McArthur v. McLeod, 51 N.C. 475, 6 Jones 475 (1859)

June 1859 · Supreme Court of North Carolina

51 N.C. 475, 6 Jones 475

JOHN A. McARTHUR v. JOHN R. McLEOD et al.

Although notes and endorsements, as simple contracts require a consideration, it has long been held that they import a consideration prima facie, so as to throw the onus on ther side to shew the want of a consideration. Where one signs a note in blank and delivers it to another to be filled up' and used by him, the party is bound to others, to whom it has come in the course of business, by the note as filled up, just as he would have been, if it had been in full before his signature.

Where a note is given for a real business transaction, although it may be expressed to be payable at a bank, it is nevertheless negotiable in the market generally. It is only restricted when it appears on the paper to be negotiable at a bank, and no where else.

(Ray and Pearce v. Panics and others, 6 Jones’ Rep. 118, cited and approved.)

Assumpsit, tried before IIbatii, J., at the last Spring Term of Cumberland Superior Court.

The declaration was upon a promissory note for $500, against the maker, and the four other defendants as endorsers, negotiable and payable at the bank of Fayetteville, or at the branch bank of Cape Fear, payable to the defendant McKay. Plea, non-assmnpsit. The defendants gave in evidence, that McLeod applied to McKay to endorse a note in blank for him, and that the latter did so on the condition, that it was to be for $500, and was not to be absolute, unless McLeod procured three other endorsers, and had the note discounted at one of the banks mentioned in it; McLeod agreed that he would use the note only in that way, and would procure the three endorsers, and also pay the note at maturity; and McKay then delivered the note in blank to McLeod. The note was afterwards filled up in the hand-writing of the last endorser, Johnson, and the endorsements were filled up by the •plaintiff’s attorney at the bar. The note was not offered for discount at either of the banks, and soon after maturity it was sued on by the plaintiff, as the endorsee of Johnson. The counsel for the defendants contended, that they were not liable, because it was apparent on the note, that if was to be used only at one of the banks to borrow money, and it had not been so used; and because, according to the agreement between McLeod and McKay, the note was to be so used only, and had not been, whereby McKay was not liable, and the defense enured to the benefit of the other endorsers; and because the plaintiff had shown no consideration between him and the defendants, or any of them. The Court instructed the jury, nevertheless, that the plaintiff was entitled to recover ; and after a verdict and judgment, the defendants appealed.

No counsel for the plaintiff in this Court.

1Veil McKay, W. McKay, Banks and Kelly, for defendant.

EuKFiN, J.

When the law made promissory notes negotiable, like the bills of exchange, it intended to impart to them a mercantile character, so as to make them answer many of the purposes of money in trade; and, therefore;' the courts were obliged early to lay down rules to prevent frauds on the public, and to sustain that character. Hence, although notes, as simple contracts require a consideration, it has been long settled, that they import a consideration prima facie from the holder, so as to throw the onus on the other side to show the want of a consideration. It is necessarily, the same as to endorsements; and although in this case, there was no consideration between McLeod and McKay, and neither of them could recover from the other; yet, as soon as the note passed into another hand for value, and on the credit of the previous names, the consideration extended to all the parties. The same reasons require the rule, that when one signs a note in blank, and delivers it to another to be filled up and used by him, the party is bound by the note as filled up, just as he would have been, if it had been in full before his signature. It was his folly to put such blind faith in another, and the safety of third persons, who can know nothing of the secret agreement between the parties, requires such effect to be given to the paper. The conditions on which McKay endorsed the paper, were altogether between him and McLeod, and cannot affect others, to whom the paper comes in the course of business. Here, the defendants do not show, that the present holder got the note by improper means from McLeod, or any other party. The only remaining objection, arises out of the fact, that the note is upon its face negotiable at bank. But that is only to enable the holder to get it discounted at bank, if lie should wish it, as our bank charters prohibit most of the banks from discounting any paper not expressed to be negotiable there. It is not a restriction on its general negotiability, as has been more than once said by the Court, and was explained at large, at the last term, in Ray and Pearce v. Banks and others, 6 Jones’ Rep. 118. It is only when it is apparent on the paper, not only that it is negotiable at a bank, but also that it is negotiable there only, and, therefore, is not thrown into the market, that the restriction applies.

Per Curiam, Judgment affirmed.