TYLER, P. J. This was an action brought

ANGLO-CALIFORNIA TRUST CO. v. WAL- to recover judgment upon certain promis

LACE et al. (Civ. 4182.)

(District Court of Appeal. First District,
vision 1, California. July 26, 1922.)
1. Novation 12 One relying on novation

must establish substitution.

The burden is on the one relying on a novation to establish that the new obligation was intended as a substitution or extinguishment of the old one.

2. Bills and notes 430-New note does not extinguish old indebtedness, without express agreement.

Before a note extinguishes and satisfies the indebtedness evidenced by an earlier one, there must be an express agreement or understanding to that effect.

3. Bills and notes

sory notes executed by the defendants, who were doing business under the firm name and Di-style of George J. Wallace & Co. The notes were four in number and were in the principal sum of $500 each, and were made payable to their codefendant, Emma B. Freeman. They were all executed on August 29, 1919, and matured thereafter in two, three, four, and five months, respectively. On the 20th day of October, 1919, and prior to maturity thereof, they were indorsed by the payee to respondent, Anglo-California Trust Company. The first two notes having become due and not having been paid, suit was filed thereon on December 12, 1919, and thereafter on March 1, 1920, and after their maturity another suit was instituted on the two remaining notes. Defendants by answer set up certain defenses, including fraud and rescission. The actions were consolidated, the parties and questions being identical. At the trial and before the submission of the cases, the defendants other than Emma B. Freeman duly moved the court for permission to file certain answers supplementary, and to reopen the cases for further testimony. These motions were denied, for the reason, as found by the court, that plaintiff accepted the notes before maturity for a valuable consideration and without notice of the al

140-Execution of new note as renewal of old one simply postpones payment of the old one.

Where a new note is given as a renewal of an old one, the new note only postpones the time of payment of the old one until default is made in the payment of the new note. 4. Pledges

25-Lien of pledge not lost by

renewal of debt.

Collateral security pledged for the payment of a note is not released by the taking of a new note in renewal of the old.

5. Bills and notes 348-Indorsee's rights as

purchaser before maturity held not affected by subsequent transaction of indorser amounting to renewal of note.

Where a payee indorsed notes before their maturity to a bank to secure a debt, the fact that she later incorporated her business and had the corporation give a note to the bank for her indebtedness did not change the position of the bank as holder of the note in due course to that of holder after maturity, though she guaranteed payment of the corporate note, as the subsequent transaction merely amounted to a renewal of the original obligation.

6. Pledges 30(2)-One holding note to secure debt may seek to recover on the note, though debt is not due.

One holding a promissory note deposited as security for a debt evidenced by another note may seek to recover on the collateral note, and hold the proceeds in satisfaction of the principal debt, though the note evidencing the debt is not dishonored by nonpayment.

Appeal from Superior Court, City and County of San Francisco; Frank H. Dunne, Judge.

Action by the Anglo-California Trust Company against George J. Wallace and others. Judgment for plaintiff, and defendants appeal. Affirmed.

Wm. J. Hayes, of Oakland, for appellants. F. A. Denicke and H. S. Young, both of San Francisco, for respondent.

leged defenses attempted to be set up in the proposed amended pleading. It is the contention of appellants that this finding is not supported by the evidence. Defendant Emma B. Freeman has not appealed.

It is admitted that the notes were indorsed

by the payee and transferred to respondent before maturity. It is also admitted that at the time of the indorsement Emma B. Freeman was a customer of respondent and was indebted to it, and that she received additional accommodation in the nature of advances on the strength of the notes so indorsed, and that they were held by respondent as security for the payment of this indebtedness. It is further conceded that there

is nothing in the evidence to show that prior to the transfer the trust company had any knowledge of the alleged defenses of appellants. Notwithstanding these admissions, it is urged that the evidence disclosed certain facts which altered and changed the position of respondent as holder of the notes in due course to that of holder after maturity, and that such facts had the effect of opening the

door for the defenses alleged in appellants' answer, and their proposed amendments.

brief summary of the transactions of the For a full understanding of the question a parties becomes necessary. On August 22, 1919, the defendant Emma B. Freeman occupied a certain store and conducted a business therein, known as Freeman Art Com

For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes

(209 P.)

pany. She held the premises under a lease the note by the corporation and its acceptfor the term of five years. The lease con- ance by the bank. The rule is well estabtained restrictions against assignment or sub-lished in this state that, before a note exletting without the written consent of the tinguishes and satisfies the indebtedness evilessor, and provided for forfeiture in the denced by an earlier one, there must be an event of a breach of either of these condi- express agreement or understanding to that tions. On August 22, 1919, pursuant to rep- effect. It is not contended that there was resentations on the part of Mrs. Freeman any express agreement upon the subject, and that she had a right to sell her lease, ap- whatever presumption, if any, which might pellants agreed to purchase the same for arise from the transaction itself, is dispelled the sum of $5,000. Thereafter Mrs. Freeman by the testimony of the teller of the bank, informed them that she was having difficulty which shows there was no such agreement, in obtaining the consent of her landlord to a but on the contrary, that the corporate note transfer of the lease. She subsequently, was simply a renewal of the original indebthowever, presented to Wallace & Co. what edness. Comptoir D'Escompte de Paris v. purported to be an assignment thereof. Wal- Dresbach, 78 Cal. 15, 20 Pac. 28; Savings & lace & Co., believing the instrument to be Loan Society v. Burnett, 106 Cal. 514, 39 Pac. satisfactory, completed their agreement. The 922; Bonestell v. Bowie, 128 Cal. 511, 61 notes sued on, which constituted a part of the Pac. 78; Gnarini v. Swiss-American Bank, consideration for the sale, were executed and 162 Cal. 181, 121 Pac. 726. In such a case delivered, and Wallace & Co. then went into the note only postpones the time of payment occupation of the premises. Shortly there- of the old note until default is made in the after the owner demanded possession there- payment of the new note. Clark v. Berlin Realof, on the ground that the covenant against | assignment had been violated, and a suit in unlawful detainer was instituted by him against the purchasers. Four months thereafter Wallace & Co. moved to other premises.

ty Co., 33 Cal. App. 50, 164 Pac. 333. Nor is the collateral security pledged for the payment of the original debt released by the taking of such new note. 8 Corpus Juris, p. 442.

[5] Counsel for appellants argues that the doctrine announced in the Gnarini Case has no application to the instant one, for the reason that Emma B. Freeman guaranteed payment of the corporation note. We fail to see how this fact in any manner affects the doctrine there announced. The note executed by the Freeman art Company was for the same debt, and was manifestly executed simply to meet the changed conditions brought about by the incorporation of the business. The rights of the bank became fixed at the time it took the notes, and they were in no manner affected by the subsequent transaction, which merely amounted to a re

It is claimed by appellants that at this time a rescission of all contractual relations between Mrs. Freeman and appellants took place, and that appellants abandoned the premises and surrendered the same to Mrs. Freeman, and that she thereupon went into full possession thereof and resumed the conduct of the busines she had theretofore carried on prior to the sale, and subsequently incorporated the business under the name of the Freeman Art Company, and that its assets were transferred by her to this corporation, which in turn assumed all of her liabilities. This corporation executed and de-newal of the original obligation. livered to respondent bank its promissory note in the sum of $3,000 in payment of the indebtedness to it of Emma Freeman, a guaranty of payment being indorsed thereon by

her.

[6] Appellants' further contention that, asnevertheless Mrs. Freeman's liability to the suming that a novation never took place, bank was suspended so long as the corporate

note was not dishonored by nonpayment. As

[1-4] It is the claim of appellants that, respondent bank having assented to this trans-suming this to be so, a pledgee of commeraction and accepted the corporate note, Emma B. Freeman's indebtedness to the bank was thereby novated, and the bank merely held the notes here sued on as collateral to the corporate note, and as the transaction took place after their maturity, appellants' defenses are material and competent.

We

cial paper takes it as a trustee for the owner
and pledgor, and the suspensive condition as
to payment could in no manner affect the
bank's right to seek to recover upon a ma-
tured promissory note deposited as security
for this debt, and to hold the proceeds, if and
when recovered, in satisfaction of the prin

see no merit in this contention. One rely-
ing upon a novation must establish that the
new obligation was intended as a substitu-
tion and extinguishment of the old one.
Here the only evidence that in any manner
indicated a novation was the execution of I concur: RICHARDS, J.

cipal debt secured by it. 2 Randolph, Com-
mercial Paper, § 795.

For the reasons given, the judgment is affirmed.

FRANCIS v. SUPERIOR COURT OF KERN
COUNTY et al. (Civ. 3916.)
(District Court of Appeal, Second District, Di-
vision 2, California. July 25, 1922.)

Attachment 131-Superior court authorized to hear application for increase of bond, the amount of which was fixed by clerk.

$11,250, with interest thereon at 7 per cent. per annum from the date of the commencement of the action.

The return, which, as we have stated, has not been traversed by petitioner, further alleges that it will take approximately three years before the action in which the attachment was issued can be finally concluded; that the interest which will accrue on the moneys or debts garnisheed by the sheriff, together with costs, will amount to approximately $2,500; that if the defendants in that

The superior court has jurisdiction to hear and determine an application for an increase in an attachment undertaking, the amount of which was fixed by the clerk of that court, un-action shall prevail the sum of $500 named der Code Civ. Proc. § 539, for the clerk, in fixing the amount of the undertaking before issuing the writ, was acting merely as a constituent part of the court.

Original application for writ of prohibition by Mary F. Francis against the Superior Court of Kern County and Howard A. Peairs, as Judge thereof. Alternative writ discharged, and peremptory writ denied.

as the penalty of the undertaking on attachment will be entirely inadequate to compensate them for the damages which they will sustain by reason of the attachment; and should overtake the oil company whose inthat if, pending the final outcome, disaster debtedness to the defendants was thus levied upon and garnisheed, the full amount of $11,250 so tied up by the attachment might be dissipated and the defendants further dam

Matthew S. Platz, of Bakersfield, for peti-aged thereby. tioner. The defendants, whose property has thus George E. Whitaker, of Bakersfield, for re- been attached, have given notice to the plainspondents,

tiff in that action, the petitioner here, that they will move the superior court for Kern

FINLAYSON, P. J. This is an original ap-county to increase the amount of the underplication for a writ of prohibition directed to taking on attachment from $500 to $11,250, the superior court for Kern county, and Hon. on the ground that an undertaking in the Howard A. Peairs, judge, commanding and sum of $500 is wholly inadequate. It is to directing them to desist from hearing a mo- prevent the hearing of that motion that the tion to increase the amount of an undertak-present proceeding was commenced; petitioning on attachment which had been given in er claiming that the superior court is withan action wherein the petitioner here is the out jurisdiction to alter the amount of the plaintiff and L. W. Lowell and others are the undertaking, once it is fixed by the clerk of defendants. To the alternative writ of pro- the court prior to the issuance of the writ. hibition, issued out of this court, respondents have made a return, which petitioner has not seen fit to traverse.

If the clerk could have been aware that solvent credits, aggregating the full amount sued for, due and owing to the defendants, The petition and the return thereto dis- were about to be attached and held for three close the following facts: Petitioner com- years, possibly, while awaiting final disposimenced an action against L. W. Lowell and tion upon a crowded calendar, there can be others to recover $11,250, alleged to be due little doubt that he would have required a on a contract. Petitioner, as the plaintiff in very different undertaking. The clerk canthat action, caused an affidavit for attach- not be said to have found judicially upon the ment to be filed in the superior court; at the amount of security which was really resame time the clerk of that court fixed the quired, for it does not appear that the circumamount of the undertaking on attachment at stances as at present seen, now that the at$500, as he was authorized to do by section tachment has been levied, were brought to his 539 of the Code of Civil Procedure, whereby attention when fixing the amount of the unit is provided that the clerk, before issuing dertaking; and if the security as originally rethe writ, shall require an undertaking on quired by the clerk proves now to be insuffithe part of the plaintiff in a sum not less cient, why cannot the superior court, looking than $200 and not exceeding the amount to the interests and rights of both plaintiff claimed by the plaintiff. Petitioner gave an and defendants, make it sufficient? The clerk, undertaking in the amount required by the who is a ministerial officer, is an arm of the clerk-$500-and thereupon the writ of at- court and an essential constituent thereof tachment was issued. Acting under this (In re Durant, 60 Vt. 176, 12 Atl. 650), and writ, the sheriff, on March 11, 1922, levied when fixing the amount of the undertaking upon certain debts then due and owing to the before issuing the writ he is but acting as a defendants in that action by the Midway constitutent part of the court. He is not exNorthern Oil Company, which debts were ercising jurisdiction as a separate and indesufficient to satisfy plaintiff's demand for pendent tribunal. It is true that, in deterFor other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes

(209 P.)

mining the amount of the undertaking which | pressly conferred, it was held to be an incident should be required of a plaintiff, the clerk is to the regulation and conduct of provisional exercising a judicial or a quasi judicial func-remedies. Whitney v. Deniston, 2 Thomp. &

tion, but his act and judgment is not the act C. 471." (Italics ours.) or judgment of an independent judicial en- And in the case thus referred to (Whitney tity; and if subsequent developments, aris-v. Deniston, 2 Thomp. & C. [N. Y.] 471) we ing after the levy of the writ, show that the find this language: amount of the undertaking required by the "The court has general power to discharge clerk before issuing the writ is insufficient to indemnify the defendant for the costs which attachments the same as all other provisional remedies. Code, § 241. It may be exercised may be awarded him and the damages which for all proper reasons, including those where. he may sustain by reason of the attachment, for any cause, the plaintiff's proceedings are why may not the court, whose ministerial in any respect defective, and they certainly are officer prescribed the amount of the under- so where the amount of the undertaking is intaking in the first instance, make an order, sufficient to indemnify the defendant for the after a hearing, increasing the amount, upon costs which may be awarded to him and the damages he may sustain by reason of the ata showing that the security is inadequate? The security to be given by a plaintiff who tachment. Code, § 230. It is the intention of the law that the defendant shall have that inobtains a writ of attachment is intended to demnity where his property is attached; and be an indemnity to the defendant in the ac- if the undertaking given, when the attachment is tion against his costs and damages. The obtained is insufficient for that purpose, the law affidavit on attachment, which is intended to cannot be properly administered without requirprevent the wrongful suing out of the writ, ing an adequate increase in the amount to be is a restraint upon the conscience of the made. The power is incidental to all the proplaintiff, and the undertaking imposes an ad-visional remedies provided by the Code, and its ditional restraint by fixing a definite liability upon the plaintiff and his sureties as indemnity to the defendant against loss from the wrongful and vexatious use of the process. Ex parte Damon, 103 Ala. 477, 15 South. 862. But if, through an error of judgment or a mistake of fact, the clerk has failed to require an undertaking in an adequate amount, the defendant may have no real protection against loss from the wrong-it an imperfect obligation for the purposes inful or vexatious use of the writ unless the court has the right and the power to require additional security.

We think the power of the court to require an increase in the amount of the undertaking is incidental to the provisional remedy of attachment. It is true that in some jurisdictions this power is expressly conferred by statute, but it exists without such express statutory authorization. Thus, in Manda v. Etienne, 13 App. Div. 237, 43 N. Y. Supp. 194-a case involving the jurisdiction of the Special Term to require the plaintiff in an action to give an additional undertaking on attachment-it was said:

"The plaintiff's main contention is that the Special Term 'was wholly without jurisdiction, power, or authority to make' the order in question. He seems to overlook section 682 of the Code of Civil Procedure, where this power is expressly conferred. It is a power which is frequently exercised. Before it was thus ex209 P.-6

existence is in substance provided for in the authority which the court has for supplying omissions in any proceeding." (Italics ours.)

In Ex parte Damon, supra, it is said that the undertaking on attachment"must be regarded as defective, when it is insufficient in security, as well as when it is lacking in some particular, which, while it does not render it absolutely void, does render

tended. 1 Wade on Attachment, §§ 114, 115, 288; Bumberger v. Gerson, 24 Fed. 257. It is the right, then, of the defendant to have the of the cause, the bond shall become defective attachment dissolved whenever, at any stage or insufficient, as an indemnity, on account of the insolvency of its securities; but the plaintiff should be accorded the right of maintaining his cause by repairing a defect brought about by no fault of his."

See, also, Gapen v. Stephenson, 18 Kan. 140, and Bumberger v. Gerson (C. C.) 24 Fed.

257.

Our conclusion is that the superior court is not without jurisdiction to hear and determine the application for an increase in the amount of the undertaking on attachment.

The alternative writ of prohibition is discharged, and the application for a peremptory writ of prohibition is denied.

We concur: WORKS, J.; CRAIG, J.

"In my opinion, the break in this glass, I, R. C. L. p. 1437, par. 599; Blasingame v. rather think, was produced by unequal expansion of the bars. That might have been some undue stress at one place."