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

• Decision Date: 20 April 1927
• Docket Number: (No. 14490.)
• Citation: 293 S.W. 800
• Parties: J. I. CASE THRESHING MACH. CO. v. HOWTH.
• Court: Texas Supreme Court

Page 800

293 S.W. 800

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

(No. 14490.)

Supreme Court of Texas.

April 20, 1927.

Application for Writ of Error to Court of Civil Appeals of Fifth Supreme Judicial District.

Action by the J. I. Case Threshing Machine Company against C. W. Howth and another. Judgment against C. W. Howth was reversed, and judgment rendered by the Court of Civil Appeals (280 S. W. 238), and writ of error was denied by the Supreme Court. On motion for a rehearing on the application for writ of error. Motion overruled.

Spence, Smithdeal, Shook & Spence, of Dallas, for applicant.

GREENWOOD, J.

The question presented by this case was whether the undisputed facts showed that Howth was discharged from liability on a certain negotiable note signed by him and another as joint makers. The facts disclosed that Howth executed the note as an accommodation maker, receiving no consideration, the other maker being actually the principal obligor, as the payee, who sues herein, well knew; and that such payee, without Howth's knowledge, for a valuable consideration, extended to the principal obligor a further, definite period of time for the note's payment. The district court gave a peremptory instruction against Howth. On appeal, the judgment of the district court was reversed and judgment was rendered for Howth. 280 S. W. 238. At the last term, the Supreme Court overruled a motion for a rehearing of its action in refusing a writ of error to review the judgment of the Court of Civil Appeals in favor of Howth.

We are fully satisfied with the correctness of the action of the Court of Civil Appeals, and ordinarily would add nothing to what has been written by that court. The question is not only one of importance in applying the provisions of the Uniform Negotiable Instruments Act, but is one on which the various courts of last resort are not in accord. We therefore gave the question quite careful consideration before we refused the application for writ of error, and deem it best to write some of the reasons which impelled us to conclude that the accommodation maker was not liable on the note.

Howth's right to the peremptory instruction necessarily follows from the conclusion that the payee, plaintiff, to whom the completed note was originally delivered, was not "a holder in due course," as defined in the Negotiable Instruments Act.

Plaintiff was the "holder" of the note as the payee in possession of it (section 191, article 5948), and was entitled to sue thereon (section 51, article 5935). Plaintiff not being "a holder in due course," the note was subject to every defense to which it would be subject if it were nonnegotiable. Section 58, article 5935. A complete defense to the suit of a holder of a nonnegotiable note in behalf of an accommodation maker would be established by his pleading and proving that the holder of the note had made a binding agreement with the principal obligor to extend the note for a definite time, with knowledge of the status of the accommodation maker and without his consent. Burke v. Cruger, 8 Tex. 66, 58 Am. Dec. 102; Ryan v. Morton, 65 Tex. 260; Wylie v. Hightower, 74 Tex. 306, 11 S. W. 1118; Benson v. Phipps, 87 Tex. 578, 29 S. W. 1061, 47 Am. St. Rep. 128; Lonergan v. San Antonio Trust Co., 101 Tex. 77, 104 S. W. 1061, 106 S. W. 876, 22 L. R. A. (N. S.) 364, 130 Am. St. Rep. 803; Brandt on Suretyship and Guaranty (2d Ed.) §§ 342, 375.

The principle underlying all the cases on this subject is that one cannot be bound by a contract to which he has not given his assent. Consent to become surety for another's promise to pay at one time is not consent to be surety for such other's promise to pay at an altogether different time. The Negotiable Instruments Act recognizes the essence of the engagement of the maker of a negotiable instrument to be "that he will pay it according to its tenor," and not according to quite different terms. Section 60 of article 5936.

In order for one to be a holder in due course of a negotiable instrument, under the act's own definition, he must have had no notice of any infirmity in the instrument or of any defect in the title of the person negotiating it "at the time it was negotiated to him." Section 52, article 5935. All doubt as to the meaning of the word "negotiated," as used in section 52, is removed by the declaration in section 30 of article 5934 that "an instrument is negotiated when it is transferred from one person to another in such manner as to constitute the transferee the holder thereof. If payable to bearer it is negotiated by delivery; if payable to order it is negotiated by the indorsement of the holder completed by delivery." This definition explicitly calls for a passage of title to the note itself from one person to another. This requires more than that the note has become a completed contract in the hands of the original holder or holders. In the case of a note payable in ordinary form to a person's order, the statute explicitly requires something further to accomplish its negotiation than the note's delivery to the payee as a completed instrument, to wit, indorsement by such payee, followed by delivery by the payee to another.

There are other provisions of our statutes which persuade us that...