Murphey v. Citizens Sav. Bank

Opinion of the court by JUDGE BURNAM Affirming. This action was instituted by appellee in the Daviess Circuit Court against TV. B. Rudd,‘agent, as acceptor and drawer, and John Murphey, as indorser, of an inland bill of exchange for $2,500, dated May 11, 1895, and due thirty days after date. The suit having been filed the 10th of January, 1896, the defendant Murphey filed an answer and several amended answers, in which he relied upon a number of separate and distinct defenses; all of which, however, seem to have been abandoned 'except one. He says that he was only the accommodation indorser of his co-defendant, Rudd; that the bill sued on was the final re [228] newal of a bill for the same amount, dated on the ,29th of September, 1892, payable four months after date, which was renewed from time to time until the bill in suit was finally executed, and that one of the renewals of the original bill was dated June 19, 1893, and due and payable on September 20,1893; that at the maturity of this particular bill no demand for payment was made upon him, nor was it protested for non-payment, and that he had not waived protest thereon; that he signed the renewal for this bill in ignorance of the fact that he had been released from liability thereon by such failure to protest; and that appellee subsequently failed to protest several renewals of the same bill; and that in ignorance of this fact, and believing that all legal steps necessary to hold him liable as indorser had b'een taken, he signed the subsequent renewals; and that at the date of thbse renewals the principal had become insolvent; and that he would not have indorsed the renewal bills if he had known of the failure of appellee to protest the preceding bills, and his release by reason thereof; and that the bank officers knew that he was in ignorance of these facts, and fraudulently failed to communicate them to him; and accepted the bills with his' indorsement with full knowledge of such facts.; and that by reason of the failure of appellee to protest and take other legal steps necessary to hold him liable upon the maturity of the bill September 10, 1893, and several other renewals thereof, he had been released from all liability .by reason of his indorsement, and there was no consideration for the execution of the obligation sued on. To support this contention appellant refers us to the case of Ray v. Bank, 3 B. Mon., 513, in which it was held that whenever there was a clear afid palpable mistake of fact or law, or after money had been paid without consideration, it should be recover [229] ed back, and that the payment of a bill of exchange by an indorser who had been legally exonerated therefrom in ignorance of such exoneration, came within the rule; to the case of Bank v. Leathers, 10 B. Mon., 64, in which it was held that an indorser who had been released by laches of the holder of a bill of exchange was not bound by a subsequent verbal promise made in ignorance of his release; and to the case of Russell v. Rice, 19 R., 1613; 44 S. W., 110, in which it was held that a married woman, not being liable upon a note executed byher during coverture, was not bound by a renewal of the obligation after the entry of a judgment giving her the rights of a feme sole. In none of these cases was the liability of- an indorser upon an inland bill of exchange executed in renewal of a previous bill, which had been discounted and accepted in payment of the preceding obligation, considered; and it seems to us that this liability rests upon an entirely different principle of law. It is a welLsettled principle of law that the surrender of one negotiable instrument in consideration of receiving another in lieu of it is a sufficient consideration to support the new bill or note. In the early case of Grey v. Bank, 12 Ky., 378, the bank instituted a suit upon a piece of paper, which stood upon the footing of a bill of exchange. The defense pleaded that the note was executed without good or valuable consideration. A demurrer was sustained to the plea, and the court said, viz.: “The only question material to be noticed is whether the want of consideration for the execution of the note is admissible as a defense to the action or not. This question obviously depends upon the character of the note. If it is to be treated as a mere common-law instrument, the want of consideralion is clearly a'good defense; but, on the contrary, if it is fo be considered as being placed upon the footing of a bill [230] of exchange, then it is clear that the want of consideration can not be alleged in bar of action. For although, in an action upon a bill of exchange by one party against another from whom he receive® it (as by the payee against the drawer -or by the indorser against his immediate indorser), the want of consideration, is a sufficient defense, yet it is well settled, as a general rule, that, where there exists any privity to the suit (as where the action is brought by the indorser against the drawer, or the payee against the indorser), the want of consideration is inadmissible as a defense-.” In the case of Buckner v. Clark’s Ex’r, 69 Ky., 168, it was held that a surety is liable on a note given in the place of a previous note, on which he -was surety, but on which he was released by -the lapse of time. In that case the court said: “The question is not as to the consideration or benefit received by the security, for it is rare that he receives any; but wha.t was the consideration as to the creditor, or did lie- part with anything valuable in fact or law,'or what consideration did the principal debtor receive? Here the creditor merged his right of suit on the- old note both with his principal and security, and also gave additional time during which his right of action against both wasi also suspended.” While- the drawer or indorser of a domestic or inland bill of exchange is entitled to notice of its non-payment, no protest thereof is required by law. See Whiting v. Walker, 2 B. Mon., 262; Bank v. Leathers, 10 B. Mon., 65; Bank v. Hays, 96 Ky., 365, (29 S. W., 20). That appellant had notice of the non-payment of the dishonored renewals, which he relies on to release him from liability on the obligation sued on, is abundantly shown by the fact that he indorsed the new bills which were executed to take them up. If he intended to raise any question of negligence on the part of ap [231] pellee in not giving him notice of the default in their payment, the time to have done so was before he signed the netv bills. He resided in the same town with the principal and with appellee, and by very slight care on his part he could have been fully informed of all of the facts upon which he now relies to escape liability. By the execution of the new bills, and their acceptance by the bank, his principal was granted protracted indulgence. It seems to us that this is» an ordinary case of the borrowing and lending of money, and appellant can not escape liability upon obligations voluntarily executed by him upon the ground that no protest or notice wa,s given to him of previous default in the payment of the obligations executed in renewal of the original paper. Judgment affirmed. Petition for rehearing by appellant overruled. (See p. 930.)