Opinion
No. 3491.
Decided February 6, 1945.
Where one with full knowledge of facts constituting a defense to his note secures an extension thereof on the faith of his promise to pay it upon a new maturing date, he ratifies the instrument and so waives his defense thereto. In such case the "new maturing date" is sufficiently definite when the extension agreement provides for payment "shortly after" a specified date. The requirement of the Negotiable Instrument Law (R.L., c. 366) that an instrument to be negotiable must be payable on demand or at a fixed or determinable future time has no reference to an extension agreement deferring the time of such payment.
ASSUMPSIT upon three promissory notes made by the defendant John R. Golter, dated March 14, 1940, and payable to H.A. Yeaton Son, endorsed by them in blank, and delivered to the plaintiffs. The first of these notes was for $800, payable May 1, 1941; the second was for the same amount, payable November 1, 1941. These two notes contain no provision with reference to interest. The third, for $961.75, was payable April 1, 1942, with interest.
Trial by jury. At the close of the evidence a verdict was directed for the defendant Cecelia M. Golter. The plaintiffs seasonably entered a motion for a directed verdict in their favor and excepted to the denial thereof. They also excepted to certain instructions to the jury, and to the denial of certain requests for instructions. The defendant also moved for a directed verdict and excepted to the denial thereof and to the denial of certain requests for instructions. The jury returned a verdict for the defendant John R. Golter. Thereafter the plaintiffs seasonably moved to set aside the verdict on the ground, amongst others, that "upon all the evidence, the plaintiff is entitled to a verdict." Plaintiffs also moved for a judgment notwithstanding the verdict. Upon these motions the following orders were made: "Notwithstanding the jury verdict, the Court rules as a matter of law that the defendant for valuable considerations, waived any defense he may have had on the note for $800 maturing May 1, 1941, and entered into a valid and binding extension agreement with the plaintiff for the payment of said note at a definite, certain, ascertainable time, i.e. on or before January 15, 1942. In all other respects the jury verdict stands and plaintiff's motion is denied. Judgment for plaintiff for $800 with interest from January 15, 1942." To these orders, in so far as their motion was denied, the plaintiffs seasonably excepted.
The defendant excepted "to the findings contained in said order to the setting aside of the jury verdict and to the order of judgment for the plaintiff for $800 with interest from January 15, 1942."
The evidence tended to prove that, upon August 2, 1939, the defendant Golter executed and delivered to II. A. Yeaton Son a note for $3,278.50, payable eight months after date. This note was findably designed to cover the balance due from the defendant to Yeaton Son upon an open account which had been running for several years as shown by the books of Yeaton Son. The defendant at that time denied that he owed Yeaton Son any money and asked for a statement of his account. He was assured by Mr. Harry A. Yeaton, with whom he had been on friendly terms for years, that the note would not be used but would be kept in the office and that the amount of the account would be straightened out later. This note was endorsed and delivered to the plaintiffs to whom Yeaton Son were indebted, together with all the other accounts receivable of Yeaton Son. When this note became due, the defendant was called into the office of Yeaton Son, Mr. J.A. Trinley, one of the plaintiffs, being present, and asked to sign a series of five notes aggregating the amount then due upon the note for $3,278.50. The defendant again protested that he did not owe Yeaton Son any money, whereupon he was told by Mr. Trinley, "We are just asking to break up something which you've already given. . . . If there's any errors we will correct them." On the strength of these assurances the defendant signed the new notes as requested. Two of these notes for $500 each were subsequently paid, and the present suit is to collect the other three.
The defendant testified that he did not actually find out about the true state of his account with Yeaton Son until July, 1941. It then appeared that he was entitled to credits upon his account in such amounts that instead of Mr. Golter's owing Yeaton Son $3,278.50, they owed him $134.78. Thereafter, in October, 1941, the defendant informed Mr. Trinley of the situation, both orally and by letter dated October 24, 1941. Under date of October 31, 1941, Mr. Trinley wrote the defendant expressing his amazement at the information which he had received, and arranged for a personal interview. Upon November 20, 1941, the defendant wrote Mr. Trinley as follows:
"Mr. J.A. Trinley Columbia Hotel Portland, Maine
Dear Sir:
In regard to our conversation of yesterday, as the matter now stands regarding notes given to H. A. Yeaton Son and which he turned over to you in good faith as far as you were concerned, it would seem best for me to take my medicine and try and get something from them if there is anything to get. Therefore if satisfactory to you, the two notes that are past due are to be paid as follows, one to be paid on or before January 15, 1942 and the other shortly after, perhaps thirty days later but this one I would rather give the date when paying the other."
To this letter the plaintiffs replied under date of December 15, as follows:
"Mr. John R. Golter Portsmouth, N.H.
Dear Sir:
Referring to your letter of November 20 and confirming our conversation with you just prior to said date, would say we will be glad to grant you an extension for payment of note due May 1, 1941, for $800 to be paid on or before January 15, 1942, and note you will advise at that time, specific date when the note due November 1, 1941 for $800 will be paid. . . .
That will then leave your note due April 1, 1942, for $961.75, with interest, and trust it will be possible for you to easily provide for it."
Other facts are stated in the opinion. Plaintiffs' bill of exceptions was allowed by Lorimer, J.
Robert W. Upton, Laurence I. Duncan, and Arthur J. Reinhart, (Mr. Duncan orally), for the plaintiffs.
T. H. Simes Son and William H. Sleeper, (Mr. T. H. Simes orally), for the defendant.
Viewing the evidence in the light most favorable to the defendant, the plaintiffs occupied the position of endorsees for value but with knowledge of the infirmity of the notes. The issue of lack of consideration was fully tried and submitted to the jury, who must be assumed to have found in favor of the defendant upon it. The principal question in the case arises in regard to the legal effect of the defendant's conduct, subsequent to his discovery of the errors in his account.
It is the contention of the plaintiffs that the defendant's agreement evidenced by the correspondence set forth above, "constituted a waiver of his defenses to all the notes," and they rely upon the rule of law which has been stated as follows: "The rule is that if one, with full knowledge of facts constituting a defense to his note, secures an extension thereof on the faith of his promise to pay it upon the new maturing date, he ratifies the instrument and so waives his defense." E.H. Taylor Sons v. Bank, 212 Fed. 898, 902; Brown v. First National Bank, 115 Ind. 572; Farmers c. Bank v. Jones, 196 Ia. 1071; Muirhead v. Kirkpatrick, 21 Pa. St. 237; Monahan v. Watson, 61 Cal.App. 417; Fitzpatrick v. Flannagan, 106 U.S. 648, 660; Brannan, Negotiable Instruments Law (5th ed.), page 567.
The Negotiable Instruments Law does not appear to cover this situation but the defendant does not question the soundness of the above rule, and indeed it is difficult to deny the logic of the reasoning of Mr. Justice Matthews in Fitzpatrick v. Flannagan, supra, 660 as follows: "A subsequent promise, with full knowledge of the facts, is certainly equivalent to an original promise made under similar circumstances; and no one, acting with full knowledge can justly say that he has been deceived by false representations. Volenti non fit injuria." We, therefore, accept the above as a correct statement of the law.
Apparently applying this principle, the trial Court ruled "that the defendant, for valuable considerations waived any defense he may have had on the note for $800 maturing May 1, 1941, and entered into a valid and binding extension agreement with the plaintiffs for the payment of said note at a definite, certain, ascertainable time, i.e. on or before January 15, 1942." This conclusion of the Presiding Justice regarding the first note in suit appears to be inescapable. Defendant's express declaration of intention to take his medicine and his express promise to pay the note upon January 15, 1942, leave no room for argument upon this point.
We think that the same conclusion follows in regard to the second note. The defendant himself proposed that this note be paid "shortly after" January 15, 1942 "perhaps thirty days later but this one I would rather give the date when paying the other." This proposal was accepted in full by the plaintiffs. "We . . . note you will advise at that time, specific date when note due November 1, 1941 for $800 will be paid." If this arrangement was satisfactory to the parties, there is no reason why the Court should find fault with it.
The above-quoted rule refers to a promise to pay "upon a new maturing date." The "new maturing date" of the second note was fixed definitely enough to comply with this rule. The promise of the defendant to pay was absolute. It was agreed that the time of payment should be "shortly after" January 15, 1942. This was, in effect, a promise to pay within a reasonable time after that date. This promise was valid and enforceable under the ordinary rules of contract, which must govern it.
By his reference to payment at a "definite, certain, ascertainable time" the trial Court apparently had in mind section 1 of the Negotiable Instruments Law (R.L., c. 366, s. 1), which provides that an instrument to be negotiable "must be payable on demand, or at a fixed or determinable future time." There is no requirement that extension agreements must be similarly conditioned. The binding effect of such agreements must be determined by an application of the established rules of contract law. It is a subject with which the Negotiable Instruments Law does not deal. The Court should have directed a verdict for the plaintiffs on this note.
With respect to the third note for $961.75, no waiver can be spelled out of the correspondence since no extension of time was requested or granted. That note apparently came due according to its terms upon April 1, 1942, and as to it the defendant was free to assert any defenses which he possessed. Having established the defense of lack of consideration, the defendant is entitled to judgment in respect to the third note.
In view of the results reached above, plaintiffs' remaining exceptions need not be considered, and the defendant's exceptions are overruled.
Judgment for the plaintiffs for $1600 with interest on the first two notes; Judgment for the defendant on the third note.
All concurred.