Bank of Conway v. Stary
| Decision Date | 18 August 1924 |
| Parties | BANK OF CONWAY v. STARY et al. |
| Court | North Dakota Supreme Court |
BANK OF CONWAY
v.
STARY et al.
Supreme Court of North Dakota.
Aug. 18, 1924.
An accommodation indorser, who indorses a promissory note before delivery, under sections 6914, 6948, 6949, C. L. 1913 (sections 29, 63, and 64 of the Uniform Negotiable Instrument Law), is not a surety within the provisions of chapter 85 of the Civil Code (sections 6675 to 6689, C. L. 1913) so as to have the right, under section 6683 thereof, to require the creditor to proceed against the principal or to pursue any other remedy in his power which the surety cannot himself pursue, and which will lighten his burden, with resulting exoneration from liability if the creditor fails, refuses, or neglects to sue the principal or enforce payment by the principal in appropriate legal proceedings. Whether, and, if he is, under what circumstances and to what extent, an accommodation indorser or maker of a promissory note may be entitled to any of the rights and remedies of sureties under chapter 85, supra, is not decided, because that question is not properly involved in this proceeding.
The status of the accommodation indorser is fixed by the Negotiable Instruments Law as that of an indorser.
One who is an accommodation indorser of a note, and liable as such, in accordance with sections 6914, 6948, 6949, C. L. 1913, being sections 29, 63, and 64 of the Uniform Negotiable Instruments Law, which contains in the body thereof the following stipulation: “The makers and indorsers each guarantee the payment of this note and waive demand, protest and notice of nonpayment, and consent to any extension of time of payment or renewal thereof without notice,” is bound by this waiver, and, if a surety within the provisions of section 6683, C. L. 1913, permitting a surety to accelerate the movements of the creditor by notice and upon demand, he cannot afterwards, by giving notice, require the creditor to proceed against the principal debtor.
The relation between a bank and a depositor is that of debtor and creditor merely; the bank is not a custodian of a deposit, but a debtor to the depositor in the amount thereof. Section 6868, C. L. 1913 (repealed in 1919), giving the bank a lien upon all property in its hands, has no application to a general deposit. Whether a bank may apply a deposit upon an indebtedness of the depositor is not decided.
Under section 6948 (section 63 of the Negotiable Instruments Act) the intent to be bound in some capacity other than defined in sections 6948 and 6949 (sections 63 and 64 of the Negotiable Instruments Act) must be indicated in the indorsement and cannot be shown by parol proof. The statute fixes the status of the accommodation indorser.
The “law merchant” is a system of law not resting exclusively on the institutions and local customs of any particular country, but consisting of certain principles of equity and usages of trade which general convenience and a common sense of justice have established to regulate the dealings of merchants and mariners in all the commercial countries of the civilized world.
Birdzell, J., dissenting.
Appeal from District Court, Walsh County; A. G. Burr, Judge.
Action by the Bank of Conway against B. H. Stary and Dan Sutherland. From a judgment for plaintiff, defendant Sutherland appeals. Affirmed.
H. C. De Puy, of Grafton, for appellant.
Gray & Myers, of Grafton, for respondent.
JOHNSON, J.
This is an appeal from a judgment entered by the district court of Walsh county, against the defendant Dan Sutherland. The other defendant, B. H. Stary, interposed no defense, and judgment was entered against him by default. Sutherland appeals.
The suit is upon a promissory note; the complaint being in the usual form. It is alleged that the defendant Sutherland wrote his name on the back of the note, before delivery thereof to the payee, for the purpose of securing the loan.
The defendant Sutherland answered, specifically admitting the corporate character of the plaintiff and the execution of the note by his codefendant Stary; otherwise the answer denied generally the allegations of the complaint. At the trial the paragraph containing the general denial was stricken out. The result is that the allegation of the complaint, as to the indorsement by appellant, stands admitted. The defendant alleged, by way of defense, that he received no consideration for indorsing the note, that it was indorsed for the accommodation of the maker, that, at the time he indorsed the note, the maker Stary was wholly solvent and was doing a profitable business and was
[200 N.W. 506]
fully able to pay the note; that thereafter, and while Stary was solvent, able to pay the note, engaged in a profitable business, and while the plaintiff had funds and collateral in its possession and opportunity to collect said note from the maker, the defendant demanded that plaintiff proceed against the maker and served notice that, unless such proceedings were taken, appellant would hold himself discharged; that the plaintiff did not proceed against the maker, but instead, and for a valuable consideration, without appellant's consent, extended the time of payment. The answer further alleges that several times thereafter, and after the note was past due and payment thereof had been extended, and while the maker was solvent and was transacting business with the plaintiff and fully able to pay the note, and while the plaintiff had opportunity to collect the note from the maker, the appellant demanded that plaintiff take proceedings against the maker Stary, or this appellant would hold himself discharged. Then follow allegations that the plaintiff and respondent neglected to take proceedings against the maker; that the maker became and was, at the time of the trial, wholly insolvent; that collateral held by the plaintiff had become worthless and deposits withdrawn; and that the appellant herein had been prejudiced by the acts and omissions of the plaintiff as alleged in the answer to the full amount due on the note.
Some testimony and formal proofs were offered tending to support the allegations of the answer. These were rejected by the court, and error is predicated on such ruling. The plaintiff proved the execution of the note by the defendant Stary and the indorsement thereof in blank by the defendant Sutherland, introduced the note in evidence, and rested. The note contained the following:
“The makers and indorsers each guarantee the payment of this note and waive demand, protest, and notice of nonpayment, and consent to any extension of time of payment or renewal thereof without notice.”
The defendant took the witness stand, and some questions were asked with reference to the solvency of the defendant Stary, but the witness was not permitted to answer; the theory of the trial court being that the facts affirmatively alleged did not constitute a defense to plaintiff's cause of action.
In order to have a correct understanding of the situation, it is necessary to refer more specifically to the proceedings had in the trial court. The defendant Sutherland testified in his own behalf, in substance, as follows: That he indorsed the note in suit for the accommodation of the maker and received no consideration therefor either from the payee or the maker of the note; that after the note matured, to wit, after the 15th day of November, 1917, the plaintiff bank, through either an officer or employee, asked the defendant to pay the note or renew it, but that defendant at that time told the bank that he would not pay it or renew it; that the maker was doing “lots of business,” and “that, if they did not get it from Stary (the maker), I would not consider myself under obligation to them.” It is to be noticed that the date of this conversation is not given, but it took place after the maturity of the note. Obviously, if this demand upon the defendant to pay the note was made (as the inference must be from the testimony) before any binding extension had been given to the maker and the maker had defaulted in payment, the obligation of the indorser to pay the note had become absolute, and such liability, it has been held, is not that of a surety. See section 6969, C. L. 1913; Carnegie Trust Co. v. Kistler (Sup.) 152 N. Y. S. 242. The defendant testified that in the fall of 1920 the bank again requested him to renew the note, and that he refused. He now contends that he was entitled to the rights of a surety as defined in chapter 85, Civil Code, C. L. 1913, and more specifically sections 6681, 6682, and 6683 thereof, and was exonerated by reason of the refusal or failure of the plaintiff to proceed against the principal upon demand.
When the witnesses had testified as above set forth, and offers of proof had been made and rejected, a colloquy took place between the court and counsel for both parties, at the conclusion of which counsel for the defendant struck from his answer the general denial, and counsel for plaintiff moved for judgment on the pleadings. The trial judge, in granting the motion, said that he took into consideration the evidence already in the record, as well as the defensive matters alleged in the answer. This statement of the court seems to have been acquiesced in by both sides, and, in fact, counsel for appellant, in his statement of the ultimate facts, sets out the demand made upon the defendant Sutherland for the payment or renewal of the note. This was testified to by Mr. Sutherland. The case, therefore, comes before this court upon the pleadings and the evidence before the trial court when the motion for judgment on the pleadings was granted.
Taking the most favorable view of the case from the standpoint of the defendant and appellant, the record shows that, after the note was due, at the time when plaintiff made its demand upon the defendant for payment, the latter countered with a demand that the plaintiff proceed against the principal debtor, and...
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