Longmont Nat. Bank v. Loukonen

• Decision Date: 11 November 1912
• Citation: 53 Colo. 489,127 P. 947
• Court: Colorado Supreme Court
• Parties: LONGMONT NAT. BANK v. LOUKONEN.

127 P. 947

53 Colo. 489

LONGMONT NAT. BANK v. LOUKONEN.

Supreme Court of Colorado

November 11, 1912

Error to District Court, Boulder County; Harry P. Gamble, Judge.

Action by the Longmont National Bank against William Loukonen. There was a judgment of dismissal, and plaintiff brings error. Reversed and remanded.

Geo. Q Richmond, of Denver, and Grant E. Halderman, of Longmont, for plaintiff in error.

Henry J. O'Bryan, of Denver, for defendant in error.

BAILEY J.

Claiming to have purchased it for value before maturity, in due course of business, the Longmont National Bank brought this action against William Loukonen, the maker, to recover the amount due on the following promissory note:

'$700.00 Longmont, Colo., Oct. 28, 1908.

'One year after date, for value received, we or either of us jointly and severally, promise to pay to B. F. Bonnewell, or order, the sum of Seven Hundred & no/100 Dollars, at the Cen. Nat. Bank Denver Colo., with interest at the rate of six per centum per annum until paid. Interest payable annually.

'And a failure to pay any of said interest when due shall cause the whole note to become due one collectible at once, or the interest to be counted as principal, at the option of the holder of the note. The makers and endorsers hereof hereby severally waive presentment for payment, protest, notice of non-payment and of protest, and agree to any extensions of time of payment and partial payments before, at or after maturity. If this note is not paid when due I agree to pay all reasonable costs of collection, including attorney's fees, and also waive all exemptions in case of suit on this note.

'Wm. Loukonen.'

The answer alleges lack of consideration; fraud in securing the execution and delivery of the note; that plaintiff is not a bona fide holder; and that the instrument, by its terms, is nonnegotiable, therefore subject to all defenses, in the hands of the bank, which might be properly urged against it in an action by the original payee. The replication avers that the note is negotiable, and that plaintiff is a holder for value before maturity, without notice of any of the alleged infirmities in the paper.

Trial was to the court by agreement without a jury. The plaintiff, to support the allegations of its complaint, introduced the note duly indorsed. The defendant thereupon offered proof to support his allegations of failure of consideration and of fraud in procuring its execution and delivery, which was admitted over objections of immateriality, irrelevancy and incompetency. To this showing the plaintiff offered no rebuttal evidence. The court held the note nonnegotiable; and found that its execution and delivery were procured through fraud and without consideration. There was no attempt to show that the bank had actual notice of any matter offered in proof under the special defenses. A judgment of dismissal was entered, which plaintiff brings here for review.

The sole question is: Does a clause in a promissory note, otherwise clearly negotiable, wherein the makers and indorsers consent to any extensions of time of payment and partial payments before, at or after maturity, render the time of payment indefinite and uncertain, and thus make it nonnegotiable, because in conflict with the provisions of the negotiable instrument act, that time of payment must be on demand, or at a fixed or determinable future time? If the instrument is nonnegotiable the judgment is right and should be affirmed; if negotiable, the judgment is wrong and must be reversed.

In the recent case of First National Bank v. Buttery, 17 N.D. 326, 116 N.W. 341, 16 L.R.A. (N. S.) 878, 17 Ann.Cas. 52, construing a provision essentially like the one under consideration, it was said:

'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.'

The provision under consideration does not mean that the holder can arbitrarily extend the time...