1. The late civil war was flagrant in Arkansas from April, 1861,
till April, 1866, and the statutes of limitation did not run during
that term. This principle applies to suits between persons in
different states of the late so-called Confederate states of
America, as much as to suits between citizens of states of the
North, which remained loyal, and citizens of the said so-called
Confederate states, with which they were at war.
2. An endorser of a promissory note, though an endorser for
accommodation only, is not a "person bound as security" within the
meaning of the statute of Arkansas which enacts that any person
bound as "security" for another, on any bond, bill, or note, may at
any time after action has accrued thereon require the person having
such right of action forthwith to commence suit against the
principal debtor, on penalty of such security being exonerated.
On the 11th of June, 1864, [
Footnote 1] Congress enacted that:
"Whenever, during the existence of the present rebellion, any
action . . . shall accrue against any person who by reason of
resistance to the execution of the laws of the United States, or
the interruption of the ordinary course of judicial proceedings,
cannot be served with process; OR whenever after such action . . .
shall have accrued such person cannot &c.
Page 89 U. S. 577
of the time limited by law for the commencement of such
action."
In addition to this, this Court has repeatedly decided that
during the civil war, the courts of the United States in the
insurrectionary states were closed, and that statutes of limitation
did not run against suitors having a right to sue in the federal
courts. [
Footnote 2]
It has also decided that in Arkansas the war was flagrant from
April, 1861, till April, 1866. [
Footnote 3]
In the state just named, actions of assumpsit are barred by the
statute of limitations in five years.
Another statute of the state [
Footnote 4] thus enacts:
"SECTION 1. Any person bound as security for another in any
bond, bill, or
note, for the payment of money, or the
delivery of property, may, at any time after action hath accrued
thereon, by notice in writing, require the person having such right
of action forthwith to commence suit against the principal debtor
and other party liable."
"SECTION 2. If such suit be not commenced within thirty days
after the service of such notice, and proceeded in with due
diligence, in the ordinary course of law, to judgment and
execution,
such security shall be exonerated from
liability to the person notified."
In this condition of the law, on the 31st of January, 1860,
Rives gave to Bull -- both persons being citizens of Arkansas -- a
promissory note, payable on the 1st of November, 1861. Bull
endorsed it to Jones, of Memphis, Tennessee; both the States of
Tennessee and Arkansas having, in the late civil war, been members
of the so-called Confederate states of America. The note was not
paid at its maturity, and it having been protested, notice of the
dishonor &c., was given to Bull.
Bull died in November, 1869, and letters of administration on
his estate were granted to one Ross.
Page 89 U. S. 578
Jones, now, October 13, 1871, brought assumpsit on the note
against the administrator, Ross, on the endorsement of Bull, his
intestate.
The defendant pleaded two pleas.
1. The first plea was the statute of limitations of five
years.
The plaintiff replied to this plea:
"That from the 1st of June, 1861, to the 2d of April, 1866, a
war existed between the United States and the Confederate states,
including the state of Arkansas, where during all that period the
said Bull resided, and that during all that period the courts of
the United States in and for the state of Arkansas were, by reason
of the said war, closed, and no process could be issued therefrom
or served on the said Bull, the authority of the United States
therein being resisted &c. That the said Bull died in said
state on the 15th November, 1869, and that letters testamentary
were granted &c.; and that, counting out the period of the said
war, the plaintiff's cause of action did accrue within five years
next before the said grant of letters on the estate of Bull."
The defendant rejoined:
"That during the said rebellion, and on account thereof, the
said courts were so closed that legal process could not be issued
against this defendant from the month of May, 1861, until the month
of March, 1865, and not longer; without this, that said courts were
so closed from the 1st day of June, 1861, to the 6th of August,
1865."
The plaintiffs demurred to the rejoinder:
"Because it puts in issue a matter of public law pleaded in the
said replication."
The court sustained this demurrer.
2. The second plea (which was founded on the above-quoted
statute about persons bound as security for another in any bill,
note &c.) was thus:
"That Bull was only an endorser on the note, and, as such, only
security; that Rives was the principal, and had ample property and
effects out of which to make the debt, and that after the note had
become due and payable and been protested
Page 89 U. S. 579
for nonpayment, to-wit, on the 1st day of January, 1861, Bull
had given notice to Jones to bring suit upon the note immediately,
and that in default of then doing so he, Bull, would hold himself
free from all liability on the same. But that Jones had not brought
suit on the note for more than the space of thirty days, nor indeed
until the bringing of the present suit, October, 1871."
The plaintiffs demurred to this plea because:
"1. The endorsement of Bull made him primarily liable to the
plaintiffs on his contract of endorsement. His contract was
separate and distinct from that of Rives, the maker of the note.
There was no unity or privity of contract between Rives and Bull,
and Bull was in no sense the surety of Rives on his contract."
"2. The liability of Bull on his contract as endorser became
perfect on protest of the note and notice, and he could not
discharge it by the matter set up in the plea under the statute of
Arkansas."
The court sustained this demurrer. Both demurrers being thus
sustained, judgment was given for the plaintiff; and the
administrator brought the case here, assigning for errors:
1. That the court erred in sustaining the plaintiff's demurrer
to defendant's rejoinder to his replication to plea of statute of
limitation.
2. That the court erred in sustaining the demurrer to
defendant's third plea.
Page 89 U. S. 585
MR. JUSTICE CLIFFORD delivered the opinion of the Court.
Two errors are assigned, as follows:
1st. That the court erred in sustaining the demurrer of the
plaintiffs to the rejoinder filed by the defendant to the
plaintiffs' replication to the first special plea of the
defendant.
2d. That the court erred in sustaining the demurrer of the
plaintiffs to the third plea of the defendant.
I. Unsealed written contracts are barred by the statute of
limitations of that state in five years from maturity, and it
appears that the note described in the declaration matured on the
first of November next after its date, but the record shows that
the endorser deceased on the fifteenth of November, 1869, leaving
the note unpaid and outstanding. Under the laws of the state the
general statute of limitations runs from the maturity of the
contract to the granting of administration upon the estate of the
decedent, when the general statute ceases to run and the statute of
limitations applicable to the estates of deceased persons begins to
run. [
Footnote 5]
The case, therefore, on both points, is one entirely clear.
Page 89 U. S. 586
Hence the defendant pleaded that the cause of action did not
accrue to the plaintiffs at any time within five years next before
the grant of letters of administration upon the estate of the
deceased endorser.
War, when duly declared or recognized as such by the warmaking
power, imports a prohibition to the subjects or citizens of all
commercial intercourse and all correspondence with citizens or
persons domiciled in the enemy country. Total inability, therefore,
on the part of an enemy creditor to sustain any contract in the
tribunals of the other belligerent, exists by the law of nations
during the continuance of the war, but the restoration of peace
removes the disability and opens the doors of the courts.
Unquestioned right to sue is the status of the creditor if the
contract was made during peace, but the effect of war is to suspend
the right, not only without any fault on the part of the creditor,
but under circumstances which make it his duty to abstain from any
such attempt. His remedy is suspended by the acts of the two
governments and by the law of nations, not applicable to the
contract at its date, but which comes into operation in consequence
of an event over which he has no control. [
Footnote 6]
Peace, it is said, restores the right and the remedy, but as
that cannot be if the statute of limitations continues to run
during the period the creditor is rendered incapable of suing, it
necessarily follows that the operation of the statute is also
suspended during the same period.
Attempt is made to distinguish the case before the court from
the case in which that rule of decision was first promulgated by
this Court, but it is clear that the attempt must be unsuccessful,
as the same doctrines have since been applied in a case where a
mortgagee, who was a citizen and resident of one of the Confederate
states, brought a suit after the close of the war upon a bond and
mortgage executed prior to the war by citizens of one of the loyal
states, and the court held that the period from the
proclamation
Page 89 U. S. 587
of the blockade to the proclamation that the war was closed,
must be deducted in the computation of the time which the statute
of limitations of the loyal state had run against the right of
action. [
Footnote 7]
Extended discussion of that topic is quite unnecessary, as the
oft-repeated decisions of this Court have established the rule that
the statute of limitations was suspended in the rebellious states
during the existence of the late rebellion, and the express
decision of this Court is that the war was flagrant in that state
for the whole period specified in the replication filed by the
plaintiffs. [
Footnote 8]
Viewed in the light of that decision it is clear that the
rejoinder filed by the defendant is insufficient and that the
ruling of the circuit court adjudging it bad was correct. [
Footnote 9]
II. Due demand of the marker, protest, and notice to the
endorser of nonpayment are admitted, and it is alleged that the
endorser subsequently, by a certain notice in writing, required the
plaintiffs, as holders of the note, to sue the maker and the
endorser at a time when the maker was solvent and able to pay the
same, and that the plaintiffs omitted for more than thirty days to
comply with the terms of the notice, during which time the market
became insolvent.
Based on these facts the second defense set up is that the
endorser was discharged by the neglect of the holders of the note
to comply with the terms of that notice, which must depend in a
great measure upon the nature of the obligation that the endorser
assumed by his contract of endorsement. If the holder of a
negotiable promissory note does anything, the effect of which is to
suspend, impair, or destroy the right of the prior parties to
indemnity from those otherwise liable over to them, he cannot
resort to the parties affected by his conduct to make good the
default of the maker of the instrument. [
Footnote 10]
Page 89 U. S. 588
Simple indulgence, however, or mere delay to enforce payment,
without a binding contract to give time, will not, under the
general rules of commercial law, have that effect, even in the case
of a party occupying strictly the contract relation of a surety.
[
Footnote 11]
Endorsers, it is sometimes said, are sureties, but their
contract, which is a new one as compared with the marker of the
note, differs in some important respects from that of the surety,
who is a joint promisor with the principal, as the holder of such
an instrument is under no obligation to use diligence to enforce
payment against the maker in order to hold the endorser. [
Footnote 12]
Even in a case where the holder of a promissory note was, after
the note fell due, called upon by the endorser to prosecute the
maker, of whom the amount might then have been collected, but who
afterwards became insolvent, and the holder neglected to do as
requested, still it is held that such neglect will not discharge
the endorser. [
Footnote
13]
Judicial decisions of high authority deny that the endorser is
to be regarded as a surety after his liability is fixed by due
presentment, demand, and notice of the dishonor of the note, and
insist that when his liability is fixed by those acts of the
holder, that he, the endorser, becomes a principal debtor himself,
subject only to the condition that the holder shall do no act to
suspend, impair, or destroy his remedy over against prior parties
to whom he has a right to resort for a remedy; and support to that
view is certainly derived from the conceded fact that the endorser
is answerable upon an independent contract, which makes it his
legal duty to
Page 89 U. S. 589
pay the note when duly presented and demanded and due notice is
given to him of its dishonor, and also from the fact, which is also
conceded, that he has not the same reason as may exist in common
cases of suretyship to compel the creditor to active diligence
against the maker, as he has in general the complete power, by
paying the note, to reinstate himself in the possession and
ownership of the same, and thus to entitle himself to a personal
remedy against the maker. [
Footnote 14]
Doubtless the endorser is in some respects a surety, but his
principal relation to the instrument is that expressed by the
commercial term applied to every party who contracts that
obligation. Such a party to such an instrument contracts with the
endorsee and every subsequent holder to whom the note is
transferred, as follows:
1. That the instrument and antecedent signatures are
genuine.
2. That he, the endorser, has a good title to the
instrument.
3. That he is competent to bind himself in such a contract.
4. That the maker is competent to bind himself to the payment,
and that he will, upon due presentment of the note, pay it at
maturity.
5. That if, when duly presented, it is not paid by the maker,
he, the endorser, will, upon due and reasonable notice being given
him of the dishonor, pay the same to the endorsee or other holder.
[
Footnote 15]
Confirmation that the endorser is not a surety in the general
sense is also derived from the fact that he stands in the attitude
of the drawer of a new bill and that he is not primarily liable to
make the payment, but only in case of the default of the maker and
proof of due presentment, protest, and notice of dishonor, and that
even then he cannot be joined with the maker, as the surety
proper may be, because the maker and endorser are liable
on different contracts. [
Footnote 16]
Page 89 U. S. 590
Suppose that is so, when the theory is tested by the rules of
commercial law, still it is insisted by the defendant that the
contract of the endorser in this case was made in the state where
he resides, and that the endorser, by the law of that state, is
discharged for the reason that the holder of the note omitted to
seek his remedy against the maker, as thereto requested by the
endorser.
Support to that defense as exhibited in the second assignment of
errors is attempted to be drawn from the statute of the state where
the endorser resides, which provides in effect that a surety in any
bond, bill, or note, may give the holder notice to sue the
principal in writing, and if the holder fails to do so within
thirty days the surety shall be discharged. [
Footnote 17]
Founded on that statute the defendant alleges that the
endorsement was made in that state, and the allegation also is that
the consideration of the note was a debt due from the maker to the
plaintiffs, and that it was made payable to the decedent and was by
him endorsed merely as a means of procuring his liability for the
payment of the said debt due to the plaintiffs.
Grant that the contract of endorsement was actually executed in
that state, still it is the better opinion that the case is not
governed by the statute of that state already referred to for the
reason that the statute of the state does not include the contract
of an endorser.
Sureties in a note who become joint promisors with the maker, it
may be conceded, are within the terms of that statute, as they
stand in the same relation to the principal as in a bond given for
the payment of money or the delivery of property. Authority to give
the described notice arises immediately after the bond, bill, or
note falls due, which evidently refers to the lapse of time
specified in the contract, but the absolute obligation to pay does
not arise in the case of an endorser before notice of dishonor,
which can never be given to the endorser till after the note is
presented to the maker, and he has refused or neglected to
Page 89 U. S. 591
fulfill his promise to pay, so that the notice in writing
requiring the holder to sue the endorser with the maker, would seem
to be inapplicable before the liability of the endorser is fixed by
demand of payment of the maker and his refusal to comply, and
notice is given to the endorser of the dishonor of the note.
Evidently the statute contemplates that the cause of action will
accrue against the principal and surety at the same time, which is
never the case with the endorser and maker. Such a notice may
unquestionably be given by a surety proper, whether his contract is
expressed in a bond, bill, or note, as soon as the instrument falls
due, but it would be unreasonable to suppose that an endorser would
give such a notice before his liability had become fixed, as it may
be that such a demand to sue would operate as waiver of the right
to notice of the dishonor of the note. Nor is it necessary to
extend the operation of the statute so as to include an endorser,
in order to satisfy the literal scope of the language employed.
"Persons, bound as security for another," are the words of the
statute, which undoubtedly includes sureties proper in a bond,
bill, or note, but it would be extending the words of the statute
beyond their reasonable meaning, to hold that it includes an
endorser whose liability is fixed by the required notice of the
dishonor of the bill or note.
Beyond all doubt the statute is one passed in derogation of the
common law, even if restricted to sureties in the general sense,
but it would be even more so, if by a broad construction, it could
be extended to include endorsers upon bills of exchange and
negotiable promissory notes.
Statutes passed in derogation of the common law, it is
everywhere held, should be construed strictly, nor is there any
subject matter to which that rule should be applied with greater
intensity than where the attempt is made to change by local
legislation the rules of commercial law, applicable to that class
of commercial instruments. Remedies of a statutory character, where
the right to be enforced was unknown at the common law, are to be
followed with strictness,
Page 89 U. S. 592
both as to the methods to be pursued and the cases to which they
are to be applied. [
Footnote
18]
When a statute alters the common law the meaning shall not be
strained beyond the meaning of the words, except in cases of public
utility, as when the end in view appears to be more comprehensive
than the enacting words. [
Footnote 19]
Where the expression is in general terms, statutes are to
receive such a construction as may be agreeable to the rules of the
common law in cases of that nature, for statutes are not presumed
to make any alteration in the common law, beyond what is expressed
in the statute. [
Footnote
20]
Argument to show that the statute in question, if it be
construed to include the endorser of a bill or note, is in
derogation of the rule of the commercial law, is scarcely
necessary, as it appears to be well settled that it is no part of
the duty of the holder of a note which has been dishonored and due
notice thereof given to the endorser, to sue the maker merely
because the endorser requests him so to do. On the contrary the
holder has his choice to sue anyone of the parties to the note who
is in default, and it is the duty of the endorser, if he desires to
secure the amount against the maker, to pay the note himself and
thus to entitle himself to bring a suit against that party.
[
Footnote 21]
Such a holder, says Judge Story, is perfectly at liberty to sue
any or all the parties at his pleasure, and he is not bound to any
diligence in seeking his reimbursement. Nor can the endorser insist
that the holder should, upon his request, use any such diligence.
His remedy is to pay the note and then to seek recourse against the
maker or any other party liable over to him. [
Footnote 22]
Such an endorser, that is, one whose liability is fixed by due
notice of the maker's default, is not entitled to the aid
Page 89 U. S. 593
of a court of equity as a surety, as he has the right to pay the
amount of the note to the holder, and to be subrogated to all his
rights as against the maker. [
Footnote 23]
None of these suggestions are intended to deny the well known
rule that the maker of the note is in general the principal debtor,
nor that all the other parties are in a special sense sureties for
him; they, if endorsers, being liable only in case of his default,
unless they have waived demand and notice. Though all the other
parties are sureties in respect to the maker, still they are not
co-sureties, but each prior party is a principal in respect to each
subsequent party.
An endorser of a promissory note, though in the nature of a
surety, is not for all purposes entitled to the privileges of that
character, as he is answerable upon an independent contract, and it
is his duty to take up the note when it is dishonored. [
Footnote 24]
Unquestionably there is in some respects a resemblance between
the endorser and a surety, but in others there is none, as he does
not in any case lose his character of endorser nor can he be made
liable on the note without proof of due demand and notice.
[
Footnote 25]
Proof of the kind, if the demand and notice are season able and
in due form, removes every condition from his liability except that
the holder will do no act to suspend, impair, or destroy his right
to indemnity from such other parties to the instrument as are bound
to save him harmless. [
Footnote
26]
Negotiable promissory notes, like bills of exchange, are
commercial paper in the strictest sense, and as such must ever be
regarded as favored instruments, as well on account of their
negotiable quality as for their universal convenience in mercantile
transactions. Hence the law encourages their
Page 89 U. S. 594
use as a safe and convenient medium for the settlement of
balances among mercantile men, and any course of judicial decision
calculated to restrain or impede their unembarrassed circulation
would be contrary to the soundest principles of public policy.
Mercantile law is a system of jurisprudence recognized by all
commercial nations, and upon no subject is it of more importance
that there should be, as far as practicable, uniformity of decision
throughout the world. [
Footnote
27]
Apply these several suggestions to the case and it follows that
the statute, when properly construed, does not include the endorser
of a negotiable promissory note whose liability has become absolute
by due notice of the dishonor of the note.
Judgment affirmed.
[
Footnote 1]
13 Stat. at Large 123.
[
Footnote 2]
Hanger v.
Abbott, 6 Wall. 539;
Brown v.
Hiatts, 15 Wall. 177, and other cases.
[
Footnote 3]
Batesville Institute v.
Kauffman, 18 Wall. 151.
[
Footnote 4]
Gould's Digest 1015.
[
Footnote 5]
Brown v. Merrick, 16 Ark. 612;
Biscoe v.
Madden, 17
id. 533.
[
Footnote 6]
Hanger v.
Abbott, 6 Wall. 539.
[
Footnote 7]
Brown v.
Hiatts, 15 Wall. 177.
[
Footnote 8]
Batesville Institute v.
Kauffman, 18 Wall. 155.
[
Footnote 9]
The Protector,
12 Wall. 700;
Adger v.
Alston, 15 Wall. 555;
Semmes v.
Insurance Company, 13 Wall. 158;
Levy
v. Stewart, 11 Wall. 253.
[
Footnote 10]
Bank v.
Hatch, 6 Pet. 258;
McLemore v.
Powell, 12 Wheat. 556;
Wood v. Bank, 9
Cowen 194;
Bank v. Hanrick, 2 Story 416;
Newcomb v.
Raynor, 21 Wendell 108; Byles on Bills (11th ed.) 247 n. 1; 3
Story on Notes (5th ed.) § 413.
[
Footnote 11]
Philpot v. Briant, 4 Bingham, 721; Story on Notes (5th
ed.) § 415.
[
Footnote 12]
Bank v. Myers, 1 Bailey, 418;
Powell v.
Waters, 17 Johnson 179;
Stafford v. Yates, 18
id. 329;
Bank v. Rollins, 13 Maine 205;
Page
v. Webster, 15
id. 256;
Bank v. Ives, 17
Wendell 502;
Sterling v. Marietta & S. T. Co., 11 S.
& R. 182;
Kennard v. Knott, 4 M. & G. 474.
[
Footnote 13]
Trimble v. Thorne, 16 Johnson 159;
Beebe v.
Bank, 7 W. & S. 375.
[
Footnote 14]
McLemore v.
Powell, 12 Wheat. 556; 2 Parsons, Notes and Bills
243-245; 3 Kent (12th ed.) 114*.
[
Footnote 15]
Story on Notes (5th ed.) § 135; Story on Bills § 108; 2 Parsons
on Bills and Notes 23;
Ogden v.
Saunders, 12 Wheat. 341; 3 Kent (12th ed.) 88;
Bateman on Commercial Law § 319.
[
Footnote 16]
2 Parsons on Bills and Notes 25.
[
Footnote 17]
Gould's Digest of Statutes 1015.
[
Footnote 18]
Lease v. Vance, 28 Ia. 509.
[
Footnote 19]
Potter's Dwarris on Statutes 186.
[
Footnote 20]
9 Bacon's Abridgment, by Bouvier, 245; Sedgwick on Statutes, 2d
ed 267; 1 Kent, 12th ed. 464; Broom's Legal Maxims, 4th ed.
552.
[
Footnote 21]
Story on Notes, 5th ed. § 115a.
[
Footnote 22]
Ib. § 419;
Beebe v. Banks, 7 W. & S.
375.
[
Footnote 23]
Lenox v.
Prout, 3 Wheat. 525;
Trimble v. Thorne, 16
Johnson 153;
Warner v. Beardsley, 8 Wendell 199;
Same
v. Same, 6
id. 610;
Frye v. Barker, 4
Pickering 382;
Hunt v. Bridgham, 2
id. 581.
[
Footnote 24]
Ellsworth v. Brewer, 11 Pickering 320.
[
Footnote 25]
Bradford v. Corey, 5 Barbour 462.
[
Footnote 26]
Woodman v. Eastman, 10 N.H. 359;
Warner v.
Beardsley, 8 Wendell, 2d ed., 195 and note.
[
Footnote 27]
Goodman v.
Simonds, 20 How. 364.