2. GUARANTY 67-DISCHARGE OF GUARAN-[ decretal sale the land brought $1,324.97, less TOR-NOTICE OF DEFAULT.

Shirley Tisdale died in June, 1912, without having paid the $500 note due January 1st of that year or either of the others. The administrator of his estate instituted a suit to settle the estate. Hollingsworth was made a defendant, and he filed the notes and asserted his lien on the land mentioned. Upon Duv. 77.

But the extension must be based on a binding agreement, founded upon consideration, and for a definite time. 20 Cyc. 1472; 32 Cyc. 202. Mere indulgence by a creditor to the debtor, or even a promise by the creditor

Viewed in the light of these rules, the evidence for appellant fails to sustain his plea of discharge from liability in virtue of the alleged extension of time. Judgment affirmed.

[3, 4] 3. Section 120 of the Negotiable Instruments Laws provides that a person secondarily liable on the instrument is discharged (subsection 6) by any agreement binding upon the holder to extend the time of payment or to postpone the holder's right to enforce to extend the time of payment of the debt, the instrument, unless made with the assent will not operate to discharge the surety or of the party secondarily liable, or unless the guarantor; a contract valid and complete in right of recourse against such party is ex- all its essentials is requisite. Barber v. pressly reserved in the original instrument. Ruggles, 87 S. W. 785, 27 Ky. Law Rep. 1077. A guarantor is secondarily liable. Section It must be for a definite time and based on 191, Negotiable Instruments Law. And as a valid consideration. Daviess County Bank further defense appellant pleaded that when & Trust Company v. Wright, 129 Ky. 21, the $500 note matured, on January 1, 1912, 110 S. W. 361, 33 Ky. Law Rep. 457, 17 L. R. appellee agreed with Tisdale that, if he A. (N. S.) 1122. would pay the interest accrued and place improvements upon the land to that extent, an extension of time of payment of that note for one year would be granted; that this agreement was made without appellant's knowledge or assent; that appellee thereby waived the right to declare a precipitation of the whole indebtedness, and, in effect, ex-HODGE TOBACCO Co. v. SEXTON et al. tended the time of payment of all the notes, (Court of Appeals of Kentucky. Oct. 15, 1915.) and thus released appellant from liability thereon. Whether such an extension of time would have released the guarantor from liability on any note other than the $500 one is a question we find it unnecessary to disfor appellant by his proof failed to sustain the allegations of his answer. Such extension of time was sought to be proven by the testimony of a brother of Shirley Tisdale in regard to certain statements made to him by appellee. His testimony on this subject was as follows:

"Q. Did you ever have any talk with Mr. Hollingsworth about these notes that Shirley Tisdale died owing him; if so, when? A. Well, I don't know; the day of the sale-I don't remember what day it was-the day the place here was sold, we talked a little about the busiress here in Eddyville. He told me that my brother had paid the interest on the notes, but had not paid any of the principal; that he came to him and told him he could pay the interest on the notes, but couldn't pay the principal and have money to do what he wanted to do on the farm; that he would like to use the money on the place, what he had left, and that he told him it would be all right; and that he did pay him the interest. * *I think that was all that was said about the notes, anyway. Q. Did he say how much money your brother told him that he could pay or that he wanted to use in improving the land? A. Didn't specify the amount, that I remember of, at all that he wanted to use. Q. Did he tell you that he consented that your brother might do this? A. Yes; said to pay him the interest and he extended the time."

*

This conversation is denied by Hollingsworth; but, conceding that it was had, there is no showing of such an extension as would operate to release the guarantor.

1. PLEADING 180-REPLY-SCOPE OF.

Under Civ. Code Prac. § 98, subsecs. 1, 2, 3, and 4, declaring that a reply may contain a traverse, a statement of facts avoiding a defense, a counterclaim, or a cross-petition, a reply cannot, where another has intervened as a defendant, set up against such person a cause of action which was not contained in the petition, and in cases of an attempt to do so it should be stricken.

Cent. Dig. §§ 358-384; Dec. Dig. 180.]
[Ed. Note.-For other cases, see Pleading,
2. APPEAL AND ERROR 171-CHANGE OF
THEORY ON APPEAL.

Where the intervening defendant, after overruling of its demurrer, filed a rejoinder to the reply which set up a wholly new cause of action against it, the case on appeal will be disposed of on the theory that the reply took the place of an amended petition; for, where the case is disposed of below on one theory, the theory cannot be changed.

[Ed. Note. For other cases, see Appeal and Error, Cent. Dig. §§ 1053-1063, 1066, 1067, 1161-1165; Dec. Dig. 171.]

3. PLEADING 196, 355 - DEMURRER SCOPE OF.

be set up by reply instead of amended petition, Where a cause of action is attempted to the defect can be reached by motion to strike

and not demurrer.

[Ed. Note. For other cases, see Pleading, Cent. Dig. §§ 453-455, 1102-1110; Dec. Dig. 196, 355.]

4.

PRINCIPAL AND AGENT 145 - UNDISCLOSED AGENCY-LIABILITY OF PRINCIPAL.

Persons giving credit to the agent of an undisclosed principal may recover from the business of his agency, an undisclosed principrincipal moneys furnished the agent for the pal being bound by the acts of his agent to the same extent as a disclosed principal.

[Ed. Note. For other cases, see Principal and Agent, Cent. Dig. §§ 499, 513-520; Dec. Dig. 145.]

"The extension of the time of payment given by the creditor to the principal is an alteration of a very material part of the contract, and 5. PRINCIPAL AND AGENT 25-ESTOPPEL TO unless consented to by the surety (or guaran- DENY AGENCY. tor), such extension or valid agreement for ex- As an estoppel is raised only where the tension for a definite time will operate to dis-owner of property or of a right knowingly makes charge him from liability for such payment." misrepresentations or acts in such a manner Elliott on Contracts, § 3968. that another not knowing the facts is misled

コ

the amount of the note which they had, as | An "estoppel" means where one is the ownsureties, been obliged to pay for him. The er of property or has a right, but is precludappellant was not mentioned in any way in the petition and no recovery sought of it in the petition. The only cause of action attempted to be stated against the appellant was in the reply of the appellees, and it was only therein that a recovery was sought against it. By the provisions of section 98, subsecs. 1, 2, 3, and 4, of the Civil Code, it is very evident that, under the state of case and the recovery here sought, a plaintiff cannot maintain a cause of action and seek a recovery of one made a defendant by stating a cause of action and seeking a recovery from such person in a reply. According to the provisions of the Civil Code, the plaintiff must necessarily seek a recovery in his petition, or by an amended petition. The appellant, if it did not desire to contest upon the merits the cause of action stated against it in the reply, should have resorted to a motion to strike out such part of the reply as undertook to maintain a cause of action and a recovery against it, instead of undertaking to reach that question by a demurrer. The appellant, however, failed to make any motion to strike out from the reply, but filed a rejoinder, after its demurrer was overruled, in which it made an issue with the plaintiffs upon the cause of action stated against it. In the case of Ruffner v. Ridley, 81 Ky. 165, this court held that, where a reply is treated by the lower court and parties as an amended petition, it will be so treated by this court.

ed from claiming the property or to assert the right on account of some representation or act of his in regard to the property or right, which has induced another, not knowing the facts, to act to his prejudice. An element that is essential to make an equitable estoppel is that the person who is invoking it must have been influenced by or relied upon the representations or conduct of the person sought to be estopped, and was thereby induced to do something to his prejudice. Taylor v. Jenkins, 65 S. W. 601, 23 Ky. Law Rep. 1574; Smither v. McGinnis, 35 S. W. 630, 18 Ky. Law Rep. 134; Wilson v. Scott, 11 Ky. Law Rep. 370. It is also essential that the one to be estopped must have had knowledge of the facts, and the one relying upon the estoppel must have been ignorant of the truth, and was led into doing something that he would not have done but for the silence of the one sought to be estopped. Newell v. Dunnegan, 1 Ky. Law Rep. 354; Milby v. Akridge, 59 S. W. 18, 22 Ky. Law Rep. 867; Watson v. Prather, 65 S. W. 439. There is no allegation that the tobacco, which was attached, was in Whaley's possession when appellees became his sureties, or paid the note, or that the tobacco was ever in the possession of Whaley, or that he was claiming or pretending that it was his own at the time. Neither is there any allegation that appellant ever pretended, by word or act, that the to[4] Persons giving credit to an agent, who was no act nor silence on the part of appelbacco was owned by Whaley. Hence there has an undisclosed principal, may maintain an action against the principal for the mon- prejudice in becoming the sureties of Whalant, which induced appellees to act to their eys furnished, upon his discovery, and an undisclosed principal is bound by the acts of ley. The mere fact that a creditor believes his agent within the scope of his agency, to that property is owned by his debtor and the same extent as a disclosed principal, does not estop the real owner from assertcauses an attachment to be levied upon it and if it was true, as alleged in the reply, ing title to it, unless the owner has, by his that the appellant, as the principal, borrow- acts or silence, when he ought to speak, inthat the appellant, as the principal, borrowing title to it, unless the owner has, by his ed the money which Whaley received upon the note executed to the bank, as the agent of appellant, and that the transaction was for appellant, and the money to be put into its business and it was so used, it seems that the appellees stated a cause of action entitling them to recover of the appellant, and for that reason its demurrer, upon the ground that no cause of action was stated against it, was not well taken. For the same reason, the demurrer to the third paragraph of the reply was properly overruled.

[5] The demurrer to the second paragraph of the reply, wherein it was attempted to plead an estoppel against appellant claiming to be the owner of the tobacco, should have been sustained. No fact is alleged showing that appellant ever knew of the fact of the appellees becoming surety of Whaley, neither is any fact or circumstance alleged, which would show that there was ever any duty imposed upon the appellant to give in

duced or caused the creditor to do some act duced or caused the creditor to do some act to his prejudice in regard to it.

[6] The question left to be determined is whether there was any evidence which conduced to show that the appellant borrowed the money in controversy, through its agent, Whaley, or that Whaley was the agent of appellant, with authority to borrow money for it, and did borrow this money for appellant. If there was any evidence to support this averment, then the case should have been submitted to the jury, otherwise it should not have been. The statements of the witnesses as to what Whaley said about being the agent of appellant were not competent evidence against appellant to prove such agency, and should have been excluded. It should be stated that the three appellees each testified that they had no knowledge, at the time they became the sureties of Whaley, that he was an agent of the appellant,

to satisfy the note, and not to the appellant an entire failure of proof to show that the or any one else. The proof shows, without money was invested in the business of appelcontradiction, that on the 10th day of Decem- lant, but, instead thereof, the proof conduces ber, 1913, Whaley entered into a contract to show the contrary, altogether. If Whaley, with the appellant, by which he sold to the by an arrangement thereafter with appelappellant an unlimited quantity of tobacco lant, by which he became its agent, incurred of certain dimensions and at certain prices. expenses which he would be entitled to reThere was no provision in this contract that cover against it, the appellees, because of Whaley should buy tobacco at all. During his indebtedness to them, could not be subthe life of this contract he could not be con- stituted to his rights against appellant, in sidered the agent of appellant in any sense. the absence of any privity between him and On the 11th day of December, the day follow- appellees. The only way in which appellees ing the making of the contract between him could reach reach what appellant might owe and the appellant, he executed the note and Whaley would be by means of a garnishment obtained the money in controversy, and the of appellant in a proper action for that purappellees became his sureties upon the note. pose, and the recovery would have to be Whaley was introduced as a witness for ap- upon the basis of what appellant owed pellees, and is the only person who could Whaley, and not upon the basis of appellant possibly know, so far as the evidence dis- being their debtor. closes, what he did with the proceeds of the note, and he stated that at the time he executed the note he was not an agent of appellant, but was preparing to open up and conduct a business of his own, in buying tobacco and delivering it to appellant, under the contract that he had with it, and that he used the entire proceeds of that note in expenses incurred by him while operating under that contract. After that time, 10, 15, 20, or 30 days, he did enter into an arrangement with appellant, by which he became the agent of appellant in buying tobacco and shipping to it.

The court should therefore have sustained the motion for a direct verdict by the jury. It being admitted in the pleadings that appellant owned the tobacco, and no sufficient grounds shown to estop it from claiming it, the court should have discharged the attachment levied upon it as the property of Whaley.

The judgment appealed from is therefore reversed as to the Hodge Tobacco Company, and the cause remanded for proceedings consistent with this opinion.

AVERY BUILDING ASS'N v. COMMON

WEALTH.

(Court of Appeals of Kentucky. Oct. 14, 1915.) 1. BUILDING AND LOAN ASSOCIATIONS 4FORMATION-CHANGE OF NAME.

Where an existing corporation, to comply with Ky. St. § 856, providing that the words "Building Association" must form a part of the name of every building and loan association, added to its name, Home and Savings Fund Company, the words "Building Association," under the circumstances the amendment of the name did not create a new corporation, as it did not change in any material manner the name or the powers or privileges conferred on the original corporation by the act creating it.

[7] It seems that Whaley and appellant have a controversy about whether the appellant should pay him for certain expenses incurred by him in conducting the agency he had for it, in addition to the commissions paid him for his services; but, if his testimony can be believed, no part of the proceeds of the note, upon which appellees were his sureties, was invested in any of those expenses paid by him after he became the agent of appellant, and there is not a particle of testimony disclosed by the record to the contrary. There is no contradiction in the proof that Whaley was not the agent of appellant when he borrowed the money and appellees became his sureties, and, of course, the appellant could not be held as borrowing this money through Whaley, as its agent, when in fact and truth Whaley was not its agent. The only cause of action which appellees Where the articles of incorporation of a could have would be one against Whaley, to building association by amendment in successive recover from him the money paid for him by years increased the capital stock and authorized the association to increase its indebtedness them, as his sureties, or, if Whaley was the above the amount designated in its original agent of appellant at the time and had au- charter, such amendments did not render the thority to borrow money for it, appellant association a new corporation, to subject all of would then be the principal, although undis-its capital stock to the payment of an organiza

[Ed. Note.-For other cases, see Building and Loan Associations, Cent. Dig. § 4; Dec. Dig. 4.]

3

2. BUILDING AND LOAN ASSOCIATIONS FORMATION-INCREASE OF STOCK AND IN

DEBTEDNESS.

tion tax.

[Ed. Note.-For other cases, see Building and Loan Associations, Cent. Dig. § 3; Dec. Dig.. 3.]

closed at the time, and appellees could main-
tain their action against it; but there is a
total failure of proof to show, either that
Whaley was the agent of appellant at the
time he incurred the obligation, or that he
had any authority of any kind to borrow
money for appellant, and there is, likewise, was

3. BUILDING AND LOAN ASSOCIATIONS 3FORMATION-EXTENSION OF FRANCHISE AND CHANGE OF NAME.

The Home and Savings Fund Company organized in 1888, prior to the enactment