Wolstenholme v. Smith

• Decision Date: 14 April 1908
• Docket Number: 1897
• Court: Utah Supreme Court
• Parties: WOLSTENHOLME v. SMITH et al

97 P. 329

34 Utah 300

WOLSTENHOLME v. SMITH et al

No. 1897

Supreme Court of Utah

April 14, 1908

APPEAL from District Court, Third District; T. D. Lewis, Judge.

Action by Daniel Wolstenholme, special administrator of the estate of James Megeath, deceased, against Grant H. Smith and another. From a judgment for plaintiff, defendant J. E Darmer appeals.

AFFIRMED.

Stephens Smith & Porter for respondent.

APPELLANT'S POINTS.

Where a negotiable instrument is materially altered without the assent of all parties liable thereon, it is avoided as to those who do not assent thereto, and any alteration which changes the time of payment is a material alteration. (Laws Utah 1899, secs. 124, 125.)

The law implies an agreement for extension where interest is paid, as such, in advance, and extends the time of payment during the period for which interest is so paid. (Brandt, Surety and Guar., sec. 305; Walley v. Bank, 14 Utah 311; Crashy v. Wyatt, 10 N.H. 322; Bank v Jeffs, 15 Wash. 235; Bank v. Colcord, 15 N.H. 124; Woodburn v. Carter, 50 Ind. 376; Hamilton v. Winterwood, 43 Ind. 395.)

Any change in the note is an alteration, as by clipping off conditions from the bottom. (State v. Shatton, 27 Ia. 420; Watt v. Pomeroy, 20 Mich. 425; Palmer v. Largent, 5 Nebr. 233, Krouskop v. Shoutz, 57 Wis. 204.)

S. P. Armstrong for appellant.

RESPONDENT'S POINTS.

"A surety is liable as much as his principal is liable and absolutely liable as soon as default is made without any demand upon the principal whatsoever, or any notice of default." (2 Daniels, Negotiable Instruments [5 Ed.], sec. 1753; Tiedeman on Commercial Paper, sec. 415; 2 Randolph on Commercial Paper [2 Ed.], 849.)

STRAUP, J. McCARTY, C. J., and FRICK, J., concur.

OPINION

STRAUP, J.

This is an action brought to recover a judgment on a promissory note. The note reads: "Salt Lake City, Utah, Sept. 13, 1901. Sixty days after date, without grace, for value received, we or either of us promise to pay to the order of Joseph P. Megeath, three hundred dollars ($ 300) in United States gold coin, negotiable and payable at the bank of Commerce, at Salt Lake City, Utah, without defalcation or discount, with interest at the rate of one per cent. per month from maturity until paid, both before and after judgment, and if suit be instituted for the collection of this note we agree to pay thirty dollars ($ 30) attorney's fee. Grant H. Smith. J. E. Darmer." The note was indorsed to James Megeath. The suit was brought by his administrator. The defendant Darmer, answering the complaint, alleged that his codefendant, Smith, was the principal debtor; that he (Darmer) received no part of the loan or consideration for which the note was given, and that he signed it only as surety, which facts were known to both Joseph P. and James Megeath when the note was executed; that by a binding agreement Smith, and the holder of the note, extended the time of payment to October, 1902, without his knowledge or consent; that no demand was made upon him for payment until more than four years after the note became due; and that, by reason of the extension of time and of the delay in payment, he was prevented from protecting and securing himself. The court found the facts substantially as alleged in the answer, but as conclusions of law found that the defendant Darmer was a maker and primarily liable on the note, and therefore rendered judgment against him. From this judgment, the defendant Darmer has appealed.

There is no doubt that under the decisions of this court prior to the enactment of chapter 83, p. 122, Laws 1899, relating to negotiable instruments, the facts alleged in the answer and found by the court constituted a defense, and discharged Darmer. It was the law generally in this country that a binding agreement between the principal and holder of a negotiable instrument, whereby the time of its payment was extended, relieved the surety, though he apparently signed as maker, if the holder had knowledge or notice that he was in fact a surety. It is, however, contended by the respondent that the law in this respect has been changed by the act in question. On the other hand, the appellant contends that it has not been changed, and that the law in this regard is now as it was before the enactment. We cannot agree with appellant in this contention. The negotiable instruments law enacted in 1899 is like that of the bills of exchange act of 1882 of England, and of the negotiable instruments law of New York adopted in 1897, and of about nineteen other States.

The particular sections pertinent to the question are:

Section 29: "An accommodation party is one who has signed the instrument as maker, drawer, acceptor, or endorser, 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."

Section 60: "The maker of a negotiable instrument by making it engages that he will pay it according to its tenor."

Section 63: "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."

Section 119: "A negotiable instrument is discharged: I. By payment in due course by or on behalf of the principal debtor. II. By payment in due course by the party accommodated where the instrument is made or accepted for accommodation. III. By the intentional cancellation thereof by the holder. IV. By any other act which will discharge a single (simple) contract for the payment of money. V. When the principal debtor becomes the holder of the instrument at or after maturity in his own right."

Section 120: "A person secondarily liable on the instrument is discharged: I. By an act which discharges the instrument. II. By the intentional cancellation of his signature by the holder. III. By the discharge of a prior party. IV. By a valid tender of payment made by a prior party. V. By a release of the principal debtor, unless the holder's right of recourse against the party secondarily liable is expressly reserved. VI. 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."

Section 192: "The person 'primarily' liable on an instrument is a person who by the terms of the instrument is absolutely required to pay the same. All other parties are 'secondarily' liable."

By subdivision 6 of section 120 it will be seen that a person secondarily liable on the...