71 or suit against the maker is not necessary where, because of absence from the state or absconding since the execution or assignment of the note, it is impossible or impracticable to sue. In such a case it is not necessary that the holder of the note shall attach property of the maker within the state 69 enforce a vendor's lien.70 But it is generally held that temporary absence is not sufficient to excuse suit; neither is removal from the state long after the note became due,72 nor mere absence from the county. So the fact that the attorneys for the holder of the note do not know the residence of the principal obligor on the note does not show that the residence of such obligor is unknown to the holder and cannot be ascertained by reasonable diligence, so as to excuse a suit against the principal obligor before, suing the indorsers. Moreover, if the holder elects to pursue the maker in a sister 73 74 state, he must use due diligence.75 If the maker was a nonresident at the time of the assignment, to the knowledge of the assignee, it is held in some states that he must show that he has pursued the 'maker with due diligence or that such pursuit would have been unavailing; but in other states a contrary rule prevails." The absence from the state of the holder of a note is no excuse for his failure to sue the maker to the first term of court, as required by a statute, in order to charge an assignor or an indorser.78 [ 680] 5. Insolvency of Maker or Acceptor. By express provision of the statute in some jurisdictions, and even in the absence of express provision to such effect, the insolvency of the maker of a note or other paper will excuse the bringing of suit against him in order to charge an indorser or an assignor, unless there is some provision in the statute 79 Va.-Drane v. Scholfield, 6 Leigh | nonresident after he has been sued | 586 (holding that, if one of the (33 Va.) 386. [a] Where three months before maturity the maker left the state, taking his property with him, and returned to the state eleven months after the maturity of the note, was sued on the day following his return, and regularly prosecuted to judgment and execution, there was sufficient diligence on the part of the holder to charge the indorser. Watson v. Robinson, 8 Blackf. (Ind.) 386. [b] Temporary visits of the maker to the state with property in his possession are immaterial. Titus V. Seward, 68 Ind. 456. 69. Barber v. Bell, 77 Ill. 490; Titus v. Seward, 68 Ind. 456; Sayre V. McEwen, 41 Ind. 109; Sims V. Parks, 32 Ind. 363; Bernitz v. Stratford, 22 Ind. 320; Huston v. Fatka, 30 Ind. A. 693, 66 NE 74. [a] In Indiana Burns Rev. St. (1901) §§ 7518, 7520 provide that the indorsee of a nonnegotiable bill of exchange may recover against the maker and, on due diligence, against any immediate or remote indorser. By 277 it is enacted that, in an action by an assignee of a claim not assigned by indorsement in writing, the assignor shall be made a defendant, except in actions on negotiable notes and bills of exchange. It is held that, where the maker of a nonnegotiable note moved out of the state after it was assigned by the payee, the holder would not be required to pursue the maker outside of the state, nor to resort to the attachment of the property of the maker within the state before suing the assignor. Huston v. Fatka, 30 Ind. A. 693, 66 NE 74. 70. Sayre v. McEwen, 41 Ind. 109. 71. Lemmons v. Choteau, 15 F. Cas. No. 8,239a, Hempst. 85; Bledsoe V. Graves, 5 Ill. 382; Hilborn V. Artus, 4 Ill. 344; Holton v. McCormick, 45 Ind. 411; Brinker v. Perry, 5 Litt. (Ky.) 194. [a] Continuance of nonresidence. -Under the Illinois statute, absence of the maker, in order to excuse the institution and prosecution of suit against him, must not only exist at the time of the maturity of the note, but it is also necessary to show a continuance of it up to the time when suit is instituted against the assignor. Bledsoe v. Graves, 5 Ill. 382: Hilborn v. Artus, 4 Ill. 344. [b] That the maker of a note is a transient and unsettled person is not sufficient to excuse the holder from using due diligence. Lemmons v. Choteau, 15 F. Cas. No. 8,239a, Hempst. 85. 72. Weil v. Sturgus, 63 SW 602, 23 KyL 644 (construing an Illinois statute); Hobbs v. Blackmore, 4 KyL 727. [a] In other words, the fact that the maker of a note has become a and served with process is no excuse for not issuing execution on the judgment and thereby perfecting the cause of action against the assignor. It is only where the maker becomes a nonresident between the assignment and the maturity of the note that it in any way affects the liability of the parties. Hobbs v. Blackmore, 4 KyL 727. 73. Roberts v. Kilpatrick, 5 Stew. & P. (Ala.) 96. To same effect Hogan v. Vance, 2 Bibb (Ky.) 34; Spratt v. McKinney, 1 Bibb (Ky.) 595. 74. Whitaker v. Brooks, (Tex. Civ. A.) 137 SW 921. 75. Drane v. Scholfield, 6 Leigh (33 Va.) 386. [a] Removal of maker from state. -Where the maker of a note was a resident of the state at the time when the note was made or when it was assigned, and afterward removed to an adjoining state, whether he is bound to pursue the maker in the adjoining state or not, if he elects to do so and fails to commence or to prosecute his suit against the maker with due diligence, he has no recourse against the assignor. Drane v. Scholfield, 6 Leigh (33 Va.) 386. 76. Bristow v. Jones, 1 Ala. 159 (holding also that, in an action against the indorser of a note which was indorsed while the maker was a nonresident, if plaintiff alleges that the maker is a nonresident, as an excuse for not suing him, the court will not presume that plaintiff was ignorant of the maker's place of residence at the time of the indorsement); Ivey v. Sanderson, 6 Port. (Ala.) 420; Stevens v. Alexander, 82 Ind. 407; Citizens' Nat. Bank v. Hubbert, 97 Ky. 768, 31 SW 735, 17 KyL 515 (holding that an assignee of a note could not hold an assignor without suing the maker, a corporation of another state, having its chief place of business and all its property therein, in such other state, although it was insolvent and its property was in the hands of a receiver, it not appearing that he was in any way prevented from bringing suit in such state; and that a suit against the president of the corporation outside such other state was insufficient); Simpson v. Daniel, 1 B. Mon. (Ky.) 250 (holding that the assignor of a note, one of the makers of which was a nonresident at the time of the assignment, was not responsible on the assignment without suit and return of nulla bona against such obligor in the state and place of his residence; and a return of nulla bona on a judgment recovered against a nonresident obligor on a promissory note, who was only temporarily within the state, did not render the assignor responsible); Halsell v. Morgan, 7 Ky. Op. 405; Myers v. Miller, 3 Mo. makers of a joint note resides in the state of New York at the time of making the note, the assignee cannot maintain his action against the assignor in Missouri before he sues the makers, unless he shows that the suit would have been unavailing in New York). Compare however Bradley v. Patton, 51 Ala. 108; Miller v. McIntyre, 9 Ala. 638 (where the maker was not only a nonresident, but was also notoriously insolvent). 77. Prior v. Gentry, 11 Ga. 300 (holding that an indorser of a note is not discharged because the holder on request neglected to proceed against the principals until the note was barred by limitations as to them, where the maker resided out of the state, although he may have been a nonresident of the state at the time the note was executed, if there was no offer of indemnity to the holder against the consequences of risk, delay, and expense); Barber v. Bell, 77 III. 490; Mason v. Burton, 54 Ill. 349: Schuttler v. Piatt, 12 Ill. 417; Hill v. Planters' Bank, 3 Humphr. (Tenn.) 670. [a] In Illinois under the statute making an assignor of a note indorsed by him in the state liable without suit against the maker, if the maker had absconded, or if he resided without or had left the state when the note became due, it has been held that it is only necessary that the maker shall be outside the state at the maturity of the note, and that the fact that he resided in another state when he executed the note is immaterial. Barber v. Bell, 77 Ill. 490; Mason v. Burton, 54 Ill. 349; Schuttler v. Piatt, 12 Ill. 417. [b] In Tennessee the statute discharging an indorser of a bill of exchange, if on due notice the holder refuses to sue, does not apply to cases where the drawer resides without the state. Hill v. Planters' Bank, 3 Humphr. 670. 78. Rathbone v. Bradford, 1 Ala. 312. 79. U. S.-Wills v. Claflin, 92 U. S. 135, 23 L. ed. 490; Camden v. Doremus, 3 How. 515, 11 L. ed. 705; U. S. Bank v. Weisiger, 2 Pet. 331, 481, 7 L. ed. 441, 492; Violett v. Patton, 5 Cranch 142, 3 L. ed. 61 [aff 18 F. Cas. No 10,839, 1 Cranch C. C. 463]; Yeaton v. Alexandria Bank, 5 Cranch 49, 3 L. ed. 33: Janney v. Geiger, 13 F. Cas. No. 7,212, 1 Cranch C. C. 547; McIver v. Kennedy, 16 F. Cas. No. 8,830, 1 Cranch C. C. 424. Ala.-Miller v. McIntyre, 9 Ala €38. Colo.-Castagno V. Carpenter, 14 Colo. 524, 24 P 392. Conn.-Gillespie V. Wheeler, 46 Conn. 410; Rhodes v. Seymour, 36 Conn. 1; Ranson V. Sherwood, 26 Conn. 437; Prentiss v. Danielson, 5 to the contrary.8 80 Where the statute excuses suit against the maker of a note, in order to charge an assignor or an indorser, if such a suit would be "unavailing," the insolvency of the maker is sufficient excuse for not suing.81 If the property of Conn. 175, 13 AmD 52; Welton v. Del.-Pyle v. McMonagle, 2 Del. 468. 442. Ill.-Babcock v. Blanchard, 86 I11. 165; Kelly v. Graves, 74 Ill. 423; Hawkinson v. Olson, 48 Ill. 277, Ellsworth v. Varney, 83 Ill. A. 94. Ind.-Mishawaka First Nat. Bank v. Stapf, 165 Ind. 162, 74 NE 987, 112 AmSR 214, 6 AnnCas 631; Smythe v. Scott, 106 Ind. 245, 6 NE 145; Schmied v. Frank, 86 Ind. 250; Huston_v. Centerville First Nat. Bank, 85 Ind. 21; Dick v. Hitt, 82 Ind. 92; Willson v. Binford, 81 Ind. 588; Gwin v. Moore, 79 Ind. 103; Iles v. Watson, 76 Ind. 359; Williams v. Osbon, 75 Ind. 280; Couch v. Thorntown First Nat. Bank, 64 Ind. 92; Kestner v. Spath, 53 Ind. 288; Markel v. Evans, 47 Ind. 326; Bernitz v. Stratford, 22 Ind. 320; Reynolds v. Jones, 19 Ind. 123; Dugdale V. Marine, 11 Ind. 194; Bozell v. Hauser, 9 Ind. 522; Spears v. Clark, 3 Ind. 296; Black v. Wilson, 7 Blackf.| 532 (holding, however, that the insolvency of the maker was not proved); Foresman v. Marsh, 6 Blackf. 285; Youse v. McCleary, 2 Blackf. 243; Bullitt v. Scribner, 1 Blackf. 14. Mo.-Baker v. Blades, 23 Mo. 405; Clemens v. Collins, 14 Mo. 604; Pillard v. Darst, 6 Mo. 358; Lowenstein v. Knopf, 4 Mo. A. 594. To same effect Bailey v. Smock, 61 Mo. 213. S. C.-Arnold v. Waters, 42 S. C. L. 433. [c] Although he was heavily in debt, suit against the maker was not excused, where he had property subject to execution. Shufeldt v. Sutphen, 52 I. 255. the maker does not exceed what he is entitled to claim as exempt, he is insolvent; 82 but if the maker is able to pay any part of the debt, suit is not excused.83 It would seem to follow that the mere fact, that the maker has been adjudged a bankrupt is [b] Where, after the indorsement | property is encumbered does not exof a certificate of deposit to defend- cuse an indorsee from failure to levy ant, the drawer bank had no property on it, so as to charge the indorser, subject to execution and refused to where it is not shown that the enpay the same, the indorser was liable cumbrance was valid and that a levy thereon without regard to defendant's would prove unavailing. Clayes v. diligence in presenting the certificate White, 83 Ill. 540. To same effect for payment. Mishawaka First Nat. Roberts v. Haskell, 20 Ill. 59. Bank v. Stapf, 165 Ind. 162, 74 NE 987, 112 AmSR 214, 6 AnnCas 631. [c] Proof of the insolvency of the maker is an excuse for not suing the maker and justifies an action against the indorser. Costin v. Burton-Lingo Co., 57 Tex. Civ. A. 634, 123 SW 177. [d] "Insolvency" (1) of the maker of a note, so as to excuse the holder from suing thereon at the request of the indorser, is an absence of property of the debtor out of which the debt can be made by execution. Eagle Lake First Nat. Bank v. Robinson, (Tex. Civ. A.) 124 SW 177. (2) Under Rev. St. art 1204, authorizing the indorser of a bill to be sued without the maker being first sued, where the latter is "actually or notoriously insolvent," the maker must be without any property liable to execution, to relieve from the necessity of suing him before looking to the indorser. Smith v. Ojerholm, 93 Tex. 35, 53 SW 341. [e] Reputed insolvency is not enough to excuse suit. Johnson v. McDaniel, 1 Tex. A. Civ. Cas. § 1012. [f] Real estate.-Where the declaration in an action by the assignee against the assignor of a note avers that the maker is insolvent, a plea that he has real estate in the county of a value sufficient to satisfy the debt is good. Foresman v. Marsh, 6 Blackf. (Ind.) 285. To same effect Jacobs v. McDonald, 8 Mo. 565. [g] The burden of showing the maker's insolvency is on the holder. Summers v. Sheldon, 40 Ill. A. 189; Oglesby v. North Dallas Impr. Co., (Tex. Civ. A.) 28 SW 1016. Tex.-Smith v. Ojerholm, 93 Tex. 35, 53 SW 341; Smith v. T. M. Richardson Lumber Co., 92 Tex. 448, 49 SW 574; Fisher v. Phelps, 21 Tex. 551; Insall v. Robson, 16 Tex. 128; Toole v. Hemphill First Nat. Bank, (Civ. A.) 168 SW 423; Daniel v. Brewton, (Civ. A.) 136 SW 815; Eagle Lake First Nat. Bank v. Robinson, (Civ. A.) 124 SW 177; Costin V. Burton-Lingo Co., 57 Tex. Civ. A. 634, [h] The question of insolvency is 123 SW 177; Norton v. Wochler, 31 for the jury-Smith v. T. M. RichTex. Civ. A. 522, 72 SW 1025; Ogles-ardson Lumber Co., 92 Tex. 448, 49 by v. North Dallas Impr. Co., (Civ. SW 574. A.) 28 SW 1016; Hunt v. Wiley, 1 Tex. A. Civ. Cas. § 1214; Johnson v. McDaniel, 1 Tex. A. Civ. Cas. § 1012. Va.-Drane v. Scholfield, 6 Leigh (33 Va.) 386; Brown v. Ross, 6 Munf. (20 Va.) 391; Saunders v. Marshall, 4 Hen. & M. (14 Va.) 455; Goodall v. Stuart, 2 Hen. & M. (12 Va.) 105. W. Va.-Merchants' Nat. Bank v. Spates, 41 W. Va. 27, 23 SE 681, 56 AmSR 828; Morrison v. Lovell, 4 W. Va. 346. Contra Arthur v. McArthur, 10 Ky. Op. 340. [a] Illustrations.—(1) If the indorsee of a note, in attempting to enforce it by suit against the maker, does not order the attachment or execution to be levied on property notoriously of less value than the debt, he does not thereby lose his claim on the indorser to that amount. Sheldon v. Ackley, 4 Day (Conn.) 458. (2) The exercise of due diligence requires of the holder of a note the immediate institution of a suit by attachment against the maker, if he is possessed of attachable property sufficient to pay the note, and that neither the insolvency of the maker, nor the fact that the holder is ignorant that he is possessed of such property, is a sufficient excuse for a neglect to institute such suit. Holbrook v. Camp, 38 Conn. 23. (3) After suit has been brought by the assignee of a note against the maker, a failure to hold defendant to bail is not a discharge of the assignor, if the maker is insolvent. Pyle v. McMonagle, 2 Del. 468. [i] Evidence of insolvency.-In a suit brought by the holder of a note against an indorser, the mere fact that the maker of the note provided no funds with which to pay it at the time and place of payment, but suffered it to be protested for nonpayment, does not furnish prima facie proof that the maker was insolvent when the note fell due. Ranson v. Sherwood, 26 Conn. 437. 80. Kain v. Walke, 12 Ala. 184; 81. Wills v. Claflin, 92 U. S. 135, [a] Solvency of the maker at maturity of the note will not discharge the assignor from liability, unless his solvency continued until a suit against the maker could have been made availing. White v. Clayes, 32 111. 325. [b] The fact that the maker's [d] Continuance of insolvency.— Where the excuse is that the institution of suit would have been unavailing, it is not sufficient to show such excuse at the time of the maturity of the note, but it is necessary also to show a continuance of it up to the time suit is instituted against the assignor. Bledsoe v. Graves, 5 Ill. 382. To same effect Garrity v. Betts, 20 Ill. A. 327. in a [e] Presumption.-Where, suit by an indorsee of a note against the indorser, it appears that the maker had sufficient property subject to execution to pay the note, it may be presumed that a suit against him would have been availing. Clayes v. White, 83 Ill. 540. To same effect Roberts v. Haskell, 20 Ill. 59. [f] Want of knowledge by an indorsee that the maker had property subject to execution does not excuse him from proper exertions to collect from the maker, so as to render the indorser liable. Clayes v. White, 83. Ill. 540. [g] In an action against an indorser of a partnership note, evidence that the estate of one of the makers was insolvent, and that an execution issued in a suit against the other was returned unsatisfied, is sufficient to render the indorser liable thereon. Horton v. Brown, 45 Ill. A. 171. [h] Debts subject to garnishment. The assignor of a note cannot defeat an action brought against him by the assignee by merely proving that debts were owing to the maker, which might have been reached by trustee process without proving that the assignee knew of those notes. Pierce v. Short, 14 Ill. 144. [i] Suit in equity.-Where it is shown that a suit at law against the maker of a note, at its maturity and since, would have been unavailing, a right of recovery in the assignee against the assignor is established. A resort to a court of equity by the assignee against the maker is not necessary to charge the assignor. Phillips v. Webster, 85 Ill. 146. [j] Assignor not bound to point out property.-The assignor of a note is under no legal obligation to give information of the maker's property, when requested by the assignee, and his failure to do so will create no liability. The assignee must ascertain at his peril the fact of the insolvency of the maker. Kelly v. Graves, 74 Ill. 423. 82. Bozell v. Hauser, 9 Ind. 522. To same effect Dick v. Hitt, 82 Ind. 92; Williams v. Osbon, 75 Ind. 280; Campbell v. Gould, 17 Ind. 133. [a] Exempt property.-The mere possibility that a debtor may not insist on his legal right to retain such property as is exempt from execution does not render the prosecution of a suit and the issuing of an execution necessary before proceeding against the indorser. Pierce v. Short, 14 Ill. 144. 83. White v. Clayes, 32 Ill. 325 (holding that, where in an action by an indorsee against the indorser of a note, who seeks to recover on the 84 insufficient, unless it is shown that there are no available assets in the hands of the assignee in bankruptcy; nevertheless there is authority to the contrary.85 There is sufficient diligence where judgment is obtained against the maker of a note, and he is arrested on a ca. sa. and then discharged under the insolvent law.86 Time of insolvency. Insolvency at the time of the indorsement is not of itself sufficient where it is not shown to have continued,87 nor is insolvency long after the note became due.88 ground that a suit against the maker would have been unavailing because of his insolvency, it appears that by proper diligence a portion of the debt might have been recovered against the maker, plaintiff may recover against his indorser the residue of the debt which he could not have made by suit against the maker); Herald v. Scott, 2 Ind. 55; Blair v. Perpetual Ins. Co., 10 Mo. 559, 47 AmD 129; Smith v. Ojerholm, 93 Tex. 35, 53 SW 341. To same effect Somerby v. Brown, 73 Ind. 353; Sering v. Findlay, 7 Ind. 247; Dole v. Watson, 2 Ind. 177; Pillard v. Darst, 6 Mo. 358. [a] Ability to pay any part of debt. (1) The assignee, when he omits to sue the maker of a note on account of insolvency, must prove, in a suit against the assignor, the maker's inability, from want of property liable to execution, to pay any part of the given debt. Herald V. Scott, 2 Ind. 55. (2) The maker of a note who has the means of paying a sufficient portion of the debt to make it worth a suit is not so insolvent as to entitle the assignee to recover of the assignor without first recovering against the maker. Blair v. Perpetual Ins. Co., 10 Mo. 559, 47 AmD 129. [b] What constitutes insolvency within meaning of the statute.-A debtor is not insolvent when any part of the debt can be made by execution. Smith v. Ojerholm, 93 Tex. 35, 53 SW 341. 84. Somerby v. Brown, 73 Ind. 353; Hayne v. Fisher, 68 Ind. 158. | Proof of the return of an execution "no property found" is not indispensable, in most states, in order to establish that a suit against the maker of a note would have been unavailing; 89 but the contrary is held in Kentucky 9o and Alabama.o1 [§ 681] 6. Waiver. The assignor or the indorser of paper may waive his right to insist that diligence shall be used against the maker 92 by a provision in the note;93 by an agreement before the maturity of the note; by requesting the holder not to sue;93 where the maker has been discharged, 86. Bullitt v. Scribner, 1 Blackf. 87. Smythe v. Scott, 106 Ind. 245, 6 NE 145. To same effect Fisher v. Phelps, 21 Tex. 551. 88. Spears v. Thompson, 30 Ind. A. 267, 65 NE 928. [a] The maker might have been solvent when the note became due," and have so remained for some years thereafter. Spears v. Thompson, 30 Ind. A. 267, 65 NE 928. commercial paper will constitute a waiver of suit by the assignor of paper not commercial); Harrison v. Monmouth Nat. Bank, 108 Ill. A. 493 [aff 207 111. 630, 69 NE 8711; Owensboro Sav. Bank, etc., Co. v. Haynes, 143 Ky. 534, 136 SW 1004; Ketterson v. Inscho, 55 Tex. Civ. A. 150, 118 SW 626. [a] Reason for rule.-This requirement is imposed for the benefit and protection of the indorser or the assignor, and as between him and the indorsee he can waive the condition. Harrison v. Monmouth Nat. Bank, 103 Ill. A. 493 [aff 207 111. 630, 69 NE 871]. [b] Applied to accommodation indorser.-A stipulation in a note that the parties thereto, including the makers and the indorsers, waive pre89. Castagno v. Carpenter, 14 Colo. sentment for payment, notice of non524, 24 P 392; Springer v. Puttkamer, payment, protest, notice of protest, 159 Ill. 567, 42 NE 876 [aff 58 Ill. A. and diligence in bringing suit against 675]; Phillips v. Webster, 85 Ill. 146 any party thereto applies to an ac(holding that, in a suit by the as- commodation indorser who, if a suresignee against the assignor of a note, ty, waives the right given by Ky. St. an allegation of the insolvency of the $ 4668 (Russell St. § 2036), authormaker as an excuse for want of dili-izing a surety to require the creditor gence by suit is prima facie estab- to sue the principal obligor, and he lished by the return of executions in cannot afterward give notice and inother cases against the maker nulla sist on the diligence required by the bona). See also Willson v. Binford, statute. Owensboro Sav. Bank, etc.. 81 Ind. 588 (holding that, where the Co. v. Haynes, 143 Ky. 534, 136 SW maker of a note is insolvent, and no 1004. part of the debt could have been made if judgment had been recovered and execution issued thereon with due diligence, the assignee may have his action against his immediate or any remote indorser, whether he used due diligence or not). 93. Metzger v. Hubbard, 153 Ind. 189, 54 NE 761; Atkinson v. Skidmore, 152 Ky. 413, 153 SW 456; Swope v. Boone County Deposit Bank, 101 SW 334, 31 KyL 48; Williams v. Rosenbaum, (Tex. Civ. A.) 79 SW 594 (holding that a waiver in a note of diligence in suing enters into the contract of an indorser, and that delay in such case short of the period of limitations does not relieve him from liability). 90. Miller v. Browning, 89 SW 3, 28 KyL 175; Pritchett v. Hape, 51 SW 608, 21 KyL 408 [reh den 53 SW 29, 21 KyL 781; Francis v. Gant, 80 Ky. 190; Spratt v. McKinney, 1 Bibb (Ky.) 595; Smallwood v. Woods, 1 [a] Illustrations.-(1) An inBibb (Ky.) 542; Hobbs v. Blackmore, dorsement by payee on the back of a 4 KyL 727. To same effect Bryan v. note as follows, "For value received Perry, 5 T. B. Mon. (Ky.) 275; Clair I hereby sell and assign the within v. Barr, 2 A. K. Marsh. (Ky.) 255, 12 note to.. and guarantee the payAmD 391. But compare Roberts v. ment and collection of the same, and Atwood, 8 B. Mon. (Ky.) 209 (where agree to pay all attorney's fees, and the maker had been declared a bank- do waive presentment for payment, rupt on his own petition in bank-protest and notice of protest and nonruptcy). payment of the same,' constitutes a direct undertaking to pay said note, on which the indorser is liable absolutely and unconditionally at the suit of his own or any subsequent assignee, and under which the assignee is not required to attempt collection from the maker. Metzger v. Hubbard, 153 Ind. 189, 190, 54 NE 761. (2) An indorser of a note waiving demand, protest, notice of protest, and legal diligence to enforce collection must, as between himself and the indorsee, prosecute a right of action against the maker; and the indorsee may rely absolutely on the indorser and need not enforce collection against the maker. Atkinson v. Skidmore, 152 Ky. 413, 153 SW 456. [a] Due diligence on the part of the assignee of a note requires him to file his claim against the bankrupt estate. Somerby v. Brown, 73 Ind. 353; Hayne v. Fisher, 68 Ind. 158. 85. Wills v. Claflin, 92 U. S. 135, 23 L. ed. 490; National Bank of Commerce v. Booth, 17 F. Cas. No. 10,036, 5 Biss. 129; Williams v. Nesbit, 65 Ind. 171 (holding that, in a suit against an indorser of a note on which a judgment had been obtained with due diligence against the maker and an execution issued thereon, a return of nulla bona was sufficient to fix the liability of the indorser, and it was not competent for him to "The rule is settled in this state prove that the estate of the maker that an assignee on a promissory in bankruptcy would pay a percent-note, to hold his assignor liable, must age on his debts); Commonwealth sue the maker at the first term and Bank v. Allen, 11 KyL 268 (holding that, where the obligor in an assigned note has taken advantage of the Bankrupt Law, the assignee is not required, in order to preserve his recourse against the assignor, to prosecute the obligor to insolvency, that having already been adjudged in the bankruptcy proceeding); Lowenstein v. Knopf, 4 Mo. A. 594 (holding that where the maker of a nonnegotiable note is, at the maturity thereof, bankrupt, the assignee and the holder of the note may at once sue the assignor, without waiting for final distribution of the estate of the bankrupt maker, the bankruptcy of the maker being a breach of the implied warranty of the assignor). [a] Discharged in bankruptcy or insolvency. (1) A suit against the maker of a note is not necessary to entitle the holder to sue the assignor, obtain a return of 'No property [a] The mere insolvency of the 91. 769. Bishop v. Bradford, 16 Ala. 92. Caulfield v. Finnegan, 114 Ala. 39, 21 S 484 (holding that anything which will constitute a waiver of demand and notice by the indorser of 94. Stafford v. Bruce, 10 KyL 187; Hiatt v. Field, 8 Ky. Op. 740. [a] Where there are several notes of a series, some due and others not due, one such agreement may be made to apply to all. Stafford v. Bruce, 10 KyL 187. 95. Brown v. Fowler, 133 Ala. 310, 32 S 584; Schmied v. Frank, 86 Ind. § 681] BILLS AND NOTES 98 time does not relieve the holder of the duty to sue the maker.99 Likewise, if the request not to sue is revoked, due diligence to sue the maker must then be exercised.1 Under some statutes, a waiver is required to be in writing.2 by consent to delay or the like;96 or by any act, request, or promise of the indorser or the assignor inducing the holder to delay suit against the maker.97 However, consent to delay in suing is not a waiver So of the necessity for suit at some future time." a waiver in a note of objections to extensions of 250; Huston v. Centerville First Nat. | Share, 44 Ind. 390; Brown v. Robbins, | the assignee of a note, shortly after Bank, 85 Ind. 21; Hoffman v. Hol-1 Ind. 82; Nance v. Dunlavy, 7 Blackf. lingsworth, 10 Ind. A. 353, 37 NE 172; Brown v. Robbins, Smith 14. Iowa.-Friend v. Beebe, 3 Greene 960; Krachts v. Obst, 14 Bush (Ky.) 34; Stafford v. Bruce, 10 KyL 187. 279. Ky.-Stafford v. Bruce, 12 SW 280, [a] Thus (1) where the holder of a note was induced to delay suit against the maker by the request of the indorsers and by their promise to pay the note, in a suit against them thereon, evidence of the solvency and property of the maker of the note at its maturity is irrelevant. Brown v. Fowler, 133 Ala. 310, 32 S 584. (2) Where the assignor of a promissory note requested the not to bring suit signee thereof against the maker of the same at its maturity or afterward and to give such maker time to pay the note, such request was a reasonable and valid excuse for the failure of the assignee to use due diligence in the collection of the note against the maker. Huston v. Centerville First (3) Where an Nat. Bank, 85 Ind. 21. indorser and an indorsee of a note secured by mortgage agreed that the latter should forego suit on the note and mortgage until he was requested to sue by the indorser, such indorser could not complain that, when the mortgage was foreclosed, the mortgaged premises were sold at sheriff's sale for one dollar, and that at the time of the indorsement the land was worth one thousand dollars over and above the encumbrances, since it must be presumed that the disadvantageous sale resulted from the dethe lay foreclosure in instituting suit. Schmied v. Frank, 86 Ind. 250. (4) If, on the failure of the maker of a note to meet the obligation, an indorser told the holder not to proceed to collect it, but to try to induce payee to discharge it, and the holder induced to forego taking the necessary steps to fix the indorser's liability, there was a waiver by the indorser of the necessity for taking such steps, and his liability attached. Hoffman v. Hollingsworth, 10 Ind. A. 353, 37 NE 960. (5) Where defendants signed their names on the back of a note, and when it fell due begged for time and promised to pay when the money was obtained, they could not subsequently take advantage of plaintiff's failure to sue at the maturity of the note, such failure being at their solicitation Krachts v. Obst, (6) The assignor 14 Bush (Ky.) 34. of several notes, after requesting the not to sue the makers, assignees wrote a letter to the assignees asserting that he was not liable, but calling upon them to unite with him in an effort to make the notes out of certain property mortgaged to him by the maker of the notes, to inIt was demnify him against loss. held that this letter was but the expression of a willingness to trust the the only suit equity proceeding as which could be instituted, or was at all necessary, to ascertain what sum could be coerced out of the makers of the notes, and that it was not a withdrawal of his previous request not to sue. Stafford v. Bruce, 10 KyL was 187. 96. Ala.-Walker v. Wigginton, 50 Ala. 579; Lodor v. Gayle, 29 Ala. 412; Lockett v. Howze, 18 Ala. 613; Foster v. Stafford, 14 Ala. 714; Litchfield v. Allen, 7 Ala. 779. Ill-Morgan v. Peet, 32 Ill. 281: Telford v. Garrells, 31 Ill. A. 441 [aff 132 III. 550, 24 NE 573]. 86 Ind. Ind. Schmied v. Frank, 250; Huston v. Bank, 85 Ind. 21; Lomax v. White, 83 Ind. 439; Davis v. Leitzman, 70 Ind. 275; Lowther v. er [a] Illustrations.-(1) Where an [b] Waiver does not prevent suit. [c] Explaining waiver.-Where an was an 97. Caulfield v. Finnegan, 114 Ala. 39, 21. S 484; Huston v. Centerville First Nat. Bank, 85 Ind. 21; Davis v. Leitzman, 70 Ind. 275; Lowther v. Share, 44 Ind. 390; Sims v. Parks, 32 Ind. 363; Friend v. Beebe, 3 Greene (Iowa) 279; Dotson v. Owsley, 141 Ky. 452, 132 SW 1037; Smallhouse v. American Nat. Bank, 77 SW 1113, 25 KyL 1435; Stafford v. Bruce, 12 SW 280, 14 SW 374, 12 KyL 280. [a] Thus, where the assignor of a note repeatedly assured the holders that he would see the makers and would have the note either paid or secured, thereby causing the holders to postpone suit on the note, he could Smallhouse v. not rely on their delay to prosecute, to escape liability. American Nat. Bank, 77 SW 1113, 25 KyL 1435. that he could find no property of the [c] In Alabama, (1) by statute, the holder is excused from bringing suit or issuing execution when, by any act or promise of an indorser, plaintiff is induced to delay bringing such suit. Brown v. Fowler, 133 Ala. 310, 32 S 584; Caulfield v. Finnegan, (2) This in114 Ala. 39, 21 S 484. Marshall cludes a promise of the indorser to pay, made after maturity. v. Bishop, 140 Ala. 206, 37 S 324. (3) Such a promise need not be in writing. Brown v. Fowler, 133 Ala. 310, (4) There is a sufficient 32 S 584. (5) The fact that consideration for the promise. Brown v. Fowler, supra. the holder afterward recovered judgment against the maker was not a Brown v. (6) Code §§ 1778waiver of such promise. Fowler, supra. 1780 provide that, where the amount due on nonnegotiable paper assigned exceeds one hundred dollars, the assignment may be converted into an absolute undertaking by suit against the maker at the first term of court, unless the time for bringing it has dorser in writing, and that suit is been extended or waived by the inexcused "when, by any act or prominduced to delay bringing" it, etc. ise of the indorser, the plaintiff is It is held that a "promise" is not shown by evidence that one of the holders told the indorser that nothing could be made out of the maker, and that the indorser said that he did not expect them to make anything out of him, but wanted them to wait until the maker died and see if the maker's wife would not pay it out of the insurance money she would then receive. Caulfield v. Finnegan, 114 Ala. 39, 21 S 484. 98. Thomason v. Cooper, 57 Ala. 560; Walker v. Wigginton, 50 Ala. 579; Bates v. Ryland, 6 Ala. 668. [a] Illustration.-An indorsement, by payee, of paper not commercial, as follows, "I indorse the within until paid," is a waiver of suit against the with the suit not dispense maker for an indefinite period but does not brought against the maker and render him discharged if suit is primarily liable; and the indorser is against the maker before the statute of limitations bars an action on the Thomason v. Cooper, 57 Ala. 560. V. Anderson Fdy., Matchett 99. note. etc., Works, 29 Ind. A. 207, 64 NE 229, 94 AmSR 272. [a] That a nonnegotiable note, not by the law merchant, governed of the time for payment given the waives all defenses of the extension drawers or the indorsers does not relieve the holder from the rule requirorder to hold an indorser, but when ing diligence against the maker, in the note falls due after the extenFdy., etc., V. Anderson sion, the rule as to diligence applies. Works, 29 Ind. A. 207, 64 NE 229, 94 Matchett AmSR 272. 1. Free v. Kierstead, 16 Ind. 91. 2. Caulfield v. Finnegan, 114 Ala. [b] Estoppel to deny that suit would have been unavailing.-Where 39, 21 S 484; Litchfield v. Allen, 7 Ala. Waiver after discharge. Even after an indorser or an assignor is discharged by the laches of the holder, he may waive the prior delay so as to bind 3 him, provided he had knowledge of the facts; but the intent to waive, in order to be effective, must be clear.5 XX. WHO ARE HOLDERS IN DUE COURSE [ 682] A. Scope of Subdivision. This subdivision treats merely of who are holders in due course. The defenses which can or cannot be set up against the holders in due course are considered hereafter, as are questions relating to presumptions and burden of proof in connection with holders in due course. What law governs the determination of the question has already been noted." [§ 683] B. Importance of Question. The rule that a holder in due course holds the instrument free from any defects of title of prior parties and free from defenses available to prior parties among themselves,10 while a holder not in due course is subject to the same defenses as if the instrument was nonnegotiable," reiterated by the Negotiable Instruments Law,12 makes it important to determine whether a holder is one in due course, since he is greatly protected against defenses by the maker if he is such a holder while he stands in the shoes of 779. To same effect Kampmann v. Williams, 70 Tex. 568, 8 SW 310; McKenzie v. Harris, 2 Tex. Unrep. Cas. 180. But see Brown v. Fowler, 133 Ala. 310, 32 S 584 supra note 97 [c] (1). [a] In Alabama the act of 1828 requiring the written consent of the indorser to authorize delay in the indorsee in suing the maker of a note applied only where the sum due did not exceed fifty dollars, and in other cases a verbal consent was binding on the indorser. Litchfield v. Allen, 7 Ala. 779. 3. Morgan v. Peet, 32 Ill. 281, 41 Ill. 347. But see Riggs v. Covenant Mut. L. Assoc., 49 SW 190, 20 KyL 1260 (holding that, where the assignor of a note has been released from liability by the laches of the assignee, his request for further indulgence does not revive his liability); Stafford v. Bruce, 12 SW 280, 14 SW 374, 12 KyL 374. [a] Thus, when an indorser promises to pay, after such laches on the part of the holder as would operate to release him from his liability, with knowledge of the facts which would constitute such release, he will be held liable on his new promise, regardless of the question of the solvency or insolvency of the maker. Morgan v. Peet, 32 Ill. 281, 41 Ill. 347. 4. Morgan v. Peet, 41 Ill. 347. [a] Ignorance of facts. Where the liability of an indorser of a note has been discharged by the failure of the holder to bring suit against the maker in due time, and the holder relies on a new promise to pay, made by the indorser after such discharge, such new promise, to be binding, must have been made with knowledge of the facts from which the discharge arose. If, however, the indorser had knowledge of such facts, whether he knew that by the rules of law they would operate to discharge him is immaterial. Morgan v. Peet, 41 Ill. 347. 5. Prentiss v. Danielson, 5 Conn. 175, 13 AmD 52. his transferor if he is not such a holder. [684] C. Definition.13 In the Negotiable Instruments Law the term "holder in due course" is used as an equivalent for the old expression "bona fide holder for value without notice,' 14 and inasmuch as such statute is in force in most of the states in this country the term "holder in due course" will be used herein instead of its equivalent "bona fide holder." Independent of statute, in order to constitute one a holder in due course of a bill or a note, so as to protect him from equities and defenses available between antecedent parties, either he or some one through whom he traces title must be a holder in good faith for value, before maturity, in the usual and ordinary course of business, and without notice of dishonor or of any fraud, defect of title, illegality, or other defense that would defeat recovery between such antecedent parties.15 To repeat, it is necessary that the instrument be taken by the holder not a waiver of diligence, so as to 6. Bona fide purchasers: Of personal property in general see Of as warehouse receipts see Ware housemen [40 Cyc 422]. Reformation of instruments against see Reformation of Instruments [34 Cyc 956]. 7. See infra §§ 999-1066. 8. See infra §§ 1287-1332. 9. See supra § 184. 12. See statutory provisions. 13. [a] Under California statute 14. Bluthenthal v. Columbia, 175 15. U. S.-Washington First Nat. Ala.-Bluthenthal v. Columbia, 175 Ala. 398, 57 S 814; Rudulph v. Brewer, 96 Ala. 189, 11 S 314; State v. Cobb, 64 Ala. 127; Barney v. Earle, 13 Ala. 106; German-American Nat. Bank v. Lewis, 9 Ala. A. 352, 63 S 741. Ark. Hogg v. Thurman, 90 Ark. 93, 117 SW 1070, 17 Ann Cas 383; Reynolds v. Roth, 61 Ark. 317, 33 SW 105. Cal.-Russ Lumber, etc., Co. V. Conn.-Von Windisch v. Klaus, 46 Del. Otis El. Co. v. Ford, 27 Del. D. C.-Hutchins v. Langley, 27 App. 234. Ga.-English-American L. & T. Co v. Hiers, 112 Ga. 823, 38 SE 103: Montgomery v. Hunt, 99 Ga. 499, 27 SE 701; Stewart County Bank v. Adams, 96 Ga. 529, 23 SE 496; Robinson v. Darien Bank, 18 Ga. 65. [a] Thus, where an indorser, after he had become discharged by the laches of the holder, took an assignment of property from the maker as security or indemnity for indorsements and liabilities on the maker's account, and it appeared that he was under indorsements and liabilities for the assignor to the full amount of the property conveyed, aside from Ill-Hunter v. Clarke, 184 Ill. 158, the note in question, it was held that 56 NE 297, 75 AmSR 160; Stoner v. the taking of such assignment was Millikin, 85 Ill. 218; Gridley v. Bane, Ida.-Brown v. Miller, 22 Ida. 307, 125 P 981. 57 Ill. 529; Mulford v. Shepard, 2 IL. 583, 33 AmD 432. Ind. Wayne Agricultural Co. v. Cardwell, 73/ Ind. 555; Helms V. Wayne Agricultural Co., 73 Ind. 325, 38 AmR 147; Lawrenceburgh First Nat. Bank v. Lotton, 67 Ind. 256; Woollen v. Vankirk, 61 Ind. 497; Bremmerman v. Jennings, 60 Ind. 175; Hereth v. Merchants' Nat. Bank, 34 Ind. 380; Halstead v. Woods, 48 Ind A. 127, 95 NE 429. Iowa. Keegan v. Rock, 128 Iowa 39, 102 NW 805; Wormer v. Waterloo Agricultural Works, 50 Iowa 262; Sully v. Goldsmith, 32 Iowa 397; Clapp v. Cedar County, 5 Iowa 15, 68 AmD 678; Stein v. Keeler, 4 Greene 86; Temple v. Hays, Morr. 9. See also Irwin v. Deming, 142 Iowa 299, 120 NW 645 infra this note. Ky.-American Nat. Bank v. Madison, 144 Ky. 152, 137 SW 1076, 33 LRANS 597; Jett v. Standafer, 143 Ky. 787, 137 SW 513; American Nat. Bank v. Minor, 142 Ky. 792, 135 SW 278; Deavenport v. Green River Deposit Bank, 138 Ky. 352, 128 SW 88, 137 AmSR 386; Campbell v. Cincinnati Fourth Nat. Bank, 137 Ky. 555, 126 SW 114; Choteau Trust, etc., Co. v. Smith, 133 Ky. 418, 423, 118 SW 279 [quot Cyc]; Spencers v. Brigga, 2 Metc. 123. La.-Pavey v. tauffer, 45 La. Ann. 353, 12 S 512, 19 LRA 716. Me.-Burrill V. Parsons, 71 Me. 282; Hobart v. Penny, 70 Me. 248: Farrell v. Lovett, 68 Me. 326, 28 AmR 59; Wait v. Chandler, 63 Me. 257. Md.-Crampton v. Perkins, 65 Md. 22, 3 A 300. 111 106 Mass.-Smith V. Livingston, Mass. 342; Patten v. Gleason, Mass. 439; Estabrook v. Boyle, 1 Allen 412; Merriam v. Granite Bank, 8 Gray 254; Wheeler v. Guild, 20 Pick. 545, 32 AmD 231; Thurston v. MeKown, 6 Mass. 428. See also Briggs v. Cushing, 168 Mass. 71, 46 NE 401. Mich. Nichols v. Sober, 38 Mich. 678; Miller v. Finley, 2 Mich. N. P. 231. Minn. Stephens v. Olson, 62 Minn. 295, 64 NW 898; Robinson v. Smith, 62 Minn. 62, 64 NW 90; Fredin v. Richards, 61 Minn. 490, 63 NW 1031; Rochester First Nat. Bank v. Bentley, 27 Minn. 87, 6 NW 422. Miss.-Winstead v. Davis, 40 Miss. 785. Mo.-Neuhoff v. O'Reilly, 93 Mo. 164, 6 SW 78; Corby v. Butler, 55 Mo 398. |