Story Case

Harvey Wilkins indorsed to Samuel Strong, as security for money borrowed from him, a note made payable to a Sarah Hamilton and by her indorsed to Wilkins. When Wilkins did not repay the loan, Strong brought suit upon the indorsement of the note. Wilkins maintained as a defense that he never had title to the note, because the indorsement of Sarah Hamilton, under the law of Tennessee, where the transaction occurred, was invalid, because she was a married woman. Is this a valid defense?

Ruling Court Case. Watson Vs. Cheshire, 18 Iowa Reports, Page 202. 87 American Decisions, Page 382

John Cheshire, owner of certain land, sold it to Moore. In part payment of the land, Moore gave to John Cheshire his note. Cheshire transferred this note by an indorsement without recourse to Phillips. Phillips likewise indorsed it without recourse to Watson. When the note became due, Watson presented it to Moore for payment. It then appeared that Moore had paid to Cheshire all due in respect to this note. Watson then sued Chesire, upon the latter's indorsement.

Chesire contended that he was not liable npon his indorsement because he had indorsed without recourse.

Mr. Justice Dillon said: "The accepted doctrine on this subject may be thus stated: Where a note is transferred without recourse, equally as when it is transferred by delivery only, the transferor is exempted from all the ordinary responsibilities which attach to such a transfer. But he does not, unless such is the agreement, stand free from all obligations. Thus, unless otherwise agreed, he warrants that the paper so transferred is genuine, and not forged or fictitious." He also warrants that he has good title to the instrument, and the power and capacity to indorse; likewise, that the instrument has not been paid. In case of indorsement without recourse, however, these warranties exist only to an immediate indorsee. Therefore, Watson should have sued Phillips. Judgment was given Cheshire.

Ruling Law. Story Case Answer

When once a person indorses a negotiable instrument, he thereby promises and agrees with the person to whom he indorses it that he has good title to it; that is, he agrees to make good any loss which may be sustained by his indorsee, due to any defect in the title which he has passed. If he had no title, so that he was able to pass none to his indorsee, then by his indorsement he is under an obligation to make good this loss. By his indorsement, he likewise promises that he has the right and power to make the indorsement. He cannot thereafter maintain his lack of power or right to indorse as against one to whom he has indorsed.

Because of the coverture of Sarah Hamilton, she could not be sued on her indorsement of this note. Therefore, this case shows strongly the justice in allowing the holder to recover of the indorser in spite of his lack of title to the note. Even though Wilkins was never the owner of the note, he did secure money from Strong upon the security of his indorsement. Therefore, he should be held liable according to the terms of his indorsement, notwithstanding the lack of capacity in the prior indorser. His defense should not be allowed, and Strong should have judgment.