Bisbing v. Graham

The opinion of the Court was delivered, by

Rogers, J. — Had suit been brought by Paynter, the payee of the note, it is beyond question, the maker would have been liable-to set-off, under the agreement given in evidence. But the note being a negotiable instrument, the doubt is whether Graham, to whom it is endorsed, be a bona fide holder, without notice, and, as such, not affected by the equities duly existing between the original parties. That Graham knew of the agreement between Paynter and Bisbing was not pretended; at least, there is no proof of it; nor is there any proof from which fraud can be inferred. • At the trial, the cause was not put on these grounds, but it was contended that, inasmuch as Graham, the endorse^ was the son-in-law of Paynter, the payee, and the assignment was made out of the usual course of business, and without recourse, there was enough to put him on inquiry, and consequently he stood in no better position than the payee. If the premises are admitted, the conclusion is inevitable. But, taken separately, the objections, as will be shown hereafter, amount to nothing; nor are they more to be regarded when taken together; for, if you add nothing to nothing, ad infinitum, it is still nothing. The fact that Graham was the son-in-law of Paynter weighs nothing in the scale, because a son-in-law, as such, is not bound to know that his father-in-law meditates a fraud, by a plain and palpable violation of his agreement. Nor is the fact that the transfer of the note assumes the form of an ordi *17 nary assignment, such a departure from the usual course of business, as to put the endorsee on his guard against the endorser. Although a blank endorsement in our commercial towns is the usual mode, yet in the country it is so frequently otherwise that it seldom if ever provokes inquiry or observation. That it is made payable without recourse, produces no effect, is ruled in Epler vs. Funk, ■ 8 Barr 468. In that the court properly ruled there was nothing proved in the case to put the endorse^ upon inquiry. That is the only question submitted to them on this head.

Exception is taken to the admission of Sarah Paynter, wife of David Paynter, the payee^, endorser, as a witness. She stands, as is conceded, in the same position with her husband. If he is competent, she is so also, and vice versa. That the husband is competent, is ruled in Epler v. Funk, 8 Barr 468; on the authority of Barnes v. Ball, 1 Mass. Rep. 73 , and Rice v. Stearns, 3 Mass. Rep. 225 . When an endorser is released, as here, he is competent, as is there expressly held, not to impeach, it is true, but to enforce payment of the note. For this purpose she was offered, and properly admitted. But was the court bound to non-suit the plaintiff on the ground that no action can be sustained against the maker of a lost note, without he proffers an indemnity ? That the defendant is entitled to indemnity, before he can be compelled to pay, I have no doubt; for it may be, that the note was endorsed in blank by Graham, and is now in the hands of a holder for value. The time of the endorsement does not usually appear on the bill. This is a contingency against which the maker is entitled to indemnity. The maker ought not to encounter any risk, as he is in no default. The inconvenience, if any, is one to which the holder has exposed himself, arising, perhaps, from his own carelessness, or, as would appear, from the neglect of his agent. In this, all the authorities to which I refer generally agree. But the question recurs, is the failure to indemnify in bar of the action, or, is it a prerequisite merely to the execution to enforce payment of the judgment ? In the absence of all direct authority, in this state at least, I incline to the latter view of the case. However the law may be, as to suit brought to recover on a lost note, (and I see no reason why there should be any difference,) we are of opinion that, when the note is lost after the commencement of the action, it is no objection to the rendition of judgment. Justice may be effectually administered by restraining the plaintiff from issuing his execution, without proper indemnity be given. This is an equitable power vested in the ■ courts, which will take care to do equity, having a proper regard to all the circumstances of each case. It was formerly supposed the courts of this State could not do complete equity, having no power over the costs, which were in all cases to be determined by the event. But this Was a narrow and contracted view of the law, long since exploded; and has now, happily, no *18 place in our system of jurisprudence. In cases depending on principles of equity, the courts have, in substance, the powers of a Court of Chancery, to be administered with the machinery, (sometimes clumsy, it is true,) of common law forms.

The judgment is affirmed, the record remitted to the District Court, with directions to exact indemnity before execution is permitted to issue.