#### W. S. WOODS v. J. T. FINLEY et al.

(Filed 30 November, 1910.)

1. Notes, Joint and Severa! — Several Liability Only — Parol Evidence,

When a note sued on is, upon its face, joint and several, evidence is incompetent, as contradictory of the written instrument, of a contemporaneous oral agreement that the makers should only be liable each for his pro rata part of the note.

2. Notes, Joint and Several — Payment in Discharge — Several Liability — Evidence.

When the holder of a note appearing to have been jointly and severally executed by several makers, accepts and collects a check expressing upon its face to he in payment of the drawer’s “share” of the note, the check is competent evidence, as tending to show that the owner agreed to receive the payment in discharge of the drawer’s liability upon the note.

3. Notes — Endorsement—Equitable Owner — Fraud—Evidence.

Negotiation of a note payable to order is “by the endorsement of the holder and is completed by delivery,” ftevisal, 2178; and the introduction of the note in evidence without endorsement' raises the presumption of equitable ownership and assignment, and without proof of endorsement the holder is not one in due course, and takes subject to the equities existing in favor of the maker, and in such instance fraud in its procurement by the payee may be shown.

*498Appeal by defendants Finley, Brame et al. from E. B. J ones, J., at tbe Spring Term, 1910, of "Wilkes.

Tbe facts are stated in tbe opinion of tbe court.

W. W. Barber, Manly & Hend/ren and Finley & Ilenckren for appellants.

Oscar 0. Bancey for appellees!

Clark, C. J.

McLaughlin Bros., of Cleveland, Obio, tbrougb tbeir agent, sold to certain parties in Wilkesboro, N. C., a stallion at tbe price of $3,000. Tbe purchasers executed to tbe vendors three notes for $1,000 each, payable 1 July, 1907. These notes were signed by twelve parties and were expressed as being joint and several. At tbe same time tbe notes were executed, tbe vendors executed in writing a guarantee as to tbe quality of tbe horse, and that if be was not satisfactory upon bis return in good condition, they would replace him with another at tbe same price. Tbe vendees becoming dissatisfied with tbe horse, J. T. Finley and five others returned tbe horse and received another. - Tbe other six (Brame and five others) declined to have any part in accepting tbe other horse, contending that by reason of tbe horse not coming up to tbe guarantee they were released from tbeir liability by reason of fraudulent representations which they set forth in tbeir answer. This action is upon one of tbe notes for $1,000.

Tbe plaintiff alleges in bis complaint that be was a bolder in due course, and took tbe note by assignment of tbe payees for value and without notice before maturity. This is denied in tbe answer. There was evidence, if believed, that tbe plaintiff became tbe bolder of tbe note for value and before maturity and without notice of any equities, but there was no evidence that tbe note was endorsed.

EiNley's Appeal.

J. T. Finley and four others alleged in tbeir answer that they bad paid tbeir full pro rata part of said note, and that judgment should be taken against tbe other defendants alone, if any should be rendered. Tbe plaintiff admitted tbe receipt by him *499from Finley and others of tbe amount claimed, but contended that such payments bad been credited upon tbe note, and that be was entitled to judgment against all tbe defendants, jointly and severally, for tbe balance due on said note.

Tbe note upon its face was joint and several and bis Honor therefore properly excluded evidence offered to show an alleged contemporaneous oral agreement that each of tbe signers should be liable only for-bis pro rata part of tbe notes. This would have been to contradict tbe written contract. But it was error to refuse in evidence tbe checks given by Finley and bis associates in this appeal, in making payments upon said notes. Each of these checks expressed on its face that it was to pay tbe drawer’s “share of McLaughlin Bros, notes.” These checks were accepted by tbe plaintiff and endorsed by him were paid by tbe drawee. They are competent evidence that tbe plaintiff agreed to receive from said parties such payments in discharge of their liability upon tbe note. Petit v. Woodlief, 115 N. C., 120; Kerr v. Sanders, 122 N. C., 635; Cline v. Rudisill, 126 N. C., 524; Wittkowsky v. Baruch, 127 N. C., 315; Ore Co. v. Powers, 130 N. C., 152; Armstrong v. Lonon, 149 N. C., 434; Drewry v. Davis, 151 N. C., 297.

It is true that if some of tbe other signers of tbe notes should be insolvent and those not so should be compelled to pay tbe whole of tbe balance due on tbe note, it is possible that they may set up against tbe plaintiff an equitable demand for relief as to so much of tbe note as by reason of tbe release of Finley and associates they are compelled to pay, on account of tbe insolvency of some of their associates. But this matter is not before us.

In rejecting in evidence tbe checks given by Finley and others there was error.

Ijst Beame's Appeal.

It is true that tbe mere averment in tbe answer denying tbe endorsement does not rebut tbe presumption 'raised by law that tbe bolder is tbe rightful owner of tbe note, Causey v. Snow, 120 N. C., 285. But to make tbe plaintiff a bolder in due course of a negotiable instrument, payable to order, it is essential that *500tbe same shall be endorsed. In tbe absence of proof of such endorsement be bolds it subject to any valid defense open to tbe maker and it is error to exclude evidence tending to sbow fraud. Mayers v. McRimmon, 140 N. C., 640. Tbat case cited witb approval from Tyson v. Joyner, 139 N. C., 69, where Walker, J., held: “In an action on a note it is error to bold tbat tbe mere introduction of tbe note witb tbe name of the en-dorsee written on tbe back is evidence of its endorsement by such endorsee so as to vest tbe legal title in tbe plaintiff and cut off any defense against tbe endorsee, as tbe signatures of tbe endorsers, whose endorsement is required to vest tbe legal titles must be proved.”

To constitute a bolder in due course, one of tbe requirements is tbat tbe instrument must be negotiated to tbe bolder, and Revisal, 2178, defines negotiation of a note payable to order as being “by tbe endorsement of tbe bolder and completed by delivery.” Therefore, it was said in Tyson v. Joyner, supra, tbat “tbe introduction of tbe note by tbe plaintiff raised tbe presumption tbat she was its owner, but only tbe equitable owner and assignee, and it was subject in her bands to any equities or other defenses of tbe maker against prior holders.” And further on in tbe same case it is said, referring to Revisal, 2208: “When it is said in tbe cases tbat there is a prima facie presumption of law in favor of every bolder of negotiable paper to tbe extent tbat be is owner of it; tbat be took it for value and before dishonor and in tbe regular course of business, it will be found tbat reference is made to a bolder by endorsement to an instrument which, under tbe law merchant was not required to be endorsed, but which was negotiable by delivery.” Tbe whole subject is so fully discussed and,so clearly by Walker, J., in tbat case tbat nothing can be added.

In Steinhilper v. Basnight and Myers v. Petty, both at this term, tbe above authorities were cited and affirmed. There being no evidence that tbe note bad been endorsed by McLaughlin Bros, to tbe plaintiff, tbe judge erred in excluding evidence offered to sbow fraud and fraudulent representations by tbe payee.

In both appeals there must be a

New trial.