Court Opinion

ID: 3495543
Source: CourtListenerOpinion
Date Created: 2016-07-05 22:03:24.528548+00
Date Added: 2024-06-11T14:05:12.948356
License: Public Domain

This case was before this court in 239 Mich. 404, where a statement of facts may be found. Plaintiff took the original note from the payee, discounted *Page 568 
it, and gave the payee thereof credit therefor. The credit of the payee with plaintiff was not exhausted before maturity of the first or original note. Plaintiff had not paid value therefor. It is contended that after maturity of the original note plaintiff could not become a bona fide holder for value of any of the renewal notes, particularly of the one sued upon.
Plaintiff is a bona fide holder for value of the last renewal note, unless the fact the note originally discounted was not paid when due was of itself such notice to plaintiff of an infirmity therein or defense thereto as to defeat plaintiff's right to recover.
The title of the payee of the original note and all original notes was defective. 2 Comp. Laws 1915, § 6096. A promissory note does not lose negotiability after maturity. Gardner v.Beacon Trust Co., 190 Mass. 27 (76 N.E. 455, 2 L.R.A. [N. S.] 767, 112 Am. St. Rep. 303, 5 Ann. Cas. 581); Hawkins v. Wiest,167 Mo. App. 439 (151 S.W. 789); Beall v. Russell,134 N.Y. Supp. 633. But in the hands of any holder other than a holder in due course, a negotiable instrument is subject to the same defenses as if it were nonnegotiable. 2 Comp. Laws 1915, § 6099. To be a holder in due course, plaintiff must have acquired the note sued upon before it was overdue, without notice it had been previously dishonored, in good faith, and for value. 2 Comp. Laws 1915, § 6093. When defendant's original promissory note was not paid when due, it was notice to plaintiff that defendant had failed to fulfill his contract; might have a valid defense to the note; be unable to pay; was negligent in caring for his obligations promptly; that he expected to be able to renew the obligation, and perhaps of other things. It gave rise to a presumption that nonpayment was owing to some defect *Page 569 
or other cause which furnished to defendant a sufficient reason for not having punctually performed his obligation.Morgan v. United States 113 U.S. 476 (5 Sup. Ct. 588).
Plaintiff was not a bona fide holder for value of the original note before maturity, and after maturity it was subject to the same defenses as if it were not negotiable by reason of the presumption and the statute. If defendant had sufficient reason for not paying the original note at maturity, or is to be presumed to have had such sufficient reason, and this is the only basis of the rule making the note after maturity subject to the same defenses as if it were not negotiable, it was defendant's duty upon presentation of the note to him for payment to make such reason known or to refuse to recognize, pay, or renew the obligation or any part thereof.
When the original note was presented to defendant, he did not question its validity or binding obligation, but recognized them, paid a substantial sum upon the indebtedness, obtained the cancellation and surrender to him of the original note, and gave a new note for the balance due. Under such circumstances there is no room for a presumption of invalidity arising from defendant's nonpayment of the original note.
Plaintiff took the first and second renewal notes, just as it took the original note before maturity, subject to any defenses of which it had notice. It would be anomalous, to say the least, to hold that from the mere fact the original note was not paid in full when due, plaintiff is charged with knowledge or notice of all its latent infirmities, of which neither it nor defendant had any actual knowledge or notice. If, from the fact alone of nonpayment in full at maturity, plaintiff is to be charged with knowledge *Page 570 
or notice of such mutually unknown latent infirmities, defendant is and should be charged with like knowledge or notice. If defendant is chargeable with such knowledge or notice, for this or any other reason, his subsequent renewals of the unpaid part of the obligation is a waiver of such infirmities in the original obligation as defendant might, in the exercise of reasonable and ordinary diligence, have ascertained. Padgett v. Lewis, 54 Fla. 177 (45 So. 29); Hyer
v. York Manfg. Co., 58 Fla. 283 (50 So. 485); FranklinPhosphate Co. v. International Harvester Co., 62 Fla. 185
(57 So. 206, Ann. Cas. 1913 C, 1247); Roess Lbr. Co. v.State Exchange Bank, 68 Fla. 324 (67 So. 188, L.R.A. 1918 E, 297, Ann. Cas. 1916 B, 327); Stewart v. Simon, 111 Ark. 358
(163 S.W. 1135, Ann. Cas. 1916 A, 825); Sheffield v.International Harvester Co., 3 Ga. App. 374 (59 S.E. 1113). This is consistent with Gladwin Bank v. Dow, 212 Mich. 521
(13 A.L.R. 1233), and Allen v. Hillman, 215 Mich. 312, which did not involve the question in controversy here, and with MolsonsBank v. Berman, 224 Mich. 606 (35 A.L.R. 1289), which holds that a bona fide holder for value of negotiable paper may accept payment in part and a renewal of the balance, with such notice, without ceasing to be a bona fide holder for value.
An obligation is renewed when the same obligation is carried forward by a new paper or undertaking whatever it may be. What makes the renewal is the extension of time in which to discharge the obligation. Lowry National Bank v. Fickett,122 Ga. 489 (50 S.E. 396).
"It means to re-establish a particular contract for another period of time." Kedey v. Petty, 153 Ind. 179 (54 N.E. 798). *Page 571 
Under the facts, the renewal notes advanced the due date of the unpaid balance of the original obligation. Neither plaintiff nor defendant, by the mere fact of nonpayment in full of the original obligation at maturity, is charged with knowledge or notice of the latent infirmities in such obligation mutually unknown and unsuspected by the parties. Plaintiff having, in good faith paid value for the last renewal note before maturity, without knowledge or notice of any infirmity therein or defense thereto, must be held to be a holder in due course and entitled to recover. Judgment should be reversed, with costs to plaintiff.