Cost v. MacGregor , 124 W. Va. 204 ( 1942 )

I fully concur with the majority as to the necessity of a reversal in this case, but I would place the plaintiff's right to proceed on the note wholly upon equitable principles which became applicable immediately when he, an accommodation indorser, was called upon to, and did, pay the note. I am not at all certain that any additional rights accrued to him by reason of the pretended "assignment" of the instrument, or that any vested in him by virtue of any statute, applicable to the situation.

The note was paid, not sold. Banks, in regular course, do not sell notes, but require their payment by those liable therefor. In this case, the plaintiff expressly says, both in his affidavit for attachment and in his bill of complaint, that the bank demanded payment and that he did pay. He nowhere pretends that he purchased the note. These statements are made in the bill of complaint in great detail, covering two full pages in the record, and are followed by allegations of subsequent demands for contribution from the defendants. Then ensues another numbered paragraph of the bill alleging that on the day on which the note was paid, the bank "after receiving from the said P. R. Cost the said sum of Five Thousand One Hundred Twenty-Two and 44-100 ($5,122.44) Dollars, assigned and endorsed said note, without recourse, to the said P. R. Cost." (Italics supplied). This unquestionably shows that the note was paid before it was attempted to be assigned. In this situation, what could the bank assign? What right, title or interest in the note had the bank left which could be the subject of an assignment? Could the bank have assigned the note to a third party so as to vest in him any character of right? And, if such an assignment to a third party would have been ineffective, how could it have any greater efficacy when made to the plaintiff? True, the note was not, by its payment, actually discharged for all purposes, nor as to all parties, but all the rights of the bank were thereby discharged. It could not, itself, maintain any sort of action on the note, or make any claim by virtue of it, hence, it could not transfer or confer upon anyone else any such rights with relation thereto. The payor acquired undoubted rights by his payment, but they were such rights only as accrued to him by the act of payment, independent of the "assignment." The assignor of a past due negotiable instrument, even without recourse, assumes substantial liabilities. Code, 46-5-6; Houston v. Lawhead, 116 W. Va. 652, 182 S.E. 780. We should, for that reason also, avoid a judicial pronouncement to the effect that the transaction here involved is in legal effect an assignment of the note itself.

Nor are we cited to any statute which may be construed as having created any rights in the plaintiff by reason of the payment of the note. Section 3, article 8, chapter 46, Code 1931, provides that: "When the instrument is paid by a party secondarily liable thereon, it is not discharged; but the party so paying it is remitted to his former rights as regards all prior parties * * *." (Italics supplied). This sentence postulates precisely the plaintiff's situation. He was secondarily liable; he paid the note; he therefore, is now "remitted to his former rights as regards all prior parties." But who are the "prior parties" in this case? The MacGregors were joint payees with the plaintiff and became with him joint endorsers. They never were "prior parties" as to him. The only prior party was the maker of the note. And what were Cost's "former rights"? He was merely an accommodation payee and indorser and never had any rights on the note against any party thereto prior to his payment thereof. This statute, therefore, avails the plaintiff nothing against the defendants, and no other statute is cited as a source of any rights accruing to him by virtue of his payment of the note.

Hence, I am persuaded that the plaintiff acquired no rights which he could enforce on or through the note, either by the "assignment," or by any statute applicable to the case. But equity, under these circumstances, creates for him a remedy on the note. In 60 C. J., pp. 754, 755, is found a readily available statement of the correct basis of the plaintiff's right to relief in this suit: "While the English rule, refusing subrogation to the debt, * * * has apparently been followed in some jurisdictions, * * * it is the widely accepted American rule that, no matter what the effect of payment at law, it is, in equity, by virtue of the doctrine of subrogation, to be regarded as a purchase by the surety, and operating as an equitable assignment to him of the debt and all its evidences and incidents, so that he may enforce the same to the extent necessary to obtain reimbursement from the principal, or contribution from the cosurety."

The plaintiff has pleaded, distinctly and fully, abundant facts to entitle him, in equity, to be subrogated to all rights on the note which the bank had against the defendants prior to its payment by him, and which may be necessary to equalize the burden of the note's payment between him and them; and he is, therefore, entitled to prosecute his suit on that theory under the prayer for general relief.