Mechanics' & Farmers' Savings Bank v. Katterjohn

• Decision Date: 09 March 1910
• Citation: 137 Ky. 427
• Parties: Mechanics' & Farmers' Savings Bank v. Katterjohn
• Court: Kentucky Court of Appeals

Page 427

137 Ky. 427

Mechanics' & Farmers' Savings Bank v. Katterjohn

Court of Appeals of Kentucky.

March 9, 1910.

Appeal from McCracken Circuit Court.

W. M. REED, Circuit Judge.

Judgment for defendant, plaintiff appeals. — Affirmed.

BRADSHAW & BRADSHAW for appellant.

T. L. CRICE for appellee.

OPINION OF THE COURT BY WM. ROGERS CLAY, COMMISSIONER — Affirming.

This action was instituted in the McCracken circuit court on the 25th day of July, 1908, by the appellant, Mechanics' & Farmers' Savings Bank, the plaintiff below, on a certain promissory note executed by John G. Rinkliffe to the order of appellee, F. W. Katterjohn, bearing date of August 19, 1907, due 60 days after date, for the sum of $800, and which was indorsed by F. W. Katterjohn, and also by Thompson-Wilson & Co., a corporation. The defendant, Rinkliffe, made no defense, and judgment was rendered against him by default. Appellee, Katterjohn, defended on the ground that he was simply an accommodation indorser for Rinkliffe, and that he was discharged from liability by reason of the fact that the note was not presented for payment, and he received no notice of dishonor. Appellant, by amended petition, pleaded a waiver by Katterjohn of presentment and notice. The evidence was heard on the 11th day of February, 1908, and submitted to the court without a jury. The court, being unable to arrive at a satisfactory conclusion, continued the case until the next term, whereupon the preceding order of submission was set aside, and a jury ordered, and the case set for trial on the 13th day of the May term. On that day the evidence previously taken was considered read, and the court instructed the jury peremptorily to find for appellee Katterjohn. The bank's motion and grounds for a new trial were overruled, and it appeals.

It is the contention of appellant (1) that where a payee in a negotiable promissory note becomes an accommodation indorser for the maker, he is a mere surety, and primarily liable on the instrument, and therefore not entitled to notice; and (2) that there was sufficient evidence on the question of waiver of presentment and notice to justify the submission of the case to the jury.

At the outset, we may say that the note in question fulfills all requirements of a negotiable instrument: First, it is in writing and signed by the maker; second, it contains an unconditional promise or order to pay a sum certain in money; third, it is payable at a fixed or determinable future time; fourth, it is payable to the order of a specified person. The note under consideration not only contains the above requirements of a negotiable instrument, but it was actually negotiated by appellant. After it was indorsed by appellee, Katterjohn, Rinkliffe took the note to the bank, discounted it, and obtained the proceeds. That being the case, no question has been raised, nor could any be raised, as to the negotiable character of the instrument.

The evidence is as follows: J. T. Laurie, cashier of the appellant bank, testified that the note was discounted in the regular course of business by Rinkliffe, who received the proceeds. In reply to the question whether or not he had given notice to Katterjohn and the other parties on the note of its maturity he answered: We mail notices to all parties anywhere from 8 to 10 days before the paper is due. Q. Did you mail notice to this party on this particular paper? A. I am sure I did. Yes, sir; sent notice." Upon cross-examination upon this point it is made to appear that his confidence in the fact of the notice being sent was due to the regular custom of the bank to mail notices; he did not have any recollection of the particular notice being sent. This witness further testified that about a week or two after the maturity of the note, he met appellee, Katterjohn, at the post office in Paducah, and said to him, "Will you give me a renewal of that note down there?" Katterjohn answered, "Yes, sir." He also testified that the note in question was in possession of the bank on the date of its maturity. Katterjohn testified that he indorsed the note in controversy for the accommodation of Rinkliffe, and that he received none of the proceeds. He also denied receiving notice of the maturity of the note, and further denied the conversation in the post office with reference to renewing the note. It also appears from his testimony that he was on a number of notes in different banks in Paducah, but did not know how many, or what they were until his attention was called to them.

Passing the question whether or not appellee was entitled to presentment and whether or not presentment was duly made, we shall consider only two questions: (1) Was appellee, as accommodation indorser, entitled to notice of dishonor? (2) If so, did he waive that requirement?

It is insisted by appellant that, under the rule laid down by this court in the case of Hunt v. Armstrong's Adm'r, 5 B. Mon. 399, appellee, Katterjohn, was in effect a surety, and therefore primarily liable, and not entitled to notice. In that case, however, no question of notice was before the court. In the more recent case of Sebree Deposit Bank v. Moreland, etc., 96 Ky. 150, 28 S. W. 153, 16 Ky. Law Rep. 404, 29 L. R. A. 305, this court announced that there was no doctrine more firmly established than that negotiable paper, when dishonored, requires demand, protest, and notice to those who are mere accommodation indorsers or drawers, in order to hold them responsible. However the rule may have been prior to the new negotiable instrument act (Laws 1904, c. 102), we now regard the question as finally determined by its provisions. That act is now in force in a majority of the states of this country. It resulted from the concerted efforts on the part of bar associations, commercial clubs, bankers' associations, and the citizens generally, to secure uniformity in the law relating to negotiable instruments. Prior to the adoption of this act by the various states in which it is in force, there was a great lack of uniformity in the statutes of those states and in the decisions of the courts with reference to the law merchant. A merchant engaged in business in one state, and doing business with citizens of other states, would frequently find that a note which was negotiable under the law of his domicil was, in fact, nonnegotiable at the place where it was executed or was to be paid. This led to great confusion in the conduct of commercial affairs. To obviate this difficulty the negotiable instruments act was passed by the Legislatures of several states. The provisions of these various acts are substantially the same, and we take it that they should be construed so as to maintain, as far as possible, the idea of uniformity. Our conclusion, then, is that, where the negotiable instruments act speaks, it controls; where it is silent, resort must be had to the law merchant or the common law regulating commercial paper.

With this view of the act in mind, let us examine certain of its provisions. Section 63 is as follows: "A person placing his signature upon an instrument otherwise than as maker, drawer or acceptor, is deemed to be an indorser, unless he clearly indicates by appropriate words his intention to be bound in some other capacity." Section 89 is as follows: "Except as herein otherwise provided, when a negotiable instrument has been dishonored by nonacceptance or nonpayment, notice of dishonor must be given to the drawer and to each indorser, and any drawer or indorser to whom such notice is not given is discharged." Appellee,...