Supreme Court
Action No. 2 of 1984
7th March, 1984
Rajasingham, J., Q.C.

Mr. N.V. Dujon for the Plaintiff
No appearance for the first Defendant
Mr. D.B. Courtenay for the second Defendant

Action for balance due on a promissory note - Effect of the word 'cancelled' on face of promissory note - Sections 29 and 60 of Chapter 209 of the Laws of Belize as it relates to the discharge of a promissory note.

J U D G M E N T

The Plaintiff's Action against the first Defendant is for a sum of $612.44 being the balance due to the Plaintiff from the first Defendant against a sum of $2,134.00 paid by the Plaintiff to the second Defendant on a promissory note drawn by the first Defendant. The Plaintiff has sued the second Defendant in the alternative because he claims that the second Defendant, when it stamped the word "cancelled" on the face of the promissory note upon receipt of payment from him, deprived him of a cause of action against the first Defendant on the promissory note.

The evidence is brief. The first Defendant Hoare wished to borrow $4,000.00 from the second Defendant Bank. The Plaintiff was himself a client of the said Bank and the Bank was prepared to lend the money to Hoare if the Plaintiff Blanco would agree to endorse a promissory note, drawn in his favour by Hoare, over to the Bank. The promissory note "I.B.1" was drawn by Hoare in favour of Blanco and Blanco then endorsed it over to the Bank. The Bank then made the money available to Hoare by a simple book transfer on a debit note. Although all this was done on the one occasion when the parties met to arrange the transaction, the effect was a loan by the Bank to Blanco against the promissory note, which Blanco in turn would make to Hoare against the same note. The intention of all parties was that Blanco would, in the words of the Bank Manager Martin, "be indirectly responsible to the Bank although he did not get the money." In fact Blanco as endorser became directly liable on the promissory note.

The first Defendant Hoare commenced direct payments to the Bank as agreed between the parties, but after a few months defaulted on these payments. The Manager Martin then went to see Blanco and told him of the default and Blanco agreed to the Bank debiting his account with the full balance due. Although the Bank was entitled to call in the full balance, this, to my mind, appears to be rather harsh treatment of a client who to their knowledge was only an accommodating party; the Bank could, having included the interest for two years in the sum being recovered, as easily have continued to recover the sum in installments from Blanco's account. Instead they chose to recover their entire investment plus the two years interest which in any event already worked out to about 18% per annum, in one year. Having done so they stamped the word "cancelled" across the face of "I.B.1" and returned it to Blanco. The Manager Martin, who does not say he stamped this word on it himself and who did not arrange the transaction or make the endorsement in favour of the Bank on it, says that the Bank did not, by stamping the word "cancelled" in large letters across the face of the promissory note, "intend to discharge the note". However he did say that he never gave his mind at any time to just canceling the endorsement and, after much cross examination, that he would never accept a note with the word "cancelled" stamped across it nor would any Bank. This to my mind, is a clear admission that he does look on the stamping of the word "cancelled" across the face of a promissory note as having the effect of invalidating that note. Thus I am afraid I must conclude that when he says he did not intend to discharge the note when the word "cancelled" was stamped across it by someone, he is speaking an untruth because he himself would not accept such a note as still valid.

Mr. Courtenay referred to section 60 subsection (1) of Chapter 209 of the laws, arguing that the note was in fact discharged by payment. Sub section (3) paragraph (b) of the same section, however, states that that is not so in circumstances such as those in this case.

Mr. Courtenay also referred to section 29 of Chapter 209 and I agree that in this case Blanco, the Plaintiff, is an accommodation party and that payment by the accommodated party, which in this case is Hoare, would discharge the bill; I do not agree, however, with his submission that payment on behalf of the accommodated party would have the same effect where the payment is made by the accommodating party. Section 60 sub section (4) clearly envisages payment by the accommodated party only and not payment on his behalf by the accommodating party. I, therefore, find that the promissory note was discharged by the stamping of the word "cancelled" across the face of it because it was done with the full knowledge that it could have that effect.

The evidence shows that the Bank refused to rectify its error and that the first Defendant Hoare used this error to avoid payment. The first Defendant's liability has been established by the Bank's explanation of its actions.

I therefore give judgment against the first Defendant in a sum of $612.44 with interest at 12% per annum from the 8th December, 1982. I dismiss the alternative claim against the second Defendant. I award costs to the Plaintiff against both the first and second Defendants.

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