Opinion
No. 5640.
May 27, 1931.
APPEAL from the District Court of the Fourth Judicial District, for Gooding County. Hon. D.H. Sutphen, Judge.
Action by E.B. Hughes against George H. Nichols and Ed Warner, as indorsers of village warrants. Judgment for plaintiff. Reversed.
Bissell Bird, for Appellants.
The warrants involved in this suit, being merely orders on the village officials to deliver to the payee named certain sums of money "from the St. Imp. Dist. No. 2 Fund" if and when any moneys should be in such fund, are not "written contracts for the payment of money or personal property," as the latter expression is used in C. S., secs. 6063, 6064, and therefore such statutes do not fix the rights and liabilities attendant upon the indorsement and transfer of said warrants. ( Hughes v. Village of Wendell, 47 Idaho 370, 275 P. 1116; Dana v. San Francisco, 19 Cal. 486; 15 C. J. 598; 19 Cal. Jur. 807; Martin v. San Francisco, 16 Cal. 285; Radke v. Liberty Ins. Co., 37 Idaho 436, 216 P. 1040.)
In the absence of such statutes the common-law rule, and the rule which properly applies to the indorsement and transfer of said warrants from appellants to respondent, is that such assignment and transfer do not imply a warranty that the warrants will be paid or performed. (Bigelow on Bills, Notes and Checks, 3d ed., sec. 15; 5 C. J. 969; 8 C. J. 57; Newer v. First Nat. Bank, 74 Mont. 549, 241 P. 613-615.)
A.F. James, for Respondent.
An assignor of a non-negotiable written contract for the payment of money is liable to the assignee in case of nonpayment if the assignee has unsuccessfully used due diligence to collect from the maker, and in any event, if the institution of such suit would have been unavailing. (C. S., secs. 6063, 6064.) Section 6064, C. S., is merely a legislative adoption and enactment into law of a rule of law which existed and still exists in a number of states independent of statute. ( Goff v. Miller, 41 W. Va. 683, 56 Am. St. 889, 24 S.E. 643; 5 C. J. 969, notes 59, 60, and on page 970: also, Welsh v. Ebersole, 75 Va. 651 at 657.)
The due diligence required by C. S., sec. 6064 is the institution and prosecution of a suit against the maker of the instrument and the statute does not require the indorsee to resort to any other proceeding or to look to any other person other than the maker.
This action was brought by respondent, Hughes, against appellants, Nichols and Warner, as indorsers, to recover the amount paid by him to them for certain warrants issued by the village of Wendell.
In September, 1920, the village of Wendell created Local Improvement District No. 2, and entered into a contract with appellants for the construction of sidewalks and curbings in said district, and the warrants in question were given to them in part payment for their work. The warrants were dated September 10, 1921, signed by the proper village officials and directed the village treasurer to pay appellants the several amounts specified therein "from the St. Imp. Dist. No. 2 Fund."
Respondent alleged that the funds collected by reason of assessments levied against property in said improvement district had all been paid out upon warrants prior in time to the warrants in question. The complaint showed that no further funds can be realized by reason of the special assessments, and that the city used due diligence in respect to the making and collection of the assessments and application of the money.
Appellants filed general and special demurrers, all of which were overruled by the trial court. Upon their refusal to plead further, default judgment was entered against them, from which this appeal is taken.
Appellants assign as error the action of the trial court in overruling their general demurrer, for the reason that the instruments so transferred are not contracts for the payment of money, as contemplated by C. S., secs. 6063, 6064; and in overruling their special demurrer. C. S., sec. 6063, provides:
"A nonnegotiable written contract for the payment of money or personal property may be transferred by indorsement, in like manner with negotiable instruments. Such indorsement transfers all the rights of the assignor under the instrument to the assignee, subject to all equities and defenses existing in favor of the maker at the time of the indorsement."
C. S., sec. 6064, provides, in part:
"Every assignor, his heirs, executors or administrators, of every such instrument in writing, is liable to the action of the assignee thereof, his executors, or administrators, if such assignee has used diligence, by the institution and prosecution of a suit against the maker of such instrument, or against his heirs, executors or administrators, for recovery of the money or property due thereon, or damages in lieu thereof; . . . ."
Respondent concedes that the warrants in question are non-negotiable instruments, but contends that they fall within the provisions of the above statutes and appellants' liability as indorsers is fixed thereby.
Appellants, on the other hand, contend that the warrants are not contracts for the payment of money, as contemplated by the above provisions, and that they are not liable, under the allegations of the complaint, as indorsers.
Where the matter is not regulated by statute, there is much conflict in judicial decisions as to the liability of a payee of a non-negotiable instrument who writes his name on the back thereof and transfers it to another. Cases setting out the different views of the liability thus created will be found in 8 C. J. 57. The majority view is that such a transaction amounts only to an assignment or transfer of title and creates no liability on the part of the assignor.
By the enactment of section 6064 the legislature elected to follow the minority rule, holding the indorser liable, but did not intend thereby to create any greater liability than that set forth in the terms of the instrument indorsed. The liability of the appellants is within the general rule, measured by the liability of the maker, under the maker's contract for the payment of money. (28 C. J. 947, note 75.)
These warrants were merely a means for drawing money from a fund to be created by the collection of the special assessments levied against the property in the improvement district and created no indebtedness against the village. ( Hughes v. Village of Wendell, 47 Idaho 370, 275 P. 1116.) The only obligation incurred by the village was to use due diligence in collecting the assessments and to apply the money so realized in the redemption of the warrants in the order of their issue.
As against the village of Wendell, respondent could have no relief save that of resorting to the special assessment fund; that was his only security; and the same condition which limited the liability of the village also constituted a limitation on the liability of the appellants as indorsers.
The general demurrer to the complaint should have been sustained. The special demurrer raised the question of the bar of the statute of limitations, which it is unnecessary to pass upon or discuss.
Judgment reversed; costs to appellants.
Budge, Givens, Varian and McNaughton, JJ., concur.
Petition for rehearing denied.