James v. Yaeger

California Supreme Court Oct 22, 1890 No. No. 13940Published

Before: Works

AI Brief

AI-generated · verify before citing

Holding. The court held that a non-negotiable promissory note is extinguished upon payment by a maker, and a subsequent purchaser who acquires the note from a maker after maturity cannot maintain an action on the instrument against that maker.

Issues

Whether a non-negotiable promissory note remains a binding obligation after it has been paid by one of the makers.
Whether a purchaser of a non-negotiable note from a maker after maturity can enforce the note against that maker.
Whether the doctrine of estoppel applies to a maker who re-transfers a paid note to a purchaser who has knowledge of the facts.

Disposition. reversed and remanded

Quotations verified verbatim against the opinion

“By the payment to the payee the note became extinct, and ceased to be a binding obligation.”

Synopsis

Payment—Extinction oe Note—Purchase from Accommodation Maker —Action by Indorsee—Defense..—When one of the co-makers of a nonnegotiable note, who is merely a surety for the other makers, pays the note to the payee, and takes it up, the note becomes extinguished, and ceases to be a binding obligation, and a purchaser of the note from the surety after maturity, or if the note he non-negotiable, whether before or after maturity, takes it subject to the defense of payment, and can maintain no action upon it, either against the co-makers or against the surety who assigned the note to him.

Id.—Presumption of Notice — Pleading — Bona Fide Purchase.— The fact that the purchase of the note was from one of the makers is sufficient to put the purchaser on inquiry as to the fact of its payment; and it must be presumed that he took with full knowledge of all the facts, if his complaint does not allege that he had no knowledge thereof at the time when the note came into his hands.

Id.—Estoppel—Assignment by Maker after Payment of Note — Pleading. —The maker who puts out a note after it has been paid is not estopped to set up the defense of its extinguishment by payment, when it is not alleged that the assignee was ignorant of the facts, or that he was misled by any representations of the maker who assigned the note to him.

Id.—Transfer of Note—Warranty against Worthlessness—Construction of Code. — Section 1774 of the Civil Code, which provides that one who sells or agrees to sell an instrument purporting to bind any one to the performance of an act, thereby warrants that he has no knowledge of any facts which tend to prove it wqrthless, extinct, or invalid, applies only to the transfer of paper in due course to an innocent holder, and does not apply to an indorsee with knowledge of the defense of payment, or who is put on inquiry as to the facts constituting such defense.

Works, J. — This action was brought by the respondent, as indorsee, against the appellant and two others, on a non-negotiable, joint and several promissory note. The other makers of the note denied the assignment to the respondent, and set up affirmatively that the note had been fully paid by the appellant. The appellant answered, admitting the execution of the note by himself and the other defendants, but denied that the payee of the note had ever assigned or delivered the same to the respondent, and alleged that he had fully paid the note to the payee, and taken it up; that he thereby became entitled to contribution from his co-makers; that he was only a surety on the note for the other makers, which was known to the plaintiff; and that he sold his right to contribution to the plaintiff, and nothing more, and assigned and delivered the note to him for the purpose of securing the same.

[187]At the trial, it appearing that the appellant had in fact fully paid the note to the payee upon its maturity, and taken it up, the court granted a nonsuit as to the other defendants, who were the principals on the note, and the plaintiff amended his complaint by adding thereto the following allegations: “2. That on or about the twenty-ninth day of November, 1889, the said defendant C. Gomber paid the principal sum of said promissory note, and the interest due thereon, to the said H. Werder, and that thereupon the said Werder delivered the said promissory note to the defendant C. Gomber; and afterwards, to wit, on or about the fourth day of December, 1889, the said defendant Gomber sold and delivered said note for a valuable consideration to the said plaintiff; 3. That since the said fourth day of December, 1889, no part of the said principal sum of said promissory note, nor of the interest due thereon, has been paid by said defendant Gomber, or at all.”

Upon the issues thus formed the court below tried the cause, and found the execution of the note, as alleged, the payment of it to the payee by the appellant, and its. delivery to him; that he afterwards sold the note to the plaintiff, and has not since paid it the second time; and upon these findings rendered judgment against the appellant for the amount of the note and interest.

It is contended by the appellant that the findings of the court do not sustain the judgment. In this contention we fully agree with counsel for appellant. By the payment to the payee the note became extinct, and ceased to be a binding obligation. (Code Civ. Proc., sec. 1473; Wright v. Mix, 76 Cal. 465.) And a purchaser of the note after maturity — or in this instance, the note being non-negotiable, whether the purchase was before or after maturity-—■ took it subject to the defense of payment. (Elgin v. Hill, 27 Cal. 373.) Having been paid, it became functus officio, and no action could be' maintained upon it. (Gordon v. Wansey, 21 Cal. 79.) If the respond

James v. Yaeger

AI Brief

Synopsis

More from California Supreme Court

Related research

AI Brief