Winton v. Sullivan

• Decision Date: 12 June 1939
• Docket Number: 14542.
• Parties: WINTON v. SULLIVAN.
• Court: Colorado Supreme Court

91 P.2d 996

104 Colo. 450

WINTON v. SULLIVAN.

No. 14542.

Supreme Court of Colorado, En Banc.

June 12, 1939

Error to District Court, Arapahoe County; H. E. Munson, Judge.

Action by C. O. Winton against E. J. Sullivan on a note. Judgment for defendant, and plaintiff brings error and applies for supersedeas.

Reversed and remanded, with instructions to enter judgment for plaintiff.

Harry Behm, of Brighton, for plaintiff in error.

Parriott & Cranston and James L. Weinmeyer, all of Denver, for defendant in error.

OTTO BOCK, Justice.

This is an action by plaintiff in error, plaintiff below, against E J. Sullivan, defendant in error, defendant below, on a promissory note. Judgment was entered in favor of defendant and plaintiff seeks reversal. The issues were decided upon the pleadings and stipulated facts. It appears that June 11 1932, The Littleton Drug Company executed and delivered its promissory note to the First National Bank of Littleton payee. Defendant, prior to delivery of said note to payee endorsed the same as follows: 'Demand notice and protest waived. Payment guaranteed. E. J. Sullivan.' Payee went into receivership. Subsequently, and after maturity, the receiver, for valuable consideration, assigned said note to plaintiff. Some time after the execution of the note the maker became financially embarrassed and attempted to make an assignment for the benefit of its creditors, culminating in an offer by the mortgagee of the property of the maker to the creditors, by which the payee was offered twenty per cent of the amount due on the note. This offer was rejected by the receiver of the payee, as evidenced by correspondence between the so-called trustee of the creditors of the maker, the receiver stating, in substance, to said trustee, that the Comptroller of the Currency would not authorize the acceptance of the twenty per cent unless the waiver of defendant, as an endorser of the note, was first obtained, otherwise no surrender of the note would be made. The note never was surrendered. November 1, 1933, the trustee executed his check to the payee for said twenty per cent and endorsed thereon the following: 'Acceptance hereof constitutes an agreement by payee to accept this check in full settlement of all indebtedness due the payee from the debtor named upon the face hereof and also constitutes ratification of all acts of trustee of said debtor.' This check was received and cashed by the receiver, and the sum credited on the note.

The errors assigned may be comprehended in the following statement: That the trial court erred in its findings and judgment in favor of defendant and against plaintiff. Plaintiff contends, first, that the acceptance, under the circumstances, of the twenty per cent by the receiver of the payee did not release the maker, because the trustee had no authority to require the release of the maker; and that the twenty per cent was a partial payment of a liquidated debt, citing Schlessinger v. Schlessinger, 39 Colo. 44, 88 P. 970, 8 L.R.A.,N.S., 863; and second, if the maker was released by the acceptance of the twenty per cent, correspondence between the receiver and the trustee indicates an express reservation to hold the defendant liable as endorser. Counsel for defendant contend that the maker of the note was released by the acceptance of the twenty per cent by the receiver, and that defendant, being secondarily liable, was thereby discharged from any liability, because the receiver did not, at the time of the acceptance of the check, expressly reserve the liability of the endorser.

Several sections of the Uniform Negotiable Instruments Act, which was adopted in this state in 1897, are applicable. The sections in the act are numerically the same as in chapter 112, '35 C.S.A. We quote those which are pertinent:

'An accommodation party is one who has signed the instrument as maker, drawer, acceptor or indorser, without receiving value therefor, and for the purpose of lending his name to some other person. Such a person is liable on the instrument to a holder for value, notwithstanding such holder at the time of taking the instrument knew him to be only an accommodation party.' ' 35 C.S.A. c. 112, § 29.

'A person placing his signature upon an instrument otherwise than as maker, drawer or acceptor is deemed to be an indorser unless he clearly indicates by appropriate words his intention to be bound in some other capacity.' ' 35 C.S.A. c. 112, § 63.

'A person secondarily liable on the instrument is discharged:

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'Fifth--By a release of the principal debtor, unless the holder's right of recourse against the party secondarily liable is expressly reserved.' ' 35 C.S.A. c. 112, § 120.

'The person 'primarily' liable on an instrument is the person who by the terms of the instrument is absolutely required to pay the same. All other parties are 'secondarily' liable.' ' 35 C.S.A. c. 112, § 192.

In its findings the trial court stated, among other things: 'The controversy in this case arises by reason of the fact that the defendant, E. J. Sullivan, is a guarantor on the said note sued upon. The payment of the said note was guaranteed by the defendant, Sullivan. The Littleton Drug Company was a party primarily liable, and E. J. Sullivan, being an indorser on the said note as guarantor, became secondarily liable.'

The trial court predicated its judgment for defendant upon the theory that defendant was a guarantor of the note, that the maker was primarily liable, and that defendant, as such guarantor, was secondarily liable; that by the acceptance of said check, without express reservation to proceed against defendant, the maker was released, and therefore, under the circumstances above mentioned, defendant was released from any further liability to the assignee of the payee. There is no contention here, nor are there any facts supporting such a contention, if made, that the endorsement on the note signed by defendant is a collateral contract or undertaking and not a direct liability.

The liability of a guarantor of negotiable paper is not fixed by the negotiable instruments law. There is nothing to prevent the same person being both guarantor and endorser. Douglas v. Rumelin, 130 Or. 375, 280 P. 329. The learned trial judge misconceived the liability of defendant, in finding that he only was a guarantor. It clearly appears from the pleadings that the endorsement by defendant was made prior to delivery of the note to the payee. By the weight of authority, when the endorsement is in the language used in the instant case, defendant clearly is a surety or accommodation endorser within the meaning of section 29, supra.

One of the latest cases sustaining this principle is M. J. Wallrich Land & Lumber Co. v. Ebenreiter, 216 Wis. 140, 256 N.W. 773. The endorsement of the note in that case was as follows: 'Protest waived. Payment guaranteed.' The Supreme Court of Wisconsin there quoted extensively from the opinion in the case of Mangold & Glandt Bank v. Utterback, 54 Okl. 655, 160 P. 713, L.R.A.1917B, 364, as follows:

'It will be observed from section 4113 that the tendency of the law, when the status of a party who places his name upon the back of a negotiable instrument is under consideration, is to resolve all doubtful cases towards holding the same to be a commercial indorsement in due course. This rule is founded upon commercial necessity. The unshackled circulation of negotiable notes is a matter of great importance. The different forms of commercial instruments take the place of money. To require each assignee, Before accepting them, to inquire into and investigate every circumstance bearing upon the original execution and to take cognizance

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