Appeal, No. 104, Oct. T., 1958, from order of Court of Common Pleas No. 7 of Philadelphia County, Sept. T., 1955, No. 8784, in case of John E. Bittner v. John McGrath et al. Order affirmed.
Frank J. Strassner, Jr., for appellant.
Charles H. Greenberg, with him Robinson, Greenberg & Lipman, for appellees.
Before Rhodes, P.j., Hirt, Gunther, Wright, Woodside, and Watkins, JJ. (ervin, J., absent).
[ 186 Pa. Super. Page 478]
The defendants contracted with Narduc Construction Company for the erection of a motel on their land. We will refer to this contractor as Narduc. On February 8, 1954, the defendants executed a judgment note in the sum of $11,700 payable to Narduc covering construction costs. By three payments made by defendants the principal of the note was reduced to $8,000, and on surrender of the prior obligation the defendants on August 4, 1954 gave the contractor a new note in that amount. No waiver of the right to file mechanics liens had been filed of record. When defendants therefore were informed that two subcontractors had not been paid on completion of their work, by agreement of the defendants with Narduc, a payment of $2,600 made on the note on August 26, 1954, was divided between Narduc and the two subcontractors reducing the debt to $5,400. Thereupon a new judgment note was given by defendants to Narduc. Early in February 1955 the plaintiff, John E. Bittner, notified defendants that he had purchased the above $5,400 note and he then demanded payment. Defendants made three payments to Bittner thereafter which reduced the balance of the debt to $4,000. In each instance a new judgment note payable to Bittner was given by them. The note for $4,000 was dated April 26, 1955. Legal action was subsequently brought against the defendants by a plumber, and a second action was threatened by an electrician, for work performed by them as subcontractors of Narduc in the construction of the building. The defendants settled the two claims for a total payment of $2,000. Thereupon defendants made a demand on Bittner for a credit of $2,000 on the note held by
[ 186 Pa. Super. Page 479]
him. This was refused and on December 2, 1955, the plaintiff Bittner entered the note in judgment assessing his damages at $4,156.75. On February 27, 1956, the defendants petitioned to have the judgment opened and to be let into a defense, and on September 23, 1957, the rule granted thereon was made absolute. This is the plaintiff's appeal from that order.
The note of the defendants for $5,400 which was assigned to the plaintiff by Narduc authorized the confession of judgment (as did all other notes executed by the defendants) "as of any term". The note therefore was not negotiable. A note containing a warrant to confess judgment at any time is a non-negotiable instrument. Cf. Uniform Commercial Code of April 6, 1953, P.L. 3, 12a PS § 3-112(d); Shinn et al. v. Stemler, 158 Pa. Superior Ct. 350, 45 A.2d 242. Accordingly the plaintiff Bittner, by assignment, took that obligation of the defendants subject to every defense which they had or might have had against Narduc, the payee named in the note, regardless of whether Bittner, the assignee, knew of infirmities in the obligation.
In our view it is of no controlling importance under the circumstances that the defendants reduced the principal of the note which had been assigned by Narduc to Bittner by payments to him and on surrender of the former notes gave a new note for $4,000 to Bittner as the payee. Under the circumstances the payments on the $5,400 note and the giving of the new note for $4,000 to Bittner did not amount to a waiver of defense to the obligation of the defendants on the note in question.
After the original note had been reduced to $8,000 the defendants received notice from a roofing subcontractor that he had not been paid. The defendants thereupon paid this roofer $1,032 to forestall the ...