Cowan v. Ramsey

• Decision Date: 06 May 1914
• Docket Number: Civil 1351
• Citation: 15 Ariz. 533,140 P. 501
• Parties: WILLIAM COWAN, Plaintiff in Error, v. FRANK RAMSEY, LULU RAMSEY and PETER JOHNSON, Defendants in Error
• Court: Arizona Supreme Court

140 P. 501

15 Ariz. 533

WILLIAM COWAN, Plaintiff in Error, v. FRANK RAMSEY, LULU RAMSEY and PETER JOHNSON, Defendants in Error

Civil No. 1351

Supreme Court of Arizona

May 6, 1914

WRIT OF ERROR from the Superior Court of the County of Cochise. Fred Sutter, Judge. Reversed and remanded.

The facts are stated in the opinion.

Mr. O Gibson, for Plaintiff in Error.

Mr Cleon T. Knapp, for Defendants in Error.

OPINION

ROSS J.

The plaintiff in error sued the defendants in error to recover upon the following promissory note:

"4000.00. Douglas, Arizona, Jan. 30, 1908.

"Twelve months after date, for value received, we promise to pay to the order of William Cowan four thousand no/100 dollars at Bank of Douglas, Douglas, Arizona, with interest thereon, from date until paid, at the rate of 12 per cent. per annum payable monthly; the said interest, if not so paid, to be added to and become a part of the principal, and to bear the same rate of interest, and in case suit or action is instituted to collect this note, or any portion thereof, we promise to pay, besides the costs and disbursements allowed by law, such additional sum as the court may adjudge reasonable as attorney's fees in such suit or action.

"FRANK RAMSEY.

"Mrs. FRANK RAMSEY.

"PETER JOHNSON."

The defendant answered that he received no part of the money for which the note was given, and that he "only signed and executed the said note as surety, and not as a principal maker thereof, all of which was at the time then and there, and ever since has been, known to plaintiff." That the plaintiff, the holder of note, without the knowledge or consent of defendant, had on June 28, 1911, after note was due and payable, bound himself by agreement with the principals on said note, Frank Ramsey and Lula Ramsey, to extend the time of payment, and had by such agreement postponed his right to enforce the payment of said instrument. There was a trial to the court, with judgment for defendant.

The question is as to whether the matters set up by defendant constitute a defense. In other words, is the defense of extension of time of payment by the holder of a negotiable promissory note to the principal available to an accommodation comaker when the extension is granted without his consent, under the negotiable instrument act? Title 36, Ariz. Rev. Stats. 1913.

Under the law-merchant or common law affecting commercial paper, "a definite and binding agreement between the holder and the maker or acceptor of commercial paper extending the time of payment will discharge the surety thereon, including a joint maker who is in fact a surety or accommodation maker, to the knowledge of the holder, . . . unless he consents to the extension, or is estopped, or waives the right to set up a discharge by a binding agreement after the extension." 7 Cyc. 882; McGlassen v. Tyrrell, 5 Ariz. 51, 44 P. 1088. The defendant's answer, therefore, is a good defense, unless the common-law rule has been changed or supplanted by statute. Paragraph 4174 defines "an accommodation party" as "one who has signed the instrument as maker, drawer, acceptor or indorser without receiving value therefor and for the purpose of lending his name to some other person. Such a person is liable on the instrument to a holder for value, notwithstanding such holder, at the time of taking the instrument, knew him to be only an accommodation party." Paragraph 4205 is: "The maker of a negotiable instrument by making it engages that he will pay it according to its tenor; and admits the existence of the payee and his then capacity to indorse." Paragraph 4336 is: "The person 'primarily' liable on an instrument is the person who by the terms of the instrument is absolutely required to pay the same. All other parties are 'secondarily' liable." Paragraph 4264 provides how primary parties may discharge negotiable instruments in these words: "A negotiable instrument is discharged: (1) By payment in due course by or on behalf of the principal debtor. (2) By payment in due course by the party accommodated, where the instrument is made or accepted for accommodation. (3) By the intentional cancellation thereof by the holder. (4) By any other act which will discharge a simple contract for the payment of money. (5) when the principal debtor becomes the holder of the instrument at or after maturity in his own right." And paragraph 4265 provides how secondary parties may discharge negotiable instruments, as follows: "A person secondarily liable on the instrument is discharged: (1) By any act which discharges the instrument. (2) By the intentional cancellation of his signature by the holder. (3) By the discharge of a prior party. (4) By a valid tender of payment made by a prior party. (5) By a release of the principal debtor, unless the holder's right of recourse against the party secondarily liable is expressly reserved. (6) By any agreement binding upon the holder to extend the time of payment, or to postpone the holder's right to enforce the instrument, unless made with the assent of the party secondarily liable, or unless the right of recourse against such party is expressly reserved."

The negotiable instrument law, as found in our statutes, has been adopted by many of the states with a view of securing uniformity and "to remove the confusion or uncertainty which might arise from conflict of statutes or judicial decisions amongst the several states and to make plain, certain and general the controlling rules of law." Union Trust Co. v. McGinty, 212 Mass. 205, Ann. Cas. 1913C, 525, 98 N.E. 679. In this case the court had before it the identical question that we have, and in discussing the act, and like sections thereof as we have quoted, said: "Approaching the act from this point of view (uniformity), it is apparent that no relation of principal and surety is established or contemplated by any of its sections. It determines...