Hane v. Exten

Singley, J., delivered the opinion of the Court. John B. Hane is the assignee of the note of Theta Electronic Laboratories, Inc. (Theta) in the stated amount of $15,377.07, with interest at six per cent per annum. The note was dated 10 August 1964; stipulated that the first monthly payment of $320.47 would be due five months from date, or on 10 January 1965; and that “In the event of the failure to pay the interest or principal, ⁶⁷⁰ as the same becomes due on this Note the entire debt represented hereby shall at the end of thirty (30) days become due and demandable * * The note was assigned without recourse to Hane by George B. and Marguerite F. Thomson, the original payees, on 26 November 1965. A default having occurred in the making of the monthly payments, Hane took judgments by confession in the Circuit Court for Montgomery County on 7 June 1967 against Theta and three individuals, Gerald M. Exten, Emil L. O’Neil, and James W. Hane, and their wives, who had endorsed Theta’s note.

On motion of the Extens, the judgment was vacated as to them and the case came on for trial on the merits before the court without a jury. From a judgment for the Extens for costs, Hane has appealed. This case raises the familiar question: Must Hane show that the Extens were given notice of presentment and dishonor before he can hold them on their endorsement? The court below, in finding for the Extens, relied on the provisions of Uniform .Commercial Code (the U.C. C.), Maryland Code (1957, 1964 Repl.

Vol.) Art. 95 B. § 3-414(1) of the U.C.C. provides: “Unless the indorsement otherwise specifies (as by such words a.s ‘without recourse’) every indorser engages that upon dishonor and any necessary notice of dishonor and protest he will pay the instrument according to its tenor at the time of his indorsement to the holder or to any subsequent indorser who takes it up, even though the indorser who takes it up is not obligated to do so.” § 3-501 (1) (b) provides that “Presentment for payment is necessary to charge any indorser” and § 3-501 (2) (a) that “Notice of any dishonor is necessary to charge any indorser,” in each case subject, however, to the provisions of § 3-511 which recite the circumstances under which notice of dishonor may be waived or excused, none ⁶⁷¹ of which is here present. § 3-502 (1) (a) makes it clear that unless presentment or notice of dishonor is waived or excused, unreasonable delay will discharge an indorser. See 1 Hawkland, A Transactional Guide to the Uniform Commercial Code (1964) § 206 at 495-97. There was testimony from which the trier of facts could find as he did that presentment and notice of dishonor were unduly delayed. It is clear that Hane held the note from November, 1965, until some time in April 1967 before he made demand for payment.

U.C.C. § 3-503 (1) (d) provides that “Where an instrument is accelerated presentment for payment is due within a reasonable time after the acceleration.” “Reasonable time” is not defined in § 3-503, except that § 3-503 (2) provides, “A reasonable time for presentment is determined by the nature of the instrument, any usage of banking or trade and the facts of the particular case.” But § 1-204 (2) characterizes it: “What is a reasonable time for taking any action depends on the nature, purposes and circumstances of such action.” Reasonableness is primarily a question for the fact finder. Vandenberg v. Siter, 204 Pa. Super. 392 , 204 A. 2d 494 (1964); 11 Am. Jur.2d Bills and Notes § 754 (1963); 1 Anderson’s Uniform Commercial Code, Commentary, § 1-204:3 (1961) at 40.

We see no reason to disturb the lower court’s finding that Hane’s delay of almost 18 months in presenting the note “was unreasonable from any viewpoint.” See Maryland Rule 886 a. As regards notice of dishonor, § 3-508 (2) requires that notice be given by persons other than banks “before midnight of the third business day after dishonor or receipt of notice of dishonor.”