Night & Day Bank v. Rosenbaum

• Decision Date: 08 June 1915
• Docket Number: No. 14051.,14051.
• Citation: 177 S.W. 693,191 Mo. App. 559
• Court: Missouri Court of Appeals
• Parties: NIGHT & DAY BANK v. ROSENBAUM.

177 S.W. 693

191 Mo. App. 559

NIGHT & DAY BANK v. ROSENBAUM.

No. 14051.

St. Louis Court of Appeals. Missouri.

June 8, 1915.

Appeal from St. Louis Circuit Court; Wilson A. Taylor, Judge.

Action by the Night & Day Bank against Lazarus Rosenbaum. From a judgment for defendant, plaintiff appeals. Reversed and remanded, with directions.

George B. Webster, of St. Louis, for appellant. I. Landauer, of St. Louis, for respondent.

NORTONI, J.

This is a suit on three promissory notes. The finding and judgment were for defendant, and plaintiff prosecutes the appeal.

The principal debtor is the Southwestern Produce Distributors, a corporation, and defendant Rosenbaum is an accommodation party in that he indorsed the several notes in suit for the accommodation of the Southwestern Produce Distributors at and before their delivery to plaintiff. The maker (that is, the Southwestern Produce Distributors) made no defense to the suit, while defendant Rosenbaum pleads in his answer that he is an accommodation indorser, and as such is discharged from liability: First, because the notes were paid; and, second, because time was extended for the payment to the principal debtor without his knowledge or consent. There is no evidence whatever tending to prove that the notes were paid, and the principal matter for consideration here relates to the defense of the accommodation indorser to the effect that he is discharged from liability because of a valid and binding agreement for an extension of the time of payment entered into between the plaintiff bank and the principal debtor, Southwestern Produce Distributors, without his consent.

The petition is in three counts. Each declares upon a separate promissory note therein described.

The first note involved is of date January 9, 1912, and by its terms due 60 days there after. On this note a credit of $250 appears under date of January 27, 1912. The note is signed Southwestern Produce Distributors and on the back thereof indorsed as follows:

                   "Demand for payment, protest and notice of
                 dishonor are hereby waived
                                           "L. Rosenbaum."
                

On the execution of the note, it was de livered to plaintiff bank, who gave value therefor by the way of a loan of the amount to the principal debtor. On maturity of the note March 9, 1912, it had been reduced by the partial payment thereon above mentioned, so that $1,750 remained as the balance due. This balance was not paid, and the plaintiff bank carried the note as overdue paper until March 29th, when the Southwestern Produce Distributors made and delivered to the bank a note representing the same indebtedness (that is, for $1,750), due 30 days thereafter on the form generally known as a collateral note, and this new note stipulated a pledge of the prior note (that is, the note now here in suit) as collateral security for the same indebtedness so represented in the second note then taken. However, the note now in suit was retained in possession of the bank all of the time, and it refused to surrender the same for the reason that it had not been paid. Subsequently payments were made on the indebtedness, and these were credited on the back of the original note (that is, the note now in suit), so as to reduce the amount from $1,750 to $1,195.90. The second note taken for the same indebtedness was not paid, and on May 4, 1912, the Southwestern Produce Distributors executed three new notes in similar form, one for $395.90, one for $400, and another for $400, due on demand, whereupon the second note (that is, for $1,750, of date March 29th) was surrendered to that company, but the original note, on which defendant was accommodation indorser (that is, the note now in suit here), was retained, as before, collateral to such demand notes representing the same indebtedness.

The second note sued upon is of date January 15, 1912, when it was executed and delivered to plaintiff bank by the Southwestern Produce Distributors in the amount of $2,500 for a loan. By its terms the note fell due on April 11, 1912. At and prior to its delivery defendant Rosenbaum indcrsed the same for the accommodation of the maker and stipulated in writing thereon that he waived demand of payment, protest, and notice of dishonor. On maturity of the note, April 11th, no portion of it was paid, and it was carried by the bank as overdue paper until May 4th, at which time the Southwestern Produce Distributors made and delivered to plaintiff, on account of the same indebtedness, five separate demand collateral notes, upon each of which it pledged the original note of $2,500 here in suit. However, the original note was not surrendered by the bank to the maker at the time for the reason it had not been paid, but the new demand notes stipulated it should be retained by the bank as collateral security for such new notes so representing the same indebtedness. Subsequently, on June 5th, there was paid on this indebtedness the sum of $500, and the amount so paid was credited upon the back of the original note (that is, the note now in suit), and one of the demand notes theretofore taken on May 4th for that amount was surrendered to the Southwestern Produce Distributors.

The note involved in the third count was executed by the Southwestern Produce Distributors to plaintiff bank on the 16th day of January, 1912, in the amount of $2,500, and by its terms fell due on April 15, 1912. On the back of this note, at and before its delivery, defendant Rosenbaum affixed his signature as indorser, waiving demand of payment, protest, and notice of dishonor. Certain payments were made on this note, so that, when it matured, $2,248 was the balance unpaid. This balance was not paid, and it was carried as overdue paper until May 4th, when the Southwestern Produce Distributors executed a 30-day collateral note to the bank representing the same indebtedness upon which it pledged the original note (that is, the note now in suit) as security therefor. Subsequently several payments were made on the note until the amount of the indebtedness was reduced to $2,128, and the several credits were indorsed on the back of the original note (that is, the note now in suit), and likewise on the 30-day note of date May 4th, representing the same indebtedness. The note of date May 4th fell due on June 4, 1912, and on June 6th the Southwestern Produce Distributors took it up by giving a new collateral note for the balance due on such indebtedness (that is, $2,128) due 30 days after date, and on this was likewise pledged as collateral security the original note revealing all of the credits above mentioned. When the note of June 6th matured, it had been reduced in amount so that the balance remaining due of the indebtedness represented by both notes was $1,522, and the several credits showing this result were indorsed on both the original note now in suit so held as collateral and on the new note given on account of the same indebtedness as well. On July 6th the last-mentioned new note for a period of 30 days was taken up by the Southwestern Produce Distributors executing a new note of that date, which likewise represented the same indebtedness, and provided on its face that the original note (that is, the note now here in suit) was pledged as collateral security therefor. When the note last taken matured, there was due on the original debt represented in these notes $1,509.65. No part of this debt was paid, and the suit proceeds on the original note. Though it appears from the facts above stated that several extensions of time as for a fixed period were given on each of the notes in suit through the bank's taking other' notes on account of the same indebtedness from the Southwestern Produce Distributors, it appears, too, that none of the notes in suit were ever surrendered by the bank to the maker, but each and all of them were held as collateral to the balance due on the same indebtedness for which they were originally given. There is evidence tending to prove that there was a consideration, such as payment of interest in advance for the extension of time on the indebtedness represented by the first two notes above described, while, on the other hand, the officers of the bank insist that no interest was paid in advance on any of these transactions, and therefore say no consideration for such extension appears. It is conceded that no interest was paid in advance for the extension of time given on account of the indebtedness represented by the note sued upon in the third count of the petition (that is, on any of the extensions made concerning the indebtedness represented in the note of date January 16, 1912). But it is said the deposit of additional collateral sufficed to afford consideration for the extension of time of payment under this note. The evidence is not clear as to this, but, for the purposes of the case, it may be conceded that such consideration appears. We say this for that in any view the defendant Rosenbaum, an accommodation indorser, is not entitled to be discharged because of an extension of time to the principal debtor under the provisions of our negotiable instrument law, and this is true even though such extensions were granted to the maker for a definite period on a valid consideration under each of the several notes without his assent. It appears defendant Rosenbaum did not assent to an extension of time in any of the instances referred to.

Formerly a valid and binding agreement entered into between the principal maker and the holder of the note on sufficient consideration, by which the time for payment was extended to the maker to a day certain, operated to discharge an accommodation indorser, who was then regarded secondarily liable and stood in the relation of surety, but this is no longer true. All of the notes in suit here were executed and delivered subsequent to the adoption of our negotiable instrument statutes, which materially change the rule in respect of this matter....