E. H. Taylor, Jr., & Sons, Inc. v. First Nat. Bank of Aurora

WARRINGTON, Circuit Judge (after stating the facts as above). [1] Examination of the statement will show that this case finally [901] presents but two questions: The first is one of voluntary payment; the second, waiver of alleged defenses. These questions concern the two promissory notes each for $6,560, which were given by the defendant to the Cooperage Company, September 7, 1910, to cover the price of 4,000 whisky barrels that the Cooperage Company then contracted to manufacture and subsequently deliver to the defendant. The Cooperage Company was adjudged bankrupt in the following November, and so failed to manufacture and deliver these barrels. Of these two notes, the one falling due in three months was paid by defendant at maturity, December 7, 1910, and this payment is. made the basis of the set-off and counterclaim alleged and alone relied on to escape recovery of the balance admittedly owing on the note sued on in the plaintiff’s first cause of action. It will be observed that this payment was made after the bankruptcy of the Cooperage Company, and it is neither alleged nor claimed that defendant was ignorant of that fact. True, defendant alleges that prior to the payment plaintiff had advised it that the barrels had been stored fpr defendant at Aurora, but this is distinctly denied in the reply. True, also, defendant alleged the existence of an agreement between the Cooperage Company and the plaintiff and defendant, in effect that such notes as these, including these particular notes, were temporary instruments, given for the accommodation of the Cooperage Company, and were not to be presented for payment until the barrels to which they related were either manufactured and stored at Aurora for defendant’s account, or were delivered to it; but this, too, was met by express denial. In short, nothing was alleged that tended to excuse payment of this note at maturity that was not specifically denied; and yet defendant declined to offer evidence in support of any of its allegations, and so must be treated the same as if it had not made them. Further it was agreed in open court that the plaintiff’s evidence showed transfer of the notes to and ownership thereof ip the plaintiff. We are mindful of the omission of plaintiff to deny defendant’s allegation that these notes were assigned to the plaintiff in Aurora, Ind., and also of the reliance of defendant upon a statute of Indiana (Burns’ Revision of 1908, §§ 9071, 9072, 9073), which, it is in substance claimed, denied to plaintiff any better title to or right under the notes than the Cooperage Company had; but, if it were assumed that a good defense might thus have been available, it is hard to see how defendant could both pay the note and claim the benefit of the defense. [2] Although defendant was a corporation of Kentucky, located at Frankfort, and of course under the general rule could not be presumed to know the law of another state (see, for example, Haven v. Foster, 9 Pick. [Mass.] 112, 129, 19 Am. Dec. 353), yet, concededly, it had for years been doing business with both the Cooperage Company and. the plaintiff in Aurora, and so was bound, we think, to take notice of the laws of Indiana (Hill v. Spear, 50 N. H. 253, 261, 9 Am. Rep. 205); and, moreover, in view of such business relations, and of the well-known rule requiring a defendant to set up all the defenses it has, it is to be presumed that if defendant had not in fact [902] known of the existence of the Indiana statute at the time it paid the note, it would have so alleged; this was not done, nor is it even suggested that a mistake of fact concerning knowledge either of the existence or the meaning of this statute was made (Norton v. Marden, 15 Me. 45, 46, 32 Am. Dec. 132). As it seems to us, then, this portion of the case presents all the essential characteristics of a voluntary payment. As Mr. Justice Bradley said in Lamborn v. County Commissioners, 97 U. S. 181, 185 (24 L. Ed. 926): “A voluntary payment, made with a full knowledge of all the facts and circumstances of the case, though made under a mistaken view óf the law, cannot be revoked, and the money so paid cannot he recovered back.” See, also, Utermehle v. Norment, 197 U. S. 40, 56, 25 Sup. Ct. 291, 49 L. Ed. 655, 3 Ann. Cas. 520; Brisbane v. Dacres, 5 Taunt. 143, 151; Elliott on Contracts, § 1381, and, citations. [3] We come next to the .second of these notes. This note has not been paid, and recovery upon it is sought. Bearing in mind what has thus far been said 'respecting the allegations of the answer and the denials of the reply, there would remain against the second note the defense that the barrels have not been delivered. However, it is further set up in the reply that upon defendant’s requests, and its promises to pay at later specified times, plaintiff granted it two extensions of time respecting the payment of this note. The note as delivered was to mature January 7, 1911; and the first request was made and granted December 13, 1910, according to a written memorandum executed on that date, until February 20, 1911. February 17, 1911, the second request was made and granted, until March 2, 1911. The paragraph of the reply containing these allegations was met by a rejoinder admitting the execution of the memorandum of December 13, 1910, but alleging that defendant was induced to sign the same through representations of plaintiff’s president and attorneys, which appear in the statement. We may lay the. first extension and these alleged representations to one side, for (apart from the rule that would ordinarily exclude contemporaneous oral statements), the rejoinder contains neither denial nor allegation concerning the second extension; indeed, the request, promise, and extension, so alleged in the reply, were admitted by the defendant, as well by its motion to strike out the paragraph as by its demurrer thereto. The motion and demurrer were alike overruled; and here again is seen the effect of defendant’s refusal to offer evidence. Under the pleadings it must be presumed that defendant was at this time familiar with all the material facts; if it could waive its defenses, it plainly did so here. 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. Mr. Justice Matthews had occasion to state the rulé, and .the reasons for it, in Fitzpatrick v. Flannagan, 106 U. S. 648, 660, 1 Sup. Ct. 369, 379 (27 L. Ed. 211): “A subsequent promise, with full knowledge of the facts, is certainly equivalent to an original promise made under similar circumstances; and no one, [903] acting with full knowledge, can justly say that he has been deceived by false representations. ‘Volenti non fit injuria.’ ” See Kingman & Co. v. Stoddard, 85 Fed. 740, 746, 749, 29 C. C. A. 413 (C. C. A. 7th Cir.); Doherty v. Bell, 55 Ind. 205, 208; Brown v. First National Bank of Indianapolis, 115 Ind. 572, 578, 579, 18 N. E. 56; Tuttle v. Stovall, 134 Ga. 323, 330, 331, 67 S. E. 806, 20 Ann. Cas. 168. The principle of these cases is analogous to that which is usually applied to the giving of renewal notes with full knowledge of the facts. Griffith v., Trabue, 11 Heisk. (Tenn.) 645, 650; Odbert v. Marquet (C. C.) 163 Fed. 892, 899, s. c. affirmed 175 Fed. 44, 99 C. C. A. 60 (C. C. A. 4th Cir.); Hogan v. Brown & Co., 112 Ga. 662, 37 S. E. 880; Franklin Phos. Co. v. Inter. Harvester Co., 62 Fla. 185, 190, 57 South. 206, Ann. Cas. 1913C, 1247; 1 Daniel, Neg. Inst. (6th Ed.) p. 302, and citations. Thus, unless we misinterpret the pleadings, Judge Cochran was right in directing a verdict for the plaintiff. The notes are dated at Frankfort, Ky., are negotiable in form, and payable at a bank in Frankfort. They were offered in evidence, and, since they were.admittedly transferred to and owned by the plaintiff, a prima facie case was made; this but emphasized the defensive character of the issues tendered by defendant and the need of supporting them by evidence. The judgment is accordingly affirmed, with costs.