payment. Daniels on Beg. Inst., 171.

But citations from the adjudications of other states, where no similar statute regulates the admissibility of evidence, are altogether inapplicable here. To permit the introduction of such proof by parol would violate the plain meaning of the statute (art. 206), and would be opposed to the policy of the law, which was doubtless designed to relieve the courts of the embarrassing questions and controversies which, without stint, would necessarily spring up in-determining what acts or expressions would or would not amount to a waiver of diligence, and to provide a fixed rule upon that subject, adapted to our people, our times and our system of laws.

Again, if the liability of McKenzie was wholly discharged, as we think it was, and the debt, remained as the debt of Marion College, his parol promise to pay it was a promise " to pay the debt of another, and therefore invalid. If we look at the provision of the statute requiring diligence, and limiting the period within which suit may be brought, as a law of limitation, as was the view taken of it by the supreme court in Locke v. Huling, 24 Tex., 312, and that the debt as against McKenzie was wholly barred, then it could not be revived except by a written acknowledgment. P. D., art. 4617a.

But it is urged that the mortgage made by McKenzie and wife bound him to pay the debt to Stroop, and is a continuing acknowledgment in writing of his liability on the draft. How, the mortgage speaks for itself, and it seems to be carefully worded to convey the very opposite idea. It is certainly not a security for McKenzie’s indorsement, but it binds the land only on the condition 66 that B. F. Hawkins shall pay or cause to be paid to the said J. L. Stroop $596, which is evidenced by an order on said Hawkins in favor of J. W. P. McKenzie for said amount, dated July 10, 1872, and accepted the same dajr by said Hawkins.” The mortgage stands unaffected by McKenzie’s release as indorser. It still remains effectual as security for the payment, by Hawkins, of the amount specified according to its terms.

That McKenzie is not liable upon the memorandum signed by Bay for the payment1' of interest at two and one-half per cent, per month scarcely needs serious discussion. It is not signed by him, he is in no sense party to it or liable upon it, it forms no part of his contract of indorsement; nor is the allegation of his connection with it so as to make him liable upon it (in itself wholly insufficient to .charge Mm with any liability) supported by any proof whatever. It seems an obligation for the benefit of Stroop, made by Fry, possibly at the request of McKenzie, and had he designed it as obligatory upon himself he doubtless would have signed it; but it is executed in Ms absence, long after ■ the transfer of the draft.

We do not doubt that if, for the loan of money from Stroop, McKenzie had, at the date of this transaction, undertaken to pay interest at two and one-half per cent, thereon, even by parol, such a contract" could be enforced against him, but it cannot be tacked on to his obligation as indorser. It would constitute a separate and independent cause of action against Mm.

1. We conclude, therefore, that the court erred, for the reasons indicated, in overruling defendant’s exceptions to the plaintiff’s amended answer.

2. That the court erred in permitting the introduction of the parol testimony.

3. That it erred in the judgment rendered, and therefore this cause should be reversed.