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George G. Smith, the son of the appellee, to the appellant, for
$3,663.

The single bill is dated the 1st of May, 1871, and is made pay-
able twelve months after date. It was, on the day of its date, de-
livered to the appellant for money borrowed by Smith; and about
nine months thereafter, the appellee wrote her signature without
any thing more across the back of the note, and over this blank in-
dorsement the appellant at the trial below wrote the following:

*'In consideration of the loan of the money mentioned in the
within single bill to my son, and in fulfillment of his representa-
tions to the payee that I would guarantee or become surety for the
payment of the money, and in consideration of the payee's promise
and agreement not to press the payment of this single bill at its
maturity, and to forbear suit thereon for two years or more, I
hereby guarantee the payment thereof to the said Samuel Gulbert-
son, should George G. Smith make default in payment thereofc"

The appellee pleaded that she never promised, or was never in*



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OCTOBER TEEM, 1879, 385

Calbertsou y. Bmith.

debtedy as alleged, and that she never made the guaranty alleged;
and she resisted the appellant's right to recover upon two grounds:
1. That there was no suflBcient writing to gratify the requirement
of the statute of frauds; and 2. That there was no sufficient con-
sideration for the alleged undertaking. There was an agreement
that all errors in pleading should be waived, and that either party
should be at liberty to introduce any evidence that would be admis-
sible under a proper state of pleading.

In answer to the defense of the appellee, the appellant contends
and offered evidence for the purpose of showing that the contract
as between the appellant and George G. Smith, resulting in the
making and delivery of the single bill, was not complete and exe-
cuted until the blank indorsement was placed upon the single bill
by the appellee ; that the single bill had been made and delivered
provisionally only, previous to that time; that it was contemplated
from the beginning of the transaction, that the appellee would be-
come surety for the ultimate payment of the money loaned, and for
which the single bill was given, and that the money was loaned
upon that assurance and understanding, as between the original
parties to the single bill. But notwithstanding the parol evidence
offered by the appellant, the court below held that the statute of
frauds constituted an insuperable barrier, and that the appellant
could not recover; and after careful consideration, we fail to dis-
cover any ground upon which that ruling can be successfully ques-
tioned.

In the case of promissory notes, and also of non-negotiable notes,
aot under seal, questions often arise as to the effect of a blank in-
dorsement placed thereon by a party other than the payee or his
indorsee, the question in such case being whether the party thus
indorsing should be held liable as an indorser, or as an original
promisor? Story's Pi;om. Notes, § 473. And in all such cases, in
order to construe such blank indorsement into a joint original
promise with that expressed upon the face of the note, it is neces-
sary that it should appear either that the signature was placed on
the note at the time it was made or before it passed to the payee,
or so soon thereafter, and under such circumstances as will give it
relation to the original making of the note. This is the principle
of many of the cases relied on by the appellant; as for example,
Morris v. Bird^ 11 Mass. 436. In that case it was held, that although
the blank indorsement was placed upon the note sabeeqnent to tta
Vol. XXXVI— 49



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386 MARYLAND,



Calbertson v. 8mith.



time at which tho note was made and delivered by the principal
debtor, yet the act of placing the signature upon the note should be
referred to the date of the note; and that the party thus signing
the note in execution of a previous promise should be held to assent
to such reference, so as to bo considered as having placed his name
upon the note before it was passed to the payee, and thus be made
an original promisor. So in the case of Samson v. Tliornton, 3
Mete. 275, and again in the case of Union Bank v. Willis, 8 id. 504.
And in the case of Hawks v. FhilHps, 7 Gray, 284, much relied on
by the appellant, it was held, that where a person, not a party to a
promissory note, who after its delivery to tho payee placed his name
upon the back of it pursuant to an agreement made with tho payee
before the making of the note, though without the knowledge of
the maker, was liable on the note as a joint maker. These cases,
and others decided upon the same principle are not within, ^nd
therefore not affected by, tho statute of frauds, and consequently
parol evidence was admissible for the purpose of showing the cir-
cumstances under which the signatures were placed on the notes.

But in the case under consideration, the note being under seal,
the party placing her name upon the back of the note cannot be
regarded as a joint obligor with the maker of the note, nor can she
be regarded as an indorser in the ordinary sense of that term,
which implies obligation to pay, as upon a negotiable note. The
circumstances of the case moreover all repel the idea that there
was any thing inchoate or incomplete in regard to the binding
effect of tho note itself, as between tho original parties to it The
noto must speak for itself. It is an unqualified promise to pay,
after the lapse of a definite period of time, under the hand and
seal of the debtor. It was duly delivered, and tliereby the original
debt was merged, and it has ever since been held by the payee;
and there can be no question of its being completely binding upon
the maker, irrespective of the fact whether the apj>ellee had ever
indorsed it or not. The blank indorsement having been placed
upon this note nine months after its date and delivery, that in-
dorsement, if it could have any effect at all, could only be effect-
ive as a guaranty, and that is the nature of the contract as ex-
pressed by the appellant in the writing over the signature of the
appellee.

Such being the case, the important question is, whether tihe
blank indorsement of the appellee authorized the writing of aaoh



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OCTOBER TERM, 1879. 387

Culbertson v. Smitli.

contract over the signature as has been written, and whether that
contract can be enforced under the statute of frauds (29 Gar. II,
chap. 3, § 4), which provides **that no action shall be brought
whereby to charge the defendant upon any special promise to an-
swer for the debt, etc., of another person, etc., unless the agree-
ment upon which such action shall be brought, or some memoran-
dum or note thereof, shall be in writing, and signed by the party
to be charged therewith," etc.

In England, prior to the Mercantile Law Amendment Act of 19
and 20 Vict., chap. 97, § 3, which made a change in this respect,
the construction of the foregoing provision of the statute of
frauds was established, to the effect, that the word "agreement'*
should be understood as requiring written evidence of the consider-
ation for the promise as well as the promise itself ; and therefore
when one promised in writing to pay the debt of a third person,
without stating on what consideration, it was held that parol evi-
dence of the consideration was inadmissible, and consequently such
promise, appearing to be without consideration upon the face of
the written engagement, was nudum pactum, and gave no cause of
action. This was the construction adopted in the leading case of
Wain V. Warllera, 6 East, 10, and that construction nas been, with-
out qualification, adopted in this State, and strictly adhered to in
all the decisions of this court Wyman v. Oratj, 7 H. & J. 409 ;
Elliot V. Oicse, id. 457; Aldridge v. Turnery 1 G. & J. 427 ; Nahh
v. Koontz, 17 Md. 283 ; Mitchell v. McCleary, 42 id. 374 ; Deutsh
V. Bondy 46 id. 104 ; Ordeman v. LawsoUy 49 id. 135.

Of the undertakings within this provision of the statute of
frauds, there are two classes which should be carefully discrimina-
ted, the one from the other. In tho first are cases in which the
guaranty or promise is collateral to the principal contract, but is
made at the same time, and becomes an essential ground of the
credit given to the principal debtor. In such case, there is not,
nor need be, any other consideration than that moving between
the creditor and the original debtor. And in the second class are
cases in which the collateral undertaking is subsequent to the crea-
tion of the debt, and is not the inducement thereto, although the
subsisting liability is the ground of the promise, without any dis-
tinct and unconnected inducement In this case there must be
some further consideration shown, having an immediate respect to
sach liability; as the consideration for the original debt will not



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388 MARYLAND,



Calbertson y. Smith.



attach to the sabfscqaent collateral promise. Story on Prom. Notes, §
457 ; 1 Pars, on Cont. 496 ; Leonard y. Vredenburgh, 8 Johns. 29;
5 Am. Doc. 317.

To the first of these classes the cases of N^abb v. Koontz and
Mitchell V. McCleary belong, in which the guaranties were held
good; and to the second class the cases of Elliott v. Oeise and Aldridge
V. Turner belong, in which the guaranties were held bad, becaase,
while the promises were sufficiently expressed, there was a failure
to express in writing the consideration upon which they were
founded.

In the case of Ndbb v. Koontz, supra, the defendant, at the Joot
of a promissory note of 9k feme covert, made payable to the plaintiff,
for value received, at the same time of the making and delivery of
the note, wrote and signed the following guaranty : '* I hereby
guarantee the payment of the above note on maturity.^ The question
in that case was, whether the guaranty sufficiently expressed the
consideration, to gratify the statute of frauds; and this court held
that it did. The writing signed by the party sought to be charged
clearly expressed the promise, and by reading the written promise
of guai-anty, made simultaneously with the note, as referring to the
note, and as part of one and the same transaction, the consideration
for the guaranty was made sufficiently apparent by writing. The
consideration that supported the note equally supported the guar-
anty. And upon the same principle the case of Mitchell y, McCleary,
supra, and also that of Coldham v. Showier, 2 Car. & K. N. P. 261,
were decided; and many other cases to the same effect might be
cited.

There are cases to be found where parol evidence has been admit-
ted to support guaranties sought to be enforced, by showing the
consideration for the undertaking ; but those decisions have been
made in States, as in Massachusetts and others, where it is held that
the promise only, and not the consideration, need appear on the face
of the guaranty itself. Packard y. Ricliardson, 17 Mass. 122 ; 9 Am.
Dec. 123. But as we have shown, this is not the law of this State.
Here the effort is to supply by parol evidence, not only the con-
sideration, but the promise also; and if such a guaranty as is heie
attempted to be made out, by the evidence produced, could be en-
forced, it would be in the teeth of the plain terms of the statate of
frauds, and would let in all the evils that it was the design of that
Aatnte to ezolnde. Indeed, it would seem to be too plain for quee*



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OCTOBER TERM, 1879. 389

' I •■ ■

Rose y. Coffield.

tion, that a mere blank indorsement of a third party on an instru-
ment, such as we have in this ease, cannot be construed into such
an agreement or note in writing as will gratify the statute ; nor ie
the statute gratified, either in its letter or object, by the subsequent
wnting placed over the signature of the appellee by the appellant.
See cases of Jach v. Morrison^ 48 Penn. St 113 ; Schafer v. F. Jf.
Bank, 59 id. 144, and Wilson v. Martin, 74 id. 159.

The case of Oist v. Drakely, 2 Gill, 330, though much relied on
by the appellant, has no application to this case. There, it is true,
the notes were under seal and they were indorsed by the defendant
in blank, and he was held liable thereon. But such indorsements
were made under special arrangement, and before the notes were
delivered to the payee ; and these notes thus indorsed were used
for the benefit of the defendant, and as means of paying his own
individual indebtedness io the corporation in whose name the notes
were made. In that case both the defendant and the corporation
were liable, not upon a joint, but upon several original undertak-
ings. The promise of each was a direct original promise, founded
upon the same consideration, in which both were interested. The
credit was not given solely to either, but to both as separate con-
tractors, upon co-existing contracts, one under seal and the other
not, but both contracts forming parts of the same general trans-
action. De Wolf V. Babaud, 1 Pet. 476, 499. Such a contract is
not within the provision of the statute of frauds, and hence, in
the decision, there is no reference to the statute.

With these views of the principles of law that control the case,
this court is of opinion that the several prayers offered by the ap-
pellant for instruction to the jury were properly rejected, and that
there was no error in the instruction actually given by the court
below; and the judgment must therefore be affirmed.

Judgmeni affirmed.



BOSB V. COFFIBLD.

(53 Md. IS.)

PartnerMp — diaaol'ution -^ rwHee to preHouB deaien.

A partnersbip indorsed tlie note of third persons to tbe plaintiff for yalne. Al
mAtmity tlie note was renewed by the checic of third persons indorsed h^
the partnership and others. Pending the running of the note the partiMf«>



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390 MARYLAND,



Rose V. Coffield.



ship had been dissolved, and notice thereof had been published in the newB>
papers, but there was no proof that the plaintiff took or read them, and
there was no proof of actual notice to him of the dissolution. Held, that he
could k'ecover against the partnership on the check.*

ACTION on a check. The opinion states the case* The plaint-
iff had judgment below.

William A, Sfetaart, for appellant.

Thomas B. HorwitZy for appellee.

Miller, J. This suit was brought by the appellee against the
appellants, Eose and Porter, as partners, composing the firm of
•* J. B. Rose & Co.," upon a check, of which the plaintiff was the
indorsee and holder. This check was upon the Citizens' National
Bank for $430, was dated the 29 th of November, 1871, and was
payable on the 2d of December following. It was drawn by *' East-
man & Rogers," to the order of "J. B. Rose & Co.," and bears the
indorsement of the payees and also of two oth6r firms. The proof
shows that this check was given in renewal of a promissory note for
the same amount, dated the 27th of October, 1871, payable one
month after date, drawn and indorsed by the same firms, and also
indorsed by another firm. The plaintiff received this note on the
day of its date, from Rose, in good faith, and paid him therefor
1430 in cash. He also received the check in renewal of the note
on the day of its date from Rose, who then indorsed the name of
" J. B. Rose & Co." thereon. At the date of the note and for
some years prior thereto Rose & Porter had been partners, con-
ducting the printing business under this firm name, Rose being the
active business manager of the firm. On the 16th of November,
1871, after the date of the note, but before the check was given,
the firm was dissolved, and notice of the dissolution published in
the newspapers of Baltimore city for several days. But there ia
no proof that the plaintiff took or read either of the papers in
which this publication was made, and there is therefore nothing in
the case bringing homo to him actual notice of the dissolution or
afiectiug him with notice thereof. Boyd v. McCanriy 10 Md. 118.
In this state of case the question arises whether Porter is liable
upon this check, the firm having been in fact dissolved before Rosa
indorsed the firm's name thereon.

* To same effect, Hayiiei ▼. Carter (12 Hefsk. 7). S7 Am. Bep. MT.



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OCTOBER TERM, 1879. 39J

Rose V. Coffleld.

It is familiar law, that after dissolution one partner cannot impose
new obligations on the firm, or vary the form or character of those
already existing. Ellicott v. Nicholhy 7 Gill, 100 ; Bell v. Morrison^
I Pet. 370, He has no authority after dissolution to give a note in
the firm's name, even though its consideration be a pre-existing
debt of the firm, nor to renew an existing note of the dissolved
firm, for these constitute new contracts, and cannot therefore
bind his former partner. Hurst \. Hill, 8 Md. 399; Hopkins
v. Boyd, 11 id. 107; Martin y. Kirk, 2 Humph. 529; National
Bank v. Norton, 1 Hill, 572. But to this general nile there are
certain well defined and clearly established exceptions or qualifica-
tions. For instance, the agency of each partner tobind his copart-
ners can only be effectually determined by giving notice of its
revocation. The principle is therefore now well established, that
where a partnership is voluntarily dissolved, or one of the ostensible
or known partners retires from the firm (which is in fact a dissolu-
tion), and there is no public notice of the dissolution given, by
publication in a newspaper or otherwise, the power of each to bind
the rest as to third persons, who have no knowledge of the dissolu-
tion, remains in full force, although as between the partners them-
selves, a dissolution or a retirement is a revocation of the authority
of each to act for the others ; and hence if a known partner retires,
and no siich notice is given, he will be liable to be sued in respect
to a promissory note made after his retirement by his late partner
in the name of the firm — even though the plaintiff may have had
no dealings with the firm previous to the retirement or before the
making of the note. Lindley on Partnership, 327; Parkin v. Carru-
ihers, 3 Esp. 248; Williams v. Keats, 2 Stark. 290; Mulford v. Griffin,
1 Fost & Fin. 145; Anderson v. Weston, 6 Bing. N. C. 296; Ketcham v.
Clark, 6 Johns. 144; 5 Am. Dec. 197; Dickinson v. Dickinson, 25
Gratt. 321. In such cases the law regards the contract as made with
the firm and on their credit^ and holds the retiring partner liable,
upon theprinciple that where one of two innocent persons must suffer
from giving a credit, he who has misled the confidence of the other,
and has been the cause of the credit, either by his representations
or his negligence, ought to suffer instead of the other. Again,
while public notice by advertisement, such as was given in this
case, may suffice to conclude all persons who have not had any
previous dealings with the firm, it will not be sufficient as to those
who have had snch dealings. All the authorities agree that as to



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392 MARYLAND,



Rose T. Coffield.



persons who havo previousij dealt with the firm, it is requisite that
actual notice of the dissolution should be brought home to them,
or at least that the creait should be given under circumstances
from which actual notice may be inferred. Story on Part., § 161 ;
Pars, on Part 412. But what will amount to such previous deal-
ing as to entitle a party to notice of this kind is sometimes a
difficult question, and this in fact is the real and only point of
difficulty in the case before us.

It has been argued with much force that the plaintiff had but a
single transaction with this firm before its dissolution, which con-
sisted simply of the purchase by him of the note of the 27th of
October, and that this did not amount to such dealing with the
firm, as to entitle him to actual notice. So far as our researches
have extended, the cases in which this question has been considered
are not numerous, and those in which the decisions have necessarily
turned upon it are very few. It is certain that no inflexible rule
or standard of dealing, by which all cases can be governed or
measured, has been established. There was a very able discussion
of the question in the Court of Errors of New York, in the
case of Vernon v. Manhattan Co., 22 Wend. 183 . In that case
a note for 15,000 was given by Vernon & Co. in December,
1831, payable to Moore. It was indorsed by another firm
after Moore's name, and in that shape was discounted by the
bank for Moore's accommodation. There were then several
renewals of it in the same form, with payments reducing the amount
until the 15th of April, 1833, when the note sued on for the balance
of 11,700 was drawn by one of the partners in the partnership name.
The firm of Vernon & Co. continued until the 28th of February,
1833, when it was dissolved, and notice of the dissolution published
in the newspapers. There was therefore but one original note,
though it was followed by several renewals before the dissolution,
and the court hold that the bank must be considered as having had
dealings with the firm within the meaning of the rule requiring
actual notice of the dissolution. That decision was followed ty the
Supreme Court of the same State in National Bank v. Norton, 1
Hill, 572, where a note was indorsed by a firm and discounted by
the bank, and several renewals with deductions followed. In that
case the original note was discounted on the 24th of January, 1837,
And the firm was dissolved, and notice of dissolution dnly pnblished
on the Ist of February, 1837, so that the first;» as well as the sub-



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OCTOBER TERM, 1879. 393



Rose V. Coffleld.



sequent renewals took place after the dissolution. The court held
that the note sued on being an attempt to renew an old note of the
firm which lay in the bank, and was confessedly binding on the
firm, the partners must be considered as dealers with the bank^ and
that the latter was therefore entitled to actual notice of the disso-
lution. In Ward well v. Haighi, 2 Barb. 549, two previous transac-
tions, one consisting of a purchase of goods for cash, and the other
a purchase on credit, which was paid prior to the dissolution, were
held suflScient In Clapp v. Rogers^ 2 Kern. 283, two previons very
small purchases on credit, one to the amount of $11.03, and the
other to $20.40, which had been paid prior to the dissolution, were
likewise held sufiScient, and the Court of Appeals, by Denio, J.,
said the rule requiring actual notice "proceeds upon a general pre-
sumption that one giving credit to a mercantile firm does so upon
the responsibility of the individual partners; and we cannot annex
to it a distinction based upon the amount of the credit without
destroying that certainty which is essential to its utility." In the
subsequent case of City Bank of Brooklyn v. McCJiesney^ 20 N. Y.
240, there was no public notice of the dissolution by publication in
the newspapers or otherwise, and what is said by the court in that
case, upon the question we are now considering, may well be re-
garded as a mere dictum. Reference has also been made to the
cases of Hutchins v. Bank of Tennessee, Hutchins v. Sims, and
Hutchins v. Hudson, 8 Humph. 418, 423, 426; Oriniian v. Baton
Rouge Mills Co., 7 La. Ann. 638, and Amidown v. Osgood, 24 Vt.
278, in which are to be found decisions or dicta, bearing to some
extent upon this question, but we discover nothing in any of them
in conflict with the New York decisions we have cited.

The principle, as shown by these authorities, upon which this rule
of actual notice is founded, seems to embrace the present case. That
principle is that credit already raised on the faith of the partnership
is presumed to be continued on the same footing, unless special
notice of a change be given; and as every partner knows, or has the
means of knowing, who are the persons with whom his firm has
transacted business, and from whom it has received credit, publio
policy and natural justice alike demand that he should give to
every such party personal and special notice of the withdrawal of
his responsibility. As was said by the Chancellor, in Vernon v
Manhattan Co., the word " dealing*' when used in reference to this
rule "is merely used as a general term to convey the idea that the per-



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394 MARYLAND,



Hose ▼. Coffield.



Online LibraryIrving Browne Isaac Grant ThompsonThe American reports: containing all decisions of general ..., Volume 36 → online text (page 44 of 123)