First National Bank of Henderson v. Johnston

WALKER, J., concurs in the result; CLARK, C. J., dissenting. Revisal, 2239: "Except as herein otherwise provided, when a negotiable instrument has been dishonored by nonacceptance or nonpayment, *Page 606 notice of dishonor must be given to the drawer and each indorser, and any drawer or indorser to whom such notice is not given is discharged." Revisal, 2259: "Notice of dishonor may be waived either before the time of giving notice has arrived or after the omission to give due notice, and the waiver may be express or implied." Revisal, 2260: "Where the waiver is embodied in the instrument itself, it is binding upon all parties." Revisal, 2261: "A waiver of protest, whether in the case of a foreign bill of exchange or other negotiable instrument, is deemed to be a waiver, not only of a formal protest, but also of presentment and notice of dishonor." Revisal, 2270: "A person secondarily liable on the instrument is discharged 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 reversed." It is well settled that a surety on a promissory note or bond is not entitled to notice of dishonor or nonpayment, but one who places his signature upon the back of a commercial paper without indication that he signed in any other capacity is deemed an indorser, and is entitled to notice of dishonor. Houser v. Fayssoux, 168 N.C. 1; Bank v. Wilson,168 N.C. 557. This notice of dishonor may be waived by the indorser before or after the maturity of the note by express words or by necessary implication. When so waived, notice of dishonor need not be given. The facts in this case are that the principals to the note paid interest on the same to 15 November, 1915, and that no notice of dishonor or nonpayment by the makers was given by plaintiff to the defendant, but that plaintiff on 9 December, 1914, placed said note for collection in the hands of its attorney, who then at once notified the makers and (529) the defendant S. H. Johnston that it had not been paid, and demanded payment of all of them; that said defendant S. H. Johnston at once called on said attorney and brought with him Mr. Richardson, who was considering taking up the same with the collateral, and said Richardson took the note and collateral to examine it and later returned it and declined to take it. It is contended by the plaintiff that notice of dishonor was waived by the indorser by the express words of the instrument, and that having consented to such indefinite extensions of payment as the principals to the note and the plaintiff should agree upon, the indorser is not entitled to notice of nonpayment. *Page 607 The defendant contends that he consented to the extensions of time granted the principals, and, consequently, he was bound by such waiver upto 15 November, 1915. At that time the extension ended, the note matured, and the defendant, indorser, was then entitled to notice of nonpayment and dishonor. The authorities seems to hold that where the indorser consents in advance of maturity to extensions of the time of payment of the note, he thereby waives his right to receive notice of dishonor and presentment for payment. Worley v. Johnson, 33 L.R.A., 641, notes. In Daniel on Neg. Inst. (6 Ed.), by Calvert, sec. 1106, it is said: "Where the indorser agrees to an extension of time of payment, it waives demand, protest, or notice." In Cady v. Bradshaw, 116 N.Y. 191, it is held that where the indorser consented that time of payment be extended a year he in effect waived notice of dishonor and demand for payment, citing Parsons on Notes and Bills, 587, and many adjudications in the opinion. Barclay v. Weaver, 19 Pa. St., 397. The point is expressly decided in Ridgeway v. Budd, 13 Pa. St., 208, where it is held that "if an indorser of a promissory note agrees to extend the time of payment beyond the maturity of the note, such agreement amounts to a guaranty that he will hold himself bound at the expiration of the period agreed upon by him." In the opinion it is said: "This is a distinct guarantee that he (the indorser) will hold himself bound at the end of thirty days after maturity, and is within the case of Foster v. Jurdison, 16 East, 104, establishing that under like circumstances the holder was not bound to give notice," citing Story on Prom. Notes, 314; Williams v.Brabst, 10 Watts, 111; Scott v. Green, 10 Bar., 103; Clark v. Devlin, 3 Bos. Pul., 365. The reason underlying this rule is given in the case of Sheldon v.Horton, 43 N.Y. 93, and that is because when the indorser consents to an extension of payment, he has notice that the note is not paid at its maturity, and by consenting to an extension his liability then becomes absolute as a guarantor, "and no subsequent demand or (530) notice at any time is required." In Amoskeag Bank v. Moore, 37 N. H., 539, it is held: "An agreement between the holder and indorser of a promissory note, made before its maturity, that the time of payment shall be extended, is a waiver by the indorser of demand and notice; and in such case no demand is necessary at the expiration of the extended time." Referring to the effect of the indorser's consent to the extension of time for payment, the Court says: "This constitutes a waiver both of demand and notice, precisely as if they had expressly indorsed with such waiver; and thereby the contingent character of their liability as *Page 608 indorsers, depending upon the demand of payment upon the maker, and notice of nonpayment, is converted into one of an absolute character as ofguarantors. Their liability being thus fixed and absolute at the maturity of the note, by reason of their indorsement and the waiver of demand and notice, the fact that no demand was made at the expiration of the extended time is immaterial, as is also the evidence offered in relation to their subsequent promise to pay. The indorsement and the waiver render them liable to pay, with or without subsequent promise, and with or without a demand upon the maker at any time. See, also, Glaze v. Ferguson,48 Kan. 157; Bank v. Ryerson, 23 Iowa 509; Bank v. Dibrell, 91 Tenn. 301;McMonigal v. Brown, 45 Ohio State, 499." We are of opinion that upon the facts agreed the plaintiff is entitled to judgment. Reversed. WALKER, J., concurs in result.