091-NLR-NLR-V-36-ADAPPA-CHETTIAR-v.-ISADEEN-et-al.pdf

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GARVIN S.P.J.—Adappa Chettiat v. Isadeen.
the note. This was the basis on which the House of Lords decidedMacDonald & Co. v. Nash & Co.1, the facts of which case are identicalwith the facts here with the exception that in the House of Lords casethe instrument was a bill and not a note. That makes no difference tothe pirnciple applicable.
There is yet another section of the Ordinance which makes the seconddefendant liable on the note. Under section 56 “ where a person signsa bill otherwise than as drawer or acceptor, he thereby incurs the liabilityof an endorser to a holder in due course". Plaintiff is a holder in duecourse because the note has been finally endorsed to him for value by hisagent, the said Suppiahpillai.
Counsel also cited McCall Bros. v. Hargreaves1 and Nagoor Pitche v.Appuhamy1. i-.. ‘.
N.Nadarajah, for second defendant, respondent. The case in theplaint is different from the case presented by Counsel for appellant.Plaint states that Suppiahpillai’s name was entered as payee by a mistakeand that it was intended to make second defendant payee and the endorser.Plaint does not state that Suppiahpillai signed at the back to cure anyomission.
Suppiahpillai, the payee on the note, cannot be a holder in due course,see R. E. Jones, Ltd. v. Waring & Gillow Ltd. * Hence his principal, theplaintiff, cannot be a holder in due course. The case has not proceeded onthe footing that plaintiff gave value to Suppiahpillai. Under section 56,second defendant is liable only to a holder in due course. As plaintiff isnot a holder in due course, second defendant in this case is not liable.The finding is that- second defendant signed to make himself liable as aguarantor only. If that be so, the statute of frauds would preventplaintiff from recovering from the second defendant in the absence of awriting. See Steele v. Mckinlyr
Further, there is no evidence in this case that there was authority tofill in the name of Suppiahpillai. See the judgment of Wright J. inNational Sales Corporation Ltd. v. Bernardi*
December 21, 1934. Garvin S.P.J.—
This action was brought on a promissory note payable on demand, ofwhich the payee is Si K. R. A. A. R. Suppiahpillai, for a sum of Rs. 2,000.The first defendant is the maker of the note and the second defendant issued as endorser. The note in its present form is complete in all respects,for it bears on the back of it the endorsement of S. K. R. A. A. R. Suppiah-pillai and below it the endorsement of th^. second‘“defendant. Theplaintiff is Adappa Chettiar of the firm of S. K. R. A. A. R. Suppiahpillai,the payee on the note was the then attorney of the firm of S. K- R.' A. A. R.The second defendant is the father Jof the first 'defendant, who has sincebeen declared insolvent. The principal contest in the case is between theplaintiff and the second defendant. ' in his answer the second defendant
(1924) A. ,C. ego. .* U926) A. C. 470.
Xl932)~2 K. B. 423:5 5 A. C. 754.
2 32 N; L.R. 232. J‘ (1931) 2 ft. B. 188.
GARVIN SPJ.—Adappa Chettiar v. Isadeen.
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admitted his bare signature on the back o£ the note and the defence setup on his behalf is that he has not by putting his signature on. this notebecome liable thereon as endorser.
There is a sharp conflict of fact between die plaintiff and the defendantsas to the circumstances under which this note was made, granted andendorsed.- It is not denied that at the date of the note, to wit January 7,1931, die first defendant was liable in respect of his dealings with the firmof S. K. R. A A. R. to- pay them a sum of Rs. 2,000. It was- the casefor the plaintiff however that both defendants- were liable and not thefirst defendant alone. The learned District Judge has, despite die evi-dence called by the plaintiff and the production of his -books, chosento accept the story told by the defendants. It was, however, stronglyurged that the learned District- Judge's^fihding was .incorrect, There,are many circumstances which seem to indicate that the. second-'defendantwas jointly liable with the first defendant; but in view of this finding offact we must, I think, proceed upon the footing that at the material datethe liability was that of the first defendant.
Early in January?, presumably on- the 7th, Suppiahpiiiai went to thehouse of the second defendant where the first defendant also lived/ Hemet the first defendant and asked for.-a cheque in lieu of .a cheque whichhad been given previously to secure a loan .and .which was then overdueA. hot discussion appears to have taken place which was overheard bythe second^ defendant. -■ He came out of the house and .joined' the otherson the verandah. He says .he told his son not to give a cheque but togive a promissory-note and that he said to Suppiahpiiiai “ take the: noteand go and not to be'afraid and that we -will pay the money ”. -He Wentin; wrote the note himself and got the first defendant to sign as maker.
. Thenote washanded so Suppiahpiiiai, but at-that time it did not* bearthe' endorsement • of- 'the second ^defendant. Suppiahpiiiai took the noteand went away. Now the second defendant does mot say, that Suppiah-piiiai looked at the .note or that he was able-to read what rwas written:He admits that .that very evening he got- a telephone message and thatthe next day Suppiahpiiiai came> back- and asked for the cheque whichhad been returned to the first defendant;. The second defendant toldhim that the cheque had been torn and , that his son had-no money at thebank arid could not give him a .cheque: Suppiahpiiiai then wanted .thesecond defendant to endorse the note. -The..second- defendant says-, .thathe did so “as security’’-.adding, “he wanted my signature: by. way.ofsecurity and I gave it It is. quite evident from -the second defendant’sevidence that SuppiahpiHai had not fully realized ;:the mature of theinstrument; which had been, given .to him: in. exchange for .the overduecheque and-there seems to be no -reason therefore to-doubt the, versionof the plaintiff that his impression was, that the. promissory note had beendrawn, up.: by- the first defendant . in ^favour ,of. the*5 second defendant.Doubtless, it was when,- Suppiahpiiiai realized that, the instrument hadnot been endorsed by the second defendant that: he returned and insistedon having- the endorsement of the second defendant The.. DistrictJudge’s findmg/on.this point is expressed by him as follows:—“ I acceptalso second defendant’s story that when he-put his name on the followingday he did so as security and; not to incur the liabilities of an endorser
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GARVIN Sf J.—Adappa Chettiar v. Isadeen.
Whatever the second defendant may have intended, he did not say in somany words that when he endorsed this promissory note he did notintend to incur the liabilities of an endorser. What he did say is, “Iendorsed the note on the back …. he wanted my signature byway of security and I gave it ”.
Now at the very outset when the second defendant interposed in theconversation that was going on between Suppiahpillai and the firstdefendant he suggested that in lieu of the cheque which Suppiahpillaiwas seeking to recover he should take a promissory note, remarking that“ we will pay the money ”. He wrote out the note himself and therecan be little doubt that he intended Suppiahpillai to understand that inconsideration of his taking a note in lieu of the cheque he would makehimself liable with his son. The liability which he promised to undertakewas clearly a liability to pay the promissory note. What happenedthereafter when Suppiahpillai realized that the second defendant had notmade himself liable on the note is described by the second- defendant asfollows:—“ The Chettiar sent a telephone message and he came the nextday and he insisted that I should sign on the back as security. He saidthat if I could not sign to give another cheque and as my son had no moneyI signed as security ”. The second defendant is quite familiar with chequesand promissory notes and with the purpose and function of endorsements.On his own evidence it is, I think, clear that he intended to makehimself liable for the debt due on the note and that he endorsedthe promissory note for the purpose and with the intention of makinghimself liable thereon. He is now endeavouring by the repetition of thewords “ as security ” to lay the foundation for the contention that heonly intended to be a guarantor and not to assume the liabilities of anendorser. For my own part, I think the proper inference from the factsspoken to by the second defendant himself is that he represented fromthe very outset that he would hold himself liable for the debt and, whenhe found that Suppiahpillai was not content to accept the promissorynote in the form in which it was drawn, agreed and did intend to becomea party to the note as endorsee to Suppiahpillai.
It was urged by Counsel for the appellant that in these circumstancesthis case was covered by the decision in Macdonald v. Nash in that thepromissory note when it was ultimately accepted by Suppiahpillai waswanting in a material particular within the meaning of section 20 of ourBills of Exchange Ordinance by reason of the absence of Suppiahpillai’sendorsement above the signature of the second defendant and that hehad an implied authority to supply the want, as he did, by placing hissignature above that of the second defendant and that the promissorynote was therefore enforceable against the second defendant. It wasfurther argued that the plaintiff was a holder in due course and that byreason of section 56 of the Bills of Exchange Ordinance the seconddefendant as the endorser of the bill was liable on the promissory note.
Macdonald v. Nash (supra) is the case of a bill of exchange payable tothe drawer’s order. The bill was duly accepted and by arrangementNash & Co. endorsed it and passed it on to Macdonald & Co., the drawers.Macdonald & Co. endorsed their names as payees on the bill above the
t (1924) Appeal Cases 625.
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endorser’s signature and on the bill being dishonoured sued Nash & Co.The judgment of the Court was “ (1) On the fact that the respondentsmust be taken to have intended to make themselves liable to the appel-lants on the bill, (2) that the bill when handed to the appellants waswanting in a material particular within the meaning of section 20 of theBills of exchange Act by reason of the absence of any endorsement bythe appellants above the signature of the respondents and that theappellants had implied authority to fill in their names as payees, as theydid, over the names of the respondents, and that when so filled up thebill became retrospectively enforceable The appellants were Mac-donald & Co. In the course of his judgment Viscount Haldane took theview that the bill was complete and regular on the’ face of it when Nash& Co. took it for endorsement in consideration for value given and forhanding it over to the appellants in due course under the agreement,that the appellants, Macdonald & Co., were therefore holders in due courseand as such entitled, by the provisions of section 20 of the Act, to makegood any lack in a material particular by the insertion of a name of apayee and thereby secure the endorser’s liability to themselves or overthe payee as endorsers. Some of the other Judges took the view thata bill payable to the drawer’s order was incomplete but that in thecircumstances of the case, under the provisions of section 20 of the Act,Macdonald & Co. were entitled to fill in the omission and make the billcomplete and enforceable. Lord Sumner, in the course of a criticalexamination of the provisions of section 20, points out that inasmuch asthe first part of the section which contemplates the conversion of a simplesignature on a blank piece of paper delivered in order that it may betconverted into a bill is an authority “ to fill it up as a complete hill forany amount the stamp will cover, using the signature for that of thedrawer or the acceptor or an indorser ”, and enables the holder when thesignature is used as that of an endorser by completing the bill so as tocharge him as an endorser, “ although when he (the signatory) wrote hisname not only had nothing been transferred to him which he couldtransfer in turn by endorsing and delivering the bill, but no draft, noacceptance, and no order by the drawer, general or special, was inexistence at all ”, and remarks that this being the effect of the first partof the single sentence of which sub-section (1) consists, he does not see howa more restricted interpretation can be placed on the other part so thatthe words “ in like manner …. has a prima facie authority tofill up the omission in any way he thinks fit ” can be limited so as toexclude endorsees. His Lordship then proceeds to refer to the languageof sub-section (2) which in his view points to the same conclusion andremarks, “ it expresses a condition of general application to all the casescovered by sub-section (1) ” and says, “ that in order that any such instru-ment when completed may be enforceable against any person whobecame a party thereto prior to its completion it must be filled up withina reasonable time. A bill on which the signature to a blank is utilizedas an endorser's signature is such an instrument. A bill complete on theface but purporting to be endorsed by a third party without that party’sname being preceded by the endorsement of the drawer is another suchinstrument. In both cases the bill is incomplete till it is filled up in one
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GARVIN S.P.J.—Adappa Chettiar v. Isadeen.
way or the other and when so filled up, though not before, it becomesretrospectively enforceable as if it had been complete throughout”.These concluding words, it seems to me, are clearly applicable to the caseunder consideration. The promissory note was complete on the face ofit, and when it was ultimately handed to Suppiahpillai by the defendantit bore his endorsement. That endorsement was made in circumstanceswhich as I have already said leave no doubt that the defendant intendedto make himself liable to Suppiahpillai on the bill, and by operation ofthe latter part of section 20 (1) Suppiahpillai had in law and I thinkin fact authority to fill in the material particular which, was lacking,namely, the . endorsement of his own name. This is decisive of thecase before us. .-
As to the second of the two points taken by Counsel for the appellantit is provided by section 56 that “ where a person signs a bill otherwisethan as drawer or acceptor he thereby incurs the liability of an endorserto a holder in due course”. The defendant clearly signed the note andfor the reasons already given I have come tb the conclusion that he didso in this case with the express intention of becoming liable to Suppiah-pillai as endorser of the bill. If therefore the plaintiff'is a holder in duecourse the mere circumstance that the defendant has signed this billrenders him liable thereon.
Now the learned District Judge has held that this promissory note wasmade in favour of S. K. H. A. A. R. Suppiahpillai “ in his individualcapacity ” and that “ it does not belong to the firm of S. K. R. A. A. R.”'It may be taken for granted that the plaintiff when he took the notethrough his new attorney did not actually pay Suppiahpillai > the amountsecured by the note. At the time this promissory note was grantedSuppiahpillai was the manager of the plaintiff’s business/ When theperiod of his managership came to an ,end and at the accounting betweenSuppiahpillai and the new attorney of the plaintiff this note was. handedover by Suppiahpillai. He has received credit in the accounting in thatthe plaintiff’s attorney took over this promissory note, which the Judgeholds was given to Suppiahpillai in his individual capacity, and presum-ably gave him a discharge to the extent of the value of the note. Hadthis aspect of the matter been more-fully developed during the progressof the case it might have been possible to treat the present plaintiff as aholder in due course.
In the present state of the record I prefer to rest my decision on theanswer to the first point taken on behalf of the appellant.
The appeal is accordingly allowed. Judgment will be centered for the'plaintiff as prayed for with costs here and below.
Akbar J.—I agree.
Appeal allowed.