Opinion
Rehearing Granted June 26, 1930
Appeal from Superior Court, Los Angeles County; L.T. Price, Judge.
Action by Charles H. Kane and another against George A. Eastman and others to recover the balance of the purchase price of the leasehold of an apartment house. From the judgment, plaintiffs appeal.
Affirmed. COUNSEL
W.W. Kaye and Samuel Horowitz, both of Los Angeles, for appellants.
William A. Barnhill and Lewinson & Barnhill, all of Los Angeles, for respondents.
OPINION
PER CURIAM.
This action was brought to recover from defendants George A. Eastman and Mildred C. Eastman, his wife, the sum of $10,850, the balance of the purchase price of the leasehold of an apartment house in Los Angeles called the Marlborough Apartments, and the furniture therein. The plaintiffs also sought to recover the same amount from defendant Goldberg on the foreclosure of a chattel mortgage of certain furniture in an apartment house called the Pickwick Apartments, executed by the latter to the defendant George A. Eastman, and by him assigned to plaintiff Charles H. Kane.
The facts of the transaction are as follows: On October 1, 1923, plaintiff Charles H. Kane entered into an agreement with defendants Eastman whereby he agreed to sell, and they agreed to buy, the leasehold and furniture of the apartment house first mentioned for the sum of $45,000, payable as follows: $13,750 in cash, $17,500 by the indorsement by the Eastmans to Kane of a promissory note executed by defendant Goldberg to George A. Eastman and the assignment of a chattel mortgage securing the same upon the furniture of the Pickwick apartment house; the balance of the purchase price, namely, $13,750, to be paid by the discharge by defendants Eastman of certain obligations of Charles H. Kane. The cash payment was made by the Eastmans, who also discharged the Kane obligations and transferred to the latter the Goldberg note and mortgage. No part of this note, which was negotiable in form and payable in installments, was paid by the Eastmans, but on May 20, 1925, Goldberg, who was then in default thereunder to the extent of $4,350, had reduced the principal to $10,850. On that date Goldberg was indebted in the same amount and was also in default to the same extent on a promissory note given by him to George A. Eastman and assigned to Mildred C. Eastman, which instrument was also secured by the same chattel mortgage upon the furniture of the Pickwick apartment house. On the date last mentioned the parties entered into a new arrangement whereby Goldberg executed two promissory notes, each for $10,850, one payable to plaintiff, the other to Mildred C. Eastman, and secured both by the execution of a new chattel mortgage to the payees. Goldberg paid nothing on either of the new notes and became in default upon both. And it further appears that between the time of filing the action and the trial, the furniture in the Pickwick Apartments, covered by the chattel mortgage, was seized under a prior mortgage by the lessor of the apartment house.
Defendants Eastman alleged as defenses that plaintiffs accepted the note executed by Goldberg to George A. Eastman and indorsed to Charles H. Kane in full payment and satisfaction of part of the purchase price of the leasehold of the Marlborough Apartments and the furniture therein, namely, to the extent of $17,500. They also alleged that the note executed by Goldberg to plaintiffs on May 20, 1925, was accepted with the intention of satisfying and extinguishing the first-mentioned note and of releasing George A. Eastman from all obligation thereunder. The court found against defendants Eastman on the first defense, and in their favor on the second. The complaint, referring to the Goldberg note, indorsed by the Eastmans to plaintiff Kane, alleged "that defendant George A. Eastman, both before and also after default in payment and dishonor of the said promissory note *** waived the presentment for payment of the said note to the defendant Gabriel Goldberg, and the said George A. Eastman also waived notice of such dishonor by defendant Gabriel Goldberg of the said promissory note." The court found that there was no waiver as alleged, no presentment or demand for payment, and that no notice of dishonor was given the Eastmans or either of them. Plaintiffs contend that the second of the above findings states but a conclusion of law, and that both the second and third to the extent they favor defendants Eastman, are unsupported.
As to the first point, it will be sufficient to say that where the intention with which an act was done is material, it may be directly alleged and found as a fact. Wilcox v. Davis, 4 Minn. 197 (Gil. 139); Kavanaugh v. Kavanaugh Knitting Co., 226 N.Y. 185, 123 N.E. 148; Rochester Ry. Co. v. Robinson, 133 N.Y. 242, 30 N.E. 1008. According to the testimony, Goldberg was in default under the original notes and it was the opinion of the parties that the installment payments which he was obligated to make were larger than the business justified. Accordingly, for Goldberg’s benefit and with the view that new notes, the installments of which were being promptly met, would be more readily marketable, it was agreed that Goldberg should execute such notes to plaintiffs and Mrs. Eastman for the unpaid amounts of the notes held by them, payable, however, in smaller installments, and secure the same by a new chattel mortgage upon the same property. This was done, but with the exception of the fact that plaintiffs thereupon surrendered to Goldberg the original note held by them, the record discloses no evidence of any agreement that the original obligations of any of the parties to the plaintiffs should be extinguished. It is well settled in that state that in the absence of an express agreement, a new note of either the debtor or a third person does not extinguish the original obligation. Griffith v. Grogan, 12 Cal. 317; Welch v. Allington, 23 Cal. 322; Brown v. Olmsted, 50 Cal. 162; Steinhart v. National Bank, etc., 94 Cal. 362, 29 P. 717, 28 Am.St.Rep. 132; Savings & Loan Society v. Burnett, 106 Cal. 514, 39 P. 922; Dellapiazza v. Foley, 112 Cal. 380, 44 P. 727; Jenne v. Burger, 120 Cal. 444, 52 P. 706; Savings Bank of San Diego v. Central Market Co., 122 Cal. 28, 54 P. 273; Bonestell v. Bowie, 128 Cal. 511, 61 P. 78; Merchants’, etc., Bank v. Bentel, 166 Cal. 473, 137 P. 25. Nor is the fact that the original note was surrendered sufficient to establish such an agreement. Welch v. Allington, supra; Steinhart v. National Bank, etc., supra; Bonestell v. Bowie, supra.
There remain the questions whether, as claimed, the evidence shows contrary to the finding that presentment and notice of dishonor were waived, and if not, whether a failure to present the original note for payment and to give notice of dishonor to defendants Eastman would discharge them from liability for the original debt. Presentment for payment and notice of dishonor, unless excused or waived, are necessary to charge an indorser (Civ.Code, § § 3151, 3170) and where a note is payable in installments at different times, demand must be made for each installment, and notice given of a default thereon. Eastman v. Turman, 24 Cal. 379. A waiver may be expressed or implied (Civ.Code, § 3190), and while in the present case it might be inferred that defendants Eastman knew that Goldberg was in default and that the note was not presented, such knowledge did not dispense with notice (Keiser v. Butte Creek, etc., Co., 48 Cal.App. 38, 191 P. 552; 8 Cor.Jur., Bills and Notes, § 904, p. 642), and one suing an indorser has the burden of proving presentment and notice or that the same were excused or waived (8 Cor.Jur. § 1329, p. 1018). A waiver may be implied from the conduct or words of the indorser whereby the holder is reasonably induced to believe that a waiver was intended, and the question is one for the jury. Linthicum v. Bagby, 131 Md. 644, 102 A. 997; Simonoff v. Granite City National Bank, 279 Ill. 248, 116 N.E. 636. It will not, however, be inferred from doubtful acts or language (Worley v. Johnson, 60 Fla. 294, 53 So. 543, 33 L.R.A. (N.S.) 639), but must be established by clear and unequivocal evidence. Keyes v. Fenstermaker, 24 Cal. 329; Keiser v. Butte Creek, etc., Co., supra; 19 Cal.Jur., Negotiable Instruments, § 95, p. 915.
In the present case the testimony shows that George A. Eastman in all negotiations between the parties subsequent to the execution of the contract between the Eastmans and the plaintiffs acted as agent for Mrs. Eastman, and that at his suggestion the note held by plaintiffs with the note held by Mrs. Eastman was deposited with the bank for collection. It was also shown that after Goldberg had defaulted on both notes Eastman suggested to plaintiff that Goldberg should not be pressed for payment, stating, as testified by Kane, "I know Mr. Goldberg is not doing very much but we should wait on him." He later made substantially the same statements to Kane in discussions between them as to how and when Goldberg would pay the notes. This is all the evidence bearing on the question of waiver. There is nothing in the record supporting the conclusion that plaintiffs were induced by any statements of defendants Eastman to believe that a waiver was intended, nor is there any suggestion in plaintiffs’ testimony that they had any intention of presenting the note or giving notice of dishonor. Moreover, it might fairly be inferred that neither of them knew that such action was necessary. The trial court found, in effect, that the burden of proving a waiver had not been sustained, and the evidence is not of a clear and unequivocal character which would compel us to say that the finding is unsupported. Though there is no conflict in the evidence, where there is sufficient to support conflicting inferences, the finding of the trial court either way thereon is conclusive on appeal, and the evidence must be viewed in the light most favorable to the support of the findings and judgment. Aronson & Co. v. Pearson, 199 Cal. 295, 249 P. 191; 2 Cal.Jur., Appeal and Error, § 549, p. 934.
While, as stated, Mrs. Eastman was not a party to the note transferred to plaintiffs by her husband, but, as alleged, admitted and found she indorsed the same, and was consequently liable as such (Civ.Code, § 3144), but like other indorsers she would be discharged from her obligation in case the holder failed to present the note or give notice of its dishonor, unless the presentment or notice was excused or waived. Deahy v. Choquet, 28 R.I. 338, 67 A. 421; Waters v. Atlanta National Bank (Tex.Civ.App.) 261 S.W. 153; Engen v. Medberry, etc., Co., 52 N.D. 410, 203 N.W. 182, 39 A.L.R. 915; Fourth National Bank v. Mead, 216 Mass. 521, 104 N.E. 377, 52 L.R.A. (N.S.) 225; Mangold & Glandt Bank v. Utterback, 54 Okl. 655, 160 P. 713, L.R.A.1917B, 364; Houser v. Fayssoux, 168 N.C. 1, 83 S.E. 692, Ann.Cas.1917B, 835; 3 R.C.L., Bills and Notes, § 396, p. 1178; Civ.Code, sec. 3170.
With regard to the indorser’s liability for the debt for which a note was given, where there has been a failure by the holder to present the instrument or give due notice of its dishonor, the decisions vary in the two cases of paper held as collateral security and as conditional payment, the distinction being discussed in a note to Coleman v. Lewis, 183 Mass. 485, 67 N.E. 603, 97 Am.St.Rep. 450, in 68 L.R.A. 482. As to the first class there are decisions, in effect, that a failure to present for payment or give notice of dishonor does not discharge the indorser from liability for the original debt unless he suffered injury therefrom. Coleman v. Lewis, supra; Anderson v. Timberlake, 114 Ala. 377, 22 So. 431, 62 Am.St.Rep. 105. It has also been held that such failure discharges the indorser, both upon the collateral security and the debt secured. Jennison v. Parker, 7 Mich. 355; Rumsey v. Laidley, 24 W.Va. 721, 12 S.E. 866, 26 Am.St.Rep. 935; State Bank of Clinton v. Parkhurst, 155 Ill.App. 101. In Tennessee the indorser under such circumstances is discharged from liability upon the instrument indorsed and prima facie from the original debt, the burden of proving that no damage resulted to the indorser being upon the plaintiff. And it is there held that the rule applies both to paper taken as conditional payment and as collateral security. American National Bank v. National Fertilizer Co., 125 Tenn. 328, 143 S.W. 597. It is held in New York that the failure to present and give notice of the dishonor of paper taken as conditional payment discharges the indorser from liability upon the original debt to the extent that he has been damaged. Carroll v. Sweet, 128 N.Y. 19, 27 N.E. 763, 13 L.R.A. 43. With respect to the latter class, it is said in Daniel on Negotiable Instruments (6th Ed.) § 971: "So absolute is the necessity for notice to an indorser, in order to charge him, that if a note has been indorsed to the holder in conditional payment of a debt, the failure to give notice to the indorser will not only discharge the indorser as a party to the note, but also as a debtor upon the original consideration ***." The rules are stated in 8 Corpus Juris, Bills and Notes, § § 738, 890, pages 525, 635, as follows: "Whenever it is incumbent on the holder of a bill or note to make presentment thereof, and he neglects to do so, he will lose his remedy not only on the bill or note, but also on the consideration or debt in respect of which it was given or transferred, as against the person discharged from liability on the instrument because of failure to present for payment"; and "failure to give, or laches in giving, notice of dishonor, without proper excuse therefor, operates to discharge the indorser *** from his obligation absolutely, and not only discharges such party from his liability as *** indorser ***, but also operates as a complete satisfaction, as to him, of the indebtedness for which the paper was received ***." See, also, 3 Ruling Case Law, Bills and Notes, § 446, p. 1224. The following decisions support the same rule: Gracie v. Sandford, 9 Ark. 238; Adams v. Darby, 28 Mo. 162, 75 Am.Dec. 115; Stam v. Kerr, 31 Miss. 199; Phoenix Ins. Co. v. Allen, 11 Mich. 501, 83 Am.Dec. 756; Orange Screen Co. v. Holmes, 103 N.J.Law, 560, 138 A. 105; Mauney v. Coit, 80 N.C. 300, 30 Am.Rep. 80; Hawley v. Jette, 10 Or. 31, 45 Am.Rep. 129; Nuzum v. Sheppard, 87 W.Va. 243, 104 S.E. 587, 11 A.L.R. 1024; Allan v. Eldred, 50 Wis. 132, 6 N.W. 565. The comment on the cases by the editors of American Leading Cases, quoted in Daniel on Negotiable Instruments, § 1277 (6th Ed.) is as follows: "The true view would seem to be that the failure of the creditors to pursue the usual course of business with reference to commercial instruments taken for a debt is a prima facie bar to a suit for the debt itself, which may, notwithstanding be removed by proving that the instrument was unavailable as means of payment, and that the debtor has not been injured by the omission to present it at maturity and to give notice of its nonpayment." No California decisions in point have been called to our attention.
In the case at bar it is conceded that no presentment was made or notice of dishonor given. It also appears beyond question that neither was waived nor excused, and there is no attempt to show that appellants were not injured by the omissions. These facts under all the decisions sustain the conclusion that defendants Eastman were discharged not only as indorsers, but from their liability upon the original debt, and are sufficient to support the judgment in their favor. The appeal is from the whole judgment, but no grounds for a reversal of the portion entered against defendant Goldberg have been shown, and this portion must also be affirmed.
For the reasons stated, the judgment is affirmed.