Schaefer v. First Nat. Bank

• Decision Date: 21 December 1938
• Docket Number: 27093.
• Citation: 18 N.E.2d 263,134 Ohio St. 511
• Parties: SCHAEFER v. FIRST NAT. BANK OF FINDLAY.
• Court: Ohio Supreme Court

18 N.E.2d 263

134 Ohio St. 511

SCHAEFER v. FIRST NAT. BANK OF FINDLAY.

No. 27093.

Supreme Court of Ohio

December 21, 1938

Syllabus by the Court.

1. There is no consideration for a promissory note given by a debtor to a creditor under an agreement between them by which the debtor merely assumes an indebtedness to the creditor from a third party who is not privy to the agreement even though as a part of the agreement the creditor extends time to the debtor on other existing indebtedness owing by the debtor to the creditor.

2. The Court of Common Pleas has authority under the Uniform Declaratory Judgments Act, Section 12102-1 et seq., General Code, to declare a promissory note invalid for want of consideration when the invalid note is part of the indebtedness secured by a mortgage upon the debtor's real estate and necessity exists to have the validity of the note speedily determined so that the mortgage indebtedness may be refinanced by the mortgagor.

3. An action for a declaratory judgment may be alternative to other remedies in those cases in which the court, in the exercise of sound discretion, finds that the action is within the spirit of the Uniform Declaratory Judgment Act and a real controversy between adverse parties exists which is justiciable in character and speedy relief is necessary to the preservation of rights that may be otherwise impaired or lost.

4. While a granting of a declaratory judgment is within the sound discretion of the court, the jurisdiction to grant such a judgment is not limited by the terms of the statutes to those cases in which no remedy is available either at law or in equity.

Joseph N. Schaefer brought an action in the Court of Common Pleas of Hancock county, Ohio, against The First National Bank of Findlay, Ohio, praying for a declaratory judgment holding a $10,000 note to be usurious and void and canceling and surrendering the same to the plaintiff and further decreeing the interest paid on the $10,000 note to be applied on other indebtedness owing by the plaintiff to the defendant.

The evidence discloses that plaintiff was indebted to the defendant bank in the sum of $39,600 on a promissory note secured by a mortgage on The Phoenix Hotel in Findlay, Ohio and in addition the sum of $6,200 which was unsecured. The hotel property had been previously leased to The Phoenix Hotel Company which finally went into receivership and then into bankruptcy and the leased property had been returned to the possession of the plaintiff and the lease forfeited or surrendered.

At the time the property was turned back by the lessee to the lessor, The Phoenix Hotel Company was indebted to the bank in the principal sum of $10,000 on a promissory note payable on demand and on which the hotel company, Isadore L. Horn and Florence Stokes Horn were makers.

The plaintiff was unable to pay the indebtedness to the defendant in the amounts of $39,600 and $6,200 or a total of $45,800 so he sought an extension of time. The bank, desiring to recoup the loss on the note owing by the hotel company and the Horns (hereinafter called the Horn note), was unwilling to extend the indebtedness of the plaintiff unless the plaintiff would give the defendant a promissory note in the amount of $10,000 which was the amount of the principal still due on the Horn note.

Finally the plaintiff gave promissory notes to the defendant for $39,600, $6,200 and $10,000. The first two were in renewal of the prior indebtedness. All three of the new notes were secured by a mortgage on The Phoenix Hotel property and matured prior to the institution of this action.

The trial court made the following findings:

'The court finds the facts of this case, as follows, to wit:

'That prior to February 21, 1934, plaintiff was indebted to the defendant bank in the sum of forty-five thousand eight hundred ($45,800) dollars; that at said time there was due and owing to the defendant bank on The Phoenix Hotel Company note, a balance in the principal sum of ten thousand dollars with interest thereon in the approximate sum of five hundred sixty and 00/100 ($560) dollars; that the indebtedness of plaintiff was past due, and that plaintiff verbally agreed with the defendant bank to assume and pay the balance due on The Phoenix Hotel Company note in the sum of ten thousand dollars; that on February 21, 1934, plaintiff executed and delivered to the defendant bank his note in the sum of ten thousand dollars due one year after date, and payable to the defendant bank in payment of this ten thousand dollar balance. The court further finds the facts to be that plaintiff did not execute this note under duress, nor was he under any coercion in executing and delivering this note.

'The court finds that he delivered this note voluntarily, and further finds that all payments made by plaintiff on his indebtedness were voluntarily made. The court further finds that there was no consideration for said ten thousand dollar note. * * *

'The court finds as a matter of law that the ten thousand dollar note is not a volunteer payment of plaintiff, but is a voluntary promise to pay. The promise to pay, namely, the note, being without consideration, is void. Payments, made by a volunteer cannot be recovered.'

Thereupon the trial court entered judgment for the plaintiff in accordance with these findings.

An appeal on questions of law was taken to the Court of Appeals of that county and there judgment was entered modifying the judgment of the trial court by declaring 'that the ten thousand dollar note described in plaintiff's petition is valid, and recovery can be had thereon only to the extent of the difference between interest at the rate of 8% per annum, payable annually, on the principal sum of forty-five thousand eight hundred and 00/100 ($45,800) dollars from Ferbuary 21, 1934, to the date of payment, and interest at the rates prescribed on the thirty-nine thousand six hundred and 00/100 ($39,600) dollar note, and the sixty-two hundred and 00/100 ($6200) dollar note respectively, for said period; and that the payments purporting to be interest payments on said ten thousand dollar note are to be credited on such difference, and any balance thereof over such difference is to be credited on said principal sum of forty-five thousand eight hundred and 00/100 ($45,800) dollars; and upon payment of said principal sum of forty-five thousand eight hundred and 00/100 ($45,800) dollars with interest as aforesaid, plaintiff is entitled to have all of said notes and the mortgage securing the same cancelled and surrendered to him, and that the judgment should be and is hereby modified accordingly.'

The judgment of the Court of Common Pleas as modified was affirmed by the Court of Appeals.

This court allowed a certification of the record.

Burket & Burket, of Findlay, for appellant.

Hall & Devlin, of Toledo, and F. R. Hover, of Findlay, for appellee.

WILLIAMS Judge.

Many questions were raised on the pleadings, and rulings thereon were assigned as error. When a decision is made by the trial court on the evidence, and judgment entered accordingly, errors previously committed in passing upon demurrers to pleadings are unavailing unless prejudicial. Putnam v. Board of Com'rs of Paulding County, 102 Ohio St. 45, 130 N.E. 165; Yocum, Adm'r v. Allen, 58 Ohio St. 280, 50 N.E. 909; Dayton Ins. Co. v. Kelly, 24 Ohio St. 345, 15 Am.Rep. 612.

In the instant case the rulings on the sufficiency of the pleadings were not prejudicial to the defendant, The First National Bank of Findlay.

This is a proceeding under the Uniform Declaratory Judgments Act, Section 12102-1 et seq., General Code.

Plaintiff, Joseph N. Schaefer, claims the note for $10,000 given by him to the defendant bank is invalid for want of consideration. Since the trial court found that there was no consideration for the note, the finding must stand if there is evidence to support it. It is therefore necessary to consider only the evidence favorable to the plaintiff.

It appears from such evidence that, when plaintiff was about to renew his indebtedness for $39,600 and $6,200 and receive an extension of time for the payment thereof, the renewal and extension were given and there was an express understanding and agreement that plaintiff would assume the indebtedness of $10,000 owing by The Phoenix Hotel Company, Isadore L. Horn and Florence Stokes Horn to the bank. There is also evidence that the plaintiff gave the $10,000 note for the assumption of such indebtedness and for no other purpose and thereupon three separate notes for $39,600, $6,200 and $10,000 were given with an extension of time on the first two and all three were secured by mortgage.

It is a general rule that an extension of time is a sufficient consideration to support a promissory note, but the application of this rule must depend upon the facts of the particular case. If A owes B $2,000 and the payment of indebtedness is extended upon A's giving to B a note for an additional $1,000 as a bonus or compensation for the extended loan, the promissory note for the additional amount is valid but usurious and the whole...