Manly v. Beam, 190 N.C. 659 (1925)

Dec. 9, 1925 · Supreme Court of North Carolina
190 N.C. 659

W. F. MANLY v. W. F. BEAM.

(Filed 9 December, 1925.)

1. Bills and Notes — Release oí Party Thereto — Statutes—Consideration.

The right of an obligor to defend an action against himself on a negotiable note under the provisions of C. S., 3104, that the holder may expressly renounce his right against any party to the instrument before, at or after its maturity, rests by statute, and may be done by virtue thereof only as therein expressed -when the release is in writing, and may not be shown when resting only by parol. C. S., 3101, relating to the discharge of the instrument, has no application.

2. Same — “Release”—Discharge.

The release by the holder of a negotiable instrument. of his right against any party thereto to hold him liable, is the same in legal effect as. the renunciation of this right.

Appeal by defendant from judgment of Superior Court of Eobsyth County, March Term, 1925, Bchenclc, J. No error.

Action upon note for $7,000, dated at Madison, Georgia, on 25 January, 1918, due on or before 1 January, 1919, payable to the order of plaintiff, Mrs. W. E. Manly, and executed by defendant, "W". E. Beam and W. G. Thompson. The execution of the note is admitted; defendant, however, in his answer, as a defense to the action thereon, alleges “that this defendant was released by the said plaintiff from any further liability on the said note when the same was assumed by one W. G. Thompson and J. W. Carroll, the plaintiff agreeing to the assumption of the liability of this defendant on the said note by the said J. ~W. Carroll, the said defendant giving such consideration for his release as was demanded by plaintiff.” Payments of interest accrued on said note on 25 January, 1919, and 25 January, 1920, are admitted; it is also admitted that the note was properly credited with the sum of $3,365.00 on 9 January, 1923, the said sum having been derived from the sale of land upon .foreclosure of a mortgage or deed of trust securing the payment of said note.

The issue submitted to and answered by the jury was as follows: “In what sum, if any, is the defendant indebted to plaintiff upon the note described in the complaint? Answer: $5,915.30, and interest on $3,635.00 from 9 March, 1925, until paid at the rate of 8%.”

From judgment upon this verdict, defendant appealed to the Supreme Court.

Bwinlc, Clement & Hutchins for plaintiff.

Walter E. Broclc and Graves & Graves for defendant.


The consideration for the note sued on in this action was money loaned by plaintiff, Mrs. W. E. Manly, to defendant, ~W. E. Beam *660and W. G. Thompson, with which they paid the purchase price of a tract of land situate in Morgan County, Georgia. The note was secured by a mortgage or deed of trust on said land. The only payment made thereon, was from the proceeds of the sale of the land upon foreclosure of the mortgage or deed of trust, after the timber had been cut and removed therefrom by J. W. Carroll, to whom it was sold by Beam and Thompson. As part of the consideration of the conveyance to him of said timber, J. W. Carroll agreed to assume the liability of defendant, W. E. Beam, on the note held by Mrs. Manly. On 30 April, 1918, J. "W". Carroll signed an endorsement written on said note by W. G. Thompson in the following words:

“For value received, I hereby agree to assume the part of liability of ~W. E. Beam as to within note. 4/30/1918. J. ~W. Caeeoll.”

At the time this endorsement was written on said note and signed by Carroll, the note was in the possession of W. G. Thompson' who was cashier of the Morgan County Bank. Mrs. Manly was not present. She had left the note, with other papers, with said bank for safe-keeping. It is admitted that Mrs. Manly has not released defendant in writing from liability on said note as one of the makers thereof.

As evidence of his release by plaintiff, as alleged in his answer, defendant offered the testimony of W. G. Thompson, a witness in his behalf, that after J. W. Carroll had signed the endorsement on the note, he showed the same to plaintiff, and advised her that defendant, W. E. Beam, wished to be released of liability on the note; that plaintiff said “it would be all right”; and that thereafter the note, with the endorsement signed by J. W. Carroll, was delivered to plaintiff. Plaintiff objected to this testimony. The objection was sustained, and defendant excepted. Upon his appeal to this Court, defendant relies chiefly upon his assignment of error based upon this exception.

The right of plaintiff, holder of the note, to release defendant, as one of the makers thereof, from liability, is not controverted by plaintiff; nor does she contend that such release would not be a good and valid defense to her action on the note against defendant. The objection to the testimony, offered by defendant to prove such release, is based upon the contention that evidence of a parol release of a party to a negotiable instrument is incompetent; that only a release, in writing, of such liability, would avail defendant as a defense in this action.

C. S., 3104, provides that the holder of a negotiable instrument may expressly renounce his rights against any party to the instrument before, at or after its maturity. An absolute and unconditional renunciation of his rights against the principal debtor, made at or after maturity of *661tbe instrument discharges tbe instrument. Tbe renunciation, however, must be in writing, unless tbe instrument is delivered up to tbe person primarily liable thereon.

Tbe note sued on in this action is a negotiable instrument; plaintiff is tbe bolder of said note; it has not been delivered up to tbe person primarily liable; a renunciation of her right to bold defendant liable on tbe note as one of tbe makers, in order to avail defendant, as a defense to an action against him on tbe note, must be in writing. A parol renunciation is not sufficient.

No substantial distinction can be made between tbe renunciation of a right, and tbe release of one from liability upon tbe enforcement of a right'. A distinction was sought to be made in Whitcomb v. National Exchange Bank, 123 Md., 612, 91 Atl., 689. Justice Urner, in tbe opinion for tbe Court of Appeals of Maryland, says: “Undoubtedly tbe word denunciation’ as used in tbe section quoted (identical with C. S., 3104), appropriately describes tbe act of surrendering a right or claim without recompense, but it can be applied with equal propriety to tbe relinquishment of a demand upon an agreement supported by a consideration.” It was there held that by virtue of tbe statute, a party to a negotiable instrument can be released from liability thereon only by a writing, unless tbe instrument is delivered up to tbe person primarily liable. In Baldwin v. Daly, 41 Wash., 416, 83 Pac., 724, it was held that an agreement by tbe payee of a note to release tbe surety, while supported by a sufficient consideration, was ineffective because tbe renunciation was not in writing, as required by tbe Uniform Negotiable Instruments Act, in force'in that state. In Dickinson v. Vail, (Mo.), 203 S. W., 635, plaintiff insisted that this section of tbe Uniform Negotiable Instruments Act only refers to and includes releases which were made without consideration. Tbe Court says: “Plaintiff’s idea seems to be that tbe word ‘renunciation’ used ’in tbe statute was not a bargain, but a renouncing in tbe sense of refusal to have further to do with tbe thing renounced. We think that not a proper construction of tbe statute, and that tbe renunciation may be made for a consideration.” Tbe release relied upon in that case’ admittedly was for a consideration, and being in writing, judgment for defendant was affirmed. See, also, Pitt v. Little, (Wash.), 108 Pac., 941; North Pacific Mortgage Co. v. Krewson, (Wash.), 224 Pac., 566, 3 R. C. L., 1270, 8 C. J., 615.

In Daniel on Negotiable Instruments, 6 ed., sec. 1290, it is said that tbe Negotiable Instruments Statute recognizes tbe right of a bolder to renounce bis rights against any party to tbe instrument, and defines tbe conditions to a renunciation. “Tbe word ‘renunciation’ is used in tbe statute in tbe sense of ‘release,’ and a release of tbe maker or surety can*662not be shown by parol but must be in writing, when the note has not been surrendered.”

C. S., 3101, prescribing how a negotiable instrument may be discharged, and prescribing, among other things, that it is discharged by any act which will discharge a simple contract for the payment of money, has no application to defendant’s contention in this action; it is not contended that the note has been discharged; the defense is that defendant has been released by the substitution of the liability of J. W. Carroll for the liability of defendant, and that by the acceptance of this substitution, plaintiff has released defendant. Defendant concedes that the note is still in force. See Whitcomb v. National Exchange Bank, supra, where it is held that the construction therein of the section of the Negotiable Instruments Act which is O. S., 3104, is not inconsistent with the section which is C. S., 3101. “It is to be noted that section 138 (C. S., 3101), is confined to a designation of the acts which discharge the instrument and does not purport to prescribe the character of proof by which they may be established. Sec. 141 (C. S., 3104), deals specifically with the subject of discharge by renunciation and provides in effect that an extinguishment of liability to be thus accomplished must be evidenced by writing, unless the instrument is delivered up to the party primarily liable.”

The construction of sec. 122 of the Uniform Negotiable Instruments Act (C. S., 3104), by the courts of jurisdictions in which the act has become the law, is well supported upon principle and by authorities. We adopt and approve this construction. A renunciation or release, whether with or without consideration, by the holder of a negotiable instrument, of rights against any party to the instrument, must be in writing, unless the instrument is delivered up to the person primarily liable. Such renunciation or release cannot be shown by parol evidence. Decisions cited in defendant’s brief, apparently to the contrary, were rendered prior to the enactment in this State of the Uniform Negotiable Instruments Act, which has been in force in this State since its ratification on 8 March, 1899.

There was no error in sustaining plaintiff’s objection to the testimony of the witness, W. Gr. Thompson, offered by defendant to prove a parol release by plaintiff of defendant from liability as a maker of the note. The execution of the note being admitted, and there being no contention that same has been paid, it seems needless to discuss the remaining assignments of error. They seem to have been made to support defendant’s contention that evidence of a parol release was competent to be submitted to the jury. The law being to the contrary, we must affirm the judgment.

No error.