Molsons Bank v. Berman

• Decision Date: 01 October 1923
• Docket Number: No. 77.,77.
• Citation: 195 N.W. 75,224 Mich. 606
• Parties: MOLSONS BANK v. BERMAN.
• Court: Michigan Supreme Court

224 Mich. 606

195 N.W. 75

MOLSONS BANK

v.BERMAN.

No. 77.

Supreme Court of Michigan.

Oct. 1, 1923.

Error to Circuit Court, Wayne County; Arthur Webster, Judge.

Action by the Molsons Bank against Frank Berman. Judgment for plaintiff, and defendant brings error. Affirmed.

Argued before WIEST, C. J., and FELLOWS, McDONALD, CLARK, BIRD, SHARPE, MOORE, and STEERE, JJ.Robert M. Brownson, of Detroit, for appellant.

Van Dyke, O'Brien & August, of Detroit (Stevenson, Carpenter, Butzel & Backus, of Detroit, of counsel), for appellee.

STEERE, J.

Plaintiff brought this action in the Wayne county circuit court to recover from defendant the amount of the following promissory note:

‘Due Sept. 13th, 1920.

‘The Molsons Bank, Windsor, Ontario.

+-----------------+
                ¦Prin.¦$1,600.00. ¦
                +-----+-----------¦
                ¦Int. ¦10.85.     ¦
                +-----+-----------¦
                ¦     ¦$1,610.85. ¦
                +-----------------+
                

‘Windsor, Ont., 9th August, 1920.

‘One month after date I promise to pay to the order of Fisher-Wilkie, Limited, at the office of the Molsons Bank here, the sum of sixteen hundred no/100 dollars, for value received, with interest at 7 per cent. per annum, both before and after maturity, until paid.

‘[Signed] Frank Berman,

‘579 Virginia, Detroit, Mich.

‘[L. B. D. 1791.]’

Indorsed on back:

‘Fisher-Wilkie, Limited, Roy R. Fisher, Pres.’

This note is the fourth renewal of a note for $2,000 taken by plaintiff from the payee, Fisher-Wilkie, Limited, on April 8, and falling due April 30, 1920. At each renewal defendant reduced the indebtedness $100. All the notes were of like form varying only in dates and amounts as reduced by payments. The indebtedness these notes represented was for stock purchased by defendant in March from the Fisher-Wilkie, Limited, a company doing a foundry and machine shop business in Sandwich, Ontario. It was sold to him in Detroit by Roy R. Fisher, president of the company, without having secured from the Michigan Securities Commission authority to sell stock of his company in this state as required by the so-called ‘Blue Sky Law.’

At the close of the testimony both parties requested a directed verdict. The trial court directed a verdict in favor of plaintiff for the amount of the note, and entered judgment thereon.

In essential features the circumstances of this controversy are kindred to those in Molsons Bank v. Wolf (Mich.) 194 N. W. 73, handed down Oct. 1, 1923. There, as here, the original note was given to the Fisher-Wilkie Co., Ltd., for its stock sold to the payor of the note in Detroit, and discounted by it at plaintiff's bank in Windsor, Canada, with the payor's knowledge, and renewed by him when due, the action being for recovery on a renewal note. In both cases the original note was amongst those listed in the ‘Assignment of contracts, notes or bills to the Molsons Bank’ quoted in that opinion. It also appears in this case that when the original note was given and discounted at plaintiff's bank, neither the payor nor payee nor plaintiff knew that the sale of the stock was in violation of the Blue Sky Law (Comp. Laws 1915, §§ 11945-11969). The manager of the bank testified that the note was taken in due course of banking business, in good faith with no circumstances to raise doubts as to its validity; the original note and renewals were dated in Windsor; he did not know defendant; had no knowledge that the note was made in Detroit, or of the Michigan Blue Sky Law, but admits that he learned of it about the middle of July, 1920, which was before the date of the renewal note sued on, both in this and the Wolf Case. Defendant knew that his note would be discounted by the payee at plaintiff's bank, but had no personal interview on the subject with any officer of the bank, as did Wolf.

In the Wolf Case, a verdict was directed for defendant by the trial court. On review this court held that the bank was a bona fide holder in good faith, and entitled under the cases cited to a verdict for the full amount of the note. In the application of those principles we find no distinguishing features in the facts of this case. Our uniform negotiable instrument act provides (section 6097, Comp. Laws 1915):

‘To constitute notice of an infirmity in the instrument, or defect in the title of the person negotiating the same, the person to whom it is negotiated must have had actual knowledge of the infirmity or defect, or knowledge of such facts that his action in taking the instrument amounted to bad faith.’ Vide Hakes v. Thayer, 165 Mich. 476, 131 N. W. 174;Van Slyke v. Rooks, 181 Mich. 88, 147 N. W. 579.

It is to be noted, however, that in this case defendant's counsel most strenuously urge and argue the proposition that this court is committed to the doctrine that renewal is payment, and the bank having taken the renewal note sued on with prior notice of its claimed infirmity by reason of the Blue Sky Law cannot recover. In other words, when defendant gave the renewal note, plaintiff knew of the Blue Sky Law which might, if known to it, have been a defense to the original note under which the credit was given and indebtedness incurred.

In support of the doctrine that surrender of the original note and acceptance of a renewal note constitutes a payment of the former, defendant's counsel especially cite Childs v. Pellett, 102 Mich. 558, 61 N. W. 54, and Bank v. Platt, 135 Mich. 267, 97 N. W. 694, where that doctrine appears to be quite plainly stated; but in the Pellett Case the court was dealing with a situation where the renewal was by other parties than those to the original note, and the vital question involved was whether a nonrenewing maker or indorser was released by a renewal note bearing the signature of different parties. In the Platt Case, which cites the Pellett Case as authority for the statement that receipt and acceptance of each renewal note constitutes a payment of the former, the original note was payable to Houran & Whitehead, who discounted it at the bank, and renewal notes made payable at the bank were given, bearing the indorsement of the firm. Houran defended on the ground that Whitehead had no authority to sign the firm name to the renewals. Plaintiff recovered judgment on the renewal note which was affirmed on appeal, this court holding Whitehead had such authority, on the assumption ‘that when the first renewal note was given they were still liable on the first note.’ If the statement that renewal was payment had any application in that connection it was to the effect that while renewal constituted a payment of the former note, in the sense that it had served its purpose as live evidence of the debt, it did not extinguish the debt, and recovery could still be had on the renewal.

In Preston Bank v. Pierson, 112 Mich. 435, 70 N. W. 1013, a note for $10,000 had been given. Thirty days after it became due $1,000 was paid, and renewal notes given for the balance, which was followed by another payment of $1,000 and new renewal notes, upon which judgment was obtained after they fell due, followed by a bill in aid of execution. Defendant contended that the $10,000 note was paid by giving new notes in renewal, and complainant was remediless, citing and relying upon the Pellett Case. Of this contention the court said:

‘That case is not in point. The question there involved was whether one who is liable upon paper as a partner continues liable upon the renewal of such paper by his former partner after the dissolution of the firm, and was well decided upon the principle that after the dissolution of a firm the retiring partner...