Howth v. J. I. Case Threshing Mach. Co.

• Citation: 280 S.W. 238
• Decision Date: 28 November 1925
• Docket Number: (No. 9441.)<SMALL><SUP>*</SUP></SMALL&gt
• Parties: HOWTH v. J. I. CASE THRESHING MACH. CO.
• Court: Court of Appeals of Texas

280 S.W. 238

HOWTH v. J. I. CASE THRESHING MACH. CO.

(No. 9441.)^*

Court of Civil Appeals of Texas. Dallas.

November 28, 1925.

Rehearing Denied January 9, 1926.

Error from District Court, Dallas County; Kenneth Force, Judge.

Action by the J. I. Case Threshing Machine Company against C. W. Howth and another. Judgment against C. W. Howth, and he brings error. Reversed and rendered.

Thomas, Frank Milam & Touchstone, of Dallas, for plaintiff in error.

Spence, Smithdeal, Shook & Spence, of Dallas, for defendant in error.

LOONEY, J.

This suit was instituted by the J. I. Case Threshing Machine Company against Henry Miller and C. W. Howth on a promissory note executed by defendants, payable to plaintiff, and to foreclose a chattel mortgage lien on certain farming machinery for which the note was given. No service was obtained on defendant Miller, and the suit as to him was dismissed.

The defendant Howth, among other defenses, plead discharge from liability on the note for this: That he was an accommodation maker or surety for Miller, the principal obligor, which fact was well known to the plaintiff, and that after the maturity of the note, plaintiff, for a valuable consideration, agreed with Miller to extend the time for the payment of the note without the knowledge or consent of this defendant. The undisputed evidence sustained the allegations of this plea.

The court at the conclusion of the evidence instructed a verdict for the plaintiff against Howth, on which judgment was rendered with foreclosure of the chattel mortgage lien on the implements. The case is before us on writ of error prosecuted by Howth.

The plea of discharge urged as a defense by plaintiff in error should have been sustained by the trial court, unless such defense was abrogated by the Uniform Negotiable Instruments Act adopted in this state in the year 1919 (Acts 1919, c. 123 [Vernon's Ann. Civ. St. Supp. 1922, arts. 6001 — 1 to 6001 — 197]).

The Supreme Court of Maryland, in Vanderford v. Farmers' & Mechanics' National Bank, 105 Md. 164, 66 A. 47, 10 L. R. A. (N. S.) 129, the Supreme Court of Oregon, in Cellers v. Meachem, 49 Or. 186, 89 P. 426, 10 L. R. A. (N. S.) 133, 13 Ann. Cas. 997, the Supreme Court of Ohio in Richards v. Market Exchange Bank, 81 Ohio St. 348, 90 N. E. 1000, 26 L. R. A. (N. S.) 99, and the Supreme Court of Oklahoma in Cleveland National Bank v. Bickel, 59 Okl. 279, 159 P. 302, gave to the Uniform Negotiable Instruments Act, which we assume is in each of these states identical with the act as adopted in this state, the effect contended for by defendant in error, holding that one who signs as principal maker of a promissory note, although in fact a surety and known to the payee to be such, is not discharged by the granting of an extension of time for payment to the principal debtor without his consent. These courts reached this conclusion by the following course of reasoning, that is to say, that the surety was primarily liable for the payment of the note under provisions of the statute the same as ours, as follows: Section 29, art. 5933, Rev. Civ. St. 1925, defines an "accommodation party" in the following language:

"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 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."

Section 192 of article 5948 of the Revised Civil Statutes, 1925, defines primary liability as follows:

"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 persons are `secondarily' liable."

It is evident that, under these provisions of the Rev. Civ. St., Howth was primarily liable on the note. Building on this idea, the argument is advanced that, as the act provides for the discharge of negotiable instruments in one of five specified methods, any other or different method is excluded under the familiar rule that the expression of one thing implies the exclusion of others.

Section 119 of art. 5939, Rev. Civ. St. 1925. provides five methods for the discharge of negotiable instruments. It reads:

"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."

It was held in the cases above cited that the right of a surety to claim a discharge by reason of an extension granted the principal obligor by the holder, without the consent of the surety, not having been mentioned in the act, such method of discharge as it existed at common law was excluded, and the defense was abrogated.

The reason given for this construction of the statute is fairly illustrated by an excerpt from the decision by the Maryland Supreme Court in Vanderford v. Farmers' & Mechanics' National Bank, 105 Md. 168, 66 A. 49, as follows:

"When the Legislature has declared, as it has done in these sections, that a negotiable instrument signed by a party who is primarily liable thereon, as that liability is defined by the act, may be discharged by one of five specified methods, it would seem plain that it meant that the particular method prescribed for the accomplishment of that result should exclude a discharge by any other, or different method, upon the familiar maxim that the express mention of one thing implies the exclusion of another."

A contrary holding was announced by the Supreme Court of Iowa in Fullerton Lbr. Co. v. Snouffer, 139 Iowa, 176, 117 N. W. 50, the Springfield Court of Civil Appeals of Missouri in Long v. Shafer, 185 Mo. App. 641, 171 S. W. 691, and the Supreme Court of that state in the same case, 273 Mo. 266, 200 S. W. 1062. In these cases it was held that, between the original parties, as in the case under consideration, the right of a surety to claim a discharge, such as it urged in this case, was not abrogated by the Negotiable Instruments Act, and is as available since as it was before the enactment of that law. This holding is based on a provision of the act which seems to have entirely escaped the consideration of the courts holding to the contrary. This provision, as it appears in our statute, is section 58, art. 5935, Rev. Civ. St. 1925, as follows:

"In the hands of any holder other than the holder in due course, a negotiable instrument is subject to the same defenses as if it were nonnegotiable. But a holder who derives his title through a holder in due course, and who is not himself a party to any fraud or illegality affecting the instrument, has all the rights of such former holder in respect of all parties prior to the latter."

The defendant in error is an original party to the instrument sued upon, and therefore is not a holder in due course, within the meaning of the Negotiable Instruments Act. This being true, under the unambiguous provision of the statute just quoted, the defendant in error can occupy no better position than the holder of a nonnegotiable instrument; it follows, therefore, that the discharge pleaded by plaintiff in error was available as a defense just as it existed at common law prior to the enactment of the Negotiable Instruments Act.

In view of this provision of the act it is our opinion that this case is not governed by the provisions of section 119, art. 5939, Rev. Civ. St. 1925, relating to the discharge of negotiable instruments, and is therefore to be governed by rules of law and equity found elsewhere.

Furthermore, it seems that, while section 119 furnishes five methods for the discharge of negotiable instruments in the hands of holders in due course, it has no reference to nor does it attempt to prescribe any method for the discharge of individual liability from an instrument as distinguished from the discharge of the instrument itself. It is true that the discharge of an instrument has the legal effect of discharging all persons liable thereon, whether from a primary or secondary liability, yet the converse of the proposition is not true, as one person may be discharged from liability on an instrument and the instrument remain undischarged as to others. The act will be read in vain for any provision by which one primarily liable on an instrument may be discharged other than such as may result from a discharge of the instrument itself, as provided in section 119.

This being a case not provided for in the Negotiable Instruments Act, we are remitted to the provisions of section 196, art. 5948, as follows:

"In any case not provided for in this act the rules of law and equity including the law merchant shall govern."

When we turn to the common law as declared by the courts of this state, we find that, without dissent, the doctrine has been announced over and over again that when an extension, based on a valuable consideration, is granted the principal debtor by the holder of...