COATES, ASSIGNEE, &C.

DICKINSON v. COATES.

RECENT AMERICAN DECISIONS.

Supreme Court of Missouri.

DICKINSON v. COATES, ASSIGNEE, &C.

A check on a bank not drawn on a particular fund, nor for the whole sum standingto the credit of the depositor, does not, before presentment and acceptance, operateeither in law or in equity as an assignment of so much of the deposit.

Where, after the drawing and delivery, but before the presentment and accept-ance of a check, the drawer makes an" assignment for the benefit of creditors, andthe assignee collects the whole deposit account from the bank, the checkholder is not

entitled to receive the amount of his check out of the fund so collected, but suchfund is distributable pro rata among all the creditors.

APPEAL from the Circuit Court of Jackson county.The facts were as follows:The Mastin Bank, a corporation organized under the laws of

Missouri for the purpose of transacting a general banking businessat Kansas City, on the 2d day of August 1878, drew and deliveredto plaintiff its check upon the Metropolitan National Bank at NewYork, as follows, to wit:

$500. State of Missouri. No. 196,225.The Mastin Bank, Kansas City, Mo.,

August 2d 1878.Pay to we order of M. H. Dickinson five hundred dollars.

JOHN J. MASTIN, Cashier.To Metropolitan National Bank, New York.

The evidence showed that the said Metropolitan National Bankwas the regular correspondent of the Mastin Bank and its de-pository in New York, and at the time the above check was drawnthe Mastin Bank had on deposit and to its credit in the said Met-ropolitan National Bank, subject to draft or check, between $50,000and $60,000; that on the 3d of August, the day after the abovecheck was drawn, the Mastin Bank closed its doors, and made anassignment, in due form of law, of all its assets of every description,to defendant (Coates), for the benefit of its creditors generally, ofwhich said assignment the said Metropolitan National Bank wasduly notified on the day it was made ; that the said check, drawnin favor of plaintiff, was not presented to the Metropolitan NationalBank till the 5th day of August 1878, when payment was refused

182 DICKINSON v. COATES.

and the check protested for nonpayment, of which due notice wasgiven ; that in the months of September and October 1878,defendant, Coates, as assignee, collected of said Metrdpolitan

National Bank between $50,000 and $60,000.Plaintiff claimed that these facts gave him a right to a judgment

and decree of the court, declaring that defendant, Coates, held themoney so collected of the Metropolitan National Bank to the useof plaintiff, and that Coates should be ordered to pay over to plain-tiff the sum of $500, the amount of said check and interest thereon.This claim was resisted by defendant, Coates, on the ground thatthe amount collected by him of said bank belonged to the trustfund held by him under the assignment, and could only be paid prorata on claims against the trust fund allowed in the course ofadministering the trust.

The Circuit Court made the order and decree as prayed for byplaintiff, and the defendant appealed.

NORTON, J. (after stating the facts as above.)-It will be per-ceived from the above statement that the controlling questionarising on this record is, did the check* in question, it beingneither drawn on any particular fund, nor for the whole sumdue the drawer from the drawee, nor confaining any words oftransfer, operate before its presentment and: acceptance by thedrawee as an assignment, either in law or equity, of so much ofthe deposit standing to the credit of the drawer in the New Yorkbank as the check called for? An affirmative answer to thisquestion affirms, and a negative one reverses, the judgment. In-asmuch as the. principle involved is one of importance, and uponwhich there is some conflict of opinion, counsel, in view of thedecision of the St. Louis Court of Appeals, in .the case of He Gradev. German Savings Bank Association, 4 Mo. App. 830, hasearnestly insisted that the authorities bearing upon the subject bereviewed by us with a view to the settlement of the question inthis state. The conflict of authorities cannot be reconciled and weshall not attempt it, but will only consider them for the purposeof ascertaining on which side of the question the weight of au-thority as well as reason lies. The question presented has beenanswered in the negative by the Supreme Court of the UnitedStates in the following cases: qhompson v. Riggs, 5 Wall. 663;Banks v. Whitman, 94 U. S. 843; Christmas v. Russell, 14 Wall.69 ; Bank of Republic v. Millard, 10 Id. 152. In the last case


cited, Justice DAvis, who delivered the opinion of the court,observed: "It is'no longer an open question in this court sincethe decision in the cases of the Marine Bank v. The Fulton Bank,2 Wall. 252, and of Thompson v. Riggs, supra, that the relationof banker and customer in their pecuniary dealings is that ofdebtor and creditor. It is an important part of the businessof banking to receive deposits, but when they are received, unlessthere are stipulations to the contrary, they belong to the bank,become part of its general funds, and can be loaned by it as othermoney. The banker is accountable for the deposits which hereceives as a debtor, and he agrees to discharge these debts byhonoring the checks which the depositors shall from time to timedraw on him. The contract between the parties is purely a legalone, and has nothing in the nature of a trust in it." * * * "Theholder takes the check on the credit of the drawer in the beliefthat he has funds to meet it, but in no sense can the bank be saidto be connected with the transaction. If it were true that therewas a privity of contract between the banker and holder whenthe check was given, the bank would be obliged to pay the check,although the drawer, before it was presented, had countermandedits payment, and although other checks drawn after it was issued,but before payment of it was demanded, had exhausted the fundsof the depositors. If such a result would follow the giving ofchecks, it would be easy to see that bankers would be compelled toabandon altogether the business of keeping deposits for customers."• * * "The right of a depositor, as was said by an eminentjudge, is a chose in action, and his check does not transfer thedebt or give a lien upon it to a third person without the assent ofthe depository. This is a well-established principle of law, and issustained by the English and American authorities."

In the case of Christmas v. Russell, supra, Justice SwAYNE,speaking for the court, said, that "a bill of exchange or check isnot an equitable assignment pro tanto of the funds of the drawerin the hands of the drawee."

The English authorities are to the same effect, of which the caseof ffopkinson v. Forster, L. R., 19 Eq. 74 (decided in 1873), isa type, where it was held that a check was not an equitableassignment of the drawer's balance at his bankers.

The courts of New York also return a negative answer to thequestion before us in the following cases: Lunt v. Bank of North


America, 49 Barb. 221; Chapman v. White, 2 Selden 412;.,Etna Bank v. Fourth National Bank, 46 N. Y. 82; Duncan v.Berlin, 60 Id. 151; Attorney-General v. Life Ins. Co., 71 Id.325. In the case of Lunt v. Bank of l7orth America, supra, itis said: "Checks drawn in the ordinary general form, not describingany particular fund, or not using any words of transfer of thewhole or any part of the account standing to the credit of thedrawer in the bank upon which they are drawn, but containingonly the usual request, directed to the bank, to pay to the order ofthe payee named a certain sum of money, are of the same legaleffect as inland bills of exchange, and do not amount to an assign-ment of the funds of the drawer in the bank, and there is noliability of the party upon whom such an instrument is drawnuntil after it is accepted, and until payment or acceptance it isalways revocable by the drawer."

In the case of the ..Etna National Bank v. Fourth NationalBank, supra, it is said: "The relation of banker and depositor isthat of creditor and debtor. Deposits on general account belong tothe bank, and are part of its general fund. The bank becomes adebtor *to the depositor to the amount thereof, and the debt canonly be discharged by payment to the depositor or pursuant to hisorder. Until payment or acceptance by the bank of a depositor'scheck, or assignment of the credit by the depositor and notice tothe bank, the deposit is subject to his order."

So in Pennsylvania, in the case of Loyd et at. v. MeCaffrey,46 Pa. St. 410, it was said by Justice STRONG, speaking for thecourt, that "it cannot be maintained that Taylor's check, withoutmore, amounted to an equitable appropriation of the funds in thehands of the banker to whom it was addressed; To make an orderor draft an equitable assignment, it must designate the fund uponwhich it is drawn."

So in Massachusetts, in case of Carr v. National SecurityBank, 107 Mass. 45, Justice GRAY, who delivered the opinion,speaking of general deposits, observed that "money depositedbecomes the absolute property of the bankers, impressed with notrust, and which they may dispose of at their pleasure, subjectonly to their personal obligation to pay an equivalent sumupon his demand or order. The right of the bankers to use themoney for their own benefit, is the very consideration for theirpromise to the depositor.- They make no agreement with the


holder of his checks. A check drawn by the depositor in commonform not designating any special fund out of which it is to be paid,nor correspondinj to the whole amount due him from the bankers atthe time, is a mere contract between the drawer and the payee, onwhich, if payable to bearer and not paid by the drawees, any holdermight doubtless sue the drawer, but, which passes no title, legal orequitable, to the payee or holder in the moneys previously paid tothe bankers by the drawer."

So in the case of Bullard v. Randall, 1 Gray 605, it was held:"That a check for a part of the drawer's funds in a bank consti-tutes no assignment of that part of such funds until presented forpayment and accepted by the bank, although verbally assented toby the cashier when absent from' the bank."

So in case of Dana v. National Bank, 13 Allen 445.In Maryland, in the case of Moses v. Franklin, 34 Md. 580, it

was held that a check does not operate as an assignment pro tantoof the fund on which it is drawn, until it is accepted or certified tobe good by the bank holding the fund ; and the doctrine of the caseof Chapman v. White, 2 Selden 412, was approved, where it washeld that a check before acceptance neither operates as an assign-ment nor creates any lien on the funds of the drawer. See, also,2 Add. on Cont. 493 ; Bylea on Bills 39 (note 1); 2 Par.on Notes and Bills 61 (note J.); also case of Bush v. Foote,decided by the Supreme Court of Mississippi in 1880, and reportedin 11 Rep. 94. We have been cited by counsel for plaintiff to anumber of authorities as establishing a contrary doctrine to thatassumed in those above referred to, and upon examination of themwe find but three states where the question has otherwise beenruled upon by the courts of last resort.

In South Carolina, in the case of Pogartie v. Stillman, 12 Rich.518, it was held by u divided court (the chief justice dissenting),that when a check is drawn by a depositor on a bank having suf-ficient funds to meet it, the holder, on giving notice to the bank,has the right to be paid, and if payment be refused may maintainan action against the bank on the implied promise which the lawraises in his behalf.

In Illinois, in the case of Munn et al. v. Burch, 25 Ill. 35, itwas held that " the check of a depositor on his banker, deliveredto another for value, transfers to that other the title to so much ofthe deposit as the check calls for." Upon an examination of this

VoL. XXXII.-24


case it will be seen that not a single authority, either English orAmerican, is referred to as maintaining the doctrine announced;but the conclusion reached is made to rest upon a judicial recog-nition of what is alleged in the opinion to be a universal customof bankers to allow depositors to withdraw their funds in parcels.This case was followed in 28 Ill. 168, also without the citation ofa single authority, Justice GATRON remarking that "the decisionof Munn v. Burch, supra, was not made till after the most matureinvestigation." The case of Munn v. Burch, supra, was also fol-lowed in the case of Bank v. Bank, 80 Illinois 212, and, asthe logical result of the doctrine enunciated, the court went so faras to say that "after a check had passed into the hands of a bonafide holder it is not in the power of tlie'drawer to countermand itspayment," a dodtrine not maintained by any authority that hascome under our observation.

In Iowa, in the case of Roberts v. Austin, Cbrbin & 0o., 26Iowa 315, it was held by a divided court that the holder of a checkcould maintain an action thereon against the drawer before accept-ance, the drawer having funds in his hands, and that a generalassignment of the drawer for the benefit of his creditors, afterdrawing the check but before the same is presented, will notinvest his assignee with the right to tle money represented by thecheck, nor affect the rights of the payee therein. The cases inKentucky to which we have been referred, of Buckner & Co. v.Sayre, 18 B. Mon. 745, and Lester & Co. v. Given, Jones & Co.,8 Bush 857, do not maintain the position contended for. Thesaid case of Buckner 6 Co. v. Sayre, supra, only decides that thedrawing of a bill of eichange by a debtor and its acceptance bythe drawee, is an appropriation of that fund to the holder of thebill, and that thereafter the drawer of the bill has no right to con-trol it, either by receiving or assigning it, and that a generalassignment of assets after a bill of exchange has been drawn andaccepted, will not pass the fund appropriated, and the ruling inthe case of Lester & Co. v. Given, Jones &' Co., supra, is basedsolely upon the case of Buckner v. Sayre, supra. So far fromthe case in Buckner v. Sayre, supra, being in conflict with theNew York and like cases cited herein from other states, it is inaccord with them. The decided weight of authority answers thequestion propounded in the beginning of this opinion in the nega-tive. This answer is returned by the Supreme Court of the United


States, the courts of last resort in Maryland, Massachusetts, NewYork and Pennsylvania, while an affirmative response is given bythe divided courts of Iowa and South Carolina, and by the case of

Munn v. Burch, 25 Ill. 35, which as an authority has been suf-ficiently adverted to in what has been said, and so far as this courthas heretofore been called on to pass upon questions kindred tothe one in hand it has ruled in accordance -with the doctrineannounced by the Supreme Court of the United States, and thecourts of Maryland, Massachusetts, New York and Pennsylvania.In the cases of State ex rel. Mississippi County v. Moore, 74 Mo.413, and of the State ex rel. v. Powell, 67 Id. 395, it was heldthat a general deposit created the relation of creditor and debtor;and in the case of Burnett v. Urandall et al., 63 Mo. 410, it washeld that a portion of a debt was incapable of assignment either atlaw or in equity, in the absence of a debtor's consent.

So in the case of Loomis v. Robinson, 76 Mo. 488, it was heldthat an assignment of part of a judgment was void both at law andin equity. If, as established by the above cases, the relationbetween depositor and banker is that of creditor and debtor, andthat a creditor cannot, either at law or in equity, assign a part ofa debt due him, without the debtor's consent, it must follow logi-,cally that the check held by plaintiff, being only for part of thedebt due the draw er and not having been accepted by the drawee,did not transfer to plaintiff either a legal or equitable right againstthe drawee to so much of the fund as the check called for, orgive him any lien thereon. In the case of St. John v. Rfomans,8 Mo. 382, it was held, Judge SCOTT delivering the opinion, that"it could not be maintained that the mere act of drawing a check

was an assignment of the amount for which it was drawn, to the

bearer." In our investigation of this question we have confinedour examination to the decisions of courts of last resort, and in thelight of the authorities we must answer the question presented bythis record in the negative, and hold that the fund sought to beappropriated by plaintiff to the payment of his debt, and in the

hands of defendant as assignee, is only subject to a pro rata distri-bution among the creditors of the Mastin Bank, of whom plaintiff

is one, whose claims have been allowed in due course of admin-istering the trust.

Judgment reversed and bill dismissed. All concur..

MERCHANTS' NAT. BANK v. COATES.

Supreme Court of Missouri.

MERCHANTS' NAT..BANK OF ST. LOUIS v. COATES, AssxGxE.

On a bill of interpleader filed by a bank against various claimants of a depositaccount, held, following Dickinson v. Coates, supra, that the assignee of the depositorfor the benefit of creditors was entitled to the fund as against holders of checksdrawn and delivered before the assignment, but not accepted by the bank.

APPEAL from the St. Louis Court of Appeals.

The opinion of the court was delivered byNORTON, J.-The Merchants' National Bank of St. Louis was

the correspondent and depository of the Mastin Bank at KansasCity, and, as such, had in its hands between $20,000 and $30,000.The said sum to the credit of the Mastin Bank was claimed byKersey Coates, in virtue of an assignment made to him on the 3dof August 1878, by the Mastin Bank, of all its effects and assetsfor the benefit of creditors generally, and payment thereof wasdemanded by him. 'The sum in the hands of the depository bankwas also claimed by various checkholders of checks drawn by theMastin Bank upon the Merchants' National Bank, eleven ofwhich were drawn to various parties on the 2d of August 1878;ten on the 1st of" August 1878, three on the 30th of July 1878;one on the 29th of July and two on the 31st of July 1878. Noneof these checks were accepted.

The Merchants' National Bank filed its bill in equity, settingforth substantially the above facts, bringing the funds in disputeinto court, and praying that the claimants thereof be required tointerplead, and that it might be discharged of all further liability.Interpleader Coates, as assignee, claimed the entire fund by virtueof said assignment, as against all other interpleaders who heldunaccepted checks drawn previous to the assignment, and who,in virtue thereof, claimed the fund, and the several checkholdersclaimed the fund as .against each other. The Circuit Court heldthat Coates, as assignee, was not entitled to the fund, and madea distribution of it to certain of the. checkholders, from whichjudgment, defendant Coates, as well as two of the checkholders,interpleaders, appealed to the St. Louis Court bf Appeals,where judgment was affirmed pro forma, from which defendant,Coates, and the Topeka National Bank and William Mulhall, have


appealed to this court. Under the ruling made at the presentterm of this court in the case of Dickinson v. Ooates, Assignee etal., supra, the judgment in this case must be reversed. It washeld in that case that a check drawn by a depositor upon his de-pository for part of the debt did not, till it was accepted, transferor assign to the holder either a legal or equitable claim to so muchof the fund as the check called for, nor did it give him a lienthereon. We must therefore hold, in the present case, that thefund in dispute is properly payable to defendant, Coates, as assignee,for pro rata distribution among the creditors of the Mastin Bank,whose claims have been or may be allowed by the assignee in duecourse of administering the trust.

The judgment of the St. Louis Court of Appeals is reversed,and the cause remanded to the St. Louis Court of Appeals, withdirections that the judgment of the Circuit Court be reversed andthe cause remanded to the Circuit Court, to be proceeded with inconformity with this opinion. All conpur.

The foregoing principal cases, Dick-inson v. Coates, and Merdiants' Nat.Bank of St. Louis v. Coates, lately de-cided in the Supreme Court of Missouri,present again, in an interesting and sat-isfactory form, the question, whether thecheckholder receives, as an incident ofthe check, a right of action against thebank or banker on whom the check isdrawn. The question has arisen invery many of the courts of this country,and it is a matter of regret that thelearned judge who delivered the opin-ions in the two principal cases, did notdeem it necessary to discuss the featuresof the cases which were most open todoubt and conjecture, as will be ex-plained later on.

All the important cases bearing onthe question have been cited by thecourt, and no further citations arenecessary here. The number 'of au-thorities supporting the position that thecheck does not constitute an equitableassignment pro tauto of the fund ondeposit, is certainly greater than thenumber which maintain the affirmative.

But I shall attempt to show that thelatter class of cases is supported byreason and commercial usage, while theerror of the former will be rationallyexplained and accounted for.

A careful reading of the cases, in-cluding the late cases from the SupremeCourt of Missouri, will disclose the fact,in almost every instance, that the courtshave failed to distinguish between thelegal effect of checks and unaccepteddrafts or bills of exchange. The differ-ence between these two classes of in-struments has an important bearingupon the question at issue. A check isan order on a bank or banker to pay tothe holder, out of the funds deposited bythe drawer, the sum mentioned in thecheck. An ordinary bill of exchange ordraft is an order upon an ordinarydebtor, drawn by the creditor, to pay tothe party named the sum set down inthe order. In the case of a bank orbanker, the deposit is made with theexpress or implied agreement that thedepositor may draw against the depositin any sum and in favor of any one.


That is the object of the deposit. Asbetween the depositor and depositary,this implied agreement or understandingclearly forms a part of the contract ofdeposit, and gives to the depositor theright to divide up the indebtednesswhich is created by the deposit into asmany debts as there are checks drawn,and as against the drawer the hank orbanker is bound in law to honor themas long as there are funds in possessionto cover them. In the case of an or-dinary bill of exchange, the order beingdrawn on an ordinary debtor,-he isunder no obligation to the drawer topay the same unless the draft calls forthe whole indebtedness, because thedrawer has not obtained his consent todivide up the debt into smaller ones,and the law protects him against anysuch attempt. His prior consent mustbe shown in order to place him underobligation to accept such drafts. Theseare such elementary principles that nocitation of authorities is required fortheir authentication. Now the burdenof the learned judge's opinion in theprincipal cases seems to be that, if it isheld that a check works an assignmentpro tanto, it will be the creation of newcreditors without the consent of thedebtor. That this would be true in thecase of an ordinary bill of exchange, ismanifest. But in the case of a check,the debtor, i. e. the bank, has alreadygiven his consent when he receives themoney on deposit.

Those who oppose the right of thecheckholder to sue-the bank, generallyrefer to the case of Mandeville v. Welch,5 Wheat. 286, as laying down ruleswhich are contrary to the claim. Butthis is erroneous. The words of JudgeSTon are calculated to form the veryfoundation upon which the claim can besustained. The following extract fromhis decision in the above-mentioned casewill explain: "It is said that a bill ofexchange is, in theory, an assignment tothe payee of a debt due from the drawee

to the drawer. This is undoubtedly true,where the bill has been accepted,whether it be drawn on general fundsor a specific fund, and whether thebill be in its own nature negotiable ornot; for in such a case the acceptor, byhis assent, binds and appropriates thefunds for the use of the payee. And tothis effect are the authorities cited at thebar. In cases also, where an order isdrawn for the whole of a particularfund, it amounts to an equitable assign-ment of that fund, and after notice tothe drawee it binds the fund in hishands. , But where the order is drawn,either on a general or a particular fund,for a part only, it does not amount to anassignment of that part or give a lien asagainst the drawee, unless be consentsto the appropriation by an acceptance;or an obligation to accept may be fairlyimplied from the custom' of trade or thecourse of business between the parties, asa part of the contract." Judge STORYevidently considered the consent of thedrawee to be the all-important elementin deterniining whether the payee wasan assignee pro tanto of the debt. Thelaw does not permit a creditor to createnew creditors for his debtor without his

- (the dehtor's) consent. If this objectionis removed by obtaining his consent,expressly or by implication, there is no-valid reason why the payee should notbe permitted to enforce the drawee'sobligation to pay,if a privity of contractcan be established between them. Inthe case of a check this consent is alwayspresent, as a necessary incident of thecontract of deposit.. The decisions are not uniform as tothe grounds upon which they base theright of the holder to sue. Some restupon the principle that, where a pro-mise is made for the benefit of a thirdperson, that third person may maintainan action upon it. This principle is aswarmly contested as the question whichis raised in the principal cases, and isapparently not in accord with the


fundamental principles of the law ofcontracts. (See annotator's article,Central Law Journal, vol. xi., p. 161.)If the right of the holder to sue canbe sustained at all, it can be moresafely supported on the theory of anequitable assignment. Here is theweakness, if any, of the courts whichfind themselves in the minority. Theconsent of the bank cuts no figure inthe case at all, for the bank has pre-viously given its consent, i. e., simul-taneously with and as a part of the con-tract of deposit.

The relation of depositary and de-positor has been repeatedly decided tobe that of debtor apd creditor. Thefunds, when deposited, become the pro-perty of the depositary, and the de-positor has only a chose in action. SeeBank of the Republic v. Millard, 10Wall. 152, and cases there cited. Ifthe check can be construed to be anassignment of the drawer's interest inthe deposit to the amount of the check,since that interest is a chwse in actionagainst the bank, coupled with the rightto 'divide it up into as many choses inaction as may suit him best, that in-terest would pro tanto be passed intothe hands of the checkholder, and investhim with the right of action against thebank to enforce payment, if there werefunds in its possession and under itscontrol, at the time of presentment anddemand. An endorsement on the checkby the payee, to pay to the order of ananother, works an assignment of thepayee's interes. in the check. If suchan endorsement assigns the endorser'sinterest in the check, what reasons canbe urged why the check does not assignthe drawer's interest pro tanto in thedeposit to the payee ? The drawer'sinterest is a chose in action as well as thepayee's. The difficulty which the judgesin the older cases experienced in ar-riving at such a conclusion, arose fromthe general non-assignability of chosesin action at common law. In Johnson v.

Coilings, I East 104, which was anaction brought by the endorsee of a billof exchange drawn on a promise of adebtor to accept it, Judge KExyoxsaid : "If we were to suffer the plain-tiff to recover on the general counts, wemust say that a chose in action is assign-able, a doctrine to which I never willsubscribe." Judge GaosE, in the samecase, said that "to permit the plaintiffto recover would virtually be makingall. coses in action assignable." Thesaihe idea seems to pervade all theolder reports. Now that the law per-mits such assignments to an almost un-limited extent, this objection to thecheckholder's right of action against thebank is removed. 'When a depositordraws a check on the bank it is evi-dently his intentifn to transfer to thecheckholder his interest in the depositto the amount of the check. The wordswhich are generally employed "pay tothe order of," "pay to the bearer," aresufficient to manifest that intention.Moreover it is unquestionably the gen-eral understanding of the business worldthat such is the case ; and this generalunderstanding will give to these wordsthe significance which they may notinherently possess, if thereby no funda-mental principle of law is violated.

The most serious objection to theassignment theory which has been raisedby the opposing decisions is, that to con-stitute an equitable assignment ofmoney, by means of an order, the ordermust direct the payment out of a par-ticular fund, and not generally out ofany to be received. In Loyd et al. v.McCaff'rey, 46 Pa. St. 410, JusticeSTRoNG said: "It cannot be main-tained that Taylor's check, withoutmore, amounted to an equitable appro-priation of the funds in the hands of thebanker to whom it was addressed. Tomake an order or draft an equitableassignment it must designate the fundupon which it is drawn." See to thesame effect, hillips v. Stagg, 2 Edw.

0 191

WEROiHANTS' NAT. BANK v. COATES.

ch. 108; Harrison v. Williamson, Id.430; Chapman v. White, 6 N. Y. 412.In equity an assignment will be validwhenever the thing assigned is capableof identification. It matters not whetherit be in existence at the time of assign-ment, or it is only a future possibility orexpectancy. " To make an assignmentvalid at law, the thing which is the sub-ject of it must have actual or potentialexistence at the time of the grant orassignment. But courts of equity willsupport assignments, not only of Closesin action and of contingent interests andexpectancies, but also of things whichhave no actual or potential existenceand rest in mere possibility; not indeedas a present positive transfer, operativein prasenti, for that can only be of athing in esse, but as a present contractto take effect and attach as soon as thething comes in esse:" Story's EquityJurisprudence, sect. 1040. So whetherthe funds drawn against be in the pos-session at the time that the check isdrawn, or are to be received subse-quently, the fact that the check is drawnagainst a particular bank or banker is asufficient particularization of the fund,in order to work an equitable Assign-ment pro tanto.of the fund on deposit.It is probable that, in the general as-signment to the defendant, Coates, forthe benefit of the creditors, $he clausewhich operated as an assignment of thedeposit only described it as being de-posited at and with a particular bank,giving its name ; and yet no one wouldquestion the right of the defendant todraw out the money, so far as the bankis concerned. There is here no clearerdescription of the thing assigned than inthe case of a check.

The opposing authorities only statethat the check effects an assignmentonly when it is accepted by the bank.See Bullard v. Randall, I Gray 605;Chapman v. White, 6 N. Y. 412. Theeffect of acceptance is to change theprimary liability from the drawer to

the drawee, and that liability, whenassumed by acceptance, is absolute andnot at all dependent upon the fact thathe has fands of the drawer wherewith topay it. If the check does not constitutean assignment before, it will not do soafter acceptance. The assignment pro-ceeds, if at all, from the act of thedrawer; it is his interest which is to beassigned, and the only effect whichacceptance would have upon it, wouldbe to make it binding upon the draweein cases where his express or impliedconsent to such assignment was not pre-viously obtained. This could obviouslyhappen only with a bill of exchange.If the check is in any sense an assign-ment, it is effectual without any furtherconsent on the part of the bank.

The liability of the bank is, of course,restricted only to such cases where thecheck has not been countermanded.The agreement of the bank or bankerwhich forms a part of the contract ofdeposit, and which is claimed .to passwith the check to the checkholder, is topay the check, if there are suffidentfunds in its possession and under itscontrol at the time of presentment anddemand. This being an essential partof the contract of deposit, the bank can-not be compelled to pay ihere paymentof the check has been countermanded bythe drawer before presentment by theholder; because countermanding is, sofar as the bank is-conoerned, equivalentto another disposition of the money,which, having taken place before pre-sentment of the check, takes precedence.And whether the checkholder still hasany interest in the fund depends uponthe question whether the check works anassignment as against the drawer.This is but the natural consequence ofthe leading proposition. If the checkworks an assignment in respect to thedrawee, it mnst have the same effectagainst the drawer and his privies.The holder of the check, therefore, canclaim the right to appropriate the funds,

NICHOLSON v. COOMBS.

even against other creditors and a gen-eral assignee for the benefit of creditors.It being, however, an' equitable assign-ment, and the thing assigned beingidentified simply as the indebtedness ofthe drawee to the drawer, it can onlybe enforced while the fund 'retainsthe means of identification. Shouldthe fund be innocently (i. e. as to thedrawee) paid over to the drawer or hisassigns, it loses its identity unless theidentical sum can be traced and dis-covered in the hands of the drawer orhis assignee, and the check is conse-quently deprived of its value as anassignment. See Row v. Dawson, IVes. Sr. 331; Couwperthwaite v. ,Shef-field, 3 Comst. 243.

Whether the check is such a completeassignment of the drawer's interest asthat, after presentment, where the checkhas been previously countermanded, thedrawee pays the money to the drawer athis peril, has never been determined byany adjudication. It is settled that hecan refuse to honor the check ; but doesthe countermand of the drawer relievehim of all obligation to the checkholder,or does it place him in the position of astakeholder, and compel him to retainthe fund for the benefit of whichever ofthe two shows himself entitled thereto?It would be hard to expect a bank ineiery case of countermanded checks tohord the funds, and become a party tosuits on the same. It is most likely

that this position would not be assumedeven by those courts which are inclinedto push tfie assignment theory to theutmost limit.

Now, if the position assumed in thisannotation is upheld in all its details,the decision of the Supreme Court ofMissouri, in the case of Dickinson v.Coates could, nevertheless, be held to becorrect in its conclusion, viz. : that theplaintiff had no right of action againstthe defendant, not because the check doesnot work an equitable assignment protanto of the fund on deposit, but becausethe means of identifying the fund barebeen lost by its ceasing to be a debt ofthe drawee or bank with whom the fundhas been deposited. For it is to be pre-sumed from the facts, as stated in theopinion of the court, that the identicalfund cannot now be ascertained, i. e., itcannot now be ascertained what par-ticular money or moneys were receivedby defendant from the bank of deposit.But in the second case, the Merrhants'Nat. Bank of St. Louis v. Coates et al.,since the bank of deposit has retainedthe custody of the fund, and is a partyto this suit by way of an interpleader,under the construction that the cheekworks an equitable assignment of thefund, judgment should have been givenfor the checkholders.

CHRISTOPHiER G. TznDnxteA.Columbia, Mo.

Supreme Court of Indiana.

NICHOLSON v. COOMBS ET AL.

The material alteration of a promissory note, made at the instance of the payeeand without the knowledge of the maker, releases the latter from all liability onthe note. The addition to an instrument of the name of a party, as maker, is amaterial alteration of it.

The word "executed,I as used in an answer, charging that the note sued uponwas materially changed after it had been "executed and delivered," implies a com-plete and perfect contract.

VOL. XXXII.-25


APPEAL from the Clark Circuit Court.The facts are sufficiently stated in the opinion, which was

delivered byELLIOTT, J.-To the complaint of appellant, charging that the

appellees, William C. Coombs, Richard F. Nugent and David S.Koons, executed to him the promissory note sued on, the appel-lees, Coombs and Nugent, answered separately. The answer ofthe former is, omitting formal parts, as follows: " That after heand his co-defendant, Richard F. Nugent, had executed and de-livered the note sued on herein, and without the knowledge orconsent of this defendant, the plaintiff procured David S. Koonsto subscribe the said note as one of the makers thereof."

It is urged that the answer is bad for the reason that it does notaver that the name of Koons was added after the note was com-pleted. This position is.not tenable. The word executed impliesboth a signing and delivery,.,and a signed note duly delivered is acomplete contract. In a" legal sense the word execute includesdelivery and implies a complete contract: Graham v. Graham,55 Ind. 23, vide 28; Prather v. Zulauf, 38 Id. 155.

It is settled law in this state that the material alteration of apromissory note made at the instance of the payee, and. without theknowledge of the maker, releases the latter from all liability on thenote: Hert v. Oehler, 80 Ind. 83; Bowman v. Mitchell, 79 Id.84; Monroe v. Paddock, 75 Id. 422. It is also firmly settledthat the addition of the name of a party as maker is a materialalteration of the instrument: Harper v. The State ex rel., 7 .Blackf.61; Herry v. Coats, 17 Ind, 161; Bowers v. Briggs, 20 Id. 139;Bigelow on Bills and'Notes 579. The answer was unquestionablygood. The answer of Nugent is the same as that of Coombs, withthe exception of a change in names, and the questions arising uponit are, therefore, disposed of by what has been said in consideringthe latter's answer. There was testimony showing that the notesued on was signed by the appellees; that it was accepted by theappellant, and, that after this had taken place, the latter, withoutthe knowledge of the former, procured Koons to sign as a maker;it cannot, therefore, be said that the finding of the trial court isnot sustained by the evidence. After the signing and delivery ofthe note, the appellees could not recall it nor the appellants changeit. From that time it became a complete and perfect contract.The silence of the makers vested no authority in the payee to


procure an additional signature to the note. The delivery of thenote closed the contract, and it was the duty of the appellant tohave kept it unchanged.

Any material alteration of a bill ofexchange or promissory note withoutthe consent of the drawer or endorserof the one, or maker of or surety uponthe other, vitiates it. No suit can bemaintained upon it as it is after itsalteration, for as such it was never exe-cuted ; nor upon it in its original form,because as originally executed it is nolonger in existence. Upon this all thewriters and authorities upon this sub-ject agree ; the only difference in them

is as to what constitutes a materialalteration: Ames N. & B. 434-447,and note I ; Story on Promissory Notes545 (6th ed.) ; Bridges v. Winters, 42Miss. 135 ; s. o. 2 Am. Rep. 598;Falmouth v. Roberts, 9 m. & W. 469;for all agree that an immaterial altera-tion (2 Parsons N. & B. 544 ; Bachellorv. Priest, 12 Pick. 399 ; Hubbard v.Williamson, 5 Ired. 397), or one that

does not change the legal effect of thebill or note is not such an alteration aswill render it void: Granite RailwayCo. v. Bacon, 15 Pick. 239 ; Johnson v.Heagan, 23 Me. 329 ; Smith v. Smith,1 R. I. 398 ; Reed v. Roark, 14 Texas329 ; Pars. N. & B. 568.

In an early English case it was held,that where a joint and several promis-sory note was made by several partiesconcerned in a jmnt undertaking, for thepurpose of securing repayment of aloan, and one of the parties signed itseveral days after the party did whoborrowed the money, the note did notrequire an additional stamp if it wassigned before the money was paid, butif it was signed after the money waspaid, an additional stamp was neces-sary: Ex parte White, 2 Deac. & Chit.334. The note was here treated as avalid note, although an additional name

Judgment affirmed.

was added to it without the consent ofthe original maker. Clerk v. Black-stock, 1 Holt N. P. 474, decidednothing more than this, as a carefulanalysis reveals.

In Oatton v. Simpson, 8 Ad. & El.136, it was held that an additional partysigning without a stamp was not boundby his signature, and that the alteration,therefore, was not material. In thatcase the original note was signed by aprincipal and surety, jointly and sev-erally, and the new name was procuredby the principal for an extension of time.The original surety paid the note, andsued his principal for the money paid tohis use. The principal defended on theground that the payment was voluntary,because the surety had been dischargedby the alteration, and had no right topay the note; but his defence wasrejected.

In Gardner v. Walsh, 5 El. & B. 83,a principal and surety made a joint andseveral promissory note, and a secondsurety was added after delivery, withoutthe knowledge or consent of the first.It was held that the first surety wasdischarged by the alteration ; and theopinion was expressed by the court thatCatton v. Simpson, supra, was not law.In Aldous v. Cornwell, L. R., 3 Q. B.573, Catton v. Simpson, supra, is citedas an authority on the point that analteration will not vitiate a note unlessmaterial, and the case of Gardner v.Walsh, supra, was referred to, merely to

-say, that it only overruled the formercase on the question whether such analteration as that passed upon was ma-terial. The court was somewhat severein condemning the earlier cases thatpaid no attention to the materiality ofthe alterations.


It has been also held in England, thatif a third party, after its execution,signs a note upon the face of it, with theintention of becoming an indorser, andfor that purpose only, it does not renderthe note void: Ex parte Yates, 2 De G.& J. (Ch.) 191. So, to a declarationupon a note accepted, payable to theorder of L., and by him endorsed tothe defendant, and by' the defendantto the plaintiff, a plea that the hill was,after the endorsement by the defendant,materially altered, without his consent,by the insertion of his name as an en-dorsee prior to the defendant's endorse-ment, was held bad, as the alterationdid not vary the nature of the instru-ment, but was a mere correction of amistake which gave the instrument theeffect which it was intended to have:London 4- Provincial Bank v. Roberts,22 W. R. 402.

In three cases decided at an early dayin Kentucky, it was held, that the nameof an additional surety placed upon a notewithout the prior surety or maker's con-sent vitiated the note: Bank of Lime-stone v. Penick, 2 T. B. Mon. 98 ; a. c.15 Am. Dec. 136; Bank of Limestonev. Penick, 5 T. B. Mon. 25 ; Sipp v.Suggett, 9 B. Mon. 5. The principlesaid to be involved in these cases wasthe same as in the case of the alterationof a deed ; in one, after the alteration,it was not the deed of the grantor; inthe other, not the note of the maker.The same point was decided in otherKentucky cases; and it was said if themaker assented to the changed conditionof the note at any time after it was sochanged, it was a binding obligation uponhim; and a jury was authorized to findsuch assent upon very slight evidence:Payne v. Withers, 8 Dana 98; Lilley v.Evans, 3 B. Mon. 417.

.Some cases have sought to draw adistinction as to the time at which theadditional name is affixed to the note.Thus where a note had been signed bythe defendant as a joint principal and

intrusted to his- associate, it was heldthat he gave his principal implied au-thority to obtain either additional sure-ties, or joint makers, indefinitely, untilthe note was fairly launched in themarket as a security. It was said thatthe rule was the same if the defendanthad signed only as a surety : Keith v.Goodwin, 31 Vt. 268; Hall's Adm'xv.'fdclenry, 19 Iowa 521. In the caselast cited it was held, that if the holdertook the note with notice of the addingof the additional name, the note wasvoid. The same doctrine has been de-clared in other Iowa cases: Dickermanv. Miner, 43 Iowa 508 : Hamilton v.IHooper, 46 Id. 515. "

So in Wisconsin it was said, that anote signed in blank by one person, asmaker, for the accommodation of an-other to whom it is delivered, and after-wards signed by a third person as jointmaker, would -probably be void in thehands of one who takes it with knowl-edge that, at the time of executing it,the first signer expressly stipulatedagainst a further signature ; but wherethe note, when signed by the first maker,contained, among other blanks, one forwords making it a joint or several obli-gation, and was delivered to the personfor whose accommodation it was made,without any express stipulation againstfurther signatures, it was held to haveauthorized such person to procure it tobe signed bi other parties or jointmakers with the first. It will be ob-served that this case turned upon aquestion of agency, as the court stated,and not upon the alteration of the note.Proof of the fact that there was ablank left in the note, was held a suf-ficient establishment of the agency to fillthem up: Snyder v. Van Doren, 46 Wis.602. The Iowa cases decide, in fact,nothing more than this Wisconsin case.It was only a question as to whetherthe defendant had authorized the pro-curing of additional signatures by hisaction.


In Ohio it was held that the signing ofa note by a stranger after its deliveryvitiated it ; it was'said,, however, that ifhe signed it as a surety it would not haveavoided it. It is difficult to see theground for such a distinction : Wallacev. Jewell, 21 Ohio St. 163.

One of the Iowa authorities cited,held that where a note had been fullyissued and delivered to the payee, theaddition of another maker, at the in-stance of the payee, and without theknowledge of the other maker, operatedas a discharge of the latter: Ball'sAdm'x v. Mc Henry, 19 Iowa 521. It wasso held in Indiana: Bowers v. Briggs,20 Ind. 139. So where C., member ofthe firm of C. & Co., obtained an ac-commodation endorsement to his indi-vidual note, and then added "& Co."to his signature, thus making it his'firm's note, it was held a material alter-ation, and to vitiate the note: Haskellv. Champion, 30 Missouri 136. In anIndiana case the court decided that anadditional surety discharged the maker,and said: "It is idle to say that thedefendant was not injured by the addi-tion of another name as maker of thenote. The character and identity of theinstrument endorsed by the defendantwas changed by the alteration. Thealteration left in existence no instrumentendorsed by the defendant; that instru-ment was destroyed : Henry, v. Coates,17 Ind. 161 ; First Nat. Bank ofSpringfieldv. Fricke, 13 Rep. 727. TheKentucky cases, as observed, were de-cided upon the same principle hereannounced.

The Supreme Court of Michigan re-fused to follow the authority of theIndiana and Kentucky cases. It wasthere held that the principal in a noteis not injured in any way by having thename of a surety added without his con-sent, and such additian does not invali-date the note. The court said: "It isvery difficult to see how such a changecan affect him in any way, it is a mere

technicality, which neither changes,increases or diminishes his liability.Where there is no surety, the principalis liable to be sued severally, and madeto pay the whole debt, if he has any pro-perty liable to execution. His liabilityon a joint judgment is precisely thesame. His property is primarily liable,and if he has enough to pay the judg-ment, and it is paid by him, or out ofhis property, he has no further concernwith the surety, or he can have no rightof contribution for his own debt. Thefact that he may not pay, does not inany way affect the nature or extent ofhis judgment obligation. A surety may,perhaps, in some cases, be injuriouslyaffected by an addition to the number ofsureties, where there is more than onealready; as, in the case of the bank-ruptey of any of them, his obligation topay may be increased, and his right ofcontribution against co-sureties dimin-ished by the change. But, as the prin-cipal is bound to pay the whole debtwithout contribution, his liability cannotpossibly be changed by the addition ofsureties:" Miller v. -Finley, 26 Mich.249. So a like decision was renderedin .Alabama, though it was admittedthat the identity of the note was de-stroyed; Montgomery R-ailroad Co. v.Hurst, 9 Ala. 513. In California,where a draft was delivered to S. forthe plaintiff, and S. altered it, it washeld, in the absence of proof, that theplaintiff authorized the alteration, andit did not vitiate the draft: Langen-berger v. Kroeger, 48 Cal. 147. SeeVance v. Collins, 6 Cal. 435.

So in New York, where the payee ofa note, without the knowledge or con-sent of the maker, procured a thirdperson to sign her name to the note as aco-principal; and before its maturity itcame into the hands of a bona fide pur-chaser, for a valuable consideration,without notice, it was held that the pur-chaser was entitled to recover againstboth of the defendants, and that the

NICHOLSON v. COOMiBS.

addition of the name was not a materialalteration of the note, and did notrender it void as to the original maker :Card v. Aliller i 1 Hun .504. The onlydistinction. between this and the Michi-gan case is, that the holder was aninnocent endorsee for value in the for-mer, without notice of the alteration,while in the latter he was regarded as aholder with notice. In another NewYork case it was held, if the holder of anote, without an endorser's knowledgeor consent, procure a second name to asale note, for the purpose of adding totheir security, such alteration is animmaterial one and does not affectthe endorser's liability: MdCaughey v.Smith, 27 N. Y. 39. This case goesas far as the Michigan case, and isfollowed by another announcing thesame doctrine: Brownell v. . Winnie,29 N. Y. 400. But the last case citedis clearly distinguishable from the casein Ilun's Reports, upon the ground thatin the latter the person making thealteration alone defended, while in theformer the original maker defended.There is no doubt that the poeonmaking the alteration is estopped todeny his liability upon the note: Cobbv. Titus, 10 N.- Y. 198. In anotherNew York case it was held, that anadditional signer was jointly and sever-ally liable with the maker to a holder ofthe note, and judgment' was allowedagainst both as joint makers. Thiswas a ease where the payee sold thenote, and to secure the sale signed it atthe request of the purchaser: Partridgev. Colby, 19 Barb. 248.

Two other New York cases are to benoticed. They are Chappell v. Spencer,23 Barb. 584, and Mcrean v. Scott, 46Id. 379. These have been frequentlycited as authorities, but were expresslyoverruled in Card v. Miller, I Hun 504.In the former it was held that the writ-ing of the payee's name, by himself, assurety, under the maker's name, was amaterial alteration. The latter case

was similar to Partridge v. Colby,supra.

Of course, consent to the adding of aname may be given, as elsewhere stated;and the administrator may consent tosuch change in his intestate's note, so asnot to release the estate: Voiles v.Green, 43 Ind. 374. And if a pur-chaser of a note, before purchasing it,exhibits it to the maker, and is assured byhim that he has no defence to it, the latzter cannot afterwards assign as a defence,that previous to the purchase the notehad been altered by the dddition of anew name: Vaughn v. Ferrall, 57 Ind.182.' So if the alteration is made andthe note afterwards restored to itsoriginal condition, with the approval ofthe maker, this will amount to a ratifi-cation, and the maker will be heldliable; Collins v. Makepeac 13 Ind..448. So in a similar case it was heldnot necessary to the validity of a notethat it should be ratified, as where theadditional name had been erased; "be-cause such erasure was no alteration ofany contract that Loring ever made, forit neither altered the note as it waswhen Loring endorsed it, nor as it waswhen it first became available as asecurity :" Whitmore v. Nickerson, 125Mass. 496. *

In Monson v. Drakeley, 40 Conn.552, after delivery, a party signed ajoint and several note of the maker andtwo sureties as surety; no questionof alteration being raised, the courtheld that he would not, unless in pur-suance of an arrangement at the timeof the execution or delivery, become ajoint promisor or maker, and that the

subsequent undertaking was independentof, and collateral to, the original ; butthe suretf so signing was bound forcontribution to the original sureties.In a like case it was held, that suchsubsequent undertaking upon a newconsideration, was a new and inde-pendent contract, not requiring theconsent of the original promisor: Stone


v. White, 8 Gray 589. The Iowa casesadopted this doctrine ; Dickerman v.Miner, 43 Iowa 508; Hamilton v.Hooper, 46 Id. 515. But there must bea consideration for such signing, andunless there is the additional surety ormaker will not be bound : Briggs v.Downing, 48 Iowa 550; Tenney v.Prince, 7 Pick. 243; s. c. 4 Id. 385;Clark v. Small, 6 Yerg. 418 ; Green v.Shepherd, 5 Allen 589.

A promissory note payable to and at acertain bank, was signed by A. and B.,the former being the maker, the latterhis surety, and delivered by A., for avaluable consideration, to C., who, forthe purpose of having it discounted forhis benefit at the bank-it having beenprepared by A. and B. with that ex-pectation--signed the note as maker,without the knowledge or consent of B.,upon the requirement of the officer ofthe bank, but with the express agree-ment with such officer that he did so assurety or guarantor to the bank for boththe other makers, and not as jointsurety with B. After maturity the banksued A., B. and C., upon the note; C.was "not found;" and judgment wasrendered against A. and B. by default,upon their failure -to appear. C. paidthe bank the amount of the judgmentunder promise by the bank to assign itto him. It was held that the signing byC. was not such an alteration of the noteas rendered it void as to B. ; that C. wasa co-surety with B. ; and that C. wasentitled to an execution for his benefiton the judgment against A. and B. ;and A., having become insolvent, suchexecution was properly levied for thewhole amount thereof upon the pro-perty of B. : Bowser v. Rendell, 31Ind. 128. The court relied upon thefact that A. and B. failed to make adefence on account of the alteration ofthe note, when the judgment wasrendered; and could not raise thatquestion on a suit to enjoin the col-lection of the judgment, although they

construed it as an immaterial alteration.And where a note had been signed bythe maker and one surety, and deliv-ered, and afterwards a second suretysigned it without the consent of themaker or first surety, it was held thatthe second surety could not plead thealteration of the note. "We know ofno authority whatever in support of theproposition that the appellant's (the sec-ond surety) alteration of the originalnote by his own execution thereof,would, of itself, avoid such note asagainst the appellant :" Crandall v..irst National Bank of Auburn, 61 Ind.349. The court added, in substance:It may be true if the facts pleaded as adefence had been pleaded by the firstsurety, they " would 'have constituted agood and sufficient defence in his be-half." In Michigan, where one of twojoint makers obtained of the payee anextension of time, and procured an ad-ditional surety, it was held not to dis-charge the other maker, though asbetween the makers the latter claimed tobe surety only, the payee having nonotice of such relation : Gano v. Heath,36 Mich. 441. Under the Indiana casesit is evident that the co-maker wouldhave been held to have been disclarged,upon the ground that the evidence of theindebtedness was changed. The case justcited is in consonance with the otherMichigan case: Miller v. Finley, supra.If a special indorser's name is incor-rectly spelt, and when he endorses itover, lie writes it correctly, this doeznot amount to material alteration:Leonard v. Wilson, 2 Cromp. & M. 589 ;4 Tyrw. 415. Adding the name in full,of a firm, to a bill drawn by them in thefirm's name, is not a material alteration,being in effect only the adding theChristian name of the drawer, whosesurname had been affixed to the billbefore acceptance; and so much the lawsupplies: Blair v. Bank of Tennessee,11 Humph. 84.

So where a firm did business under


the style of A., B. & C., and also asthe Providence Steam Pipe Co., a notewas payable to the firm by the latterstyle of-name, which was endorsed by asurety, and afterwards altered by themakcr and payee, without the knowledge

of the surety, so as to be payable to the

same firm under the style of A., B. &C., the alteration was held to be imma-terial, and not to discharge the surety:

Arnold v. Jones, 2 R. I. 345.A case somewhat similar to Bowen v.

Rendell, supra, was decided at an earlyday in New York. There the holders

of a note, in order to get it discountedsigned their own names as makers ; inaddition to the rest-the note being jointand several-and afterwards paid it; itwas held that they thereby lost no rights,and were authorized to sue it on them-selves, or transfer it to others: Muir v.

Demaree, 12 Wend. 468.If the signing of a note be attested

by witnesses, and the Statute of Litri-tations has a longer time to run than

on a note unattested, then the attes-tation of such a note not beforeattested, by a person who was not pre-

sent at the signing, is a material altera-tion of the contract, and destroys itsvalidity: Brackett v. Mountfort, 11 Me.

114; Smith v. Dunham, 8 Pick. 246;

Homer v. Wallis, 11 Mass. 309. Butwhere only one witness was necessary,

and a second witness afterwards put onhis name, it was held not to alter theeffect of the note, and so did not renderit void : Ford v. Ford, 17 Pick. 418.If the attestation is added at any time

before the note was negotiated, it willbe presumed to have received the consent

of the maker: Eddy v. Bond, 19 Me.

461. If two witnesses are necessary tochange the effect of an unattested note,and a note after its delivery, and with-

out the consent of the maker, is attestedby two witnesses, the ratification of thesubscription by one only of the twowitnesses does not cure the attestation :

Henning v. Wurkheiser, 8 Pa. St. 518.

The following cases further illustratethe irregular attestation of notes :Thornton v. Appleton, '29 Me. 298;Marshall v. Gougler, 10 S. & R. 164;Rollins v. Bartlett, 20 Me. 319; Rapev. Westcott, 3 Harr. 244; Adams v.Frye, 3 Met. 103; Willard v. Clarke, 7Id. 435 ; Miller v. Gilleland, 19 Ia.St. 119.

This review of the cases shows thatthey are not by any means harmoniousas to the result of adding an additionalname to a note without the consent ofthe parties liable to pay it. Some casesregard such addition a material altera-tion, ahd, therefore, hold that it avoidsthe note, upon the same reasoning thatan additional name to a deed, or instru-ment under seal, avoids such deed orsealed instrument. Other cases holdthat, while it is a material alteration, itis not sufficient to release the originalsureties or makers, while other casesregard it as an immaterial alteration,and, consequently, no release of makeror surety. The last two classes hold thatsuch alteration in no way increases theliability of the maker or surety; themaker cannot object to the additionalname, because he must ultimately paythe note under any circumstances ; andthe surety cannot object, because someone is willing to share the risk withhim.

Not one of the cases present a stateof facts where, besides the maker, thereare two or more sureties upon the note atthe time of signing by the additionalmaker or surety. In Miller v. Finley,supra, there is a statement that theadding of an additional surety wouldprobably release the prior sureties, as inthe case of contribution, such additionwould have the effect to increase theliability of the sureties instead of de-creasing it, if one or more sureties wereto become insolvent. It is evident thatfollowing out the reasoning of this caseto its legitinate end, the addition ofa maker's name could not be urged

FIRST NAT. BANK OF NEVADA v. BRYAN.

as a release of the sureties, where therewere two or more, because no questionof contribution could jossibly arise. Ifwe regard the additional name as oneof:the .makers of the note where therewere two or more prior makers, andthat they have a right to compel eachoth.r to contribute, it is clear, in caseof the bankruptcy or insolvency of anyone of the makers, that the liability ofthe remaining parties is increased bysuch additional name. But the addi-tion of such additional maker, in such acase would not increase the liability ofthe two or more' sureties ; it would, infact, be for their benefit, and, under thereasoning of those cases which hold thatthere is no release unless an actualinjury is sustained, it would not worktheir release.

As to the other point raised in theprincipal case. In Prather v. Zulauf,38 Ind. 155, it is said that the "de-livery of a note is the final act of exe-cutioit." - See Ketcham v. New Albany,etc., Railroad Co., 7 Ind. 391. In thecase of Bagley v. McNiclde, 9 Cal. 430,it was said that "the term ' has exe-

ments of writing, impart both makingand delivery." See Faunce v. StateMutual Life Assurance Co., 101 Mass.-279; Walbrid'ge v. Arnold, 21 Conn.425 ; Aktate v. Young, 23 Minn. 551.

So in Michigan, where a rule of courtdid not require proof of the executionof the instrument to be made unlessdenied under oath, it was said: "Exe-cution can only refer to the actualmaking and delivery, but it cannot-involve other matters without enlargingits meaning beyond reason :" Freemanv. Ellison, 37 Mich. 459.

Where an answer alleged that thedefendant had "executed" the notesued on, but had never " delivered" it,it was held that the word "executed"was, as used, synonymous with theword "signed ;" and that the answer,fairly construed, meant that the noteswere signed but not delivered : Rickettsv. Harvey, 78 Ind. 152.

With reference to a deed, the word"execution" "mean s that it has beendelivered, as well as signed and sealed :"Gaskill v. King, 12 Ired. 221.

W. W. TuoRNTON.cnted unto,' when applied to instru- Crawfordsville, Ind.

Supreme Court of Iowa.FIRST NAT. BANK OF NEVADA t. BRYAN ET AL.

A mortgage executed by a married woman under duress of imprisonment uponthe person of her husband, is, as between her and the mortgagee, void.

The bona fide holder of a negotiable mortgage note, taken for value beforematurity, may recover upon it, although both note and mortgage were obtained byduress; but he is not entitled to a foreclosure of the mortgage where the propertyis the wife's homestead mortgaged to secure the husband's note.

Mortgages are not intended to circulate as commercial paper, and the interestsof commerce do not require that the. principles applicable to negotiable paper beextended to mortgages executed as was the one in question.

Where the answer does not formally allege duress, but sets up facts sufficient toconstitute it, the defence will be received, evidence of duress being admitted with-out objection.

APPEAL from the District Court of Story county.The plaintiff, as the endorsee before maturity of a negotiable

VOL. XXII.-26

202 FIRST NAT. BANK OF NEVADA v. BRYAN.

promissory note for $645, executed by Solon Bryan to the orderof P. F. Nelson, brings this -action to recover the amount of saidnote, and to foreclose a mortgage to secure the same, executed byMary E. Bryan and Solon Bryan upon their homestead. Thecourt found that both the note and mortgage were obtained byduress, and that the plaintiff, as an innocent holder of the note forvalue before maturity, was entitled to recover upon the note, butwas not entitled to a foreclosure of the mortgage.

-Dyer & Fitzpatrick, for appellant.

. H. Balliett and S. . Balliett, for appellee.

DAY, C. J.-The appellant insists that the answer does notset up that the note and mortgage were obtained by 4uress. Theappellee filed an amended abstract, setting forth that the defendantunder leave of court filed an amended answer to meet the evidence,formally setting up that the note and mortgage were made underduress. The appellant denies that such amendment was filed. Wehave examined the transcript and do not find any reference to suchamendment. However, we regard this question as immaterial.The original answer sets up facts sufficient to present the defenceof duress, in view of the fact that the evidence was admitted with-out objection.

It appears from the evidence that Solon Bryan had a contractfor erecting a school-house in Harlan; that he purchased the brickstherefor from P. F. Nelson, and that to secure $945 of the pur-chase price he executed a chattel mortgage upon 150,000 of thebricks ; that he failed in the execution of his contract, and turnedover his contract, together with the bricks mortgaged to Nelson, tohis sureties on his bond for the performance of his contract, andthat they assumed and completed the erection of the building. Itfurther appears that the sureties had knowledge of the existenceof the mortgage when they took the assignment of the contract.The attorney of Nelson locked Solon Bryan in his office, anddemanded a mortgage to secure the balance due on the bricks,which was then $645, and represented that, unless he executed themortgage, he was liable to prosecution, and would probably beprosecuted for selling and disposing of mortgaged property. Theattorney also procured a letter to Mary E. Bryan from her husbandfor a description of the homestead property. She at first refused

FIRST NAT. BANK OF NEVADA v. BRYAN. 203

to furnish a description without seeing her husband. The attorneyof- Nelson told .her that she could not see her husband; that hewas locked up in his office, and could not come out; that Bryanhad sold mortgaged property, and that they had a warrant for hisarrest; and that if she would give a description of the homesteadfor a mortgage, it would save his arrest; that it was a penitentiarjroffence to sell mortgaged property; and that if she did not give thedescription they would send him to the penitentiary. Mary E.Bryan went to the office of the attorney and was admitted, and herhusband then told her that they had got him into some trouble, andthat by giving a mortgage upon the homestead for a short time, itwould help him out. It seems that the note and mortgage wereexecuted at that time and place. Mary E. Bryan testifies that shewas induced to sign the mortgage by what the attorney had said,that it would save Mr. Bryan's arrest, and that they wouldstraighten it up before the mortgage was due. We are satisfiedthat the execution of the mortgage was not the voluntary actof Mary E. Bryan, and that it was obtained by duress, under thedoctrine of Green v. Scranage, 19 Iowa 461.

The most important question in the case is as to whether theplaintiff, an innocent holder of the note before maturity; is entitledto a foreclosure ofithe mortgage. It has been held by this courtthat a bona fide endorsee before maturity of a nite secured by amortgage, without notice of infirmities, takes the mortgage as hetakes the note, free from the defences to which it is sulbject in thehands of the mortgagee: Preston v. Case, 42 Iowa 549 ; Farmers'Nat. Bank of Salem v. Fletcher, 44 Id. 252; (Jlasey v. Sigg, 51Id. 371. In all of these cases the mortgages were voluntarilyexecuted upon the property of the persons who executed the notes.Beyond the doctrine of these cases we do not feel justified in goingin the application to mortgages of the principles which pertain tonegotiable paper. In Burbank v. Warwick, 52 Iowa 493, whereno note was delivered with the mortgage to the mortgagee, it washeld that an assignee of the mortgagee took it subject to all equitiesbetween the original parties. In Tabor v. Foy, 56 Iowa 539,where the note accompanying the mortgage was forged, it was heldthat the assignees of the mortgagee took it subject to all defencesexisting against it in the hands of -the mortgagee, notwithstandingthe admission of the mortgagor that she signed the mortgage.This case differs from all those which have heretofore been

204 FIRST NAT. BANK OF NEVADA v. BRYAN.

determined in this court. In this case the mortgaged propertybelongs to Mary E. Bryan, who did not sign the note, and.themortgaged property is her homestead. Her execution of themortgage was procured by duress, and was not her free andvoluntary act. Section 1990 of the Code requires the concurrenceof both the husband and wife to a conveyande or incumbranceof the homestead. Mary E. Bryan did not legally concur in thisconveyance. As between her and the mortgagee the mortgage wasvoid. Mortgages are not intended to circulate as commercialpaper, and we do not think that the interests of commerce requirethat the principles applicable to negotiable paper shall be extendedto a mortgage executed under such circumstances as the mortgagein question. The judgment of the court below is affirmed.

The general question involved in theprincipal ease is so well considered byMr. Jones, in his valuable work on mort-gages (vol. 1, sect. 834), that we'ean-not do better than to use his language.He says: "An assignee for value of anegotiable note before due, takes it freefrom equities. At common law, so faras a mortgage is merely a debt, orsecurity for a debt, it is a chose inaction not negotiable, and, therefore,not assignable. * * * But the debtbeing the principal thing imparts itscharacter to the mortgage; and al-though the mortgage itself in the begin-ning is only assignable in equity, thelegal rights and remedies upon the debthave become fixed upon this incident ofthe debt, and the equitable principles inregard to the mortgage have becomenaturalized in the common-law system.When, therefore, the debt secured is inthe form of a negotiable note, a legaltransfer of this carries with it the mort-gage security; and inasmuch as a nego-tiable promissory note, by the commerciallaw, when assigned for value beforematurity, passes to the assignee freefrom all equitable defences to which itwas subject in the hands of the payee,it does not lose this character which ithas under the commercial law, when itis secured by a mortgage. The mort-

gage rather is regarded as following thenote, an;t as taking the same character;and it is the" generally received doctrinethat the assignee of a mortgage securinga negotiable note, taking it in good faithbefore maturity, takes it free from anyequities existing between the originalparties :" Beals v. Neddo, (U. S. C. C.Kans. 1880), 2 Fed. Rep. 41; Car-penter v. Lozgan, "16 Wall. 271; Ken-nicott v. Supervisors, Id. 452 ; Sawyer v.Pr'chett, 19 Id. 166; Hayden v.D rury,(U. S. C. C. Ill. 1880)i 3 Fed. Rep.782 ; Paige v. Chapman, 58 N.H. 333 ;Taylor v. .age, 6 Allen 86 ; Sprague v.Graham, 29 Me. 160; Pierce v. Baunce,47 Id. 507 ; Gould v. Marsh, 4 Thomp.&C. 128; s. c.1 Hun 566; Duttonv.Ives, 5 Mich. 515; Cicotte v. Gagnier,-2 Id. 381 ; Bloomer v. Henderson, 8 Id.395; Reeve. v. Seully, Walk. Ch. 248;Jones v. Smith, 22 Mich. 360; Helmerv. Krolik, 36 Id. 371 ; Croft v. Bunster,9 Wis. 510; Cornell v. licins, 11 Id.353; Fisher v. Otis, 3 Chand. (Wis.)83; Martineau v. McCollum, 4 Id. 153;Kelley v. Wfiitney, 45 Wis. 110; Bur-hans v. Hutcheson, 25 Kans. 625; Webbv. Haselton, 4 Neb. 308; reston v.Case, 42 Iowa 549 ; Updegraft v. Ed-wards, 45 Id. 513; Farmers' Nat.Bank v. M-etcher, 44 Id. 252; Duncanv. Louisville, 13 Bush 378; Bilgery v.


Ferguson, 3 La. Ann. 84; Loganv. Smith, 62 Alo. 455 ; Gubbert v.Schwartz, 69 Ind. 450.

In Carpenter v. Lot'qan, 16 Wall.271, which was an appeal from the Su-preme Court of Colorado, the questionwas ably considered, and a conclusionarrived at in harmony with the pre-vailing opinion, as above stated. Inrendering the opinion of the court, Mr.Justice SwAYxE, after stating, amongother things, the doctrine that this was acase in which equity must follow thelaw, said: "A different doctrine wouldinvolve strange anomalies. The as-signee might file his bill and the courtdismiss it. He could then sue at law,recover judgment, and sell the mort-gaged premises under the execution. Its not pretended that equity would inter-

pose against him. So, if the aid ofequity were properly invoked to givbeffect to a lien of the judgment upon thesame premises for the full amount, itcould not be refused. Surely such anexcrescence ought not to be permitted todisfigure any system of enlightened ju-risprudence. It is the policy of the lawto avoid circuity of action, and partiesought not to be driven from one forum toobtain a remedy which cannot be deniedin another."

"The mortgaged premises are pledgedas security for the debt. In proportionas a remedy is denied, the contract isviolated and the rights of the assigneeare set at nought. In other words, themortgage ceases to be security for a partor the whole of the debt, its express pro-visions to the contrary notwithstanding.The note and mortgage are inseparable ;the former as essential, the latter asincident. An assignment of the notecarries the mortgage with it, while theassignment of the latter alone is a nul-lity:" Jackson v. Blodgett, 5 Cow.205 ; Jackson v. Willard, 4 Johns. 43.* * * "The transfer of the note carrieswith it the security, without any formalassignment, delivery, or even mention

of the latter. If not assignable at law,it is clearly so in equity. When theamount due on the note is ascertained inthe foreclosure proceeding, equity re-cognises it as conclusive, and decreesaccordingly. Whether the title of theassignee is legal or equitable is imma-terial. The result follows irrespectiveof that question. The process is only amode of enforcing a lien. All the au-thorities agree that the debt is theprincipal thing, and the mortgage anaccessory. Equity puts the principaland accessory upon a footing of equality,and gives to the assignee of the evidenceof the debt the same rights in regard toboth. There is no departure from anyprincipal of law or equity in reachingthis conclusion. There is no analogybetween this case and one where a chosein action, standing alone, is sought tobe enforced. The fallacy which lies inovtrlooking this distinction, has misledmany able minds, and is the source ofall the confusion that exists.. The mort-gage can have no separate existence.When the note is paid the mortgageexpires. It cannot survive for a mo-ment the debt which the note represents.This dependent and incidental relationis the controlling consideration, andtakes the case out of the rule applied tochoses in action, where no such relationof dependence exists. Accessorium nonducit, sequitur principale."

The subject has been regulated bystatute in New Jersey, by which it isenacted, that in a suit by an assigneeof a mortgage, all just set-offs andother defences shall be allowed againsthim which would have been allowed ifthe action had been brought by hisassignor: Rev. 1877, p. 708, sect. 31.

In New York and Pennsylvania, byalmost universal practice, bonds areused in connection with mortgages in.stead of promissory notes; and inthose states the rule supported by theweight of authority, as above stated,does not prevail. See Jones on Mort.


(3d ed.), sect. 834, note and cases

cited.

In a few states it has been held, con-

trary to the general doctrine, that,

although the mortgage note is nego-

tiable, the mortgage itself is only as-

signable in equity, and, therefore, the

assignee having to resort to equity to

enforce his rights, is compelled to do

equity towards the mortgagor, and

allow him all the rights of defence he

had against the mortgagee; that the

mortgage follows the notes only in

equity, and is subject, in the bands of

the assignee, to any defence which

would avail against it in the hands of

the mortgagor himself, notwithstanding

the assignee may have purchased the

note in good faith, for a valuable con-

sideration and before maturity: I Jones

on Mort. (3d ed.), sect. 838; Johnson

v. Carpenter, 7 Minn. 176 ; Hostetter v.

Alexander, 22 Id. 559; Boligny V.

Forties, 17 La. Ann. 121; Olds v. Cum-

mings, 31 Il. 188 ; Fortier v. Darst, Id.

212 ; Walker v. Dement, 42 Id. 273;

Bryant v. Vix, 83 Id. 11 ; Darst v.

Gale, 83 Id. 136 ; Ellis v. Sisson, 96

Id. 105; U. S. Mortgage Co. v. Gross,

93 Id. 483; Chicago, 6-c., Railway Co.

v. Loewenthal, Id. 433 ; Baily v. Smith,

14 Ohio St. 396; Corbett v. Woodward,

(U. S. C. C. Oregon), 5 Sawyer 403.

The question involved in the principal

case appears to be new and not easy

of solution. If, under sect. 1990-of the

Code of Iowa, providing that "a con-

veyance or encumbrance by the owner

is of no validity, unless the husband and

wife, if the owner is married, concur in

and sign the same joint instrument,"

the mortgage in question is regarded as

absolutely void, the question is relieved

from difficulty; for, if void, the defence

may be made as against any person.

In this connection the cases of Edgell

v. Hagens, 53 Iowa 223; Van Sickles

v. Town, 53 Id. 259, and Spafford v.

Warren, 47 Id. 47, may be read with

profit. If, however, the mortgage is

regarded as merely voidable by reason

of duress, the question is more difficult;

and the authorities, so far as they have

come to our notice, do not appear to be

conclusive upon the question. The

general rule is, that duress does not

render a contract absolutely void, but

only voidable. In Worcester v. Eaton,

13 Mass. 376, it was held that a deed

for the conveyance of land, acknowl-

edged and recorded, but obtained by

duress, might be avoided by the entry

of the grantor or his heirs within the

period of entry, notwithstanding the land

had bqen sold by the original grantee to

a bona fide purchaser. In such a case

the maxim caveat emptor was said to

apply, as in the case of a grant from an

infant. 'In Bdote v. Henderson, 5 Cald.

471, the same principle was applied to a.

contract of sale of a chattel obtained by

dhress. See, however, contra, Deputy

v. Stapleford, 19 Cal. 302; Cook v.

Moore, 39 Texas 255, where it was held

that a deed, though obtained by fraud

and duress, is only voidable, and that a

bon-. fide purchasei from the. grantee in

such deed, for a valuable considerition,

without notice of the fraud or duress,

can hold the property. In Bisset T.

Bissett, 1 H. & McH. 211, it was held,

that an acknowledgment of a deed by a

feme covert, extorted from her by duress,

beating and ill usage, but where she was

privately examined by the magistrate,

could not be avoided on account of such

duress, on the ground that she might

have been relieved at the time of such

acknowledgment, had she so chosen.

The contrary, however, was held in

Worcester v. Eaton, supra, and as it

would seem properly. See, also, to he

same point, Central Bank v. Copeland,

18 Md. 319. As to what evidenda is

necessary to overcome the certificate of

acknowledgment, see Russell v. Baptist

Theological Sew., 73 Ill. 337 ; N. W.

Ans. Co. v. Nelson, 13 Otto 544.

Neither the above cases nor those cited

by the court in the principal case, are,

COATES, ASSIGNEE, &C.

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Transcript of COATES, ASSIGNEE, &C.