290 S.W. 1050 | Ky. Ct. App. | 1927
Affirming.
Action was instituted in the Kenton circuit court by appellant against appellee on a note in the following form:
"$2,000.00. Covington, Ky., July 20, 1915.
*48"Three years after date we or either of us promise to pay to the order of the Bavarian Brewing Company two thousand dollars. Value received. With five per cent interest.
"(Signed) FRANK F. LUEKE, J.D. HAAKE."
After the execution of the note the name of the payee therein was changed to the Reidlin Company. No defense was interposed by Frank J. Lueke, but J.D. Haake filed an answer in which he pleaded that he was only a surety on the note and that no recovery could be had against him as the cause of action set forth in the petition did not accrue within seven years before the commencement of the action. The law and the facts were submitted to the court and on the submission of the case the court held that appellee was only a surety on the note and that as to him the action was barred by section 2551, Kentucky Statutes.
The argument is advanced that appellee was not a surety on this note because he had been surety on a note for $2,100.00, given to the Security Savings Bank. He and others were the surety for Frank F. Lueke on the note to the bank and it is argued that when this note at the bank became due Lueke borrowed the money from the Bavarian Brewing Company with which to pay it, and after the note at the bank was past due appellee had become a principal as the note at the bank was at the time a primary liability against him. As we understand the contention made by appellant it is that when a note becomes due the surety on the note automatically becomes a principal. We cannot agree with appellant in this contention and no authority is cited from this or any other state showing that such a rule has ever been adopted.
The other contention made by appellant is that section 2551, Kentucky Statutes, has been repealed by section 121 of the negotiable instruments act. (Ky. Statutes, section 3720b-121). If this is true an accommodation maker of a note can be discharged only as provided in the negotiable instruments act, and if appellee could have been released only as provided in the negotiable instruments act his plea that he was released by the provisions of section 2551, Kentucky Statutes, would not avail him. Appellant cites and relies on the case of Wettlaufer v. Baxter,
The case of First State Bank of Nortonville v. Williams,
"Having covered the entire subject of discharge and release from liability, and having provided that parties secondarily liable may be released by extension of time, without any such provision affecting parties primarily liable, it is reasonable to conclude *50 that the legislature did not intend that parties primarily liable should be so released."
Many cases are cited in support of this conclusion. The court held that an accommodation maker is primarily liable on a note. The court then stated its position on the question as to whether the negotiable instrument act applies solely to instruments that have been actually negotiated to a holder in due course. The court seems to take the position that the law applies to all negotiable instruments, regardless of whether they have been actually negotiated to a holder in due course, and quotes from the case of Wettlaufer v. Baxter,supra, as follows:
"In short, if a note is not a negotiable instrument within the meaning of this act, then the rights and liabilities of the parties on it are to be determined by the law as administered with reference to nonnegotiable instruments. If it is a negotiable instrument in the meaning of the act, then the rights and liabilities of the parties to it are fixed and determined by the provisions of the act alone."
In reaffirming the previous conclusions of the court in the Wettlaufer case, supra, the court said:
" We, therefore, conclude that if the note itself is negotiable, the act applies, whether it be actually negotiated to a holder in due course or not."
This brings us to the question whether the negotiable instrument act repeals section 2551, Kentucky Statutes. It will be seen that this particular question was not discussed either in the Wettlaufer ease or the Williams case, supra.
In the case of Southern National Bank v. Schimpler,
The Schimpler case is not referred to in the Williams case,supra, and there is no conflict between the two cases as they are written. The opinion in the Schimpler case, however, left matters in some confusion, but upon the consideration of a petition for rehearing filed in the case the court modified the original opinion by withdrawing so much thereof as held that any part of section 2515, Ky. Stats., had been repealed, and held that the five year limitation provided in said section is applicable only when the note has been actually negotiated before maturity and thereby placed upon the footing of a bill of exchange and is in the hands of a third party. But so long as the instrument remains in the hands of the original payee it *52 is not upon the footing of a bill of exchange and is controlled by the fifteen year statute of limitations as to the principal therein and the seven year statute as to the sureties therein. The court then said:
"This fact leaves in force the five year statute as to negotiable notes placed upon the footing of bills of exchange by being negotiated before their maturity, and leaves in force the fifteen year and the seven year statute as to all negotiable notes in the hands of the original payee." (
160 Ky. 813 .)
It cannot be well said that it was the intention of the court in the Williams case, supra, to overrule any part of the opinion in the Schimpler case, supra. The two are not in conflict. The Williams case holds that the negotiable instrument act is controlling touching all matters coming within the purview of the act. Since the question of how an accommodation maker of a note may be discharged falls within the purview of the act, its provisions are controlling, but as the negotiable instrument act does not attempt to prescribe any periods of limitation the sections of our statutes relating to the time in which suit must be brought on notes placed on the footing of bills of exchange, is still in force; also the statutes of limitation applying to the principal and surety on notes, which statutes were in existence at the time the negotiable instrument act, became a law, are still in force. It is evident, therefore, that the court has treated section 2551, Ky. Stats., as a statute of limitation relating to sureties and not a statute providing for the discharge of sureties.
The lower court having reached this conclusion we find no error in the judgment. The judgment is affirmed.