State Bank of St. Johns v. McCabe

• Decision Date: 26 January 1904
• Court: Michigan Supreme Court
• Parties: STATE BANK OF ST. JOHNS v. McCABE.

98 N.W. 20

135 Mich. 479

STATE BANK OF ST. JOHNS v. McCABE.

Supreme Court of Michigan

January 26, 1904

Error to Circuit Court, Clinton County; George P. Stone, Judge.

Action by the State Bank of St. Johns against Houston D. McCabe. There was judgment for defendant, and plaintiff brings error. Reversed.

This suit is based upon a promissory note, payable on demand, for $700, dated December 30, 1898, made by J. H. Fedewa to the order of the defendant, and indorsed by him. The declaration contained three special counts besides the common counts. Upon the trial the court limited the cause of action to that stated in the special counts. With the general issue defendant gave notice (1) that he received no benefit from the note; (2) that he became released as indorser because of the failure to demand payment within a reasonable time, and that on three occasions plaintiff had received interest and extended time without defendant's consent. Plaintiff gave evidence to prove the following facts: The execution and delivery of the note; the death of the maker, Fedewa, January 27, 1901; that the defendant, the day after Fedewa's death, stated that he was on this note, and that he had it secured; that about two weeks afterwards defendant had a conversation with the president and cashier of the bank, in which defendant admitted his liability upon the note; that he wanted the claim presented against Fedewa's estate, and that, if there was not sufficient in the estate to pay it, he would; that it was agreed that the bank would present the claim, and wait until it was satisfied there was nothing in the estate; that the claim was filed against the estate and was allowed; that in April, 1902, it was demonstrated that the estate was insolvent; that it had no assets with which to pay the debts; that on April 14th, the same year, the cashier wrote defendant, informing him of his promise, and that the estate was insolvent, and requested payment; that to this letter defendant made no reply; that two other similar letters were written by the cashier on April 25th and 27th respectively, to which he made no reply. Thereupon this suit was instituted. The court, when the plaintiff had rested its case, directed a verdict for the defendant.

Lyon & Moinet, for appellant.

Norton & Dooling, for appellee.

GRANT J. (after stating the facts).

1. Plaintiff did not seek to recover upon the liability of the defendant as an original indorser. It was conceded that at Mr. Fedewa's death the defendant had been released as an indorser by the laches of the plaintiff in making demand upon the maker and giving notice to the indorser. The court, in instructing the jury, so stated. Recovery was sought on the theory of a waiver of demand and notice, and a new promise made by the defendant, recognizing his liability, and agreeing to pay if the note was presented against Mr Fedewa's estate, and its assets were insufficient. The court directed a verdict upon the ground that such new promise must be made with full knowledge of the facts which operated to release the indorser, that the burden of proof was upon plaintiff to show such knowledge, and that the plaintiff had failed to show it. It is conceded that failure to demand payment and give notice is waived by a subsequent promise by the indorser to pay the note, when he makes such promise with full knowledge of the facts. Porter v. Hodenpuyl, 9 Mich. 11; Newberry v. Trowbridge, 13 Mich. 263; Parsons v. Dickinson, 23 Mich. 56; Perkins v. Cheney, 114 Mich. 567, 72 N.W. 595, 68 Am. St. Rep. 495; Loose v. Loose, 36 Pa. 538. See Schierl v. Baumel, 75 Wis. 69, 43 N.W. 724; Low v. Howard, 10 Cush. 159. The same principle was enunciated in Sutton v. Beckwith, 68 Mich. 303, 36 N.W. 79, 13 Am. St. Rep. 344, where it was held that the maker of a note purchased in reliance upon his statement that it was all right was estopped to assert its invalidity. See, also, Robinson v. Barnett, 19 Fla. 670, 45 Am. Rep. 24, and Continental Nat. Bank v. Nat. Bank, 50 N.Y. 575. The instruction that the burden of proof was upon the plaintiff is correct, and we do not understand that plaintiff's counsel contend to the contrary. There was evidence, however, from which the jury might find that the defendant knew the facts. He certainly knew that he had not received notice of demand and nonpayment, and that the note was unpaid, because immediately thereafter he stated that he had it secured, and asked plaintiff that it be presented against the maker's estate. The cashier testified that he and the defendant at the time of the alleged promise went over all Mr. indebtedness to the bank, and especially this note. Fedewa and defendant were near neighbors and intimate friends, and frequently visited each other. Positive or direct evidence of knowledge is not necessary. Newberry v. Trowbridge, supra.

2. The court properly excluded those portions of the three letters written by the cashier to the defendant stating the promise claimed to have been made. The authorities make a distinction between statements made orally and those contained in letters which are unanswered or not acted upon. In the former case the party to whom statements hostile to his interest are made may with much reason be required to contradict, or be held to acquiesce in their truth. In the latter case he is not called upon to go to the trouble and expense of writing a denial, and silence cannot be construed into acquiescence in the truth of the written statements. Commonwealth v. Eastman, 1 Cush. 189, 215, 48 Am. Dec. 596; Learned v. Tillotson, 97 N.Y. 1, 9, 49 Am. Rep. 508; Fairlie v. Denton, 3 C. & P. 103; Can. Bank of Com. v. Coumbe, 47 Mich. 358, 11 N.W. 196. Those portions of the letters notifying him of the insolvency of the estate and requesting payments were admissible.

3. It was competent for the officers of the bank who made the arrangement with the defendant to testify that they relied upon his promise, and in reliance thereon presented the claim against the maker's estate.

4. Counsel for the defendant insists that the action was prematurely brought, because the estate of Mr. Fedewa was not closed when it was brought. The testimony on the part of the plaintiff was not that the estate should be closed before defe...