Farmers & Merchants State Bank v. Lloyd

SHEPARD, Chief Justice. This is an appeal from an order of summary judgment entered in favor of plaintiff-respondent Farmers and Merchants State Bank in an action to collect upon a promissory note against defendant-appellant G. K. Lloyd, also known as Gary K. Lloyd. We affirm. The following facts are established and unquestioned. On various occasions since November 6, 1972, Lloyd has borrowed sums of money from the bank. Those transactions were evidenced by promissory notes. On November 20, 1974, Lloyd was indebted to the bank for the sum of $9,271.92. At that time he executed a promissory note in that amount in consideration for an extension on the due date on the previous monies loaned by the bank and the interest due thereon. The new note was due on or before May 20, 1975. No portion thereof has been paid and the face amount of that note, interest and attorney’s [418] fees have been due and owing the bank since May 20, 1975. The sole defense asserted by Lloyd is that the last note, dated November 20,1974, was delivered to the bank upon certain “conditions” and that those conditions have not been met. Those conditions were: first, that the bank deliver a truth-in-lending statement; second, that the bank provide a record of Lloyd’s previous transactions with the bank; and finally, that the bank deliver the notes previously executed by Lloyd. The trial court correctly held that neither the truth-in-lending portion of the Consumer Credit Protection Act, 15 U.S.C. §§ 1631-1643 (1970) (now 15 U.S.C. §§ 1631-1643 (1976)), nor the Uniform Consumer Credit Code, I.C. § 28-33-101, provide that failure to receive a truth-in-lending statement is a defense to an action to collect on a note. Attached to plaintiff bank’s affidavit in support of its motion for summary judgment is a copy of a loan ledger indicating transactions between Lloyd and the bank dating from November 6, 1972. Lloyd does not by affidavit or otherwise complain this is insufficient to satisfy his asserted need to know of previous transactions between him and the bank. The Uniform Commercial Code of this state, at I.C. § 28-3-605, provides that the holder of an instrument may discharge the maker “(b) by renouncing his rights by a writing signed and delivered or by surrender of the instrument to the party to be discharged.” (Emphasis supplied.) It is further provided, at I.C. § 28-3-302(l)(c), that a bona fide purchaser for value of a negotiable instrument must have taken the instrument prior to its date of maturity, otherwise all defenses remain available to an obligor. The previous notes were overdue on May 20, 1975, and obviously no later holder could successfully assert the status of a bona fide purchaser for value, but would only hold subject to the defense of cancellation available to Lloyd. The affidavit of the bank stated that all prior notes had been canceled and that the defendant was not indebted to the bank on any prior notes. Under the statute, we hold such is an effective renunciation of the rights of the bank and an effective defense in Lloyd to any later action on the prior notes. Since no detriment to Lloyd does nor will exist by reason of nonsurrender of the prior notes and the bank has and can gain no profit thereby, the surrender of the prior notes, if a condition at all, is an immaterial condition to collection on the later note. We recognize the existence of pre-U.C.C. cases which, under some circumstances, reach a contrary result. Such cases usually are based on circumstances involving multiple obligors or intervening rights of holders which are not the original obligees. See Abrams v. American Security & Trust Co., 72 App.D.C. 79, 111 F.2d 520, 129 A.L.R. 368 (1940); First Natl. Bank v. Mathey, 308 Mass. 108, 31 N.E.2d 25 (1941); Ann Arbor Contr. Co. v. Glime Constr. Co., 369 Mich. 669, 120 N.W.2d 747 (1963); Phenix Natl. Bank v. Raia, 68 R.I. 348, 28 A.2d 20, 141 A.L.R. 1474 (1942). The orders of the district court are affirmed. Costs to respondent. DONALDSON, J., and DUNLAP, J. Pro Tern., concur.