96 the property reached to satisfy a renewal note given after the transfer.1 [656] 7. Extinguishment of Old Debt.2 Where a note is given merely in renewal of another note and not in payment, the renewal does not extinguish the original debt nor in any way change the debt except by postponing the time for payment;3 and as a general rule the holder is entitled to the same rights and remedies as if he was proceeding on the original note.* original debt ** nor affect the holder's right to the Md. 222. Minn. Miller v. McCarty, 47 Minn. 321, 50 NW 235, 28 AmSR 375. N. Y.-Twelfth Ward Bank v. Samuels, 71 App. Div. 168, 75 NYS 561 [aff 176 N. Y. 593 mem. 68 NE 1125 mem]; Holland Trust Co. v. Waddell, 75 Hun 104, 26 NYS 980. N. C.-Maryland Nat. Bank v. Hollingsworth, 135 N. C. 556, 47 SE 618. Pa. Adair v. Decker, 34 Pa. Super. 153. S. C.-Allston v. Allston, 20 S. C. L. 362. Ont.-Hamilton Bank v. Shepherd, 21 Ont. A. 156. [a] Whether a note is paid or merely renewed depends on the intention. Flanagin v. Hambleton, 54 Md. 222. 95. Cal. California Nat. Bank v. Ginty, 108 Cal. 148, 41 P. 38. Colo-Collins v. Dawley, 4 Colo. 138, 34 AmR 72. D. C.-McNamara v. Condon, 9 D. C. 364. Mich. McMorran V. Murphy, 68 Mich. 246, 36 NW 60. Miss.-Cansler v. Sallis, 54 Miss. 446; Howell v. Bush, 54 Miss. 437. Mo.-Coney v. Laird, 153 Mo. 408, 55 SW 96; Christian v. Newberry, 61 Mo. 446; Lippold v. Held, 58 Mo. 213, N. C.-Barrington v. Skinner, 117 N. C. 47, 23 SE 90; Kidder v. Mcllhenny, 81 N. C. 123; Hyman v. Devereux, 63 N. C. 624. 5 [657] 8. Construction. The rules relating to the construction of contracts in general construction of an agreement to extend. 98. See generally Fraudulent Con- 99. See cases infra note 1. Ala.-Moore v. Spence, 6 Ala. 506. 343. Ky.-Lowry v. Fisher, 2 Bush 70, Miss.-Thomson v. Hester, 55 Miss. 656. govern the ties, without authority, in renewal of a note which they admit signing, plaintiff may amend his petition so as to declare on the orginal note and may take judgment thereon). Me.-Miller v. Hilton, 88 Me. 429, 34 A 266; Howard v. Hinckley, etc., Iron Co., 64 Me. 93. Minn. Miller v. McCarty, 47 Minn. 321, 50 NW 235, 28 AmSR 375. Miss.-Wade v. Thrasher, 8 Miss. 358. Mo.-Christian v. Newberry, 61 Mo. 446. N. M.-Albuquerque First Nat. Bank v. Lesser, 9 N. M. 604, 58 P 345. N. Y.-Jagger Iron Co. v. Walker, 76 N. Y. 521; Twelfth Ward Bank v. Samuels, 71 App. Div. 168, 75 NYS 561 [aff 176 N. Y. 593 mem, 68 NE 1125 mem]; Holland Trust Co. V. N. M.-Albuquerque First Nat. Bank v. McClellan, 9 N. M. 636, 58 PWaddell, 75 Hun 104, 26 NYS 980. 347; Albuquerque First Nat. Bank v. Lesser, 9 N. M. 604, 58 P 345. Tenn.-Trezevant V. Terrell, 96 Tenn. 528, 33 SW 109. ances. See generally Fraudulent ConveyKy.-Moore v. Thompson, 100 Ky. 2. Whether new bill or note con231, 37 SW 1042, 18 KyL 681; Bur-stitutes a payment see infra §§ 793dett v. Clay, 8 B. Mon. 287. 796. La.-Aillet v. Woods, 24 La. Ann. 193. 3. Brooklyn City First Nat. Bank Me.-Buck v. Wood, 85 Me. 204, 27 V. Gridley, 112 App. Div. 398, 98 A 103. NYS 445. But see Siemans, etc., Electric Co. v. Ten Broek, 97 Mo. A. 173, 175, 70 SW 1092 (where the court said: "The new note was a new contract, not a continuation of the old one, and is free from any conditions expressed in the old (Rogers v. Broadnax, 27 Tex. 238; 1 Randolph on Commercial Paper, sec. 94) and must be interpreted by its own terms and the liability of the defendant as maker or indorser be ascertained from the position his name occupies on the note. To resort to the old note alone to ascertain these facts would be to deny the parties the right to make a new contract and to engraft upon the new note a condition in the old which does not appear on the face of the new, and which the defendant did not offer to establish by any oral evidence"). [a] Where there have been several renewals of commercial paper, it is competent to go back to the original inception of the indebtedness, and to show who was then the beneficiary of the loan, since such renewals do not prove any change in the relations of the parties liable thereon among themselves. Water Power Co. v. Brown, 23 Kan, 676. R. I.-Nightingale v. Chafee, 11 R. I. 609, 23 AmR 531. S. C.-Allston v. Allston, 20 S. C. L. 362. See also Mortgages [27 Cyc 1075, 1410]. [a] Burden is on the maker to show that the renewal did not extend to the mortgage. Wilson v. Pickering, 28 Mont. 435, 72 P 821. [b] Burden is on mortgagee to show that the note was given in renewal. Funk v. Proctor, 61 SW 286, 22 KyL 1728. [c] Novation. It is otherwise of course where there is a novation and a distinct relinquishment of the security, by taking a new note and mortgage. Smith v. Bynum, 92 N. C. 108. 96. Honore v. Bakewell, 6 B. Mon. (Ky.) 67, 43 AmD 147; Dalton v. Rainey, 75 Tex. 516, 13 SW 34. See also Vendor and Purchaser. 97. Barrington v. Skinner, 117 N. C. 47, 23 SE 90. Compare McElwee v. Metropolitan Lumber Co., 69 Fed. 302, 16 CCA 232 (proper instruction to jury). 4. U. S.-McLaughlin v. Potomac Bank, 7 How. 220, 12 L. ed. 675. Ark.-Griffin v. Long, 96 Ark. 268, 131 SW 672, 35 LRANS 855, AnnCas 1912B 622. Ill.-Union Brewing Co. v. InterState Bank, etc., Co., 240 Ill. 454, 463, 88 NE 997 [cit Cyc]. Ky. Bank of America v. McNeil, [a] Thus, where a person sells 10 Bush 54; Lowry v. Fisher, 2 Bush goods conditionally, taking "rent" 70, 92 AmD 475. See also Bright notes in payment and reserving title v. First Nat. Bank, 106 Ky. 702, 51 until payment in full, the agreement SW 442, 21 KyL 313 (holding that, being properly registered as required where two out of the three makers by statute, the seller does not lose of a note, when sued thereon, set the security given him by the reser- up as a defense that the principals vation of title by renewing the notes, signed their names thereto as sure N. C.-Kidder v. McIlhenny, 81 N. C. 123. R. Pa.-Lytle's App., 36 Pa. 131; Adair v. Decker, 34 Pa. Super. 153. Ont.-Matthews v. Marsh, 5 Ont. L. 540, 23 CanLTOccNotes 154, 2 OntWR 247. Que.-Noad v. Bouchard, 10 L. C. 476; Brown v. Mailloux, 9 L. C. 252. Compare Brewster v. Chapman, 19 LCJur 301. See also Commercial Bank v. Williston, 12 N. B. 283. [a] Where the indorser of a note, on the representations of the maker that it has been paid, indorses another note jointly with him, which is turned over to the bank discounting the first note for an extension of the amount remaining due on the first note, in whose retention by the bank such indorser afterward acquiesces, the second note does not extinguish his liability on the first, but, he remains bound on both. Woods v. Halsey, 42 La. Ann. 245, 7 S 451. [b] Renewal after dissolution of partnership-In an action against the indorser of a promissory note, made in the name of a firm, it is not material that the partnership of the makers had been dissolved before the making of the note, it being the renewal of a note given during the existence of the partnership. Greatrake v. Brown, 10 F. Cas. No. 5,743, 2 Cranch C. Č. 541. 5. See Contracts [9 Cyc 577 et seq]. 6. U. S.-Moffatt v. Blake, 145 Fed. 40, 75 CCA 265 (holding that, where an overdue note is by agreement indorsed as extended on or before Oct. 1, 1902, at six per cent interest from March 27, 1902, the legal effect is to make six per cent the rate of interest from March until the time of payment, and not merely until Oct. 1, 1902). Cal-Rowland v. Watson, 4 Cal. A. 476, 88 P 495 (holding that under an agreement between the maker and the payee of a note to extend the note for two months and for the payment of "an additional bonus of fifty dollars per month for each month or fractional part of a month which said note shall be extended," the bonus can be collected for only ་ 8 [658] 9. Defenses in Actions on Renewal Notes -a. In General. As between the original parties, and as against transferees who are not bona fide purchasers for value, a renewal note is open to all defenses which might have been made against the original note, at least in so far as they relate to consideration, such as want or failure of consideration, fraud,10 usury,11 gambling debts,12 or other illegality.1 This does not apply, however, where a note is taken in payment and not in renewal.1 It is a defense to renewal notes that the signatures of the makers were obtained by fraud of the payee, in an two months, although the holder of the note did not enforce it until some months after the expiration of the extension). Kan.-Girard Trust Co. v. Owen, 83 Kan. 692, 112 P 619, 33 LRANS 262 (holding that, where the parties to an overdue note agree in writing, on a sufficient consideration, that a part of the debt shall be forgiven and the time for paying the balance extended, a provision therein that a default in payment of the interest shall mature the new principal implies that the debtor is not to forfeit the benefit of the reduction by a failure to meet promptly the terms of the readjustment). action by the payee, notwithstanding the makers were liable on prior notes for the same amount, where there are additional makers and cosureties on the new notes.1 15 Defense cured by renewal. However, where the defense is such that it can be and is cured by the renewal it cannot be urged.16 Thus, one who gives a note in renewal of another note, with knowledge at the time of a partial failure of the consideration for the original note, or of false representations by the payee, etc., waives such defense and cannot set it up to defeat or to reduce a recovery on the re[a] Renewal of note given for Bank, 94 Ky. 231, 21 SW 1050, 15 patent right. (1) Where a note KyL 4. given for the purchase price of a Mass.-Dewey v. Bell, 5 Allen 165, patent right and bearing the words Miss.-Union Nat. Bank v. Fraser, "given for a patent right" is after- 63 Miss. 231. ward surrendered and new notes taken in lieu thereof not bearing such words, the new notes are within a statute (2 Bates Annot. St. Oh. [1900] § 3178) (2) providing that a note, the consideration for which consists in whole or in part of the right to make, to use, or to vend a patent invention, shall have written or printed thereon the words "given for a patent right" and shall be subject to defenses in the hands of purchasers, and that it shall be so subject in the hands of a purchaser with knowledge of its consideration, although such words are omitted. Dulong v. Barnes, 45 Oh. St. 237, 12 NE Me.-Alden V. Camden AnchorRockland Mach. Co., 107 Me. 508, 78 A 977 (holding that a provision indorsed on a corporate note payable in one year that it would be re-735. newed unless stock was sold to pay [b] Material alteration.-A it is part of the contract and, as construed by the parties, operates to renew the note for a year on the maker's failure to sell such stock, execution of the new note being not essential to a renewal). Que. De St. Aubin v. Binet, 18 DomLR 739 [app dism 22 Que. K. B. 564] (holding that a "renewal" of a promissory note under the terms of a security given in respect of its indorsement is not necessarily restricted to another note made by the same parties, but may be shown by the attendant circumstances to include within the protection of the security the promissory note of another party; this result will follow where the latter had received the benefit of the original transaction and was obtained to substitute his direct obligation for the first note as a continuation of the original transaction and not with any intention of creating a novation, and where the indorser of the original note had indorsed the substituted note on the faith of such security with the concurrence of all the parties). [a] Where plaintiff agreed to give defendant all the time that he needed within which to pay a note, without specifying any particular time of forbearance, it is inferred, under Civ. Code § 1657, that a reasonable time was granted, and a forbearance for one year and one month after the rote was due would be a reasonable time. Pierce v. Avakian, 167 Cal. 330, 139 P 799. 7. Tyler v. Anderson, 106 Ind. 185, 6 NE 600. [a] Where the agent of the payee of a note takes another note in renewal thereof and, without the knowledge of such payee or of the maker, makes such note payable to himself, the original payee will be treated as the owner of the note, in an action thereon in the name of such agent, SO that whatever defense the maker might have had thereto as against such payee will be available. Tyler v. Anderson, 106 Ind. 185, 6 NE 600. 8. Highbaugh v. Hubbard, 6 KyL 511; Banque Provinciale v. Arnoldi, 2 Ont. L. 624, 21 CanLTOccNotes See also supra § 388. 582. note 9. Ga.-Dalton First Nat. Bank v. Mo.-Murphy v. Gay, 37 Mo. 535. R. I.-Mason v. Jordan, 13 R. I. 193. W. Va.-Ohio Valley Bank v. Lockwood, 13 W. Va. 392, 31 AmR 768. Failure of consideration for original note as defense in action on renewal note see infra § 1022. [a] New consideration. This does not apply of course where there is a new consideration. Commonwealth Ins. Co. v. Whitney, 1 Metc. (Mass.) 21. 10. 663. Ala. Kelly v. Allen, 34 Ala. N. Y.-Brown v. James, 2 App. Div. v. Ashman, 203 Pa. 536, 53 A 375. And see Sawyer v. Wiswell, 9 Al- [a] Fraud not discovered. The 11. Ky. Sydner v. Mt. Sterling Nat. Nebr.-Farmers' Bank v. Oliver, 55 Nebr. 774, 76 NW 449; McDonald v. Beer, 42 Nebr. 437, 60 NW 868; McDonald v. Aufdengarten, 41 Nebr. 40, 59 NW 762. N. Y.-Auburn Nat. Bank v. Lewis, 75 N. Y. 516, 31 AmR 484 [rev 10 Hun 468]; Feldman v. McGraw, 1 App. Div. 574, 37 NYS 434. Pa.-Schutt v. Evans, 109 Pa. 625, 1 A 76. Renewal in another state where usury laws are different see Usury [39 Čyc 903]. 12. Ala. Kuhl v. M. Gally Universal Press Co., 123 Ala. 452, 26 S 535, 82 AmSR 135. Ind. Kain v. Bare, 4 Ind. A. 440, 31 NE 205. Ky. Campbell County Bank V. Schmitt, 143 Ky. 421, 136 SW 625. Miss.-Martin v. Terrell, 20 Miss. 571. Tex.-Seeligson v. Lewis, 65 Tex. 215, 57 AmR 593. Wyo.-Swinney v. Edwards, 8 Wyo. 54, 55 P 306, 80 AmSR 916. See generally Gaming. 13. Wegner v. Biering, 65 Tex. 506 (a note given in consideration of an agreement not to prosecute for a crime). [a] Note for intoxicating liquors sold in violation of law. Holden v. Cosgrove, 12 Gray (Mass.) 216. [b] Note for Confederate moneyScudder v. Thomas, 21 F. Cas. No. 12,567, 35 Ga. 364. 14. Dewey v. Bell, 5 Allen (Mass.) 165 (holding that, where the indorser of a note which had been discounted at a bank assisted the maker to raise money to pay it at its maturity, by indorsing a new note and disposing of it for him, and delivered to him the money so rajsed, which was applied in payment of the first note, the second note was not a renewal of the first and was not affected by usury reserved or taken on the first by the indorser). See also Hinkson v. Wigglesworth, 48 SW 1079, 20 KyL 1161; Fitzpatrick v. Apperson, 79 Ky. 272. 15. Schmidt v. Bank of Commerce, 234 U. S. 64, 34 SCt 730, 58 L. ed. 1214 [rev 16 N. M. 414, 120 P 670]. 16. McCormick Harvesting Mach Co. v. Yoeman, 26 Ind. A. 415, 59 NE 1069. "It is the settled law in this state that where the maker of a promissory note agrees with the payee that, if the latter will extend the time of payment for a definite time, he will pay the same at the expiration of said period, and the time is so extended, such promise of the maker constitutes a new contract, binding in law, and capable of enforcement, though the maker may have had a good defense to such note before the agreement to extend was made." McCormick Harvesting Mach. Co. V. Yoeman, supra. [a] Counterclaim.-The voluntary renewal of a note held by a transferee estops the maker from setting newal note." 17 This also applies where the original instrument was a forgery and was claimed to be such by the maker of the renewal instrument.18 [§ 659] b. Bona Fide Holders. Where commercial paper is usurious or otherwise illegal, or is subject to the defense of fraud or want or failure of consideration, or other defenses, but has come into the hands of a bona fide purchaser for value, new paper executed to him in renewal of the same is valid.19 And where renewal paper issued to the original payee is transferred before maturity to a bona fide purchaser for value, it is not subject to defenses which might have been set up against the original payee.20 firmity in the original instrument, where he has knowledge of its illegal consideration.21 [§ 660] F. Effect as Discharge of Other Parties 22-1. In General. The general rule is that granting time to any of the parties to a note or bill is a discharge of every other party who on paying it would be entitled to sue the party to whom the extension is granted.23 Thus an agreement between the holder and the maker or acceptor, extending the time of payment, will discharge a surety thereon,24 including, at common law, a joint maker who is in fact a surety or accommodation maker to the knowledge of the holder,26 or a guarantor,26 provided the agreement is based on a sufficient consideration 27 and is definite,28 valid, and binding,29 unless he consents to the extension or is estopped,30 or waives his Francis, 25 R. I. But the assignee of a nonnegotiable note taking a renewal note is chargeable with notice of the inup a counterclaim against the origi- | R. I.-Pease v. nal payee, although it might have 226, 55 A 686. been set up against the original note. S. C.-Grier v. Wallace, 7 S. C. 182. Scott v. Bryan, 1 Ky. Op. 424. Tenn.-Griffith v. Trabue, 11 Heisk. 645; Gill v. Morris, 11 Heisk. 614, 27 AmR 744; Torbett v. Worthy, 1 Heisk. 107. 17. Ala.-Cameron v. Nall, 3 Ala. 158. Ark.-Haglin v. Friedman, 118 Ark. 465, 177 SW 429; Stewart v. Simon, 111 Ark. 358, 361, 163 SW 1135, Ann Cas1916A 825 [quot Cyc] (holding that, where the makers of a note for the final payment for the construction of a building executed a renewal note, knowing that there was a breach of the contract, they were estopped to set up such matter as a defense in an action on the renewal note); Tenny v. Porter, 61 Ark. 329, 33 SW 211. ![[blocks in formation]](https://books.google.co.kr/books/content?id=8308AAAAIAAJ&hl=ko&output=html_text&pg=PA445&img=1&zoom=3&q=%22or+both,+according+to+its+tenor,+and+that+if+it+be+dishonored+and+the+necessary+proceedings+on+dishonor+be+duly%22&cds=1&sig=ACfU3U13DxOa3TWGgDUj_VHKNUoiPgVCcw&edge=0&edge=stretch&ci=314,478,311,53){kind=small} Man.-Robertson v. Northwestern Register Co., 19 Man. 402. [a] Knowledge or means of knowledge.-One giving a renewal note having knowledge of partial failure of the original, or who by ordinary diligence could have discovered the Fla.-Roess Lumber Co. v. State same, should investigate before exeExch. Bank, 68 Fla. 324, 67 S 188; cuting the renewal note, and on failFranklin Phosphate Co. v. Interna-ing to do so is as much bound as if tional Harvester Co., 62 Fla. 185, 57 he had actual knowledge thereof. S 206, AnnCas1913C 1247; Hyer v. Padgett v. Lewis, 54 Fla. 177, 45 S 29. York Mfg. Co., 58 Fla. 283, 50 S 485; Padgett v. Lewis, 54 Fla. 177, 184, 45 S 29 [quot Cyc]. Ga.-Riggins v. Joseph D. Boyd Mfg. Co., 123 Ga. 232, 51 SE 434; Hogan v. Brown, 112 Ga. 662, 37 SE 880 (holding that one who executed and delivered a note in renewal of a balance due on a like note previously given for the price of certain property, and who at the time of giving the second note knew that the property was, when purchased, defective or worthless, could not set up a failure of consideration in an action on the renewal notes). See also Atlanta Consol. Bottling Co. v. Hutchinson, 109 Ga. 550, 35 SE 124; Mortford v. American Guano Co., 108 Ga. 12, 33 SE 636; American Car Co. v. Atlanta St. R. Co., 100 Ga. 254, 28 SE 40; McDaniel v. Mallary Bros. Mach. Co., 6 Ga. A. 848, 66 SE 146. Compare Pearson v. Brown, 105 Ga. 802, 31 SE 746. Ida. Smith v. Smith, 4 Ida. 1, 35 P 697. Ind.-Brown v. Indianapolis First Nat. Bank, 115 Ind. 572, 18 NE 56; Henry v. Gilliland, 103 Ind. 177, 2 NE 360 (holding, however, that, where the holder of a note gratuitously permits it to run some time after maturity without attempting to collect it and then agrees with the maker "to wait" until the latter can collect money to satisfy it, but does not receive any consideration therefor and does not change his position in any way, the maker is not thereby estopped from setting up any defense then existing or thereafter arising); Doherty v. Bell, 55 Ind. 205; Jaqua v. Montgomery, 33 Ind. 36, 5 AmR 168; McCormick Harvesting Mach. Co. v. Yoeman, 26 Ind. A. 415, 59 NE 1069; Long v. Johnson, 15 Ind. A. 498, 44 NE 522. Iowa.-Keyes v. Mann, 63 Iowa 560, 10 NW 666. Kan.-Calvin v. Sterritt, 41 Kan. 215, 21 P 103. ![[blocks in formation]](https://books.google.co.kr/books/content?id=8308AAAAIAAJ&hl=ko&output=html_text&pg=PA445&img=1&zoom=3&q=%22or+both,+according+to+its+tenor,+and+that+if+it+be+dishonored+and+the+necessary+proceedings+on+dishonor+be+duly%22&cds=1&sig=ACfU3U13DxOa3TWGgDUj_VHKNUoiPgVCcw&edge=0&edge=stretch&ci=35,1326,288,48){kind=small} [b] Fraud not waived-But the maker and the surety on a note given for a patent right do not waive the defense that the note was induced by false representations of the payee, by giving a renewal note, where it is given in expectation that the payee is about to sell the patent right to a corporation and thus to relieve them. Strickland v. Graybill, 97 Va. 602, 34 SE 475. [c] Where a note of a corporation (1) for a valid consideration is invalid by reason of a defect in its execution, or for want of authority of the officer executing it, such invalidity does not attach to regularly executed notes given in renewal thereof. Smith v. New Hartford Water Co., 73 Conn. 626, 48 A 754. (2) And where a note of a corporation is invalid because the authority of the persons authorizing its execution, as directors, to act in such capacity is defective, a subsequent renewal of the note by a regularly organized board is a ratification of the former note. Smith v. New Hartford Water Co., supra. [d] Usury.-Where the statute in a particular jurisdiction does not render a note absolutely void for usury, but provides that a usurious contract cannot be enforced except as to the principal, the illegal taint of usury in a note may be eliminated by a renewal of the note after it had passed into the hands of a bona fide purchaser or by a reformation of the contract between the original parties, remitting the usury and retaining only legal interest. Grubbs, 70 Ala. 406. Masterson V. 18. Corwith First State Bank v. Williams, 143 Iowa 177, 121 NW 702, 136 AmSR 759, 23 LRANS 1234 and note; Grant v. Chambers, 30 N. J. L. 323. To same effect Bradford Nat. Bank v. Taylor, 75 Hun 297, 27 NYS 96. 19. Ala. Alabama Nat. Bank v. Halsey, 109 Ala. 196, 19 S 522; Mitchell v. McCullough, 59 Ala. 179. Ky.-Wooldridge v. Cates, 2 J. J. Marsh. 221; Shreve v. Olds, 2 A. K. Marsh. 141. Md.-Hopkins v. Boyd, 11 Md. 107. N. Y.-Goodwin v. Conklin, 85 N. Y. 21; Burton v. Stewart, 62 Barb. 194; Seventh Ward Nat. Bank v. Newbold, 2 NYCityCt 125. N. C.-Calvert v. Williams, 64 N. C. 168. Tenn.-Torbett v. Worthy, 1 Heisk. 107. Va.-Drake v. Chandler, 18 Gratt. (59 Va.) 909, 98 AmD 762. Eng. Cuthbert v. Haley, 8 T. R. 390, 101 Reprint 1450. But see Comings v. Leedy, 114 Mo. 454, 21 SW 804; Grebe v. Swords, 28 N. D. 330, 149 NW 126 (holding that the fact that persons who have executed commercial paper without consideration renew the paper to the bank to which payee, cashier of the bank, has sold it and permit it to remain an asset of the bank until a receiver is appointed, will not estop them from urging any infirmity in the paper). [a] Unauthorized note executed by partner.-One who discounts a note of a firm, before maturity, for value, without notice that it was made by one of two partners without his copartner's knowledge and for a private transaction, and who, after receiving notice of these facts from the maker, and at his request, takes new notes signed in the firm name in renewal of this note which is thereupon surrendered, takes a good title by his first note which is not injured by the renewal. Hopkins v. Boyd, 11 Md. 107. 20. Buchanan v. Drovers' Nat. Bank, 55 Fed. 223, 5 CCA 83; Alabama Nat. Bank v. Halsey, 109 Ala. 196, 19 S 522; Davenport v. Stone, 104 Mich. 521, 62 NW 722, 53 AmSR 467 (holding that, where a note accepted by a bank in renewal of a former note is rediscounted for it by others, the latter are bona fide holders thereof, although the original note was not surrendered and the new note was not entered on the books of the bank). Defenses against bona fide purchasers see generally infra §§ 999-1006. 21. Hutchins v. Stanley, 88 Kan. 739, 129 P 1180. 22. Accommodation paper see supra §§ 430-434. 23. Calliham v. Tanner, 3 Rob. (La.) 299; Laumeier v. Hallock, 103 Mo. A. 116, 77 SW 347. [a] Makers and indorsers are released from liability where the holder grants extension to the person who had assumed the payment of it. Laumeier v. Hallock, 103 Mo. A. 116, 77 SW 347. Composition with indorser as releasing maker see Compositions with Creditors [8 Cyc 451]. 24. See Principal and Surety [32. Cyc 191]. 25. See supra § 432. 26. 27. See Guaranty [20 Cyc 1472]. See supra § 643. ![[blocks in formation]](https://books.google.co.kr/books/content?id=8308AAAAIAAJ&hl=ko&output=html_text&pg=PA445&img=1&zoom=3&q=%22or+both,+according+to+its+tenor,+and+that+if+it+be+dishonored+and+the+necessary+proceedings+on+dishonor+be+duly%22&cds=1&sig=ACfU3U13DxOa3TWGgDUj_VHKNUoiPgVCcw&edge=0&edge=stretch&ci=621,1341,197,38){kind=small} right to set up a discharge by a binding agreement after the extension.31 Subject to the same qualifications, extension of the time of payment of a bill or note will operate as a discharge of the indorsers who do not consent,32 and this is so, although the indorsement was merely for accommodation, since in either case they are in the position of sureties.33 31. See infra § 665. 32. U. S.-U. S. Bank v. Hatch, .2 F. Cas. No. 918, 1 McLean 90 [aff 6 Pet. 250, 8 L. ed. 387]; U. S. Bank v. Lee, 2 F. Cas. No. 921, 3 Cranch C. C. 288; Cooper v. Gibbs, 6 F. Cas. No. 3,194, 4 McLean 396; Cope v. Huntt, 6 F. Cas. No. 3,206, 4 Cranch C. C. 293; Eldredge v. Chacon, 8 F. Cas. No. 4,329, Crabbe 296; Low v. Underhill, 15 F. Cas. No. 8,561, 3 McLean 376; McLean v. Lafayette Bank, 16 F. Cas. No. 8,888, 3 McLean 587; Morgan v. Tipton, 17 F. Cas. No. 9,809, 3 McLean 339; Seventh Ward Bank v. Hanrick, 21 F. Cas. No. 12,678, 2 Story 416; White v. Burns, 29 F. Cas. No. 17,539, 5 Cranch C. Č. 123. Ala.-Inge v. Mobile Branch Bank, 8 Port. 108. 34 An extension to the first and the last indorsers will discharge intermediate indorsers, but an earlier party will not be discharged by giving an extension of time to a subsequent one, since he cannot be prejudiced thereby.35 It is immaterial whether the note extended is the principal debt or merely collateral to it.26 But giving time to one joint maker, Nebr.-Kittle v. Wilson, 7 Nebr. 76. | mercial Bank v. Johnston, 2 U. C. Q. N. H.-Perry v. Armstrong, 39 N. B. 126. H. 583; Woodman v. Eastman, 10 N. H. 359. N. J.-Gregory v. Solomon, 19 N. J. L. 112; Martin v. Bell, 18 N. J. L. 167. N. Y.-National Park Bank v. Koehler, 204 N. Y. 174, 97 NE 468; Greene v. Bates, 74 N. Y. 333; Pomeroy v. Tanner, 70 N. Y. 547; Cary v. White, 52 N. Y. 138; Scoville v. Landon, 50 N. Y. 686; Parmelee v. Thompson, 45 N. Y. 58, 6 AmR 33; Place v. McIlvain, 38 N. Y. 96, 97 AmD 777 [aff 1 Daly 266]; Beard v. Root, 4 Hun 356; Dorlon v. Christie, 39 Barb. 610; Eisner v. Keller, 3 Daly 485; Browere v. Carpenter, 50 Misc. 525, 99 NYS 531; Stein v. Steindler, 1 Misc. 414, 20 NYS 839; Myers v. Welles, 5 Hill 463; Wood v. Jefferson County Bank, Cow. 194; Hubbly v. Brown, 16 Johns. 70. Ark.-Hazard v. White, 26 Ark. 155. Cal.-Smith v. Pearson, 52 Cal. 339. Conn. Lockwood v. Crawford, 189 Conn. 361. Del.-McDowell v. Wilmington, etc., Bank, 1 Del. 369. Fla.-Fridenberg v. Robinson, 14 Fla. 130. Ga.-Tanner v. Gude, 100 Ga. 157, 27 SE 938; Bunn v. Commercial Bank, 98 Ga. 647, 26 SE 63; Randolph v. Fleming, 59 Ga. 776; Rhodes v. Hart, 51 Ga. 320; Scott v. Saffold, 37 Ga. 384; Stallings v. Johnson, 27 Ga. 564. Ind.-State Bank v. Wymond, 7 Blackf. 363. Kan.-Horton Bank v. Brooks, 64 Kan. 285, 67 P 860. See also Evans v. Baker, 5 Kan. A. 68, 47 P 314 (holding that an indorser is not bound by a contract, made without his consent, between the maker and a subsequent indorser, changing the time when the note will mature). La.-Shaw v. Nolan, 8 La. Ann. 25; Freeman v. Profilet, 11 Rob. 33; Gustine v. Union Bank, 10 Rob. 412; McGuire v. Woolridge, 6 Rob. 47; Calliham v. Tanner, 3 Rob. 299; Hine v. Bailey, 16 La. 213, 35 AmD 214; Nolte V. His Creditors, 7 Mart. N. S. 16; Millaudon v. Arnous, 3 Mart. N. S. 596. Compare Williams v. Theodore, 34 La. Ann. 89 (which is apparently to the contrary, but which was probably a case of mere indulgence without any binding agreement for delay). Me.-Pierce v. Whitney, 22 Me. 113. Compare Merchants' Trust, etc., Co. v. Jones, 95 Me. 335, 50 A 48, 85 AmSR 412 (holding that the rule does not apply to one who signs a note by indorsement at its inception and is liable as a maker and not merely as indorser). Mass.-Veazie v. Carr, 3 Allen 14. Minn. Moore v. Folsom, 14 Minn. 340, 100 AmD 227. Miss.-Rupert v. Grant, 14 Miss. 433. See also Timberlake v. Thayer, 71 Miss. 279, 14 S 446, 24 LRA 231 (holding that, where the purchaser of an outstanding note contracts with the maker that the latter shall render personal service for a specified time in payment, an extension being thus granted, an indorser not senting thereto is released, and that the subsequent breach of such contract of service cannot revive the obligation of the indorser). con Mo.-St. Joseph F. & M. Ins. Co. v. Hauck, 71 Mo. 465; Stillwell v. Aaron, 69 Mo. 539, 33 AmR 517; Globe Mut. Ins. Co. v. Carson, 31 Mo. 218; Laumeier v. Hallock, 103 Mo. A. 116, 77 SW 347; Smith v. Warren, 88 Mo. A. 285; Noll v. Oberhellmann, 20 Mo. A. 336. N. C.-Charlotte First Nat. Bank v. Lineberger, 83 N. C. 454, 35 AmR 582. Oh-Duble v. Cincinnati, etc., R. Co., 3 Oh. Dec. (Reprint) 346. Okl.-Adams v. Ferguson, 44 Okl. 544, 147 P 772. Pa.-In re Moritz, 239 Pa. 375, 86 A 875; In re Bishop, 195 Pa. 85, 45 A 582; Siebeneck v. Anchor Sav. Bank, 111 Pa. 187, 2 A 485; Hagey v. Hill, 75 Pa. 108, 15 AmR 583; Walters v. Swallow, 6 Whart. 446; Okie v. Spencer, 2 Whart. 253, 30 AmD 251 and note; Slaymaker v. Gundacker, 10 Serg. & R. 75; Robertson v. Vogle, 1 Dall. 252, 1 L. ed. 123. R. I.-Deahy v. Choquet, 28 R. I. 338, 67 A 421, 14 LRANS 847; Bacon v. Harris, 15 R. I. 599, 10 A 647. S. C.-Sharpe v. Bingley, 8 S. C. L. 373, 12 AmD 643; Moodie v. Morrall, 8 S. C. L. 367; Kiddell v. Ford, 7 S. C. L. 678; Fiddy v. Campbell, 4 S. C. L. 21; Shirtliffe v. Davidson, 1 S. C. L. 466; Scarborough v. Harris, 1 S. C. L. 177, 1 AmD 609. But see Inman Bank v. Elliott, 100 S. C. 440, 84 SE 996 (holding that one signing a note on the back thereof before delivery is liable, although the time of payment is extended, unless he shows that he signed as surety, and payee knew that fact). Tenn. Mechanics' Bank, etc., Co. v. Hood, 126 Tenn. 443, 150 SW 420; Robertson v. Allen, 3 Baxt. 233; Union Bank v. McClung, 9 Humphr. 98; Hill v. Bostick, 10 Yerg. 410. Tex.-Zapalac v. Zapp, 22 Tex. Civ. A. 375, 54 SW 938. Utah.-Burnham v. McCornick, 18 Utah 42, 55 P 77. Vt.-Morse v. Huntington, 40 Vt. 488. Va.-State Sav. Bank v. Baker, 93 Va. 510, 25 SE 550; Stuart v. Lancaster, 84 Va. 772, 6 SE 139; Dey v. Martin, 78 Va. 1. W. Va.-Shields v. Reynolds, 9 W. Va. 483. Wis.-Hamilton v. Pasuty, 50 Wis. 592, 7 NW 659, 36 AmR 866. Eng. Hall v. Cole, 4 A. & E. 577, 31 ECL 259, 111 Reprint 904; English v. Darley, 2 B. & P. 61, 126 Reprint 1156; Gould v. Robson, 8 East 576, 103 Reprint 463; Smith v. Knox, 3 Esp. 46; Badnall v. Samuel, 3 Price 521, 146 Reprint 340. N. B.-Bedell v. Eaton, 4 N. B. 217. Ont.-Shepley v. Hurd, 3 Ont. A. 549; Vankoughnet v. Mills, 5 Grant Ch. (U. C.) 653; Farrell v. Oshawa Mfg. Co., 9 U. C. C. P. 239; Arthur v. Lier. 8 U. C. C. P. 180; Westloh v. Brown, 43 U. C. Q. B. 402; Com N. W. Terr.-Le Jeune v. Sparrow, 1 Terr. L. 384. But see Walker v. Washington Title Ins. Co., 19 App. (D. C.) 575 (agreement broken and notice of protest sent to indorser). [a] The reason for the rule that a person secondarily liable on a negotiable instrument is discharged by any agreement binding on the holder to extend the time of payment, or to postpone the holder's right to enforce the instrument, is that the right of the person secondarily liable must not be affected, on the maturity of the indebtedness, to make payment and, by subrogation to the creditor's place, to at once proceed against the principal debtor to enforce repayment. National Park Bank v. Koehler, 204 N. Y. 174, 97 NE 468 [rev 137 App. Div. 785, 122 NYS 490]. [b] Extension of another note.Indorsers on a demand note given as collateral security to an indorser on another note of the maker are not released from liability because of renewals of the other note where there were no renewals or extensions of the note which they had indorsed. In re Alldred, 229 Pa. 632, 79 A 143. [c] Extension of forged note will not release indorser on implied warranty of validity. Cluseau v. Wagner, 126 La. 375, 52 S 547. 33. Tanner v. Gude, 100 Ga. 157, 27 SE 938; Fleming v. McLeod, 37 N. B. 630; Molson's Bank v. McDonald, 40 U. C. Q. B. 529. See also supra § 434. 34. Hall v. Cole, 4 A. & E. 577, 31 ECL 259, 111 Reprint 904. 35. Whiting v. Western Stage Co., 20 Iowa 554 (holding that extension of time to an indorser of a note does not discharge the maker); Wright v. Independence Nat. Bank, 96 Va. 728, 32 SE 459, 70 AmSR 889; Smith v. Knox, 3 Esp. 46 (holding that discharge of the drawer of a bill did not discharge the acceptor who was first liable); Claridge v. Dalton, 4 M. & S. 226, 105 Reprint 818 (holding that an extension of time given by an indorsee of a bill to the payee does not discharge the drawer). 36. Huse v. Alexander, 2 Metc. (Mass.) 157; Pomeroy v. Tanner, 70 N. Y. 547; Myers v. Welles, 5 Hill (N. Y.) 463. See also Nassau Bank v. Campbell, 63 Hun 229, 17 NYS 737, 74 Hun 616, 26 NYS 831 [rev on other grounds 147 N. Y. 694, 41 NE 502]; State Sav. Bank v. Baker, 93 Va. 510. 25 SE 550. But compare Hawkins v. Gibson, 74 Ga. 405 (where, under the facts shown, the rule was not applied). [a] Discharge of indorser of collateral note.-(1) Where a note indorsed by the payee for the accommodation of the maker is pledged by the maker, without the consent of the indorser, as collateral to his own note for the same amount, given at the same time and payable at the same time, a renewal of the principal note without the consent of the indorser of the collateral note releases him from liability. State Sav. Bank v. Baker, 93 Va. 510, 25 SE 550. (2) Where a debtor gave his note to his creditor, and as collateral security therefore gave another note, indorsed by a third party for his accommodation, and at maturity the first note was taken up and paid by the maker by his giving a new note with other where he is not an accommodation maker, does not discharge the other joint makers.37 Discharge of drawer. Likewise, an extension of the time of payment of a draft or bill of exchange will discharge the drawer if he does not consent.38 The length of time payment is extended is immaterial.39 Thus a binding agreement extending the time of payment for one day only operates as a discharge.40 Time when extension granted. If there is a binding agreement for extension, it is immaterial whether it is made before or after maturity of the paper.41 Where two or more notes are secured by the same mortgage, even though they have been indorsed by the payee to the same person, extension of the time of payment of one of them does not discharge indorsers or sureties on the others.42 Reservation of right to sue at request of indorsers. Indorsers are not discharged by an agreement on the part of the holder of paper to extend the time of payment, where it is stipulated that he may sue security, it was held that the indorser of the collateral note was discharged from liability. Huse v. Alexander, 2 Metc. (Mass.) 157. 37. Hardy v. Carter, (Tex. Civ. A.) 163 SW 1003. 38. Fla. Fridenberg v. Robinson, 14 Fla. 130. Ga. Parmelee v. Williams, 72 Ga. 42; High v. Cox, 55 Ga. 662. La.-Hine v. Bailey, 16 La. 213, 35 AmD 214; Burthe v. Donaldson, 15 La. 382. Mass.-Veazie v. Carr, 3 Allen 14. Pa.-Maples v. Hicks, Brightly 56, 3 PaLJ 244. Tex.-Garcia v. Gray, 67 Tex. 282, 3 SW 42. Wis.-Racine County Bank v. Lathrop, 12 Wis. 466. Eng.-Philpot v. Briant, 4 Bing. 717, 13 ECL 708, 130 Reprint 945, 3 C. & P. 224, 14 ECL 549; Frazer v. Jordan, 8 E. & B. 303, 92 ECL 303, 120 Reprint 113. 39. Shaw v. Nolan, 8 La. Ann. 25; Fellows v. Prentiss, 3 Den. (N: Y.) 512, 45 AmD 484. [a] Extension for period sufficient to obtain judgment.—(1) It has been said that there is no general rule that giving time to the maker of a note for a period equal only to that sufficient to obtain a judgment does not discharge an indorser or surety; that such a rule has been applied only in cases where the giving of time occurred after an action had been commenced on the note, and has reference to an arrangement in the ordinary course of proceeding in an action, by which judgment is rather expedited than delayed, and does not apply where the time is given by contract, before any action has been commenced. Raught v. Black, 2 Disn. (Oh.) 477. (2) "After the bill single fell due the obligor confessed a judgment thereon in favor of Childress, the endorsee, amalgamating the amount thereof with other claims due said Childress, he agreeing to stay execution six months. This, it is contended, discharged the endorser. We do not think so. We do not look upon this as a contract for delay; because, in the first place, the delay allowed was no greater than what the law would have suffered if suit had been brought at the term at which judgment was. confessed, in which case, supposing the utmost expedition which the law allows, the judgment would have been rendered at the subsequent term four months thereafter, and the execution thereon returnable to the next, which it would be under the confessed judgment. 2d, the promise to delay was supported at any time at the request of any party secondarily liable on the paper.43 The Negotiable Instruments Law expressly provides that a person "secondarily" liable on the instrument is discharged by any agreement binding on the holder to extend the time of payment, or to postpone the holder's right to enforce the instrument, unless it is made with the assent of the party secondarily liable, or unless the right of recourse against such party is expressly reserved. Under such statute, indorsers are discharged by an extension of time granted to the maker.45 However, inasmuch as the Negotiable Instruments Law expressly enumerates what shall release a party primarily liable and does not include therein an extension of time to another, it is held that a surety on a note is primarily liable, and hence he is not discharged by an extension of time given to the principal.46 On the other hand, a guarantor of a note is secondarily rather than primarily liable, and hence he is released, by the express terms of the Negotiable Instruments as Section 119, providing the conditions under which the instrument is discharged, sets out five separate reasons, no one of which embraces the discharge by extension of time on a valuable consideration, the surety is not included therein, and that the five reasons exclude any other reason for the release of persons 'primarily liable. The reasoning then is that as Section 120, already herein copied, sets out six grounds on which persons 'secondarily' liable shall be discharged, the sixth being that the time has been extended without the assent of such person, and that as this applies only to persons 'secondarily' liable, and sureties not falling under that class, but under the class of those primarily' liable, are not discharged for that reason. reasoning of these cases, stated differently, is this: Under the Negotiable Instruments Law the only person who can be released by a binding agreement extending time is one 'secondarily' liable; the surety is not 'secondarily' liable, and therefore not released." Reeder v. White House Bank, 2 Tenn. Civ. A. 713, 719. by no consideration recognized by 40. Shaw v. Nolan, 8 La. Ann. 25; 41. Ill.-Warner v. Campbell, 26 Ill. 282. Mass.-Veazie v. Carr, 3 Allen 14. Minn.-Moor v. Folsom, 14 Minn. 340, 100 AmD 227. N. Y.-Hubbly v. Brown, 16 Johns. Wis.-Hamilton v. Prouty, 50 Wis. 42. Hopkins v. Gray, 51 Iowa 340, 43. Prout v. Decatur Branch Bank, 6 Ala. 309. 44. National Park Bank v. Koehler, 204 N. Y. 174, 97 NE 468; Adams v. Ferguson, 44 Okl. 544, 147 P 772 (holding law merchant not changed). Extension as releasing accommodation maker see supra §§ 431, 432. 45. Union Trust Co. v. McCrum, 145 App. Div. 409, 129 NYS 1078 [aff 207 N. Y. 721 mem, 101 NE 1124 mem]; Greenberg V. Ginsberg, 82 Misc. 415, 143 NYS 1017; Mechanicsburg Second Nat. Bank v. Graham, 246 Pa. 256, 92 A 198; Deahy v. Choquet, 28 R. I. 338, 67 A 421, 14 LRANS 847. Contra Night, etc., Bank v. Rosenbaum, 191 Mo. A. 559, 177 SW 693. 46. Ky.-Fritts v. Kirchdorser, 136 Md.-Vanderford v. Farmers', etc., N. C.-Rouse v. Wooten, 140 N. C. Or. Cellers v. Lyon, 89 P 426, 10 Wash.-Bradley Engineering, etc., Common-law rule see Principal and [a] "The reasoning of the courts ![[ocr errors]](https://books.google.co.kr/books/content?id=8308AAAAIAAJ&hl=ko&output=html_text&pg=PA447&img=1&zoom=3&q=%22or+both,+according+to+its+tenor,+and+that+if+it+be+dishonored+and+the+necessary+proceedings+on+dishonor+be+duly%22&cds=1&sig=ACfU3U26yB3n9uzISYGNtasX7F3ENfFzWw&edge=0&edge=stretch&ci=616,811,6,16){kind=small} The [b] The Negotiable Instruments Law (Acts [1899] c 94 § 120 subs 6), providing that a surety is not discharged by the taking of a renewal note from the principal extending the time of payment, where the extension is given under an express reservation of the right of recourse against the surety, applies where the original note is retained in the possession of the payee, and the right of action thereon against the surety is thereby reserved. Dies v. Wilson County Bank, 129 Tenn. 89, 165 SW 248, AnnCas1915A 1090. [c] Knowledge of suretyship.→→ Where by the terms of a note two or more persons are joint and several makers thereof, the mere knowledge by the payee, at or before the execution and delivery of the note, that one is surety for another, does not discharge the surety by granting an extension of time to the principal debtor, since the provision of the Negotiable Instruments Law as to when persons primarily liable on such instruments may be discharged is exclusive and does not include such a case. Vanderford v. Farmers', etc., Nat. Bank, 105 Md. 164, 66 A 47, 10 LRANS 129. [d] Statute as confined to holders in due course. While conceding that Ann J. Snouffer was a surety on the note, the appellee insists that by the terms of the note itself she was bound to pay the same, and hence was primarily liable thereon, within the meaning of section 3060a192, Code Supp. 1907, the Negotiable Instru |