Cellers v. Meachem

• Decision Date: 09 April 1907
• Citation: 49 Or. 186,89 P. 426
• Parties: CELLERS et al. v. MEACHEM et al.
• Court: Oregon Supreme Court

89 P. 426

49 Or. 186

CELLERS et al. v. MEACHEM et al.

Supreme Court of Oregon

April 9, 1907

Appeal from Circuit Court, Douglas County; Lawrence T. Harris Judge.

Action by Ada Cellers and others, partners doing business under the firm name of Cellers Sisters, against E.L. Meachem and another. From a judgment for defendant Joseph Lyons plaintiffs appeal. Reversed and remanded.

This is an action on a promissory note brought by Ada Marie, and Bessie Cellers, against E.L. Meachem and Joseph Lyons. The note was executed December 27, 1904, and runs "90 days after date, without grace, we promise to pay," etc., and is signed by Meachem and Lyons, with the word "surety" added to the name of the latter. The complaint is in the usual form. Meachem, having failed to appear, default was entered against him. Lyons answered admitting the execution of the note, and, for an affirmative defense, pleaded that he signed the instrument as a surety only, without consideration, and for the sole use and benefit of Meachem and of the plaintiff; that the payees had full knowledge of the conditions under which it was executed that, after the note had matured, plaintiffs, in consideration of additional security, given them by Meachem, and without the knowledge or consent of Lyons, extended the time of payment; and that by reason thereof he was relieved from all liability. At the trial evidence was admitted, over plaintiffs' objections and exceptions, tending to show an agreement extending the time as alleged. At the close of the trial, their counsel requested the court to direct a verdict in favor of their clients for the sum demanded; there being no dispute as to the amount due, which request was denied. The court, at defendant's request, instructed the jury, among other things, that if they found plaintiffs, after maturity of the note, entered into an agreement with Meachem extending the time of its payment, without the consent of Lyons, no recovery could be had against him. Exceptions were taken to this part of the charge, and also to the refusal of the court to direct a verdict for plaintiffs. The jury returned a verdict for defendant, and, from a judgment thereon, plaintiffs appeal.

A.N. Orcutt, for appellants.

O.P. Coshow, for respondent.

KING C. (after stating the facts).

Several errors are assigned, but the only one necessary for determination is whether or not the alleged agreement between plaintiffs and Meachem, extending the time of payment of the note, relieved Lyons from liability thereon. There is no conflict in the testimony on the issues involved, but counsel for appellants contend that the answer and the proof were insufficient to establish a valid agreement extending the time of payment. Under the conclusion reached, it will be unnecessary to consider the question of the sufficiency of the pleadings, or the evidence, on this point. It will be assumed, for the purposes of this opinion, that the alleged agreement was sufficient, under the law as recognized by the decisions of this court prior to the adoption of the Negotiable Instruments Act of 1899. Pursuant to this theory, if that act makes no change in the prior law, no judgment could be rendered against Lyons upon the facts admitted; but, if such act did change the rule in this respect, then the court erred, as claimed by plaintiffs. The negotiable instruments act became a law May 17, 1899, and is entitled: "An act relating to negotiable instruments--being an act to establish a law uniform with the laws of other states on that subject." Laws Or. 1899, p. 18; B. & C. Comp. §§ 4403-4594. It will be observed that the note sued upon was executed after the act took effect. The question, therefore, to be considered, is whether or not this act changed the rule previously recognized in this state. The effect of the statute upon the relation of the parties depends upon whether Lyons was primarily liable on the note. If his liability was secondary, the right to recover against him would be dependent upon the proving of the agreement as alleged. B. & C. Comp. § 4522.

Prior to May 17, 1899, a valid agreement entered into between a principal and the payee of a negotiable instrument, binding the latter, without the assent of the surety, whereby the time of its payment was extended, relieved the accommodation maker, whether his liability was primary or secondary, and the existence of such agreement could be shown by parol. Findley v. Hill, 8 Or. 249, 34 Am.Rep. 578; Brown & Co. v. Rathburn et al., 10 Or. 158; Hughes v. Pratt, 37 Or. 45, 60 P. 707; Hoffman v. Habighorst, 38 Or. 261, 63 P. 610, 53 L.R.A. 908. The word "surety," appended to the name of a maker of a note, cannot alter his liability as to the owner thereof, and only shows that, as between the promisors, one is a principal and the other a guarantor. Bowen v. Clarke, 25 Or. 592, 37 P. 74; Hoffman v. Habighorst, supra; Galloway v. Bartholomew, 44 Or. 75, 74 P. 467. Since the word "surety" can only affect the status of the makers of the note as between themselves, and as Lyons' liability to the plaintiffs is the same as if he had signed the instrument without using the qualifying word after his name, he became, in the language of the negotiable instruments act, "absolutely required to pay the same," and is therefore primarily liable. B. & C. Comp. § 4592; Hughes v. Ladd, 42 Or. 123, 69 P. 548; Galloway v. Bartholomew, supra; National Citizens' Bank v. Toplitz, 178 N.Y. 466, 71 N.E. 1; Id., 81 A.D. 593, 81 N.Y.Supp. 422. The fact that Lyons executed the note solely for the benefit of Meachem, and plaintiffs were aware of these conditions, is of no avail, for a person cannot enter into a contract, even though solely for the benefit of another, and then shield himself from responsibility on the theory that the purchaser has knowledge that his acts are without actual consideration. B. & C. Comp. § 4431; Packard v. Windholz, 88 A.D. 365, 84 N.Y.Supp. 666.

The negotiable instruments law defines what constitutes an accommodation maker, and specifies how negotiable instruments may be discharged; the sections thereon being as follows:

"An accommodation party is one who has signed the instrument as maker, drawer, acceptor, or indorser, without receiving value therefor, and for the purpose of lending his...