Cohn v. Hitt
Cohn v. Hitt
Opinion of the Court
delivered the opinion of the Court.
This suit was instituted hy complainant, Cohn, to recover on a note for $3,000 against Hitt, as maker, and Gupton as first indorser.
Hitt applied to Cohn to aid him in borrowing $3,000, asking whether if he, Hitt, should procure his own note to he indorsed hy Gupton, Cohn could get it discounted at the Fourth National Bank. After making inquiry as to Gupton’s financial standing, Cohn agreed that if Hitt would bring him a note payable to that bank and so indorsed he would, for a fee of $100 (Cohn being a licensed securities dealer), take the note to that bank and procure it to be discounted. This was done, the bank, in accordance with its custom, requiring Cohn to indorse the note, he being a customer of that bank. It was explained to Cohn by Hitt that both he and Gupton were customers of another national bank, and
The note was renewed several times; on the first and every occasion Gupton’s name preceded that of Cohn as indorser. When the original note was taken up by the first renewal, Hitt became aware of the actual fact of Cohn’s indorsement, though from the outset he presumed that Cohn would be required, in accordance with the course of business, to indorse, and that he would accordingly do so. Gupton did not know of the indorsement of the several instruments by Cohn.
The chancellor decreed in favor of complainant Cohn against both defendants, but Gupton only has appealed.
His first contention is that, since he did not execute the note with the expectation or understanding that Cohn would figure in the transaction, or know that Cohn had done so, the latter could not, by his own act, bring about privity with, or liability on the part of, appellant. We can see no bearing that those facts have upon the rights of the parties. If the note, after the signature of Gupton was obtained, was diverted by being used with a person, or at a bank of discount other than the one agreed upon, there might be room for a contention of nonliability on the part of appellant.
No change in the mere subordinate steps in the plan for raising the money on a note thus indorsed for accommodation will constitute a diversion. If the note effected the substantial purpose for which it was designed by the parties, the indorser, though one for accommodation, cannot defend on the ground that the accommodation was not effected in the precise manner contemplated, where, as here, his interests have not been prejudiced. 1 Daniel, Neg. Inst. (6th Ed.), sec. 793.
The next insistence is that Cohn must be treated as a joint indorser, and therefore, cosurety, so to speak, with appellant; and, though it is conceded that Cohn purchased of the payee bank and took a transfer of the last renewal note at its maturity, -it is argued that he is entitled to recover from appellant no more than one half of the amount of the note.
At an early day it was held in this State, following the decision of the Supreme Court of the United States in McDonald v. Magruder, 3 Pet., 474, 7 L. Ed., 744, that a prior indorser is liable to every person whose name is placed on the note subsequent to his own, and who has been compelled to pay its amount.
The Negotiable Instrument Law (Act 1899, ch. 94) recognizes and embodies, and does not change this rule. Thus:
“Sec. 64. Where a person, not otherwise a party to an instrument, places thereon his signature in blank' before delivery, he is liable, as indorser, in accordance with the following rules:
“1. If the instrument is payable to the order of a third person, he is liable to the payee and to all subsequent parties. ...”
Section 68 defines the rights and liabilities of indors-ers inter sese:
“As respects one another, indorsers are liable prima facie in the order in which they indorse; but evidence is admissible to show that as between or among themselves they have agreed otherwise.”
It is not claimed that there existed any agreement between the indorsers express or implied, tending to change this order of liability. Indeed, the proof and theory of appellant is that he did not even know of the indorsement by Cohn, and the latter expressly stipulated that the note should be delivered to him with the name of Chip ton- indorsed thereon. Harris v. Jones, supra. -
Other assignments of error are disposed of in a memorandum for decree. Affirmed.
Reference
- Full Case Name
- Sam Cohn v. L. M. Hitt
- Status
- Published