Richards v. Market Exchange Bank Co.

81 Ohio St. (N.S.) 348
CourtOhio Supreme Court
DecidedJanuary 18, 1910
DocketNo. 11424
StatusPublished

This text of 81 Ohio St. (N.S.) 348 (Richards v. Market Exchange Bank Co.) is published on Counsel Stack Legal Research, covering Ohio Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Richards v. Market Exchange Bank Co., 81 Ohio St. (N.S.) 348 (Ohio 1910).

Opinion

Spear, J.

If the answer tendered stated a defense the n,iotion to file it should have been sustained, and to refuse it was error. If, on the other hand, the pleading failed to state a defense, it was not only within the power of the trial court to refuse to permit it to be filed but it was its duty to so refuse and the judgment should be affirmed. The ultimate cjuestion, therefore, is: Where parties execute a joint- and several promissory note, all signing on the face thereof, one being in fact a surety, and the holder of the note, with knowledge of this fact, at the maturity of the note extends the time of payment for a valuable consideration and without the consent of the surety, is the latter discharged from liability on the note? "It is conceded that upon equitable principles incorporated as part of the common law, and sustained by numerous authoritative decisions of the courts of this state, [354]*354the answer would necessarily be in the affirmative unless the act of April 17, 1902, entitled: “An act to establish a law uniform with the laws of other states on negotiable instruments,” sections 3171 to 3178g, Revised Statutes, requires a different answer. That act establishes the status of parties to negotiable instruments. As to accommodation parties the provision (section 3172a) is: “[Liability of accommodation party.] An accommodation party is one who has signed the instrument as maker, drawer, acceptor, or indorser, without receiving value therefor, and for the purpose of lending his name to some other person. Such a person is liable on the instrument to a holder for value, notwithstanding such holder at the time of taking the instrument knew him to be only an accommodation party.” As to those primarily liable it provides that: “The person primarily liable upon an instrument is the person who by the terms of the instrument is absolutely required to pay the same. All other parties are secondarily liable.” We suppose the law to be too well settled to require citation of authorities in its support, that a surety is an original maker, and becomes primarily liable to any party lawfully holding the paper, his liability to pay being absolute and in no sense ’ dependent upon demand at maturity. To obtain some trust, confidence or credit for another the surety engages to be answerable for him. A surety upon a note undertakes to pay if the principal debtor does not; he is absolutely liable as soon as default is made. Having undertaken to be bound for the debt of another he becomes bound as the principal is hound, and is primarily liable. For further com[355]*355ment respecting the primary liability of a surety see Rouse v. Wooten, 140 N. C., 557. So that, Richards being, according to the averments' of his answer, a surety, he became liable upon the note primarily at its inception. It is to be understood that here, and elsewhere in the opinion, we are dealing with the liability of an accommodation maker who has signed on the face of the note.

By the act under review the discharge of negotiable instruments as to persons primarily liable is provided in section 3175/ as follows:

“Discharge of Negotiable Instruments.
“Sec. 3175/. [Instrument; how discharged.] A negotiable instrument is discharged: 1. By payment in due course by or on behalf of the principal debtor; 2. By payment in due course by the party accommodated, where the instrument is made or accepted for accommodation; 3. By the intentional cancellation thereof by the holder; 4. By any other act which will discharge a simple contract for the payment of money; 5. When the principal debtor becomes the holder of the instrument at or after maturity in his own right.”

The section following makes provision for discharge with respect to persons secondarily liable, viz.:

“Section 3175/e. [When person secondarily liable on, discharged.] A person secondarily liable on the instrument is discharged: 1. By any act which discharges the instrument; 2. By the intentional cancellation of his signature by the holder; 3. By' the discharge of a prior party; 4. By a valid tender of payment made by a prior [356]*356party; 5. By a release of the principal debtor, unless the holder’s right of recourse against the party secondarily liable is expressly reserved; 6. By any agreement binding upon the holder to extend the time of payment, or to postpone the holder’s right to enforce the instrument, unless made with the assent of the person secondarily liable, or unless the right of recourse against such party is expressly reserved.”

The entire field of discharge appears to be here covered, and unless some controlling reason can be adduced showing- that this statute doesn’t apply, its application to and control of the case at bar would seem to follow. It is, however, insisted by counsel for plaintiff in error that since there is in the later act no express repeal of earlier legislation bearing on the rights and liabilities of sureties on negotiable instruments, and since repeals by implication are not favored, we must conclude that the former legislation is still in force, and inasmuch as there is apparent conflict between the Negotiable Instruments Act, as construed by the courts below, and the earlier. legislation, it must be presumed that the construction thus given the act is not the correct construction; and that the purpose ascribed by those courts to the general assembly in passing- the act was not its real purpose. The sections of the Revised Statutes to which special attention is called by counsel are numbers 5419; 5832 and 5836, though general reference is made to other sections of the same chapter. Without taking-space to give the above mentioned sections in detail, their substance may be stated thus: Section [357]*3575419 provides how judgment against principal and surety may be entered, and for execution in such cases; section 5832 provides that sureties on bank paper who were known to be such at the time the contract was made may prove that fact notwithstanding it may contradict the face of the instrument, and section 5836 that a surety in a judgment who has paid it may be subrogated to the rights of the judgment creditor and may revive the judgment if it has become dormant.

We fail to perceive any necessary conflict between these sections and the Negotiable Instruments Act in the particulars here involved, and in this respect we are in accord with the claims of counsel; but does it follow that the conclusion of counsel is correct? It is not contended that either of these sections, or any part of chapter 12, title 1, division 7, provides for the discharge of a surety where a valid agreement for extension of time of payment has been made' as between the holder and the principal debtor, that rule resting entirely upon the principles of the common law. Recurring again to the above cited sections, it will be noted that sections 5419 and 5836 are mainly for the protection and advantage of the surety as between him and the principal debtor, and affect the rights or liabilities of the surety as between him and the holder only incidentally. Section 5419 provides for a situation which may arise when judgment is taken as to the form thereof, and thereafter as to its enforcement; and section 5836 confers rights upon a surety after judgment; neither section providing for - a situation arising, save [358]*358as above indicated, before judgment; neither giving any discharge from liability on the instrument and preventing judgment.

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Cite This Page — Counsel Stack

Bluebook (online)
81 Ohio St. (N.S.) 348, Counsel Stack Legal Research, https://law.counselstack.com/opinion/richards-v-market-exchange-bank-co-ohio-1910.