Keefer v. Valentine

It is conceded that the Mary Grace Oil Gas Association, Limited, was a copartnership. Its membership was large, and its business appears to have been conducted by 1. CONTRIBU- officers and a board of directors, after the TION: joint manner of a corporation. On April 27, 1920, the indorsers of partnership borrowed $5,000 of M.F. Diehl, to be note: used in its business. It executed a note payment therefor, payable to Diehl, due on or before six before months from date. The note was signed in the maturity: name of the partnership, by the appellant effect. Keefer, as president, and Walter I. Zink, as secretary and treasurer, and indorsed on the back, before its delivery to the payee, by R.S. Grossman, W.S. Montgomery, and the appellee, Valentine. All of these parties were members of the partnership. Certain payments of interest and principal were made, and indorsed on the note. The following further indorsements appear thereon:

"Balance to fall due on or before 6 mo. from date of payment of 500 Jan. 27, 1921."

"Time extended to on or before March 1, 1922."

The appellant, Keefer, conceded his liability as an indorser of the note, and we do not understand this to be questioned by appellee. The appellant and Grossman and Montgomery paid the balance due on the note to the payee, Diehl, on December 20, 1921. Thereafter, but before the maturity of the note according to the last extension of time, the appellant, for himself and as assignee of Grossman and Montgomery, brought this action against the appellee for contribution. At the close of the evidence for plaintiff, the court, on motion of the defendant, directed a verdict for the defendant. The motion was upon the grounds: (1) That the note was not due at the time the suit was commenced, and the action was premature; (2) that the defendant, as an indorser, had been released by the extension, without his consent, of the time of maturity of the note; (3) that it was sought to hold him as a partner, and there had been no settlement of the partnership affairs; (4) that it appeared from the evidence that Zink was also liable, and there was no effort to hold him.

This is not an action on the note, but is a demand, by indorsers who have paid the note, upon a co-indorser for contribution. There is no question of the order of the indorsements; they were all made before the delivery of the note to the payee, and were for the accommodation of the maker of the note, the Mary Grace Oil Gas Association, Limited. Section 3060-a64, Code Supplement, 1913 (Section 9524, Code of 1924). It cannot be doubted that, under such circumstances, where one indorser pays the note, a right to contribution from a co-indorser arises by legal implication from the fact of cosuretyship and the payment by one co-indorser of the whole debt. Novak v. Dupont, 112 Iowa 334; Flickinger v. Price,165 Iowa 570.

We turn to a consideration of the propositions advanced by appellee in his motion for a directed verdict.

I. Assuming the extension of time to be binding, it may be conceded that the action was prematurely brought, in that it was commenced before the note was due under the last 2. CONTRIBU- extension. Yates v. Donaldson, 5 Md. TION: 389 (61 Am. Dec. 283); Dedman v. premature Williams, 2 Ill. (Scam.) 154. The payment actions: of the note, while it created the liability, did when not hasten the day of payment for the co-surety, immaterial. as that was expressed in the contract of the parties. Truss v. Miller, 116 Ala. 494 (22 So. 863). But the payment of the note before it was due was not fatal to the appellant's right to recover. The mere fact that the payment of the note by appellant and his assignors was before its maturity, did not bar his right to contribution. 13 Corpus Juris 824; Craig v. Craig, 5 Rawle (Pa.) 91. In Dennison v. Soper, 33 Iowa 183, suit was brought by a surety against the principal, not only before maturity of the note, but before its payment by the surety. The decision was put upon the ground that "a surety has no right of action against his principal, in respect to the debt for which he is surety, until he has paid such debt for his principal." But see Gribben v. Clement, 141 Iowa 144. No plea in abatement was filed. The appellant and his assignors, while they paid the note before it was due, had paid it before suit 3. PLEADING: was brought. Nothing but time was wanting to fix premature the appellee's liability, and that had elapsed, actions: the note had matured under the last extension, refiling of before the cause was tried. No prejudice petition. resulted from the premature bringing of the suit. It is true, no supplemental petition was filed after the maturity of the note. Little v. Pottawattamie County, 127 Iowa 376. Nor do we think it was necessary, in this case. The note and the various extensions of time were set up in the petition. It thus appeared that the note was due at the time of the trial. All the necessary facts to entitle the appellant to maintain the action at that time were pleaded. A supplemental petition could have done no more than to add the legal conclusion that the right of action was then mature. As sustaining our conclusion on this branch of the case, see Gribben v. Clement, supra; Bohanan v.Bohanan, 150 Iowa 182; Thompson v. Yousling, 196 Iowa 363.

II. It is insisted that the appellee was released by the 4. BILLS AND extension of time of maturity of the note. The NOTES: contention cannot be sustained, for two reasons. liability of In the first place, on the record presented, it indorser: appears that there was no consideration for the extension of extension of the time of payment of the note. time of There was no agreement on the part of either the payment maker — assuming that the indorsers who without procured the extension were acting for the considera- partnership — or the indorsers to keep the tion. money and pay interest upon it for a fixed or specified time. The extension agreements, as indorsed on the note, provided that the note was to fall due "on or before" six months from a stated date, and that the time was extended "to on or before" a given date. The maker still had a right to pay the note at any time.Pagal v. Nickel, 107 Wis. 471 (83 N.W. 767); Lovenberg v. Henry,104 Tex. 550 (140 S.W. 1079). There was no prepayment of principal or interest. Neither maker nor indorsers did or agreed to do anything they were not already bound to do. They suffered no detriment, and the payee received nothing to which he was not already entitled. Van Dusen v. Parley, 40 Iowa 70; Lahn v. Koep,139 Iowa 349; Conkling v. Young, 141 Iowa 676; 8 Corpus Juris 435, 438. A valuable consideration is essential to the validity of an agreement to extend the time of payment of a note. GoodmanMfg. Co. v. Mammoth V. Coal Co., 185 Iowa 253. If there was no binding agreement for the extension of the time of payment, the indorser was not released. Section 3060-a120, Code Supplement, 1913.

But, passing that, and assuming the validity of the extension of time, there was still no ground for a directed verdict for the appellee. The extension of time must have been 5. BILLS AND without the consent of the indorser, to operate NOTES: to relieve him even as against the payee. liability Section 3060-a120, Code Supplement, 1913 of indorser: (Section 9581, Code of 1924). There was evidence consent to from which the jury might have found that extension of appellee assented to the various extensions of time of time. If he did so assent, he was not released payment. from liability, either to the payee on the note or to a co-indorser who paid the note, for contribution. Farmers'and Drovers' Bank v. Bashor, 98 Kan. 729 (160 P. 208).

III. It should require no citation of authorities to support the statement that appellee could not be held in 6. PARTNERSHIP: this proceeding at law, merely as a member of actions the copartnership. While the petition contains between an allegation to that effect, and this was not partners: attacked, the fact that appellee was a member of contribution the partnership affords no basis for a recovery between in this action by one partner as against partners: another. The fact, however, that there had been basis of no settlement of the partnership affairs was not liability. a defense to the action for contribution, based upon the payment of the note by his co-indorsers. His liability here, if any, must be predicated, not upon his partnership relation, but upon the right to contribution in his co-indorsers, arising by implication of law from his relation as a cosurety with them, and the payment by them of the note. So far as the note itself related to partnership affairs, it had been segregated therefrom. Ristine v.Ruml, 197 Iowa 1193; In re Estate of Talbott, 203 N.W. 303.

IV. There was evidence that Zink, whose liability as a co-indorser appears also to be conceded, although his name appears on the face of the note as an alleged 7. CONTRIBU- officer of the partnership, was insolvent. It is TION: extent well settled that one of several joint obligors of right: who pays the debt is entitled to contribution insolvency from the other solvent obligors. His right is to of have contribution. All others who are jointly co-indorser. bound with him and are solvent, — not alone the one who pays, — must bear their proportion of the loss resulting from the insolvency of one of them. Flickinger v. Price, supra;Owens v. Greenlee, 68 Colo. 114 (188 P. 721); 2 Randolph on Commercial Paper (2d Ed.), Section 877.

The only question before us arises on the action of the court below in directing a verdict for the defendant. This, for the reasons pointed out, was clearly erroneous. The judgment is, therefore, reversed, and the cause remanded. — Reversed andremanded.

FAVILLE, C.J., and STEVENS and De GRAFF, JJ., concur.