Bank of British Columbia v. Jeffs

The opinion, of the court was delivered by Gordon, J. This action is based upon a promissory note executed by T. M. Alvord, his wife M. J. Alvord, E. H. Alvord and appellant Richard Jeffs, said note being for the sum of $10,000, made November 15, 1890, payable to the respondent, the Bank of British Columbia, one day thereafter, with interest after date at the rate of ten per cent. The action was brought against the appellant Jeffs alone. The amended answer contains nine separate defenses, the first of which alleges that the sum for which said not wms given was loaned by the respondent to the said T. M. Alvord; that the appellant was a surety only, and that after the execution of said note by appellant the same was altered without the knowledge or consent of the appellant, by the addition thereto of the signature of one E. H. Alvord as an apparent principal. The second, third, fourth, fifth, sixth and — 232 — seventh defenses all assert that after the maturity of the note the same was, for a sufficient consideration, extended from time to time as set out in said several defenses, and that each of said extensions was had without the knowledge or consent of the appellant. The eighth defense was an attempt to set out an agreement to extend, but it lacks definiteness and the lower court sustained a demurrer thereto. From an examination we are satisfied the demurrer was rightly sustained. Stickler v. Giles, 9 Wash. 147 (37 Pac. 293). The ninth defense in substance alleged that in June, 1891, at a time when said note was due, T. M. Alvord had on deposit with the respondent the sum of $3,000, which money had been borrowed by him from the respondent and had been placed to his general deposit account. This defense proceeds upon the assumption that it was the duty of the respondent to have credited the amount of said deposit upon said past due note, and that its failure to do so operated as a defense pro tanto. A demurrer to the several defenses having been overruled, excepting only as to the eighth (as herein-before noticed), the respondent replied denying each and all of the allegations contained in the several defenses, and the cause having proceeded to trial, the court, at the conclusion of the testimony, over the objection of the appellant, withdrew from the jury the second, third, fourth, fifth,, sixth, seventh- and ninth defenses, instructing the jury to disregard' the same in arriving at their verdict, and submitted the cause to them upon the issue raised by the first defense only, viz., as to whether there had been an alteration of the note subsequent to its execution by the appellant. Upon the issue thus submitted the jury returned a verdict for the respondent, upon which the court, — 233 — having denied appellant’s motion for a- new trial, entered its judgment, and the cause comes here on appeal. It is contended in this court by the learned counsel for the respondent that the judgment was right in any event inasmuch as the note in question is signed by the appellant as an apparent maker, and it is urged that it is not competent for him to show that he executed the same in the capacity of a surety. So much has been said by courts and text-writers upon the proposition which is here urged that we deem it unprofitable to enter upon a discussion of the subject, and are content to announce that in our opinion the great weight of authority upon the question is against the contention of respondent, and that the trend of modern authority is against it. Nor 'do we think that it can he regarded as an open question in this state, and the right of one of two or more makers of a joint and several negotiable note to show by parol evidence that he was in fact a surety, and that that fact was known to the payee of the note when the same was taken, has been frequently recognized by this court. Binnian v. Jennings, 14 Wash. 677 (45 Pac. 302); Warburton v. Ralph, 9 Wash. 537 (38 Pac. 140); Culbertson v. Wilcox, 11 Wash. 522 (39 Pac. 954); First National Bank v. Harris, 7 Wash. 139 (34 Pac. 466). Probably a different rule exists where one who is in reality a surety expressly declares in his contract that he is a principal or adds the word “ principal” to his signature. Proceeding to a consideration of the questions relied upon by the appellant for a reversal, aside from the error predicated upon the ruling of the court sustaining a demurrer to the eighth defense already — 234 — noticed, we-think that the action of the court in withdrawing from the consideration of the jury the so-called defenses numbered 2, 3, 4, 5, 6 and 7, involves but a single question, and that it is not necessary to consider said defenses separately. The testimony introduced upon the trial relating to these defenses showed that the entire sum represented by said note, viz., $10,000, was a loan of money to the said T. M. Alvord, and that the appellant Jeffs never received any part thereof; also that the respondent had full knowledge of that fact at the time when said loan was made and at all times thereafter. It further appears that on July 30, 1892, said Alvord gave respondent his check drawn upon the respondent bank against the account of said Alvord in said hank for the full amount of interest on the note in suit for the month of July, 1892. Said check was accepted by the respondent and charged to the account of Alvord on that day, and an endorsement thereupon made on the back of said note as follows: “ Int. paid to the 31 July, ’92.” That on March 30, 1893, a similar check was given in payment of interest for the month of March, and a like endorsement was made by respondent upon the note; that on April 29,1893, said Alvord by a similar check paid the interest on said note for the full month of April, and that the respondent upon said 29th day of April made an endorsement upon said note to the effect that the interest had been paid for that month. On May 24,1893, Alvord gave to the respondent his check dated on the 20th day of May, 1893, for the amount of interest upon said note in full for said month of May, 1893. Upon the face of said check was contained the statement that it was given in payment of interest for that month. On the same day it was presented to the respondent and by it — 235 — marked paid, and on that day charged to the account of said Alvord, and at the same time an endorsement was made upon said note showing that the interest was paid thereon to May 31, 1893. On the 28th of June, 1893, a similar transaction occurred, viz., respondent received from said Alvord payment of the interest upon said note up to the 30th day of June of that year. Thus it will be seen that the various extensions relied upon were in some instances for a day only, and in none exceeding six days, and appellant’s contention that extensions were made and for definite periods is based wholly upon the acceptance by the respondent in several instances of interest in advance; and these payments 'are relied upon as constituting valid extensions of the time for payment of the principal sum represented by the note. The officials of the bank testified that when these interest payments were made nothing was said about the payment of or extension of the time for the payment of the principal. The respondent insists that the payment of interest in advance is not a sufficient consideration to support an agreement to extend the time, but the contrary has been held by this court in the very late case of Binnian v. Jennings, supra. After an examination of all of the authorities cited upon the main proposition we think the proposition is fully supported that where a creditor, without inadvertence or mistake, receives a payment of interest in advance on the note of a debtor, and does not expressly reserve the right to sue before the expiration of the period for which interest is taken, there is a contract created to extend the time of payment during the period for which the interest is paid. Woodburn v. Carter, 50 Ind. 376; Crosby v. Wyatt, 10 N. H. 318; Peoples’ Bank v. Pearsons, 30 Vt. 711; Hamilton v. — 236 — Winterrowd, 43 Ind. 393; Starret v. Buckhalter, 86 Ind. 439: New Hampshire Savings Bank v. Ela, 11 N. H. 335; Uniontown Bank v. Mackey, 140 U. S. 220 (11 Sup. Ct. 844); Wakefield Bank v. Truesdell, 55 Barb. 602; Kerns v. Ryan, 26 Ill. App. 177; Union Bank v. McClung, 9 Humph. 97; Scott v. Scruggs, 60 Fed. 721. In the case of Preston v. Henning, 6 Bush, 556, the court say upon this question: “ But it is argued for the appellees that although the acceptance of payments so made may have authorized an expectation that indulgence would be given, as no express contract to forbear is proved, none should be. inferred. We are of a different opinion. The prepayments of interest being made as the price of indulgence, and received by the appellees with knowledge of that fact, and without notice to the payer that the forbearance thus paid for would not be given, they were bound by an implied promise to forbear to sue until the expiration of the time for which the interest was paid.” In 2 Brandt on Suretyship, §352, that learned author says: The decided-weight of authority, and it seems the better reason, is that the payment in advance of interest on the debt by the principal to the creditor is of itself without more sufficient prima facie evidence of an agreement to extend the time of payment for the period for which the interest is paid, and works the discharge of the surety.” Of course upon principle the extention of the time of payment for six days, or for a day only, would operate to release the surety as fully and effectually as if made for a year. Brandt, Suretyship, §344; Kerns v. Ryan, supra; Winne v. Colorado Springs Co., 3 Colo. 155; Ducker v. Rapp, 67 N. Y. 464; Berry v. Pullen, 69 Me. 101 (31 Am. Rep. 248). Our conclusion therefore is that the court erred in — 237 — withdrawing' said defenses from the consideration of the jury. The remaining question relates to the partial defense urged by the appellant, and is designated “ affirmative defense No. 9.” We do not think that it was the duty of the respondent to have applied the $3,000 which was on deposit in its bank, to the credit of the said T. M. Alvord, in part payment of the note in question. This deposit was the result of a temporary lo§n made by the respondent to the said Alvord and by him subsequently checked out. We think there is no authority that would sustain the contention of the appellant in this behalf. Voss v. German American Bank, 83 Ill. 599. For the error above noticed the judgment will be reversed and the cause remanded. Anders and Dunbar, JJ., concur.