Opinion
40570.
DECIDED FEBRUARY 13, 1964.
Action on note. Fulton Civil Court. Before Judge Williams.
Schwall Hewett, Charles E. Maxwell, for plaintiff in error.
Cassandra E. Maxwell, contra.
Where a home improvement contractor, by preparing and signing an agreement that the landlord would not be held for the debt, induces the landlord to assent to an improvement contract made with a tenant and to sign the necessary papers for a bank loan, the contractor is estopped later to sue the landlord on the note assigned him by the bank after the tenant's default.
DECIDED FEBRUARY 13, 1964.
Ann Wright leased a terrace apartment from the defendant (Scales). Plaintiff (Brown) negotiated an agreement with Wright to improve the apartment. On March 17, 1961, Wright and defendant made application to the First National Bank for Title 1 FHA loan and defendant consented to the improvements. The work proceeded, but on March 31, 1961, all of these parties signed the following paper handwritten by the plaintiff:
"To Whom it May Concern: Be it known that Odessa Scales who is the property owner of the real estate known as 830 Venetta Pl. N.E. Atlanta, Ga. is not responsible for anyone or the indebtedness of anyone other than herself. Be it further known that the signature of Odessa Scales is not an admission of debt but is given to allow Ann Wright to secure a home improvement loan to make certain improvements to the terrace apt. It is understood by all that Mrs. Scales' signature is necessary to secure said home improvement loan. It is also understood by all parties concerned that said loan is not a mortgage and is not to be considered by anyone as such. The loan is made to Ann Wright on her credit and she is to make all payments of said loan together with interest and all charges."
On April 19, 1961, when the improvements were completed, defendant signed an FHA Title 1 Completion Certificate and, along with Ann Wright, signed a promissory note to First National Bank. Ann Wright is now bankrupt and the note has been paid by and assigned to plaintiff, the contractor, who guaranteed payment to the bank.
Plaintiff's demurrers to the answer and plea setting up the above release were overruled. On trial without a jury, the judge found for the defendant. Motion for new trial on the general grounds only was overruled. Plaintiff excepts to both adverse rulings.
This case presents a situation of equitable estoppel or estoppel in pais whereby one is prevented from assuming inconsistent positions to the detriment of another. Frost Motor Co. v. Pierce, 72 Ga. App. 447 ( 33 S.E.2d 910). Here the plaintiff, Brown, was the author of and a party to an agreement between himself, the defendant and her tenant, Ann Wright, whereby defendant was not to be held for the debt arising out of the home improvement contract, and that the improvements were to be made wholly on the credit of Miss Wright, but for which the home improvements would not have been made. Having agreed then that defendant would not be held in order to obtain defendant's permission that plaintiff might proceed with the improvements on the tenant's account and in order to get defendant's signature to the necessary application for the financing of the indebtedness by the tenant with the bank, it is now inconsistent and inequitable for him to seek judgment against her on the note.
This position appears to be further supported, at least inferentially, by the provision of Code § 14-508 that: "A holder who derives his title through a holder in due course, and who is not himself a party to any fraud or illegality affecting the instrument, has all the rights of such former holder in respect of all parties prior to the latter." Although plaintiff did not derive his title from a holder in due course, since the payee of a promissory note could not be one, Davis v. National City Bank, 46 Ga. App. 194 (1) ( 167 S.E. 191), Meadows Mill Co. v. Yawn, 73 Ga. App. 543, 549 ( 37 S.E.2d 372), Pendley v. Credit Equipment Corp., 92 Ga. App. 658 ( 89 S.E.2d 567), Markan Realty Co. v. Klarman, 99 Ga. App. 703, 704 (1) ( 109 S.E.2d 907), Floyd Const. Co. v. Stanley, 101 Ga. App. 696, 698 ( 115 S.E.2d 231), and since plaintiff could not himself be a holder in due course, having taken the note at a time when it was past due, Code § 14-502 (2), it does appear that he was a party to the agreement not to hold the defendant on the debt represented by the note and that under the circumstances by which defendant's signature to the note was obtained it would be a fraud upon her to permit plaintiff to enforce it.
Repealed by UCC, but similar provision is now in Code Ann. § 109A-3-306.
The rule of these cases is now changed by Code Ann. § 109A-3-302 (2) which provides that "A payee may be a holder in due course."
Repealed by UCC, but same provision is now in Code Ann. § 109A-3-302 (1-c).
Since Brown has acquired the note from the bank and is now the holder of it, we think his position here is very similar to and no better than that of the plaintiff in Arnold v. Johnston, 84 Ga. App. 138 (65 S.E.2d 707) where the maker of a note, with the assent of the payee, had written on it: "This note is not a mortgage on any property or personal belongings of the signee; and it is agreed, that in no event will it be sued." There plaintiff was held not entitled to sue on the note.
The demurrers to the plea and answer, as well as the motion for new trial on the general grounds only, were properly overruled.
Judgment affirmed. Bell, P. J., and Jordan, J., concur.