042-NLR-NLR-V-08-ARNASALAM-v.MARIKAR.pdf
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AENASALAM v. MARIKAS.D. C.t Colombo, 15,695.1908.
September 18.
Composition deed—Action on promissory note—Delay in presenting endorsed
cheque for payment
Action by endorsee of certain promissory notes against the maker(first defendant) and endorses thereof. Flea that the second andthird defendants trading together as partners endorsed the notes anddelivered them to the plaintiff, and that the plaintiff having agreedwith the first defendant to accept a composition at the rate of Bs. 4.75for every Bs. 10 of his debt, the first defendant' paid by cheque toplaintiff Bs. 3,075, leaving only Bs. 783 unpaid, whioh was still due,— '
Held, that plaintiff was bound by the. composition deed to which heand the firm of the second and third defendants were parties ascreditors of the first defendant, and the plaintiff by acquiescing in thedeed must be presumed to have agreed that the first defendant shouldbe released altogether as regards himself, and that the first defendant'sliability towards the firm of the second and third defendants should bethe measure of that firm’s liability to the plaintiff.
As regards the cheque for Bs. 8,075 accepted by the plaintiff in partpayment of the sum due upon the composition, it was drawn on 30thNovember, 1900, endorsed to plaintiff on 1st December, but notpresented for payment till' 6th February, 1901, when it was dis-honoured.
Held, that the endorsed cheque should have been promptly presentedfor two reasons, the first being that if the drawer suffers actual damagethrough the delay, as by the failure of the bank, he is discharged to ■the extent of such damage; and the record being that if it is notpresented for payment within a reasonable time after endorsement, theendorser will be discharged.
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HE plaintiff instituted this action against one S. A. L. Marikarand two others, who traded as Chittambalam, Mather & Go.,
for the recovery of the sum of Rs. 8,129.75, alleged to be due onseven promissory, notes made by the first defendant in favour ofthe other two and endorsed by them and delivered to the plaintiff.
On the 21st day of October, 1901, judgment was signed againstthe first defendant for the full amount due on the said promissorynotes.
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The second defendant, Chittambalam, filed answer admittingthat the said promissory notes were made in favour of the firmaforesaid, and that he. had endorsed and delivered them to theplaintiff, but he pleaded that he had so endorsed the said promissorynotes for the accommodation of the firsts defendant.
The second defendant further pleaded in his answer that theplaintiff had agreed with the first defendant to accept from thefirst defendant a composition at the rate of Rs. 4.75 on every Rs. 10on his debts, and that in pursuance of the said agreement the first
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1003. defendant paid to the plaintiff the sum of Rs. 3,074.50, leaving aSeptember is. balance sum '-of Rs. 783 unpaid, which the second defendant admitted was due from him to the plaintiff.
The second defendant also claimed in reconvention certainsums which he alleged he had paid to the plaintiff, and which hadnot been repaid to him.
At the trial of the action the following issues were framed: —
Did the first defendant on the 17th November, 1900, enterinto a deed of composition with his creditors, including theplaintiff, whereby his creditors, including the plaintiff, agreedto accept Rs. 4.75 for every Rs. 10?
In pursuance of the above agreement did the plaintiff accepta cheque for Rs. 3,074.50 in part satisfaction of the amount dueon the notes sued on?
Was the .second defendant discharged from all liability onthe notes by reason of the plaintiff entering into the deed, of com-position with first defendant?
Were the amounts appearing in paragraph 6 of the answerdeposited with the plaintiff as therein alleged, and are they stilldue?
The second defendant admitted that the amount of the notessued on was included in the sum of Rs. 8,596.22 mentioned in thedeed of composition as a debt due by the first defendant to* thesecond and third defendants, and not as a debt due to the plaintiff.
The Additional District Judge held that the appellant , was boundto accept the aforesaid composition on the notes sued on, and thatthe cheque not having been presented in time the plaintiff shouldsuffer the loss. After giving second defendant credit for a certainsum admitted to be due to him from the plaintiff, the District Judgegave the second defendant judgment for the sum of Rs. 1,706.67 andinterest and costs.
The plaintiff appealed.
DomhoT8t, K.C., for plaintiff, appellant.
H. J. C. Pereira , (Wadsworth with him), for second defendant,respondent.
18th September, 1903. Middleton, J.—
' This is an action by the endorsee against the maker andendorsers of seven promissory notes made by the first defendantin favour of the second and third defendants, who were partnersand endorsed by them to the plaintiff. So far as 1 can ascertainthe plea of want of consideration was not seriously insisted upon,nor could it prevail.
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On the 17th November, after two of the notes became due and 1903.were dishonoured, the first defendant entered into an arrangement September is•with some of his creditors embodied in the document D 2 producedin evidence, by which those signing it agreed for themselves, j.their executors, administrators, partners, and assigns to accept acomposition of the debts due by the first defendant to the amountof Be. 4.75 for every Bs. 10 in full satisfaction if paid within aperiod left blank, and if possible to induce all other creditors ofthe first defendant to do the same, and to execute a formal deedof composition^ The question as to the time within which theagreement was to be performed does not appear to arise, as it seemsthat what was done occurred within a reasonable time.
It was agreed by counsel on both sides that no deed of compo-sition had been executed, and that D 2 was the document uponthe construction of which the rights of the parties must depend.
The plaintiff signed this document in respect of certain debtsowed to him by the first defendant, other than those on the notesin question here, and the second defendant’s firm, Chittambalam& Mather, also signed it in respect of the notes in question andcertain other debts due by the first defendant to them.
The schedule showed the gross amounts of the debts with thecomposition amounts in columns opposite the names of therespective creditors, who apparently were all payees of notesgiven by the debtor.
The sums opposite the names of the plaintiff were Bs. 2,000,compounded for Bs. S50, and those opposite the name of thesecond defendant’s firm were Bs. 8,596.22, compounded forBs. 4,082.21.
The second defendant’s firm admitted that included in the sumof Bs. 8,596.22 were the notes now in suit, and it was admittedthat the plaintiff was paid the composition of Bs. 950.
The question for us to decide is whether the plaintiff is boundby this document so as to debar him from recovering beyond theamount of the composition agreed upon by it upon the notes nowin suit.
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In other words, did. the plaintiff agree to release the firstdefendant from his liability to the extent set out in D 2 on thosepromissory notes which the second defendant’s firm endorsed tothe plaintiff?
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The principle governing the construction of a compositiondeed»per Erie, J., in Mallalieu v. Hodgson, 16 Q B 711, is that“ each creditor consents to lose part of his debt in considerationthat the others do the same, and each creditor may be consideredto stipulate with the others for a release from them to the
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1003. insolvent in consideration of the release by him. ” The plaintiffSeptember is. knew that first defendant was indebted to him in these notes hsMiddleton, drawer, and that second defendant’s firm was so as the endorsers,
' and that, first defendant was practically insolvent, and that he(plaintiff) must look to his endorsers for payment; he was a partyto the composition deed, and must have known that the seconddefendant's firm was also a party.
It does not appear to be unreasonable then to assume thatthe plaintiff had reason to believe that included in the amountset opposite the name of the second defendant’s firm was the *amount of the notes for which defendant was primarily liable.
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If then plaintiff had reason to believe that these notes were soincluded, it seems to me that he impliedly agreed that the firstdefendant should be released on them to the extent set outas regards the endorsers, the second defendant’s firm, and therelease of the principal will release the surety. Oriental Corpora-tion v. Overend, L. E. 7, H. L. 348 (1874).
If, however, it is said that he did not know that they wereso included, and so did not agree, he has by entering into thisagreement with the other creditors induced them, including thesecond defendant’s firm, to believe that he intended to release thefirst defendant’s debts to him in the same way that the othercreditors, including second defendant, were releasing theirs,, andso caused the second defendant's firm to alter its condition inrespect to its claim against the first defendant.
I think, then, that the plaintiff ought not to be heard to denynow that he did not know the notes in question were so-included on the principle laid down by Lord Chancellor Campbellin Gaimcross v. Lorimer, 7,. Jurist N. S. 149 {I860), i.c., if a partyhas an interest to prevent an act being done and acquiesces so asto induce a reasonable belief that he consents to it, and theposition of others is altered by their giving credit to his sincerity,he has no more right to challenge the act to their prejudicethan he would have had if it had been done by his previouslicense.
As a matter of fact the plaintiff has not come into the witness-box to do so.
I am further of opinion that if he had reason to believe thepotes in question were included in the debt of second defendant’sfirm released to the extent expressed in the document D 2, that theplaintiff must be taken to have consented to release the firstdefendant entirely as regards himself and to have intended td- lookonly for payment of the notes to the second defendant to theextent already indicated.
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The plaintiff by his acquiescence in the document D 2 allowedthe payee and endorser to appear as creditor only of the first s^>tembetdefendant as regards the notes in suit, and in doing so I am fain Mxddiotok,to assume that he agreed that the first defendant should be releasedaltogether as regards himself, and that first defendant'sliability towards the second defendant's firm, as expressed in D 2,should be the measure of the second defendant's firm’s liability tothe plaintiff.
I think, then, that the plaintiff upon the proper construction ofD 2 had only a right to sue the second defendant’s firm to the extentof Bs. 8,857.50, which appears from the District Judge’s judgmentto-be the amount of the composition rate on these notes.
I agree with the District Judge that he accepted the cheque forBs. 3,074.50 X in part payment of that amount.
The next question is whether the plaintiff accepted that cheque,drawn as it was by Usoof and endorsed by the second defendant,as absolute or conditional payment.
It must be remembered that this is not an action on the chequefor Bs. 8,074.50 by the holder against endorser and drawer, but anaction on the notes for which that cheque is alleged to have beengiven in payment.
A negotiable security as a bill or note endorsed or delivered toand taken by the creditor on account of a simple contract debtpresumptively operates as conditional payment—that is, paymentwith the condition that it is paid when due—and that the debtrevives if it is. dishonoured (Sayer v. Wagstaff, 5 Beav. 415, 13L. J. Ch. 161).
If the bill or note is given and taken in satisfaction and dischargeof tiie debt, the creditor takes upon himself the risk of dis-honour, and the subsequent dishonour does not revive the debt(Sayer v. Wagstaff, ubi supra).
Whether a bill or note is given or taken in satisfaction, or asconditional payment, is question of fact as to the intention shownby the parties (Goldskede v Gotrell, 2 M.W. 20).
Again, if a creditor chooses for his own convenience to take a bill,note, or other form of credit of a third party, which is offeredinstead of cash, it is an absolute payment in satisfaction of thedebt, and he cannot upon dishonour of the security have recourseto his remedy for the debt (Strong v. Hart, 6 B. & C. 160).
Upon these principles the giving of a cheque on a banker,whether payable to bearer or to order, if accepted on account of adebt, Is equivalent to payment, and suspends the remedy until thecheque has been presented for payment and dishonoured (Houghv. May, 4 A. & E. 954).
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A creditor, however, taking a cheque in preference to cash does.September 18. not preclude himself from resorting to his original claim uponMibdkbton dishonour of the cheque (Everett v. Collins, 2 Camp. SIS).
J*Finally, a creditor who takes a cheque may present it for
payment at any time until it is barred by the Statute of Limitation;but after a reasonable time (within the next day after receiving it)for presenting it has elapsed, he holds it at his own risk against thefailure of the bank; and if the money is lost through that failurethe drawer to that extent is discharged, the holder becomingcreditor of the banker to the same extent (Bills of Exchange Act,1882, section 74 ; Robinson v. Hawksford, 9 Q. B. 52 ; Laws v.Rand, 27 L. J. C. P, 76); Leake on Contracts.
There are two reasons why an endorsed cheque should bepromptly presented, the first being that if the drawer suffersactual damage through the delay, as by the failure of the bank, heis discharged to the extent of such damage (section 74 of the Billsof Exchange Act, 1882); and secondly, that if it is not presented forpayment within a reasonable time after endorsement, the endorserwill be . discharged (section 45 (2) Bills of Exchange Act, 1882).
In this case the plaintiff’s agent received Usoof’s cheque on1st December, dated 30th November, 1900, and endorsed by thesecond defendant apparently without any stipulation, and it wasnot presented for payment till 6th February, 1901, when it wasdishonoured.'
Plaintiff's agent admits business dealings between plaintiff andUsoof after the receipt of the cheque, and that he used often togo to Usoof’s boutique on business, but never mentioned thischeque, and says, “We looked for payment to second defendant’sfirm.”
It is probable, I think, as the learned District Judge believes,that presentment of the cheque was delayed to favour Usoof.The holding of the cheque without presentment for payment atUsoof’s bankers for so long a time goes a loug way towardsrebutting the presumption that it was taken as conditionalpayment.
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The learned District Judge has given full and sufficient reasonsfor not believing Mather, the second defendant’s partner, andMeyappa, as to the second defendant requesting the plaintiff or hisagent to delay presenting the cheque for payment; and I cannotsee any reason for saying he is wrong.
The conclusion I arrive at on the question of feet is that thecheque was received by the plaintiff from the second defendant aspayment in cash or absolute payment, it being probably believedthat even if the money was not got from the drawer it would be
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possible to resort to the endorser on the cheque by action ifnecessary.
The second defendant gave the plaintiff a cheque endorsed tohim, which the plaintiff took and treated as payment in cash.
Whether or not the drawer had funds to meet the cheque doesnot seem to me to be a question affecting the position of thesecond defendant as endorser here, unless it could be shown thathe fraudulently represented that the drawer had funds. It wouldseem the plaintiff asked for the cheque, which he knew would bedrawn by Usoof.
The plaintiff may have overlooked the' provisions of section 46,sub-section (2), of the Bills of Exchange Act when he elected totreat the cheque as payment by the second defendant, and this,omission on his part will probably limit his remedy on the chequeio proceedings against the drawer only.
The learned District Judge says there is no explanation as towhy the second defendant wanted to give plaintiff at first acheque for Be. 4,088.21.
It would seem the plaintiff's agent asked for it, and as therewere other outstanding accounts (apparently from the other partof the judgment in this suit unappealed against) due from thesecond defendant to the plaintiff, it may be that plaintiff, knowingof the exact amount the second defendant would receive underthe cdmposition deed, and of its having been paid, notified thatsum as a convenient one for payment on account.
I think, therefore, that the decision of the District Judge wasright, and this apeal must be dismissed with costs.
Grenier, A.J.—I agree to dismiss this appeal.
1903.
September 18.
Middleton,
J.