Babin Zill Sash Door Co. v. Lyons

The parties hold in this court the same relative positions held in the common pleas court.

Plaintiff filed a cross-petition alleging that the defendants, Jacob Lyons and Reba Lyons, for a valuable consideration, sold to plaintiff a certain promissory note, bearing the indorsement of the defendants, and a mortgage to secure the same. The petition seeks to hold the defendants as indorsers of the promissory note before maturity, and it further alleges that the note was unpaid at maturity, and that the defendants were given due notice of the default.

In the defendants' answer there is set up the specific defense that no notice of default and nonpayment was ever given to them as indorsers.

The sole issue presented to the court dealt with the question of notice of default and nonpayment. The court rendered judgment in favor of the defendants on the ground that no notice of dishonor and nonpayment was ever given.

It appears from the meager record presented by the bill of exceptions that after maturity the defendants affixed their signatures as indorsers to this promissory note, which named them as payees. It further appears that at the time the witness, a member of the plaintiff company, secured the indorsement, the defendant Jacob Lyons told of the various plans he had in contemplation either to sell or refinance the property and to pay the cross-petitioning company.

We are referred to Section 8154, General Code, which reads as follows: "When the holder of an instrument payable to his order transfers it for value without endorsing it, the transfer vests in the transferee such title as the transferer had therein and the transferee acquires in addition the right to have the indorsement of the transferer. But for the purpose of determining whether the transferee is a holder in due course, the negotiation takes effect as of the time when the indorsement is actually made." Prior to the enactment of this section it was held that a note transferred without indorsement is subject to all the equities existing between the maker and the payee at the time of service of notice of the transfer to the maker. Kyle v.Thompson's Admr., 11 Ohio St. 616; Combes v. Chandler, 33 Ohio St. 178.

Were it not for the wording of the section as it now appears, where a transferee receives a negotiable instrument without an indorsement by the transferer, no personal liability as indorser would attach to the transferer. The transaction would constitute a mere assignment of whatever right and interest the transferer had, and no more. By force of this section he becomes in law an indorser, even though he does not attach to the instrument his formal indorsement.

At the time defendants delivered this note to the plaintiff, in which they were named as payees, they transferred it for a valuable consideration, and they became by force of law indorsers to all intents and purposes, just as if they had attached their names as indorsers on the back of the instrument. As such indorsers they would be entitled to notice of dishonor and nonpayment unless the same had been waived: "Presentment for payment is dispensed with * * * by waiver of presentment, express or implied." Section 8187, General Code.

"Notice of dishonor may be waived either before the time of giving notice has arrived or after the omission to give due notice. The waiver may be express or implied." Section 8214, General Code.

In 2 Joyce's Defenses to Commercial Paper (2d Ed.), Section 826, we find the following: "Notice of dishonor may be waived, either before the time of giving notice has arrived, or after the omission to give due notice, and the waiver may be expressed or implied; waiver may be implied by words or conduct of the endorser which induce the holder to believe that waiver is intended."

In support of this statement of the law, we cite the following decisions:

One who admits liability after maturity of the instrument and after failure to give notice and who suggests a plan of settlement is held to have waived the defense of failure to give notice. Mechanics' Farmers' Sav. Bank v. Katterjohn, 137 Ky. 437, 125 S.W. 1071, Ann. Cas., 1912A, 439.

A new promise of the indorser, with knowledge that notice of dishonor had not been given, constitutes a waiver by him of failure to give notice of dishonor. Hurlburt v. Bradley, 94 Conn. 495, 109 A. 171.

So, when an indorser, after the expiration of the time of giving notice of dishonor, makes a declaration of his intention to pay the note, he thereby waives notice of dishonor, whether or not he knew of his discharge. Doherty v. First Nat. Bank ofLouisville, 170 Ky. 810, 186 S.W. 937.

We are of the opinion that the act of the defendants in attaching their signatures on the back of the promissory note after maturity made them indorsers to all intents and purposes. When they signed the instrument as indorsers after maturity, with knowledge that the note had already matured, and that no notice of dishonor and nonpayment was ever given them, they waived thereby the requirement of notice.

We are further of the opinion that, while the allegations of the petition are to the effect that the defendants were given due notice of default and nonpayment, those allegations may be supported by evidence that there was a waiver of notice.

The evidence which tends to show a waiver of notice was introduced without objection, and in our opinion it supports the allegations of the petition. We may add, aside from the provisions of the General Code, that the act of the transferers in attaching their names as indorsers to the back of the note after maturity of the same may be regarded as in the nature of a new promise. They saw fit not to stand on their technical defense, and to acknowledge their obligation, and they may therefore be held to the performance of said obligation.

Holding as we do, the judgment of the common pleas court will be reversed, and the case remanded for further proceedings according to law.

Judgment reversed and cause remanded.

VICKERY, P.J., and CLINE, J., concur.