First Nat. Bank of Pomeroy, Iowa v. Buttery
Decision Date | 12 May 1908 |
Citation | 17 N.D. 326,116 N.W. 341 |
Parties | FIRST NAT. BANK OF POMEROY, IOWA, v. BUTTERY. |
Court | North Dakota Supreme Court |
The negotiable quality of a promissory note is not destroyed by a provision therein, that the makers and indorsers thereof severally waive presentment of payment and notice of protest, and consent that the time of payment may be extended without notice, when by its terms it is made payable on or before a day named.
Appeal from District Court, Grand Forks County; C. J. Fisk, Judge.
Action by the First National Bank of Pomeroy against J. K. Buttery. Judgment for defendant, and plaintiff appeals. Reversed.
Skulason & Skulason, for appellant. J. H. Bosard and Scott Rex, for respondent.
This is an action on a promissory note. The note was sued on by the indorsee for value before maturity, and the court found that there was a failure of consideration, and that the contract was not a negotiable note, and entered judgment for the dismissal of the action. Only one question requires consideration. If the instrument in question is a negotiable promissory note, the judgment should be reversed; otherwise, it should be affirmed.
The note was made in this state, and is payable at Sioux City, Iowa, and the clause which the trial court held rendered it nonnegotiable reads: “The makers and indorsers herein, severally waive presentment of payment and notice of protest, and consent that the time of payment may be extended without notice.” There is an apparent conflict of authorities as to whether this or similar agreements render a note nonnegotiable. The note is, by its terms, made payable on or before the 1st of October, 1903. Without the paragraph complained of, it would unquestionably be a negotiable instrument, and the indorsers would be released by any extension of time of payment without their assent. We are of the opinion that this provision does not extend the time of payment indefinitely or render it uncertain. The time of payment is already fixed.
It is strenuously argued that the use of the word “makers” in the waiver admits of an extension being made at any time on the part of the holder, by a mere secret mental process, unknown to any other party. This may be true as a psychological fact, but we do not deem it so as a matter of practice in commerce and banking. To us it is clear that it has the same effect as though the note read “on the 1st day of October, 1903, or thereafter on demand,” in which case there would be no question of its negotiability. Holders of notes do not by a secret mental process make an extension of the time of payment, but such extension, if made at all, is made by an agreement between the principal debtor and the holder of the paper, either with or without the consent of the indorsers. This provision seems to us to have been inserted to protect the holder against any release of indorsers or others, by an extension without their assent, and the word “makers” is evidently included to prevent any misunderstanding or misconstruction of the contract or failure to distinguish between makers, indorsers, sureties, and any other parties who might be or become liable thereon under certain contingencies as makers. 7 Cyc. 614. This phrase does not express an agreement to extend time, but leaves the matter of extension optional with the holder, and not obligatory upon him, and the note on its face fixes the time when it becomes due. In this respect it must be distinguished from a provision to the effect that the time of payment shall be extended indefinitely, in which case the uncertainty of the time renders the instrument nonnegotiable.
We feel that the reasoning in the National Bank of Commerce v. Kenney (Tex. Sup.) 83 S. W. 368, is not only satisfactory, but conclusive of this point. The note involved in that case contained this provision: “The makers and indorsers hereof hereby severally waive protest, demand, and notice of protest and nonpayment in case this note is not paid at maturity, and agree to all extensions and partial payments before or after maturity, without prejudice to the holder.” In holding that this provision did not render the note nonnegotiable, the Texas court says:
In Capron v. Capron, 44 Vt. 410, a note which contained the provision that “if there is not enough realized by good management in one year to have more time to pay” was held negotiable. See, also, Protection Insurance Company v. Bill, 31 Conn. 534; Farmer et al. v. Bank, 130 Iowa, 469, 107 N. W. 170.
court held that an agreement that the time of payment might be extended without notice did not destroy its negotiability, and said:
In Bank v. Commission Company, 93 Mo. App. 123, the court says: “The makers and indorsers agree to any extensions or partial payments before or after maturity without prejudice to the holder,” and that the note according to its terms amounts to no more than an agreement that in the event of an extension of time, the holder should not be prejudiced thereby. Under this agreement the holder was given the option to extend the time of payment without thereby creating the right to defend on that ground. In the exercise of this option, the holder would still retain the right to fix the time when the note should become due. There is a plain distinction between the clause in this note, and those in most of the cases cited as authority for the contention of the respondent, and this distinction has been made by the recent Iowa case cited above. The court of that state in Farmer et al. v. Bank, supra, says: ...
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