Quinn v. Bane

• Citation: 164 N.W. 788,182 Iowa 843
• Decision Date: 25 October 1917
• Docket Number: 31583
• Parties: THOMAS QUINN, Appellant, v. WALTER BANE, Administrator, Appellee
• Court: United States State Supreme Court of Iowa

164 N.W. 788

182 Iowa 843

THOMAS QUINN, Appellant, v. WALTER BANE, Administrator, Appellee

No. 31583

Supreme Court of Iowa, Des Moines

October 25, 1917

REHEARING DENIED FEBRUARY 8, 1918.

Appeal from Marion District Court.--LORIN N. HAYS, Judge.

ACTION on two promissory notes resulted in the dismissal of the petition. The plaintiff appeals.

Affirmed.

J. D Cook, W. H. Lyon, and L. D. Teter, for appellant.

W. G Vander Ploeg, Crozier & Welch, and Clarke & White, for appellee.

LADD, J. GAYNOR, C. J., EVANS and SALINGER, JJ., concur.

OPINION

LADD, J.

On July 9, 1914, Patrick Fenton entered into a written contract with W. J. Hodgins for the purchase of a half section of land in Arkansas. The stipulated price was $ 24,700; and on the same day, Fenton executed to Hodgins, as payee, two notes, one for $ 5,000, payable January 1, 1915, and the other for $ 19,700, payable January 1, 1920, covering the purchase price. The payee, on December 28, 1914, at the instance of the maker, endorsed an extension of the time of payment of the first note to January 15, 1915, and on the same day transferred both notes; without recourse, to the plaintiff. Patrick Fenton departed this life January 2, 1915, and Walter Bane is the administrator of his estate. By the terms of the contract, the notes were to be cancelled and the contract surrendered, if the note for $ 5,000 was not paid at maturity. It was not so paid, and the administrator interposes three defenses against the allowance or establishment of the notes as claims against the estate: (1) That the notes are not negotiable, and therefore plaintiff took them subject to the conditions contained in the contract; (2) that plaintiff was charged with actual notice of the conditions of the contract, and therefore took the notes subject to conditions therein; and (3) that said notes were executed in the purchase of real estate, the consideration being the agreement to convey, and said real estate has never been conveyed to the vendee, his representatives, or heirs, but remains the property of the vendor. Another defense was that Fenton was incapable of entering into a contract at the time the notes were signed; but this was not pressed, as there was a directed verdict, upon the introduction of evidence in behalf of plaintiff.

I. First, concerning the conditions contained in the notes, and whether these rendered them non-negotiable. They are in the ordinary form, and made payable, as previously stated, on dates specifically named, and each contains the following clause: "The makers, sureties, and guarantors of this note severally waive presentment for payment, notice of nonpayment, protest, notice of protest, and diligence in bringing suit against any party hereto, and consent that the time of payment may be extended, from time to time, without notice thereof." One of the requisites of a negotiable instrument is that it "be payable on demand or at a fixed or determinable future time." Section 3060-a1, Code Supplement, 1913.

"Section 3060-a4. An instrument is payable at a determinable future time within the meaning of this act, which is expressed to be payable:

"1. At a fixed period after date or sight; or

"2. On or before a fixed or determinable future time specified therein; or

"3. On or at a fixed period after the occurrence of a specified event which is certain to happen, though the time of happening be uncertain.

"An instrument payable upon a contingency is not negotiable, and the happening of the event does not cure the defect."

The contention is that though, but for the clause quoted the note would be payable at a fixed time, said clause renders the time of payment indeterminable. The authorities seem in hopeless conflict as to whether such a clause renders the date of payment uncertain. Miller v. Poage, 56 Iowa 96, 8 N.W. 799, can hardly be said to be in point; for there the stipulation contained in the note was that, "if this agent does not sell enough in one year, one more is granted." In Farmer, Thompson and Helsell v. Bank of Graettinger, 130 Iowa 467 at 469, 107 N.W. 170, the note contained a stipulation that sureties consent to an extension of time of payment without notice; and in holding that this did not obviate the negotiability of the note, the court, speaking through Bishop, J., said:

"In one branch of his argument, counsel bases a contention upon the assumption that the notes held by plaintiffs were non-negotiable, and this, because of the provision therein respecting sureties. The assumption is not warranted. As we think, the notes met all the requirements for negotiable instruments. There was no uncertainty as to the payee, the amount, or the time of payment. We may concede that, in the case of an instrument providing in terms for extension of time of payment indefinitely, there is such uncertainty as to make the same non-negotiable. And such are the cases of Miller v. Poage, 56 Iowa 96, 8 N.W. 799, and Woodbury v. Roberts, 59 Iowa 348, 13 N.W. 312, cited and relied upon by counsel. But in the notes before us, we have a distinct and unqualified agreement on the part of the makers to pay on a certain date, and we perceive no good reason for holding that the negotiable character thereof is destroyed because of a clause embodied therein providing that a surety, if such there shall be, will not claim a release from his collateral liability on the instrument, if, forsooth, an extension of time shall be granted the makers without notice to him. Our attention has been called to no case so holding. As well say that, where sureties, guarantors, and endorsers, entitled to notice of nonpayment, waive the requirement for such notice, the waiver must be given operation to destroy the negotiable character of the instrument. In the brief of points, counsel assert that plaintiffs are not entitled in any event to hold defendant to a liability beyond the amount of the debt secured by the mortgage upon the cattle alleged to have been converted."

There, the note was payable on a day certain, and the decision merely held that this was none the less certain, if therein the surety were bound by any extension the payee or holder might agree upon. In principle, this applies to all of those secondarily liable on a note, as endorsers or guarantors. In Cedar Rapids Nat. Bank v. Weber, 180 Iowa 966, 164 N.W. 233, the clause construed read, "All parties to this note, including sureties, endorsers, and guarantors, hereby severally * * * consent to extensions of time on this note;" and the court, after reviewing the authorities, and pointing out that this clause was obligatory on the payee or holder, speaking through Stevens, J., observed:

"The Iowa cases holding that the language used rendered the note negotiable are distinguished from the holding in the other cases by the difference in the effect of the language used. Where the provision of the instrument bound the payee to grant an extension, the note was held non-negotiable; but in the cases, as in Farmer v. Bank of Graettinger, supra, where the language used clearly did not impose any obligation upon the payee to grant an extension of time of payment, the notes were held negotiable."

See also State Bank of Halstad v. Bilstad, 162 Iowa 433, and Iowa Nat. Bank v. Carter, 144 Iowa 715, 123 N.W. 237, limited by Des Moines Sav. Bank v. Arthur, 163 Iowa 205, 143 N.W. 556.

Of course, if the payee or holder consents in the note to an extension in advance, no one can know when the maker may elect to pay the note; for he may extend the time of payment indefinitely. If the maker consents to extensions of time of payment without notice, may not the payee or holder do the same thing, and can it be said with any greater certainty from an inspection of the note when it is payable? In Woodbury v. Roberts, 59 Iowa 348, 13 N.W. 312, the clause construed was that "The makers and endorsers of this obligation further expressly agree that the payee or his assigns may extend the time of payment thereof from time to time indefinitely as he or they may see fit;" and in holding that this rendered the note non-negotiable, the court said:

"By the terms of the condition of the note in suit it would never fall due, but could be indefinitely extended at the will of the maker and indorser, who, it will be observed, is the same party. When the instrument was executed, the time of its maturity was contingent upon the option of the maker of the note. It was impossible to determine when it would become due by the assent of the maker. The time of payment was uncertain, and was not capable of being made certain. Nothing happened after its execution to remove this uncertainty. Notes which by their terms are payable on or before a fixed time or a specified event, are, it is true, uncertain as to the time at which they are payable. But there is no uncertainty as to the time when they become absolutely due. Paper of this character is regarded by the courts as negotiable. But the note before us may never fall due, for payment may be extended indefinitely."

The decision does not rest on the use of the word "indefinitely," but on the option of the payee or holder to extend from time to time, which might be exercised as often as the time of payment approached. This is made the more apparent...