Beer v. Clifton

Nonnegotiable Notes — Liability of Indorser—• Agreement for Due Diligence.—The indorser of a nonnegotiable note after maturity, who did not agree or undertake to become absolutely liable upon or for the note to the indorsees, but agreed only to pay such part of the same as the indorsees should fail to collect after due diligence, is not liable thereon if due diligence was not used to collect the same.

Id.—Offset—Estoppel—Transfer of Notes as Indemnity.—The indorser is not estopped from asserting nonliability upon the nonnegotiable notes so indorsed, and not collected with due diligence, by reason of the fact that they were transferred by the indorsees as collateral security to a third party to indemnify him against his liability upon another note executed jointly by the indorsees and such third party to such indorser, as payee, nor can such indorsed notes be offset against the latter note, although it was made nonnegotiable at the request of such third party for the purposes of offset.

Id.—Notice oe Condition—Presumption—Special Agency.—The indorser is not presumed to have notice of any condition of offset imposed or attempted to be imposed by such third party as a condition of his joining in the execution of the note to the indorser, not proved to luivebeen communicated to the indorser; nor is such notice implied from the fact that notice was given by such third party of his reasons for having the note made nonnegotiable to a special agent of the express company who presented the note to him for execution, with the words or order” written therein, which were stricken out before execution.

Id.—Burden of Proof—Knowledge of Payee—Change in Form of Note.. The burden of proof is upon such third party to prove that the facts were communicated to the payee of the note, nor can the mere assent of the payee to the change in the form of the note imply that the payee had been informed thereof, or had assented to any conditions imposed for joining in the execution of the note not proved to have been made-known to the payee.

Id.—Supposed Liability of Indorser—Effect of Knowledge of Facts— Offset.—Where it appears that the third party insisted upon having, the new note executed by him made nonnegotiable merely by reason of the supposed liability of the indorser upon the other nonnegotiable notes transferred to him for indemnity, the knowledge by such indorser of the desire or purpose of the holder of the other notes to set them off upon the basis of the indorser’s liability could not affect or increase that liability; and the consent of the payee to a change in the form of the new note so as to make it nonnegotiable could only have the effect to afford to such third party an opportunity to set off against the note executed by him a.ny legal demand existing by reason of the indorsement of the- • other notes when his note becomes due, and if, at such time, or thereafter, there is no legal liability of the indorser upon the indorsed notes, there can be no offset of the same.