Tatem v. Galloway , 235 Pa. 420 ( 1912 )

Opinion by

Me. Justice Moschziskee,

In 1908 the plaintiffs sold land to one Maddock and agreed to advance money for the erection of ten houses thereon, to be secured by a first mortgage on each house and lot. The buildings were commenced, and the defendant, Galloway, agreed to furnish the mill-work for the sum of $5,694; he supplied it to the value of about $2,000, but declined to deliver more until that sum was paid and the balance secured. An arrangement was then entered into whereby Maddock signed promissory notes to the order of the defendant, in the sum of $£>,000, and handed them to the plaintiffs; he also delivered to the latter mortgages for $2,500 each on two of the houses. The plaintiffs accepted the mortgages and the notes and took Maddock’s receipt for $5,000 on account of the $25,000 which they had agreed to advance; one of these notes was endorsed by the defendant and then by the plaintiffs, and the latter delivered it to the defendant, who again endorsed and had it discounted; this is the note in suit for $1,000. The mill-work was completely delivered, and the plaintiffs handed over certain other of the notes to the defendant, retaining the balance. Maddock failed, and the defendant, with other creditors, liened the houses. The notes were not paid at maturity and the plaintiffs were obliged to take up the present one at the suit of a subsequent endorser, and in turn they brought- this action against the defendant as a prior endorser. The defendant demanded a certificate against the plaintiffs for $4,000 and interest, a balance claimed to be due him, alleging that in order to facilitate him in getting his money anJ thus aid the operation, the plaintiffs had agreed to deliver the notes to him as the mill-work was shipped, and had contracted to sell the two mortgages for $2,500 each and pay the notes as they came due; and “by reason of the violation of their agreement to cash the two mortgages and to pay the notes the plaintiffs made themselves liable to the defendant for the payment of the full amount due on said notes.” The jury found for the defendant with a certificate for $4,488, and the plaintiffs have appealed. There are several assignments of error but it is only necessary to discuss the sixth, which complains of the refusal of judgment non obstante veredicto in favor of the plaintiff.

The principal contention of the defendant was that the plaintiffs had. entered into a definite binding contract with him to sell or cash the two mortgages and to pay the notes at maturity. While the plaintiffs contended that the mortgages were simply collateral for the notes, upon which they had become endorsers for the accommodation of the defendant upon his express written agreement that they should not be held liable in any manner, and that they had never contracted to cash the mortgages or pay the notes. The plaintiffs showed that they were prima facie holders for value, since they had been forced as endorsers to pay and take up the note. The defendant undertook to rid himself of his apparent liability as a prior endorser, by establishing the plaintiffs’ contractual obligation to relieve him from the payment of all the notes as they should fall due, and to provide for and take care of the same.

The proofs relied upon consisted of documentary and oral evidence. A review of the former, the material parts of which will be found fully briefed in the reporter’s notes preceding this opinion, fails to support the position taken by the defendant. On the contrary, standing alone, this evidence shows that the original proposition made by the defendant to the plaintiffs was not accepted, and that the counter proposition from the latter to the former was declined. After this, the contract between Maddock and Galloway, the declaration by the plaintiffs as to the capacity in which they held the mortgages and the accompanying letter from Dobbs, all tend to support the contention of the plaintiffs to the effect that the mortgages were simply collateral for the notes, and that the references to their sale which occur in several of the documents, merely had relation to a. suggestion made by the defendant that the plaintiffs should act as his agents in disposing of the securities for his account. Again, the letter of November 30,1908, from the defendant to the plaintiffs expressly acknowledges that the latter were accommodation endorsers without any liability to him, and plainly indicates that the mortgages were held by Dobbs for the defendant as collateral to secure payment of the notes. And finally, the agreement entered into by the defendant, as a member of the creditors’ committee, with the plaintiffs, whereby the mortgages in question were put in the general fund for the benefit of all of Maddock’s creditors, including the defendant, is inconsistent with the position taken by him in this action; and in this connection, it is to be noted that the $5,000 receipted for by Maddock, covering the two mortgages originally set aside for the defendant, was not included by the plaintiffs in the $16,-000 advances referred to in the agreement in question.

We have looked in vain for oral testimony supplemental to or explanatory of the documentary evidence, sufficient by itself or in connection with the former, to sustain a finding of such a contract or undertaking as contended for by the defendant. Throughout his testimony the defendant seems to assume that there was such a contract, but he nowhere states positively that the plaintiffs ever undertook to cash the mortgages and pay the notes, nor does he detail any conversation between himself and the plaintiffs from which such a conclusion could be drawn. In fact, when the plaintiffs produced witnesses in rebuttal and the trial judge asked what particular testimony was to be rebutted, counsel was unable to designate it; and this because there had been no real evidence of the agreement contended for by the defendant. But the witnesses for the other side said plainly and positively that the plaintiffs held the mortgages simply as collateral for the benefit of the defendant, that there bad never been any understanding to the contrary, and that the mortgages bad been repeatedly tendered to tbe defendant but be bad declined to accept them because tbe properties were not completed. Tbe defendant bimself, when upon tbe stand, stated, “They went ahead and finished eight bouses leaving my two out. That is why I would not accept tbe mortgages,” and again, “I wanted my two first mortgages which I am willing to take today.”

Tbe evidence was insufficient to support tbe verdict and certificate in favor of tbe defendant; on tbe contrary, thereunder tbe plaintiffs were entitled to binding instructions; tbe sixth assignment of error is sustained and judgment is here entered for tbe latter; tbe damages to be assessed in tbe court below.