Van De Ven v. Overlook Min. & Development Co.

• Decision Date: 09 January 1928
• Docket Number: 20623.
• Citation: 146 Wash. 332,262 P. 981
• Court: Washington Supreme Court
• Parties: VAN DE VEN et al. v. OVERLOOK MINING & DEVELOPMENT CO. et al.

262 P. 981

146 Wash. 332

VAN DE VEN et al. v. OVERLOOK MINING & DEVELOPMENT CO. et al.

No. 20623.

Supreme Court of Washington

January 9, 1928

Department 2.

Appeal from Superior Court, Walla Walla County; Kuykendall, Judge.

Action by H. J. Van De Ven and others, as trustees under and by virtue of the last will and testament of Helen A. Brennan deceased, and another, against the Overlook Mining &amp Development Company and others. From a judgment for plaintiffs, defendants appeal. Affirmed.

J. G Thomas, W. A. Toner, Gose & Crowe, and Thomas P. Gose, Jr. all of Walla Walla, for appellants.

Earl W. Benson and Evans & Steirling, all of Walla Walla, for respondents.

FULLERTON, J.

This is an action brought to recover upon a promissory note. There was a judgment for the plaintiffs in the court below, and from the judgment, the defendants appeal.

On June 28, 1916, one Helen Brennan, the predecessor in interest of plaintiffs in the action, respondents here, loaned to the appellant, Overlook Mining & Development Company, a corporation, the sum of $3,500. The loan was evidenced by a promissory note, dated upon that day, by the terms of which the borrower agreed to repay the sum loaned one year from its date with interest at 10 per cent. per annum. At the time the loan was made, the appellants J. N. McCaw, T. S. Steel, M. J. Lowden, and one John T. Flathers, since deceased, and of whose estate the appellant Union Trust Company is administrator, were stockholders and directors of the appellant Overlook Mining & Development Company, and were instrumental in securing the loan. At the time of the execution of the note, they indorsed thereon and signed the following writing:

'For value received, I hereby guarantee the payment of the within note at maturity or at any time thereafter, with interest at the rate specified in the note, and I hereby waive protest and diligence in collecting.'

Interest was paid upon the note until its maturity at the rate of 10 per cent. per annum, at which time the payee of the note indorsed thereon and signed the following writing:

'June 28, 1917, I hereby grant the extension of time of payment of the within note on or before six months from June 28, 1917, at 8%.'

Thereafter interest was paid on the note at irregular intervals until January 1, 1923, at the rate of 8 per cent. per annum. No other payments were made, and the present action was instituted on October 17, 1925. Two questions are presented by the appeal; namely, whether the extension of the time of payment of the note discharged the guarantors, and whether the action was barred by the statute of limitations.

To an understanding of the first of the questions stated, it is necessary to notice the provisions of the Negotiable Instruments Act (Rem. Comp. Stat. §§ 3392-3586). Section 3582 of the act provides:

'The person 'primarily' liable on an instrument is the person who by the terms of the instrument is absolutely required to pay same. All other parties are 'secondarily' liable.'

Section 3510 provides:

'A person secondarily liable on the instrument is discharged----

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'6. By any agreement binding upon the holder to extend the time of payment, or to postpone the holder's right to enforce the instrument, unless made with the assent of the party secondarily liable, or unless the right of recourse against such party is expressly reserved.'

It is plain by the first of the quoted sections that the guarantors here sued are persons secondarily liable on the instrument, and equally plain, by the second of the sections, that, if the agreement to extend the time of payment was binding upon the holder of the instrument and the persons secondarily liable did not assent thereto, the instrument is discharged as to them. The trial court did not find that they did assent to the extension, nor do we find anything in the evidence that would justify such a finding. It determined the question against the guarantors by holding that the extension was not binding on the holder for want of consideration.

There was no proof of an independent consideration moving to the holder; on the contrary, the evidence is that she received no consideration other than is evidenced by the writing itself. The question then is whether the writing shows a consideration. The general rule is that an extension of the time of payment of a negotiable instrument for a definite period, with interest payable during the period, constitutes an extension for a valuable consideration. The consideration moving to the holder of the instrument is the promise of the maker to pay interest during the full period of the extension, and the promise of the holder to forbear suit for the period constitutes a good consideration for the agreement on the part of the maker to pay interest for the full period. Nelson v. Flagg, 18 Wash. 39, 50 P. 571; Fanning v. Murphy, 5 Ann. Cas. 442, note; 21 R. C. L. 1027. The converse of the proposition is also true; that is to say, if the extension is for an indefinite time in which the payor of the obligation extended has the right to pay at any time during the period of extension, there is no consideration moving to the holder of the instrument, nor is there a detriment to the promisor; this because the payee of the instrument gives up nothing, and the payor gives up nothing, the payor may pay at any time, and the obligation stands, in so far as the payor is concerned, as it stood before the extension. Id.

Turning to the writing granting the extension in the case before us, it will be at once observed that the indorsers of the obligation gave up on right by reason of the extension. The extension is granted to a time 'on or before' six months. The payor of the instrument thus had the right to pay at any time during the period, and the holder of the instrument would have been bound to accept payment.

The appellants cite section 3415 of the Code, and our case of State Bank of Clarkston v. Morrison, 85 Wash. 182, 147 P. 875, as announcing a contrary rule. But both the section and the case cited have reference to the presumptions arising from the execution of the obligation. They announce the rule that every person whose signature appears thereon as an obligor is presumed to have become a party thereto for value. Neither relates to the acts of the holder of the instrument.

A second contention under this head is that the holder of the instrument is estopped from questioning the consideration for the extension of time, under the rule announced by us in Rockford Shoe Co. v. Jacob, 6 Wash. 421, 33 P. 1057. That action was upon an account for a bill of goods sold by the plaintiff to the defendant. The...