Maxwell v. Holmesville Mill & Power Co.

SANBORN, Circuit Judge. This is an appeal from an order allowing the claim of $69.72, the balance of an account for 69,725 kilowatt hours of electric current furnished by the Holmesville Mill & Power Company to Henry E. Maxwell, receiver in bankruptcy of the estate of the Iowa-Nebraska. Public Service Company, during the month of October, 1913. The parties agreed that the current was furnished and that the reasonable value of this current was 1.1 cent's per hour. Maxwell claims that the current was furnished and re [685] ceived under a written contract which fixed its price at 1 cent per kilowatt hour, and it is conceded that he has paid that amount. The Power Company insists that the contract under which Maxwell claims had been forfeited and was not in force when the current was furnished, so that it was entitled to recover the reasonable value of the current, which is conceded to have been $69.72 more than the price fixed in the contract. The real question, therefore, is whether or not the contract was in force in October, 1913. It was made in July, 1910, between the Power Company and the Electric Service Company, a corporation, and it provided that it should continue in force until November 1, 1915, that it should be binding upon the parties to it, their successors and assigns, that the Electric Company should remain liable for the payment of the amounts therein agreed to be paid, notwithstanding any sale or assignment thereof by it, and that in case the Electric Company should become three months in arrears in the payments of the amounts due thereunder the contract might be terminated at the option of the Power Company. On February 19, 1913, the Power Company served a notice upon the Electric Service Company and upon the Iowa-Nebraska Public Service Company to the effect that it canceled the contract because its charges for electric current furnished in June and July, 1911, and in December, 1912, and January, 1913, were unpaid. [1] As delinquency in payment for the current for 3 months was indispensable to the right of the Power Company to terminate the contract, if there was no delinquency on its part in the payment for the current furnished in June and July, 1911, the attempted termination of the contract was ineffectual. Hence the receiver insists that there was no delinquency in payment for the current furnished during these 2 months. The facts determinative of this claim are that the Power Company on August 17, 1911, accepted for the current furnished by the Electric Service Company in June and July, 1911, the promissory note of the Bullock Public Service Company, a corporation, for $1,-231.97, that the articles of incorporation of the Bullock Public Service Company were amended so as to change its name to the Iowa-Nebraska Public Service Company, that on October 20, 1911, that company first became the owner of the physical properties of the Electric Company and of its contract with the Power Company, that this note was taken up by another note for $1,479.10 on March 7, 1912, that on December 14, 1912, the note for $1,479.10 became due and was taken up by the execution and delivery to the Power Company of two promissory notes made by the Iowa-Nebraska Public Service Company dated December 14, 1912, one for $579.10 and the other for $900, each payable 60 days after their date. The Electric Company was not a party to any of these notes. The Power Company accepted them, discounted them at its bank from time to time, and used the proceeds of the discounts. On February 19, 1913, when the notice of termination of the contract was served the two last notes were due and unpaid, and the bills for the electric current furnished in December, 1912, and. January, 1913, also remained unpaid. It is specified as error that the court below held that the acceptance by the Power Company for the current furnished in June and July, [686] 1911, of the promissory note of the Bullock Public Service Company and the promissory notes of the Iowa-Nebraska Public Service Company did not constitute a payment of the indebtedness of tire Electric Service Company for that current. Counsel insist upon argument that the acceptance of a negotiable note of a third party on account of a debt- or’s liability raises the presumption of a payment of that liability, and they call attention to the fact that there is no evidence in this case whether these promissory notes were accepted in payment of the indebtedness of the Electric Service Company or merely as evidence of security for the indebtedness. But an examination of the decisions has satisfied that the weight of authority is that the taking by a creditor of the negotiable note of a third party for an antecedent debt does not extinguish the debt unless there is an express or an implied agreement that the negotiable note is received as payment. Peter v. Beverly, 35 U. S. 532, 567, 9 L. Ed. 522; Randolph on Commercial Paper, § 1534; Bankers’ Trust Co. v. T. A. Gillespie Co., 181 Fed. 448, 456, 457, 104 C. C. A. 196. As the notes had not been paid when the notice was given, and as the bills for the current for the months of December, 1912, and January, 1913, had not been paid, the Service Companies were in arrears more than 3 months, and the Power Company had the option to terminate the contract when it gave its notice. [2, 3] The next contention of counsel for the appellant is that the contract was not terminated by the notice, because demand for payment and a reasonable time thereafter had not been given, but the evidence satisfies that this contention cannot be sustained upon the record; second, that the termination of the contract could not be affected because the current was not shut off by the Power Company and a refusal to furnish it made before the notice was given, but no reason is perceived to sustain this contention; third, that the notice is directed to the Electric Service Company, not to the Iowa-Nebraska Public Service Company, which at the time and for a year prior thereto had been operating the electric light plant at Beatrice, and had succeeded to the rights of the Electric Service Company, but the notice was served upop the president and general manager of the latter company, who was the same man as the president and general manager of the former company, and it was, in our opinion, sufficient to give the Iowa-Nebraska Public Service Company full notice of its effect; and, fourth, that it was not a bona fide notice, and was never intended to operate as such, because Mr. Bullock, the president and general manager of the Service Company, testified that, when Mr. Steinmeyer served it upon him, he told him that if he was successful in some contest he had with some stockholders of his companies he need pay no attention to the notice, but Mr. Steinmeyer denied this statement, and the' court below was not convinced that such a statement was ever made. The notice was sufficient and effective. Finally it is said that the forfeiture and cancellation of the contract has been waived time and again. The testimony upon this subject is voluminous. It details the actions of the various parties while the electric current has been furnished to the Electric Service Company, to the Iowa-Nebraska Public Service Company, to certain creditors of the Iowa-Nebraska Public Service Company under the contract be [687] tween them and the Power Company, and to the receiver in bankruptcy of the Iowa-Nebraska Public Service Company. Suffice it to say that all the testimony upon this subject atid all the briefs concerning it have been carefully read and considered, but they have failed to convince that the court below was in error in its conclusion that no waiver had ever been made. Let the order of the court below, allowing the claim of the Power Company for the sum of $69.72 as an unsecured claim, be affirmed.