ous; 35 or a payment made on account of another debt which is not yet due 36 is a sufficient consideration. 39 An executory agreement may be a sufficient consideration.37 This includes an agreement to pay to the holder another debt before its maturity,38 but not a promise to pay such other debt, if already due, or a promise to pay such other debt when it becomes due.40 Likewise an agreement to pay the debt of a third person is a sufficient consideration.11 So an agreement by a stockholder that the payment of a note due him from the corporation be deferred until the payment of present and future outstanding creditors is supported by similar agreements by the other stockholders who held similar notes.42 On the other hand, an unperformed agreement to give a confession of judgment,43 a request by the surety on a note that the holder should not issue execution on it, or a release on the maker's part of a defense Ind. 222), (5) at least prima facie (Batavian Bank v. McDonald, 77 Wis. 486, 46 NW 902), (6) and this is so a fortiori where a receipt is given for the interest in advance and a renewal note is taken (Springfield First Nat. Bank v. Leavitt, 65 Mo. 562). 44 [b] Payment of future interest at a higher rate than that originally stipulated is sufficient. White V. Whitney, 51 Ind. 124; Seattle First Nat. Bank v. Harris, 7 Wash. 139, 34 P 466. [c] Where the anticipated period consisted of one half holiday and two days which were dies non juridicus, payment of interest on a note in advance is neither prima facie proof nor presumptive evidence of agreement to extend. Lancaster v. Prussing, 139 Ill. A. 33 [aff 234 Ill. 462, 84 NE 1062]. 35. See infra § 648. 36. Rigsbee v. Bowler, 17 Ind. 167. [a] Payment of other matured debt (1) is not a sufficient consideration for an extension (Wolz v. Parker, 134 Mo. 458, 35 SW 1149), (2) although the maker was induced by promise of an extension to borrow the money for the payment (Pomeroy v. Slade, 16 Vt. 220). 37. Drescher v. Fulham, 11 Colo. A. 62, 52 P 685 (the promise of a maker of a note to the payee, a building and loan association, that, in consideration of an extension of time for payment she would remain in the association as a member and would pay her dues thereafter, together with the payment of some of such dues, is a sufficient consideration to support the contract); Horton Bank v. Brooks, 64 Kan. 285, 67 P 860 (holding that, where the holder of a note on which there is a surety agrees with the maker to extend the time of payment, if the maker will contract with a stranger, the said holder to be the beneficiary of the contract under which such maker is liable to respond in damages for breach of contract to the third person, it constitutes a sufficient consideration moving from the maker of the note to the holder to support the agreement to extend); McKinnon v. Palen, 62 Minn. 188, 64 NW 387. [a] Agreement to "make sacrifices."-An agreement between a merchant and his creditor, whereby the merchant is to have an extension of time in which to pay notes, and he is to "make sacrifices" to pay the notes, there being no agreement to pay anything before maturity, or interest for any specified time beyond maturity, is without consideration. Marshall Field Co. v. Oren Ruffcorn Co., 117 Iowa 157, 90 NW 618. 38. Kester v. Hulman, 65 Ind. 100; Buck v. Smiley, 64 Ind. 431; Menifee 49 [646] b. Giving Additional Security. The giving of new security is a sufficient consideration for a valid extension or forbearance,18 even, it has been held, after the note is overdue." Thus new signatures, furnished as additional security, are sufficient,50 even though, it has been held, the signatures are invalid.51 So an agreement to improve the existing collateral, as for instance, to perfect the title to mortgaged land, is sufficient.52 [§ 647] c. Agreement to Pay Interest to Accrue in Future. Although the contrary is held in Indiana,53 New York,54 and Pennsylvania,55 the general rule is well settled that an agreement to pay interest v. Clark, 35 Ind. 304; Rigsbee v. | ing of a real estate mortgage. RobBowler, 17 Ind. 167. erson v. Blevins, 57 Kan. 50, 45 P 63. (8) The giving of a mortgage, even though the holder could have avoided it at his option for false representation made by the maker. Burnap v. Robertson, 75 Ga. 689. (9) The giving of a real estate mortgage, although the mortgaged property proves to be of insufficient value to satisfy the note. Underwood v. Sample, 70 Ind. 446. [a] The unperformed promise of an insolvent maker to pay another debt is not, however, sufficient. Bunker v. Taylor, 10 S. D. 526, 74 NW 450. Beasley v. Boothe, 3 Tex. Civ. 22 SW 255. 39. A. 98, 40. 41. Juchter v. Boehm, 63 Ga. 71. Kester v. Hulman; 65 Ind. 100 (the assumption of a mortgage by the_purchaser of the land); Clarke v. House, 16 NYS 777 (the assumption by a partner of the liabilities of his firm as represented by the note). 42. Amback V. Webster Woolen Co., 108 Me. 145, 79 A 381. 43. Hunt v. Knox, 34 Miss. 655. 44. Hogshead v. Williams, 55 Ind. 145. Tex.-Wylie v. Hightower, 74 Tex. 306, 11 SW 1118. See also Tunstall v. Clifton, (Civ. A.) 49 SW 244. Vt.-Paddock v. Jones, 40 Vt. 474. [a] Rule has been applied to: (1) A chattel mortgage. Lee v. Brugmann, 37 Nebr. 232, 55 NW 1053. (2) A conveyance of property which is apparently sufficient to satisfy the debt. Mobile Branch Bank v. James, 9 Ala. 949. (3) A deed in trust to sell for the payment of the note. Lee v. Dozier, 10 Humphr. (Tenn.) 447. (4) A deed of trust of property of the maker not otherwise liable to execution. Semple v. Atkinson, 64 Mo. 504. (5) Part payment and new collateral. Nott v. State Nat. Bank, 51 La. Ann. 871, 25 S 475. (6) The giving of new priority to an existing mortgage. Wylie v. Hightower, 74 Tex. 306, 11 SW 1118. (7) The giv [b] The giving of a new note (1) is sufficient (Place v. McIlvain, 1 Daly (N. Y.) 266, a postdated check; Canton Chemical Co. v. Pegram, 112 N. C. 614, 17 SE 298, a renewal note), (2) but the debtor's own note is not available as a security for an indefinite extension (Atlantic Nat. Bank v. Franklin, 55 N. Y. 235), (3) nor is the mere promise to transfer another note if the amount was not otherwise realized, such promise not being enforceable (Wadlington Gary, 15 Miss. 522), (4) nor the giv ing of a new note on which one maker's name is forged (Carter v. Columbia Bank, 16 SW 79, 12 KyL 968). V. [c] A promise to assume the debt made by a new party is sufficient Kester v. Hulman, 65 Ind. 100. 49. 50. Paddock v. Jones, 40 Vt. 474. Ind.-Trayser v. Indiana Asbury Univ., 39 Ind. 556. Iowa.-Gates v. Hamilton, 12 Iowa Tex.-Hall v. Johnston, 6 Tex. Civ. A. 110, 24 SW 861. Wash.-Merchants' Bank v. Bussell, 16 Wash. 546, 48 P 242 (new indorser). 51. Williams v. Jensen, 75 Mo. 681 (as that of a married woman). 52. McKinnon v. Palen, 62 Minn. 188, 64 NW 387. 53. Holmes v. Boyd, 90 Ind. 332; Hume v. Mazelin, 84 Ind. 574; Dare v. Hall, 70 Ind. 545; Starret v. Burkhalter, 70 Ind. 285; Miller v. Arnold, 65 Ind. 488; Chrisman v. Tuttle, 59 Ind. 155; Abel v. Alexander, 45 Ind. 523, 15 AmR 270 [overr Pierce v. Goldsberry, 31 Ind. 52]; Harter v. Moore, 5 Blackf. (Ind.) 367. But see Agnew v. Agnew, 38 Ind. A. 16, 77 NE 952. 54. Olmstead v. Latimer, 158 N. Y. 313, 53 NE 5, 43 LRA 685; Kellogg v. Olmsted, 28 Barb. 96 [aff 25 N. Y. 189]; Van Allen v. Jones, 23 N. Y. Super. 369 (especially where the extension is to be given indefinitely, so long as the interest is paid); Reynolds v. Ward, 5 Wend. (N. Y.) 501. See also New York Mut. L. Ins. Co. v. Aldrich, 44 App. Div. 620 mem, 60 NYS 195. 55. Rumberger v. Golden, 99 Pa to pay a lower rate of interest from the date of the execution of the old note up to the time of the extended payment, when the sum which it was agreed to pay was much less than what was due, or would become due, as interest, under the terms of the note."3 to accrue in the future, during the time extended or 56. Colo. Drescher v. Fulham, 11 Colo. A. 62, 52 P 685. D. C.-Walker v. Washington Title Ins. Co., 19 App. 575; Reed v. Tierney, 12 App. 165. Ill.-Dodgson V. Henderson, Ill. 360. 113 Iowa.-Conkling V. Young, 141 Iowa 676, 120 NW 353; Lahn v. Koep, 139 Iowa 349, 115 NW 877, 52 LRANS 327. E Kan.-Lorimer v. Fairchild, 68 Kan. 328, 75 P 124; Royal v. Lindsay, 15 Kan. 591 (at a higher rate); Eaton v. Whitmore, 3 Kan. A. 760, 45 P 450. Ky.-Alley v. Hopkins, 98 Ky. 668, 34 SW 13, 17 KyL 1227, 56 AmSR 382; Robinson v. Miller, 2 Bush 179. La.-Shaw v. Nolan, 8 La. Ann. 25 (at a higher rate). Mich. Ferris V. Johnson, 136 Mich. 227, 98 NW 1014. 39. Miss.-Keirn v. Andrews, 59 Miss. Mont.--Hale v. Forbis, 3 Mont. 395. Nebr.-Kittle v. Wilson, 7 Nebr. 76 (at a higher rate). Oh.-McComb v. Kittridge, 14 Oh. 348. Okl.-Adams v. Ferguson, 44 Okl. 544. 147 P 772. Tex.-Benson v. Phipps, 87 Tex. 578, 29 SW 1061, 47 AmSR 128; Robson v. Brown, (Civ. A.) 57 SW 83, 686; Zapalac v. Zapp, 22 Tex. Civ. A. 375, 54 SW 938; Angel v. Miller, 16 Tex. Civ. A. 679, 39 SW 1092. Wash.-Nelson v. Flagg, 18 Wash. 39, 50 P 571. Wis.-Fanning v. Murphy, 126 Wis. 538, 557, 105 NW 1056, 110 AmSR 946, 4 LRANS 666, 5 AnnCas 435 [cit Cyc]. Compare Whiffen v. Hollister, 12 S. D. 68, 80 NW 156 (where the facts proved did not bring the case within the rule). [a] Reason for rule.-"If the lender of money, secured by a note, after the same becomes due, contracts with the borrower that the time of paying the same shall be extended for one year, or for any other period, upon consideration that the borrower shall pay the legal or less rate of interest, why is not that a binding contract? The lender, by this contract, secures to himself the interest on his money for the year-and the borrower precludes himself from getting rid of the payment of the interest, by discharging the principal. By this contract, the right to interest is secured for a given period, and the right to pay off the principal, and get rid of paying the interest, is also relinquished for such period. Here, then, are all the elements of a binding contract. But, it is said there is no consideration for the extension of time, because the law gives six per cent. after the note is due. But the law does not secure the pay ment of this interest for any given period or prevent the discharge of the principal at any moment. There is precisely the same consideration [648] d. Promise to Pay, or Actual Payment of, Usury. Where the consideration for a promise to extend the time of payment of a note or bill is a promise to pay usurious interest, and the agreement is wholly executory on both sides and is void under the statute against usury, there is no consideration at all, and the agreement therefor neither precludes a suit by the holder nor discharges indorsers or sureties; nor does it make any difference, it has been [b] Illustration.-Where the parties to a note orally agreed that the maker should keep the money and pay interest thereon for a specified time beyond maturity, in consideration of which plaintiff extended the time for payment for the period agreed on, such extension was based on a sufficient consideration, under the rule that reciprocal promises are a sufficient consideration the one for the other. Lahn v. Koep, 139 Iowa 349, 115 NW 877, 52 LRANS 327 and note. [c] The promise must be deducible from the writing or conversation constituting the new contract. Ferris v. Johnson, 136 Mich. 227, 98 NW 1014. 57. See infra § 648. 58. Ill.-Dodgson V. Henderson, Iowa. Conkling v. Young, 141 Iowa Ky.-Alley v. Hopkins, 98 Ky. 668, Me.-Chute v. Pattee, 37 Me. 102; Warren Academy v. Starrett, 15 Me. 443. N. H.-Fowler v. Brooks, 13 N. H. 240; Bailey v. Adams, 10 N. H. 162; Wheat v. Kendall, 6 N. H. 504; Grafton Bank v. Woodward, 5 N. H. 99, 20 AmD 566 Oh.-Fawcett v. Freshwater, 31 Oh. Tex.-Benson v. Phipps, 87 Tex. 59. Lorimer v. Fairchild, 68 Kan. 328, 75 P 124; Eaton v. Whitmore, 3 Kan A. 760, 45 P 450; Kearby v. Hopkins, 14 Tex. Civ. A. 166, 36 SW 506. 60. Dodgson v. Henderson, 113 Ill. 360; Crossman v. Wohlleben, 90 Ill. 537; Bailey v. Adams, 10 N. H. 162. [a] Illustration.—À mere indorsement by the holder on a note that the time of payment is extended to a given day and that interest has been paid to such date at the same rate specified in the note, without any proof or showing that the interest was paid in advance, there being no date to such indorsement and no evidence that the principal debtor bound himself to keep the money or to pay interest for the time of such extension, will not discharge the surety. It is essential in such cases that both parties shall be bound by the agreement, or that it have mutu ality, in order to discharge the surety 63. Price v. Mitchell, 23 Wash. 742, 63 P 514. 64. Ala.-Cox v. Mobile, etc., R. Co., 37 Ala. 320; Kyle v. Bostick, 10 Ala. 589. D. C.-Green v. Lake, 13 D. C. 162. 126. Ind.-Lemmon v. Whitman, 75 Ind. 318, 39 AmR 150; Williams v. Boyd, 75 Ind. 286; Abel v. Alexander, 45 Ind. 523, 15 AmR 270; Halstead v. Brown, 17 Ind. 202; Braman V. Howk, 1 Blackf. 392. Compare Charlton Tardy, 28 Ind. 452. V. Ky.-Duncan v. Reed, 8 B. Mon. 382; Anderson v. Mannon, 7 B. Mon. 217; Scott v. Hall, 6 B. Mon. 285; Lewis v. Harbin, 5 B. Mon. 564; Tudor v. Goodloe, 1 B. Mon. 322. Me.-Berry v. Pullen, 69 Me. 101, 31 AmR 248; Williams v. Smith, 48 Me. 135. Md. Ives v. Bosley, 35 Md. 262, 6 AmR 411. Miss. Brown v. Prophit, 53 Miss. 649; Roberts v. Stewart, 31 Miss. 664. Mo.-Stillwell V. Aaron, 69 Mo. 539, 33 AmR 517; Wiley v. Hight, 39 Mo. 130; Moore v. Macon Sav. Bank, 22 Mo. A. 684. N. Y.-Billington v. Wagoner, 33 N. Y. 31; Fernan v Doubleday, 3 Lans. 216. N. C.-Charlotte First Nat. Bank v. Lineberger, 83 N. C. 454, 35 AmR 582. Oh.-Jones v. Brown, 11 Oh. St. 601. Pa.-Calvert v. Good, 95 Pa. 65; S. C.-Cornwell v. Holly, 39 S. C. Tex.-Payne v. Powell, 14 Tex. 600. Wis. Irvine v. Adams, 48 Wis. 468, 4 NW 573, 33 AmR 817; St. Maries v. Polleys, 47 Wis. 67, 1 NW 389; Meiswinkle v. Jung, 30 Wis. 361, 11 AmR 572. [a] An unenforceable verbal agreement to pay usurious interest (1) is not a sufficient consideration (Turner v. Williams, 73 Me. 466), (2) and would not prevent the indorsee's bringing suit, even in a court of equity (Wiley v. Hight, 39 Mo. 130). (3) The payment of it by a new note (McComb v. Kittridge, 14 Oh. 348, afterward paid in part; Moulton v. Posten, 52 Wis. 169, 8 NW 621) (4) or after the extension has expired (Smith v. Hyde, 36 Vt. 303), is not sufficient. [b] Void renewal note-Where, on the maturity of a note, a renewal note is given therefor under a usurious agreement, an indorser on both notes is not discharged from his li held, that at the expiration of the period of forbearance the usury was actually paid by the debtor.65 It is otherwise, however, if the promise to pay usury is not void under the statute, or is void only as to the excess,66 or if there is some other valid consideration in addition to the promise." Actual payment of usury. However, if usurious interest is not merely promised but actually paid in advance, in whole or in part, it is held in most jurisdictions that the holder, having received the same, is estopped to set up the usury, and that the payment therefore is a sufficient consideration for the ability on the first because of the usurious agreement in regard to the renewal note, where the usury invalidates the latter note. Leary v. Miller, 61 N. Y. 488. 65. Green v. Lake, 13 D. C. 162. 66. Ga. Parmelee v. Williams, 72 Ga. 42; Stallings v. Johnson, 27 Ga. 564. Miss.-Brown v. Prophit, 53 Miss. 649. N. H.-Wheat v. Kendall, 6 N. H. 504; Grafton Bank v. Woodward, 5 N. H. 99, 20 AmD 566. N. Y.-Fernan V. Doubleday, 3 Lans, 216. Oh.-Wood v. Newkirk, 15 Oh, St. 295; McComb v. Kittridge, 14 Oh. 348. [a] Criticism of rule.-"In some of the States the law makes the contract to pay usurious interest valid to the extent of the legal interest and void as to the excess; and in two cases cited in argument the court applied that law to the agreement for the extension of the overdue debt. Now, unless the law in express terms required that application, it seems to me there was error, and the court failed to distinguish between the original agreement to pay usurious interest for the forbearance received and this executory contract for extension. The distinction is very plain and simple. If a man receives money which is a legal consideration, and for that consideration promises to do two things, one legal and the other illegal, as, for instance, to pay the principal debt with legal interest, which would be legal, and also to pay a bonus, which would be illegal, there is no reason why he should not be compelled to carry out that part of his agreement which is legal and for which he has received full consideration and more than a full consideration. But if the promise to do two things-one illegal-is not given for money or other value received, but in consideration of another executory promise, such as a promise to give further time, this latter cannot be enforced by reason of the partial illegality of the promise which was its consideration. In other words the legal part of an undertaking can be enforced if the consideration for it is entirely legal, but an undertaking is void if any part of its consideration is illegal. It will be seen, therefore, that there is a wide difference between the original promise to pay a legal debt with legal and illegal interest, and a subsequent promise to pay that debt, and also illegal interest, in consideration of a promise to forbear or extend. In the former case the promise is supposed to be founded upon a legal executed consideration. In the latter case the promise to pay is founded upon an executor's promise to forbear, and this latter promise is vitiated by the partial illegality of the executory promise given as its consideration, and the agreement to forbear is therefore not binding." Green v. Lake, 13 D. C. 162, 181 (per Cox, J.). . 67. Stallings v. Johnson, 27 Ga. 564; Washington v. Tait, 3 Humphr. (Tenn.) 503 [as construed Wil 320]. [649] 4. Renewal Note. A bill or note given in son v. Langford, 5 Humphr. (Tenn.) | holding that the payee of this note could accept and retain more than the lawful rate of interest under an express agreement to extend the note for 60 days, and before the expiration of that period repudiate his contract by attempting to enforce its collection." Niblack v. Champeny, 10 S. D. 165, 167, 72 NW 402. 68. U. S.-Vary v. Norton, 6 Fed. 808. Ala.-Kyle v. Bostick, 10 Ala. 589. Cal. Smith v. Pearson, 52 Cal. 339. Ga. Scott v. Saffold, 37 Ga. 384; Camp v. Howell, 37 Ga. 312. Il-Myers v. Fairbury First Nat. Bank, 78 Ill. 257; Danforth v. Semple, 73 Ill. 170; Warner v. Campbell, 26 111. 282. Ind.-Lemmon v. Whitman, 75 Ind. 318, 39 AmR 150 [crit Chrisman v. Perrin, 67 Ind. 586, and foll Harbert v. Dumont, 3 Ind. 346, which held the usurious payment, which was not then recoverable by statute, beneficial to the holder]; White v. Whitney, 51 Ind. 124; Abel v. Alexander, 45 Ind. 523, 15 AmR 270; Hamilton v. Winterrowd, 43 Ind. 393; Cross v. Wood, 30 Ind. 378; Charlton v. Tardy, 28 Ind. 452; Calvin_v. Wiggam, 27 Ind. 489; Harbert v. Dumont, 3 Ind. 346. Compare Shaw v. Binkard, 10 Ind. 227. Iowa.-Kelly v. Gillespie, 12 Iowa 55, 79 AmD 516. Ky-Robinson v. Miller, 2 Bush 179; Duncan v. Reed, 8 B. Mon. 382; Kenningham v. Bedford, 1 B. Mon. 325. Mo.-Wild v. Howe, 74 Mo. 551; Stillwell v. Aaron, 69 Mo. 539, 33 AmR 517 [overr in effect Farmers', etc., Bank v. Harrison, 57 Mo. 503; Ritenour v. Harrison, 57 Mo. 502]. N. H.-Wright v. Bartlett, 43 N. H. 548; Grafton Bank v. Woodward, 5 N. H. 99, 20 AmD 566. N. Y.-Billington v. Wagoner, 33 N. Y. 31; Gloversville Nat. Bank v. Place, 15 Hun 564; Draper v. Trescott, 29 Barb. 401; Wies v. Sultzer, 1 NYCity Ct 1. And see La Farge v. Herter, 9 N. Y. 241; Froude v. Bishop, 25 App. Div. 514, 49 NYS 955. N. C.-Hollingsworth v. Tomlinson, 108 N. C. 245, 12 SE 989; Scott v. Harris, 76 N. C. 205. Oh.-Osborn v. Low, 40 Oh. St. 347; Blazer v. Bundy, 15 Oh. St. 57. Pa. Grayson's App., 108 Pa. 581. S. D.-Niblack v. Champeny, 10 S. D. 165, 72 NW 402. Tex.-Mann v. Brown, 7.1 Tex. 241, 9 SW 111 (the statute making usurious contracts only void as to interest and that only if specially pleaded). Vt.-Austin v. Dowin, 21 Vt. 38. & H. 504. W. Va.-Glenn v. Morgan, 23 W. Va. 467. Wis.-Fay v. Tower, 58 Wis. 286, 16 NW 558; Moulton v. Posten, 52 Wis. 169, 8 NW 621; Hamilton V. Prouty, 50 Wis. 592. 7 NW 659, 36 AmR 866; Riley v. Gregg, 16 Wis. 666. But see Chadwick v. Menard, 104 La. 38, 28 S 933 (construing statute). [a] "The authorities are conflicting, but we think the better rule is that, where the usurious interest has been paid, as in this case, it constitutes a sufficient consideration for the extension. The defense of usury is personal to the borrower and those in privity with him. Usury laws are intended to protect the borrower and we can discover no valid reason for [b] Criticism of rule.-Cox, J., in Green v. Lake, 13 D. C. 162, 180, said: "It is further held, by most of the cases (although some hold the other way), that even if usurious interest be paid in advance, that is a sufficient consideration to make the promise binding; and it is further held in a late case, that if usurious interest be paid for past forbearance, and also in consideration of future forbearance, that will be sufficient consideration, and that the agreement may be availed of by the surety as a defence; but the general current of authority is, that an agreement to forbear in consideration of an executory promise to pay usurious interest in the future for that forbearance is void under the statutes of usury. One or two cases were cited in argument in which the court said that it did not lie in the mouth of the creditor to set up the illegality of his own agreement; which is a singular proposition, because it amounts to this: that the creditor is not permitted to show that the agreement which he made is one which he could not enforce, and one which therefore must be void for want of mutuality. This is contrary to the whole current of decisions. I have had occasion to examine the cases cited, and I find that in every one of them the usurious interest was paid in advance, and that it was held that, the creditor having received the full consideration for his promise, it did not lie in his mouth to say that the agreement was void." [c] Even payment of usury by a new usurious note (1) is sufficient (Kelly v. Gillespie, 12 Iowa 55, 79 AmD 516; McComb v. Kittridge, 14 Oh. 348, where the greater part of it was afterward paid; Fay v. Tower, 58 Wis. 286, 16 NW 558; Moulton v. Posten, 52 Wis. 169, 8 NW 621), (2) especially where the note is secured by additional security (Camp v. Howell, 37 Ga. 312). (3) If made in consideration of the maker's note for usurious interest in advance the agreement for extension is valid (Scott v. Harris, 76 N. C. 205); (4) but not so if the statute makes such interest recoverable by action (Cross v. Wood, 30 Ind. 378; Shaw v. Binkard, 10 Ind. 227; Charlotte First Nat. Bank v. Lineberger, 83 N. C. 454 35 AmR 582). 69. Vilas v. Jones, 1 N. Y. 274. 70. Polkinghorne v. Hendricks, 61 Miss. 366; Meginnis v. Nightingale. 34 N. J. L. 461; Calvert v. Good, 95 Pa. 65; Shaffer v. Clark, 90 Pa. 94: Hartman v. Danner, 74 Pa. 36; Stone's River Nat. Bank v. Walter, 104 Tenn. 11, 55 SW 301; McKamy v. McNabb, 97 Tenn. 236, 36 SW 1091; Howell v. Sevier, 1 Lea (Tenn.) 360, 27 AmR 771. See Chadwick v. Menard, 104 La. 38, 28 S 933 (construing statute). renewal is supported by the consideration of the original bill or note,71 and is a sufficient consideration for an extension of time.72 [§ 650] E. Effect as between Parties-1. Accrual of Cause of Action.73 Renewal of a bill or a note or extension of the time of payment by a valid agreement between the maker or acceptor and the holder postpones the right of action and the commencement of the running of limitations until expiration of the period for which the extension is granted.74 Agreement as defense. It is held in some of the states that an agreement to extend the time of the payment by a debtor for a limited time, although founded on a valuable consideration, is in effect an agreement not to sue within that time, and cannot be pleaded in bar of an action brought within the time, but that the only remedy, under such circumstances, is an action for damages for breach of the 71. See supra § 352. 72. Hollingshead v. American Nat. Bank, 104 Ga. 250, 30 SE 728; Johnson v. Grayson, 230 Mo. 380, 130 SW 673. See also supra § 371. 73. Barring a recovery on the original consideration or on the original note see infra § 1069. 74. Ala. Ferguson v. Hill, 3 Stew. 485, 21 AmD 641. Cal.-Bridge v. Connecticut Mut. L. Ins. Co., 167 Cal. 774, 782, 141 P 375 [eit Cyc]; Bell v. San Francisco Sav. Union, 153 Cal. 64, 94 P 225; Kleinsorge v. Kleinsorge, 133 Cal. 412, 65 P 876; Koutz v. Vanclief, 55 Cal. 345. Ga.-Rodgers v. Rosser, 57 Ga. 319. Ill-Culver v. Johnson, 90 Ill. 91. Ind. Glidden v. Henry, 104 Ind. 278, 1 NE 369, 54 AmR 316. Iowa.-Cox v. Carrell, 6 Iowa 350. Kan. Olathe First Nat. Bank V. Livermore, 90 Kan. 395, 397, 133 P 734, 47 LRANS 274 [cit Cyc]; Royal, v. Lindsay, 15 Kan. 591; Wellington Nat. Bank v. Thomson, 9 Kan. A. 667, 59 P 178. La. Benedict v. Stow, 4 Rob. 390. Me.-Warren Academy v. Starrett, 15 Me 443. Mich. Morgan V. Butterfield, 3 Mich. 615. N. Y.-Pearl v. Wells, 6 Wend. 291, 21 AmD 328. Or.-Condon Nat. Bank v. Rogers, 60 Or. 189, 194, 118 P 846, 848. Tex.-Dalton v. Rainey, 75 Tex. 516, 13 SW 34. Vt. Paddock v. Jones, 40 Vt. 474. Wash.-Commercial Bank v. Hart, 10 Wash. 303, 38 P 1114. 2 Eng. Kendrick V. Lomax, [a] Illustrations-(1) An agreement by the payee of a note not to sue the maker until he has exhausted his remedy on certain collaterals is a modification of the contract, and is available by the maker in defense of an action on the note, brought by the payee without first having exhausted the collaterals. Morgan v. Butterfield, 3 Mich. 615. (2) Where the holder of an overdue note, for a valid consideration agrees not to sue the debtor for a limited time and, in violation of such agreement, commences a suit on the note before the expiration of the time agreed on, the debtor cannot sustain an independent action for a violation of such agreement. Pearl v. Wells, 6 Wend. 291, 21 AmD 328. (3) Where the maker, after stating the amount due to date on his overdue note, promised to pay an increased rate of interest if the holder would "extend time for payment of this balance for one year," the extension was for one year from the date of the agreement. Dalton v. Rainey, 75 Tex, 516, 13 SW 34. (4) contract, at least if the agreement was collateral to and not part of the note.76 But the weight of authority seems to be that an agreement made after the note becomes due, for its extension to a definite time, when supported by a valuable consideration, and otherwise valid, may be interposed as a bar to an action on the note, brought within that time." Where an agreement is made that a new note shall be given in renewal of an old one and that the old note shall be surrendered, and it is not in fact surrendered, no action can be maintained on the renewal note,78 and even where there is no agreement for a surrender the agreement to renew is not fully executed until such surrender.79 77 [§ 651] 2. Conditional Extension. If the agreement to extend is conditional, there is no extension unless the condition is complied with so and, if there is a breach of the condition, an action lies before the expiration of the period of extension.81 Where 78. Westacott v. Handley, 109 Minn. 452, 124 NW 226. But compare Olathe First Nat. Bank v. Livermore, 90 Kan. 395, 133 P 734, 47 LRANS 274 (holding that where a new note, payable at a future date, is taken for the same debt evidenced by a pastdue note, which is not surrendered, the parties are presumed to intend that action on the old note shall be suspended until the maturity of the new one, in the absence of anything to indicate a contrary intention). Where the maker of a note indorsed an independent consideration." Fish- [a] But offer to surrender in court on trial of suit on renewal note is sufficient. Carnegie Trust Co. v. Kleybolte, 74 Misc. 246, 134 NYS 69. 79. Hamiter v. State Nat. Bank, 106 Ark. 157, 153 SW 94. 80. Lowry Nat. Bank v. Fickett, 122 Ga. 489, 50 SE 396; Williams v. Wright, 69 Ga. 759; Marshall, etc., Bank v. Child, 76 Minn. 173, 78 NW 1048; G. M. & J. W. Magill v. Young, (Tex. Civ. A.) 153 SW 184; Winfree [b] Statute of limitations.-An v. Lexington First Nat. Bank, 97 Va. indorsement on a note, payable with 83, 33 SE 375. To same effect Mininterest, made several years after zey v. Mfg. Co., 25 Oh. Cir. Ct. 593. its maturity, stating that the maker [a] Illustrations.—(1) Where the renews the promise, is a renewal payee of a note maturing Jan. 1, against an action on which limita-1908, wrote to the maker in Notions commence to run at the date vember, 1907, that he would extend of the indorsement. Warren Academy v. Starrett, 15 Me. 443. 75. Vogel v. Harris, 112 Ind. 494, 14 NE 385; Williams v. Scott, 83 Ind. 405; Mills v. Todd, 83 Ind. 25; Fleury v. Roget, 7 N. Y. Super. 646. To same effect Bond v. Worley, 26 Mo. 253. But see Fisher v. Stevens, 143 Mo. 181, 44 SW 769 infra note 77. Measure of damages for breach of agreement to renew see Damages. 76. Webb v. Spicer, 13 Q. B. 886, 66 ECL 886, 116 Reprint 1502; Ford v. Beech, 11 Q. B. 852, 63 ECL 852, 116 Reprint 693; Upper Canada Bank v. Jones, 1 Ont. Pr. 185. 77. Fisher v. Stevens, 143 Mo. 181, 44 SW 769 [but see Bond v. Worley, 26 Mo. 253 supra note 76]; Condon Nat. Bank v. Rogers, 60 Or. 194, 118 P 848; Condon Nat. Bank v. Rogers, 60 Or. 189, 118 P 846, AnnCas1914A 101; Price v. Mitchell, 23 Wash. 742, 63 P 514. the time of payment for a year if interest was paid when due, but interest was not paid until about three months after maturity, there was no binding agreement extending the time of payment. City L. & T. Co. v. Sterner, 57 Tex. Civ. A. 517, 124 SW 207. (2) A holder of a note, agreeing to an extension of the time of payment on condition that the indorser consents, does not thereby release the indorser. Winfree v. Lexington First Nat. Bank, 97 Va. 83, 33 SE 375. [b] Payment of interest and giving security.-Where it is agreed that the time of payment of a draft shall be extended if the interest is paid in advance and the draft secured, a mere letter in response to a notice to pay, stating that the debtor is relying on the agreement for an extension of time, and is ready to comply with its terms, without any payment of the interest or giving of security, is not sufficient to entitle the debtor to the extension. Williams v. Wright, 69 Ga. 759. "It logically follows .. that a valid contract for the extension of the time for the payment of a note beyond the time specified by it for its payment, may be pleaded in bar to [c] Parol evidence is not admissian action upon the note brought ble to show that an extension or rewithin that time; otherwise such an newal of a note by a written indorseextension would not release the ment thereon containing no condition surety. A promissory note, like other was in fact conditional. Warren chattels, may, by subsequent agree- Academy v. Starrett, 15 Me. 443. ment by parol, be the subject-matter 81. Pyle v. Gallaher, 22 Del. 407, of contract, but any and all con- 67 A 197, 75 A 373; Costello v. Wiltracts with respect thereto in order helm, 13 Kan. 229 (holding that, in to be binding must be supported by an action on a note by the payee a note payable at a fixed time provides, in an indorsement thereon, that the maker may use the principal after maturity by payment of interest semiannually, it becomes due and payable whenever the maker fails to pay the semiannual interest.82 [§ 652] 3. Postponement of Maturity as to Subsequent Transferees. If a note is renewed at or after its maturity by giving a new note payable at a future day, a transferee of the renewal note before the day fixed for payment is a transferee before maturity.83 If, however, a note is extended by a mere indorsement thereon "after" its maturity, it has been held that the indorsement does not have the effect of renewing it so as to invest it with the negotiability it possessed before its original maturity, and that hence a subsequent transferee is not a purchaser before maturity;84 but a later decision in Louisiana materially modifies the rule in that state by limiting it to cases where the indorsements were not made for the purpose of extending the circulation of the instruments.85 At any event, if an indorsement extending the time is made before maturity, it makes a subsequent transferee before the expiration of the extended time a transferee before maturity,86 and the same is true where the indorsement is not dated.87 But a subsequent "independent" agreement, made at or about the time against the maker, an answer alleging an agreement by plaintiff that the time of payment at maturity should be extended if payment at maturity should not be convenient and practicable, without alleging that payment at maturity was either inconvenient or impracticable, did not state facts sufficient to constitute a defense); Shape v. Shape, 150 NYS 367. of maturity, does not continue the negotiable character of the instrument until the postponed date of maturity.88 So an extension without authority does not make the transferee one before maturity;89 and the same is true where the extension was by the holder without the knowledge or consent of the maker.90 [§ 653] 4. Stipulations in Old Note and in New Note. Where a note by its terms provides for its own renewal on certain conditions, and such conditions arise, so that it becomes renewed, the renewal also renews stipulations therein, such as a stipulation that the payee may declare the principal due on default in the payment of interest;91 and where a note is extended by a new agreement, a stipulation as to maturity on default in the payment of interest applies during the new term, unless excluded by the agreement.92 The validity and effect of provisions contained in a renewal note, and not in the original note, are to be determined as of the time when the renewal note is given.93 [ 654] 5. Release of Securities and Liens. Extension of the time for the payment or the surrender of a note at maturity and the taking of a new note, not in payment but in renewal merely, since it does not extinguish the original debt, does not release collateral security pledged for the payment of the notice of the provisions of the mort-, 85. Whitney Nat. Bank v. Cannon, 52 La. Ann. 1484, 27 S 948 (holding that, where, after its maturity, the maker of a note indorses upon it, "Payment of this note extended to [a fixed date], and signs his name, and thereafter negotiates said [a] Payment of interest.-Where note under circumstances which justhe debtor has the privilege of ex- tify the belief that he had contemtension, at his own pleasure, by pay-plated that the holder would put it in ing interest annually, he forfeits circulation as a live, unmatured, nesuch privilege by failure to pay interest. McCormick v. Wilson, 1 Ky. Op. 491. [b] Provision for giving mortgage. -A contract to extend the time of payment of notes on giving other notes secured by mortgage on good real estate is no defense to a suit on the original notes, where the mortgage was refused when tendered on the ground that the land was of no value, and that there was no title in the mortgagor, and these objections are not shown to have been unfounded. Nispel v. Laparle, 74 Ill. 306. [c] Where notes have been given for a patent right a subsequent independent oral agreement to extend the time of payment of the notes until the grantee can make the money out of the patent right is a defense, in an action on the note, only upon proof by the grantee that he has used due diligence to make the money or that such diligence would be useless. Ockington v. Law, 66 Me. 551. 82. Oskaloosa College v. Hickok, 46 Iowa 237 (holding also, that, if after such default the maker pays the interest, he is not for that reason entitled to an extension of the time of payment, the payment being merely a partial payment of the note). 83. Buchanan V. Drovers' Nat. Bank, 55 Fed. 223, 5 CCA 83; Davenport v. Stone, 104 Mich. 521, 62 NW 722, 53 AmSR 467. 84. Sagory v. Metropolitan Bank, 42 La. Ann. 627, 7 S 633; Marcal v. Melliet, 18 La. Ann. 223. [a] Stipulation for maturity on nonpayment of interest.-Where a note secured by a mortgage provided that, if the interest should not be paid as stipulated in the note, the whole note might, at the option of the holder, be treated as due and collectable, and also provided, "If this note is not paid at maturity, it is hereby renewed from year to year, at the option of the holder, until paid, and during such year the maker shall not have the right to pay the same," it was held that the renewal of the note by its terms renewed the gotiable instrument, and such note stipulation allowing the holder to is put in circulation, and is acquired declare the whole due for nonpayin good faith, for value, by a third ment of interest, and that, where inperson, without notice of equities terest was in default before the exbetween the original parties and be- piration of the renewed term, an fore the maturity fixed by the in-action might be brought by payee dorsement, such note is good in the to foreclose the mortgage. Kleinhands of such third person). sorge v. Kleinsorge, 133 Cal. 412, 65 P 876. 86. Sagory v. Metropolitan Bank, Whitney Nat. Bank v. Cannon, [a] Where there is nothing on [b] Presumption as to time of in- A. 88. Swan v. Craig, 73 Nebr. 182, 102 NW 471. 89. Merchants' L. & T. Co. v. Welter, 205 Ill. 647, 68 NE 1082. 90. Avirett v. Barnhart, 86 Md. 545, 39 A 532. [a] After note past-due by terms of chattel mortgage given to secure it, agreement between the maker and the indorser extending time of payment does not make an indorsee, with Cal. 412, 65 P 876. 91. Kleinsorge v. Kleinsorge, 133 92. Heath v. Achey, 96 Ga. 438, 23 SE 396. [a] Thus, where it appeared that before the maturity of a note the maker signed an application to a third person to obtain an extension, the application identifying the note, and that, after the granting of the extension, the maker gave the payee other notes for the annual interest to accrue, which also identified the main note, it was held that the main note was renewed and that the maker's original liability thereon was extended on the terms therein expressed, one of which was that, on default in the payment of any of the interest notes within thirty days after maturity, the principal should become due at the option of the holder. Heath v. Achey, 96 Ga. 438, 23 SE 396. 93. Bullard v. Mayne, (Tex. Civ. A.) 49 SW 522. [a] A note stipulating for attorney's fees given in renewal of a note for the purchase price of property containing no such stipulation, and after such property has been set aside as the homestead of the purchaser, creates no lien on the property for such fees, although it would have been otherwise if such a stipulation had been inserted in the original note. Bullard V. Mayne, (Tex. Civ. A.) 49 SW 522. |