Long v. Mason

• Decision Date: 02 February 1918
• Parties: EDWIN LONG, Appellant, v. PETER T. MASON, DAVID SHAFER et al
• Court: Missouri Supreme Court

200 S.W. 1062

273 Mo. 266

EDWIN LONG, Appellant, v. PETER T. MASON, DAVID SHAFER et al

Supreme Court of Missouri

February 2, 1918

Appeal from Texas Circuit Court. -- Hon. L. B. Woodside, Judge.

Affirmed.

C. C Bland and Holmes & Holmes for appellant.

(1) Plaintiff was a holder for value of the note (Sec. 9998, R S. 1909), and the defendants having signed the same as makers were primarily liable thereon (Sec. 10161, R. S. 1909), and their engagement to pay it according to its tenor was absolute (Secs. 10161 and 10030, R. S. 1909). McCarty v Smith, 97 P. 329 (Utah) ; Vanderford v. Bank, 105 Md. 164, 10 L.R.A. 129, 66 A. 47; West v. Stubblefield, 17 App. Cases (D. C.), 283; Trust Co. v. McGinty, 212 Mass. 205. (2) Parol evidence was inadmissible to show that the defendants signed the note as sureties or accommodation makers. Bank v. Douglas, 161 S.W. 608; Lane v. Hyder, 163 Mo.App. 692. (3) The note could only be discharged by one of four ways specified by Sec. 10089, R. S. 1909. Lane v. Hyder, 163 Mo.App. 692; Bank v. Douglass, 161 S.W. 608. The statute excludes every method of discharge of this character of instrument other than those specifically stated in Sec. 10089, R. S. 1909. 2 Sutherland, Statutory Construction (Lewis's 2 Ed.), p. 916, sec. 491; State v. Mills, 161 Mo.App. 179; State v. Eckhart, 232 Mo. 49, 133 S.W. 321; State v. Fisher, 119 Mo. 351; Ex parte Mansell, 237 Mo. 304; Bradley Co. v. Higborn, 56 Wash. 628; McGinty v. Trust Co., 212 Mass. 205. (4) Though the defendants did sign the note as accommodation makers, and Long, the payee, had knowledge of that fact, yet they were primarily and absolutely liable thereon. Sec. 10000, R. S. 1909; Ranse v. Wooten, 140 N.C. 557, 111 Am. St. Rep. 875; Cellers v. Meachem, 49 Ore. 186; Vanderford v. Bank, 105 Md. 164.

Hiett & Scott and Lamar, Lamar & Lamar for respondents.

(1) The Negotiable Instruments Law, adopted in in the various States, was to codify the law as it then was, except in cases where a conflict existed. Where there was no conflict, the law made no change. Bunker on Negotiable Instruments, pp. 1 to 21; Brannan on Negotiable Instruments (2 Ed.), pp. 190, 203, 223, 3, 7; Selover on Negotiable Instruments (2 Ed.), p. 7; Ogden on Negotiable Instruments, p. 6, sec. 8; p. 253, p. 256; Brannan on Negotiable Instruments (2 Ed.), sec. 196. (2) The Law Merchant is a part of the common law, and of the law of this State. 7 Cyc. 520-522; Stagg v. Linnenfelter, 59 Mo. 336. (3) In the absence of any provision of the Negotiable Instrument Law, the Law Merchant governs. R. S. 1909, sec. 10165. Codes, which condense and reaffirm in general the rules of the common law, do not repeal the exceptions to these general rules, and no change is to be presumed unless by the most imperative implication. The rule of expressio unius invoked by appellant is not applied to codifying statutes. Brannan on Neg. Ins. (2 Ed.), p. 190; 10 Yale Law Journal, p. 84 (article by Prof. Brewster, member of commission that framed Neg. Ins. Law); Sutherland on Stat. Cons., sec. 156; English on Interpretation of Stat., sec. 127, 205. (4) There is a marked distinction between a holder and a holder in due course. Holder means a payee in possession; a holder in due course is defined by Sec. 10022, R. S. 1909. Long, the payee in the note, is not a holder in due course, because it was never negotiated to him, but he is simply a holder whose rights are clearly defined by section 10028. It is apparent from this that all defenses are open to repondents that would be open if the note were non-negotiable. The Negotiable Instrument Law has no application to non-negotiable instruments, and they are not governed by the statute. Crawford on Negotiable Instruments (2 Ed.), p. 5, note A; Bunker on Negotiable Instruments, p. 23 note 1; Brannan on Negotiable Instruments (2 Ed.), p. 1, note 1; Selover on Negotiable Instruments, par. 2; Westburg v. Lbr. Co., 94 N.W. 574. This being true, the common law, or law merchant, would regulate the rights of the parties as to all non-negotiable instruments in this State. Under section 10028, in the hands of any other than a holder in due course, the rights of the parties are the same as though the instrument were non-negotiable; hence it unquestionably follows that as between maker and payee before a note has passed into the hands of a third party in due course, it is open to all the defenses between maker and payee that it ever was, or that a non-negotiable note is. (5) Section 10089, stating how a negotiable instrument may be discharged, refers to the instrument itself, and not to the discharge or release of a party. Section 10092 expressly provides a different method, whereby a party may be discharged. Ogden on Negotiable Instruments, p. 123, sec. 130; Bunker on Negotiable Instruments, p. 111, and note. Any defense is valid as between the immediate parties that would be valid in an ordinary contract. As between the immediate parties on a bill or note, no question arises whether the defense is absolute and is inherent in the instrument itself, or whether it is personal, raising equities between the parties. Ogden on Negotiable Instruments, sec. 142, p. 132. (6) As between the immediate parties, it is competent for defendant to show that he is an accommodation maker, and to set up any equities that may be set up under the law merchant or common law. Crawford on Negotiable Instruments, p. 35, sec. 54, note A; Crawford on Negotiable Instruments, p. 58, sec. 97, note A; Ogden on Negotiable Instruments, sec. 142, p. 132; Daniels on Negotiable Instruments (6 Ed.), p. 1477, sec. 1312; Selover on Negotiable Instruments (2 Ed.), p. 325; Brannan on Negotiable Instruments (2 Ed.), p. 117, and note; Fullerton Lbr. Co. v. Snouffer, 117 N.W. 50; Haddock v. Haddock, 85 N.E. (N.Y.) 686; Bank v. Barbour, 149 N.W. 767; Bank v. Edwards, 243 Mo. 563. (7) The testimony shows that Long knew that Mason was the maker for value, and received the whole consideration. The deed of trust recites on its face that Mason is to pay this debt. Giving the note and deed of trust were contemporaneous acts, and they will be construed together. Brownlee v. Arnold, 60 Mo. 79. (8) To allow to payee of a negotiable note, knowing the relation of the parties to the note and their liability thereon knowing that only one of such parties is a maker for value and that the others are makers without value, to take from the only one who is a maker for value, knowing him to be such, collateral security for such note and then improperly dispose of such security or permit the principal debtor so to do, and thereby deprive the makers without value of the right to be subrogated, has always been considered so unjust and inequitable as to be condemned by the courts of every civilized land. Ferguson v. Turner, 7 Mo. 497; Lakenan v. Trust Co., 147 Mo.App. 485; Colebrook, Collateral Securities (2 Ed.), sec. 209, p. 382, and sec. 212, p. 328; 27 Eng. & Am. Ency. Law (2 Ed.), p. 516. (9) The Negotiable Instrument Law makes no provision for the payee of a note to take collateral security. Now in the event the payee does so do, by what law will we determine the duties and liabilities of such payee as to such security? Evidently not by the Negotiable Instrument Law, because it makes no provisions. Certainly by the lex loci contractus. Houghtaling v. Ball, 19 Mo. 84; Sallee v. Chandler, 26 Mo. 124; State ex rel. v. Cunningham, 6 Mo.App. 263; Roach v. Foundry, 21 Mo.App. 118; Thompson v. Ins. Co., 169 Mo. 12; McKinstrey v. Railroad, 153 Mo.App. 546; 7 Cyc. 637. (10) That the payee of the note having a specific lien on the property of the principal debtor and voluntarily surrenders the lien or loses it by his own negligence the sureties will be discharged to the extent of the value of the lien so discharged or lost has been the declared law of this State ever since 1841. Ferguson v. Turner, 7 Mo. 497; Lakenan v. Trust Co., 147 Mo.App. 485. This was also the Common Law. 27 Eng. & Am. Ency. Law (2 Ed.), p. 516; Colebrooke on Collateral Securities (2 Ed.), sec. 209, p. 382; 3 Kent (13 Ed.), sec. 124, p. 195, and English cases cited in Note E. (11) Parol testimony is admissible to show who is principal and who is surety to a note. Garrett v. Ferguson, 9 Mo. 125; Bank v. Wright, 53 Mo. 153; Hardester v. Tate, 85 Mo.App. 624; Ins. Co. v. Broyles, 78 Mo.App. 364.

RAILEY, C. Brown, C., concurs. Williams, J., concurs in a separate opinion in which Graves, C. J., and Blair and Walker, JJ., concur; Faris, J., concurs in the result; Bond, J., dissents, and concurs in the views expressed by Sturgis, J.; Woodson, J., not sitting.

OPINION

In Banc.

RAILEY C.

The case was certified to this court by the Springfield Court of Appeals, in an opinion by Judge Farrington, concurred in by Robertson, P. J. Judge Sturgis dissented, in a separate opinion. The cause was certified upon the ground that the majority opinion is in conflict with Bank of Senath v. Douglass, 178 Mo.App. 664, 161 S.W. 601 (by St. Louis Court of Appeals), and Lane v. Hyder, 163 Mo.App. 688, 147 S.W. 514 (by Kansas City Court of Appeals).

The complaint alleges, that on March 25, 1910, defendants, by their joint and several promissory note, a copy of which is filed with petition, promised for value received to pay plaintiff or order the sum of four thousand dollars, one year after the date thereof, with interest from date, at the rate of eight per cent per annum, and if the interest be not paid annually to become as principal and bear the same rate of interest; that on May 16, 1911, defendants paid on said note $ 200, and on August 6, 1912, they paid thereon the sum of $ 595.16, which two payments were credited on said note and discharged all the interest that had accrued and was due on said note to July...