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able at a later time, it will discharge the draft. 568 So, if he voluntarily takes a new bill when cash is offered; or a bank credit instead of the bill of exchange which his order on the bank calls for.5

570

569

But where a note is presented by mail without indorsement according to the usual custom, and is paid by a draft mailed by the bank to the collecting agent, and the draft is duly presented and dishonored, it will not be a payment of the note, if the maker had not sufficient funds at the bank where he made the note payable, although he afterwards settled with the bank.571

Extension by Bill or Note.

§ 1567. The giving of a bill or note payable at a future day is an extension of the original debt,572 although this is not true of a demand note.573 In like manner, a mortgage taken as collateral implies an extension until the mortgage is due.574 A bill is an extension until its maturity, whether given for the full amount of the original debt,575 or only for part of the amount.576 But a note given for part of the amount due on a bond has been held not to be an extension of the bond without an express agreement. Where a purchaser gives his acceptance for goods purchased, it will be an

668 Southwick v. Sax, 9 Wend. (N. Y.) 122.

569 Smith v. Ferrand, 7 Barn. & C. 19.

570 Bolton v. Richard, 6 Term R. 139, 1 Esp. 106.

571 Indig v. Bank, 80 N. Y. 100, reversing 16 Hun (N. Y.) 200.

577

572 Byles, Bills, 391; Greene v. Bates, 74 N. Y. 333; Jagger Iron Co. v. Walker, 76 N. Y. 521; Douglas v. Bank, 97 Tenn. 133, 36 S. W. 874: Palmer v. Bramley [1895] 2 Q. B. 405; Lundberg v. Elevator Co., 42 Minn. 37, 43 N. W. 685; Reed v. Ashe, 18 App. Div. 501, 46 N. Y. Supp. 126; Shipman v. Kelley, 16 Misc. Rep. 673, 38 N. Y. Supp. 597; Martens-Turner Co. v. Mackintosh, 17 App. Div. 419, 45 N. Y. Supp. 275; Shipman v. Kelley, 9 App. Div. 316, 41 N. Y. Supp. 328; McMurray v. Taylor, 30 Mo. 263; Higgins v. Wortell, 18 Cal. 330; Smith v. Owens, 21 Cal. 11; Phoenix Ins. Co. v. Allen, 11 Mich. 501; inclusive of the days of grace, Appleton v. Parker, 15 Gray (Mass.) 173. 573 Peninsular Sav. Bank v. Hosie (Mich.) 70 N. W. 890.

674 Harshaw v. McKesson, 65 N. C. 688.

575 Kendrick v. Lomax, 2 Cromp. & J. 405, 2 Tyrw. 438.

67% Gould v. Robson, 8 East, 576.

577 Paine v. Voorhees, 26 Wis. 522.

extension until the maturity of the acceptance, although it is not negotiated by the seller. 578

580

In like manner, if the creditor takes in payment the bill of a third party at the debtor's request, it will suspend his right of action until the bill matures.579 But the note or check of a third person taken as collateral merely is not an extension of the debt." So, one who accepts a bill for the accommodation of the drawer will not be discharged if the drawer gives his bond and warrant to confess judgment upon it, no extension of time being effected by that means.581 So, the bond and warrant of the maker and first indorser of a note will not discharge the second indorser.582

Parties Discharged by Extension.

§ 1568. An extension of the debt effected by taking a bill or note payable in future will, in general, discharge an indorser 583 or an accommodation indorser of the original instrument.584 In like manner, a postdated check will discharge an accommodation indorser, 585 And if the creditor surrenders a draft for the acceptor's note, without the drawer's knowledge or consent, it will discharge him.586

The debtor's own note may amount to an extension of the debt, and discharge an original surety, although it is not payment, or

478 Simon v. Lloyd, 2 Cromp., M. & R. 187.

579 Marsh v. Pedder, 4 Camp. 257; Taylor v. Briggs, Moody & M. 28; Robinson v. Reed, 9 Barn. & C. 449, 4 Man. & R. 349. So, too, the note of a third party. Smith v. Applegate, 1 Daly (N. Y.) 91. And in California such note is an extension, although not a satisfaction. Crary v. Bowers, 20 Cal. 86. And action on the original debt revives in such case without notice of dishonor to the original debtor. Swinyard v. Bowes, 5 Maule & S. 62.

580 Van Etten v. Troudden, 1 Hun (N. Y.) 432.

581 Smith v. Knox, 3 Esp. 46.

582 Sizer v. Heacock, 23 Wend. (N. Y.) 81.

583 Greene v. Bates, 74 N. Y. 333; Gould v. Robson, 8 East, 576; Green v. Skinner, 72 Miss. 254, 16 South. 378. So, by a renewal without his indorsement, Selman v. Brown, 78 Ga. 332.

584 Smith v. Becket, 13 East, 187. And see 120, supra. So, Myers v. Welles, 5 Hill (N. Y.) 463. In this case the holder knew the accommodation character of the indorser.

585 Okie v. Spencer, 2 Whart. (Pa.) 253.

586 McLughan v. Bovard, 4 Watts (Pa.) 308.

RAND.C.P.-141

(2241)

is only presumptive payment, as to the debtor.587 So, a joint maker, who is known to the holder to be a surety only, will be discharged if the holder, without his knowledge, takes a new note payable at a future day, although he continues to hold the original note by agreement as collateral.588 An original surety will be discharged if the holder takes a renewal without his consent,589 unless he takes it with the stipulation that his remedy on the original bond shall not be affected.590 If the holder of a guarantied note, in like manner, takes two new notes in renewal of it, he will thereby extend the debt, and discharge a guarantor.591 But where one partner gives his note for a debt of the partnership, with an express agreement that the firm shall be liable if the note is not paid, the other partner (although in effect a surety) will not be discharged by such extension. 592

Right of Action Suspended.

593

§ 1569. Where the creditor takes a bill or note payable at a future day, his right of action on the original debt will be suspended until the paper becomes due." So, if he takes a renewal of the original bill or note.594 But his action is only suspended where the bill is negotiable, and might, by its transfer, give right of action to another person.595

Where a purchaser of goods agrees to pay within three months by a bill at two months, it will amount to an extension of the right to

587 Appleton v. Parker, 15 Gray (Mass.) 173; Lee v. Sewell, 2 La. Ann. 940; Mobile Life Ins. Co. v. Randall, 71 Ala. 220; although the extension may only be for a day, Fellows v. Prentiss, 3 Denio (N. Y.) 512.

588 Andrews v. Marrett, 58 Me. 539.

589 Morgan v. Their Creditors, 1 La. 527; First Nat. Bank of Springfield v. Leavitt, 65 Mo. 562.

590 Wyke v. Rogers, 1 De Gex, M. & G. 408.

591 Hart v. Hudson, 6 Duer (N. Y.) 294.

592 Vernam v. Harris, 1 Hun (N. Y.) 451.

593 Benj. Chalm. Dig. art. 251; 2 Daniel, Neg. Inst. 295; 1 Edw. Bills & N. § 283; 2 Pars. Notes & B. 155; Story, Bills, § 419; Happy v. Mosher, 48 N. Y. 313; Brewster v. Bours, 8 Cal. 501; Blunt v. Walker, 11 Wis. 334; Pitt v. Acosta, 18 Fla. 270.

594 Kendrick v. Lomax, 2 Cromp. & J. 405, 2 Tyrw. 438; In re London, B. & S. Staffordshire Bank, 34 Law J. Ch. 418.

595 Webster v. Bainbridge, 13 Hun (N. Y.) 180.

sue for the price of the goods during the five months; but an action might lie in the meantime for not giving the bill as agreed.59 It has been held, however, that the giving of a note in payment for goods is not of itself an extension, but the extension is a question of fact for the jury; and it will suspend the creditor's right of action only if it exists.597 Thus, if a note is received from a building contractor, and not in satisfaction of the amount due, it will not be an extension prima facie, either to discharge a surety or suspend the right of action against the owner on a mechanic's lien; but the agree ment for the extension must be proved.598

Other Rights Suspended.

1570. The right to commence suit by attachment, like any other right of action, will be suspended if the creditor takes the debtor's negotiable note, and procures it to be discounted.599 But if a debt is secured by a bill of sale, with a right to take possession of the goods, a note given in payment will not affect the bill of sale or the right of possession, although it may suspend the creditor's right to dispose of the goods.600 And the right to file a mechanic's lien and bring a suit upon it will, in general, be suspended by taking a bill or note payable in future.601 But, if a note is given for goods purchased, the title to the goods will pass to the purchaser, and the time for payment be extended, the goods being subject (as in other cases of sale) to the vendor's right of lien and of stoppage in transitu.602

Payment by a bill or note also suspends the creditor's right to distrain; 603 and, in general, it suspends the running of the statute

396 Mussen v. Price, 4 East, 147.

97 Moore v. Fitz, 59 N. H. 572.

598 Shaw v. Presbyterian Church, 39 Pa. St. 226.

99 McCluny v. Jackson, 6 Grat. (Va.) 96; and especially where the paper has been transferred, Black v. Zacharie, 3 How. 483.

€90 Bramwell v. Eglinton, 5 Best & S. 39.

601 Dey v. Anderson, 39 N. J. Law, 199; Cox v. Keiser, 15 Ill. App. 432; Pitt v. Acosta, 18 Fla. 270.

662 Hall v. Richardson, 16 Md. 396.

cos Byles, Bills, 388; Ewer v. Clifton, Bull. N. P. 182; Palfrey v. Baker, 3 Price, 572; Davis v. Gyde, 2 Adol. & E. 623, 4 Nev. & M. 462; Hornbrooks v. Lucas, 24 W. Va. 493.

But where a renewal note

of limitations on the original debt.*** is given by a corporation for a debt, on which an action lies against the original stockholders, the statute will run against the stockholders from the time the original action accrued.605 The effect of extending the right of action until the maturity of the bill or note taken in payment is in other respects without prejudice to the creditor's rights, and his action on the original consideration will revive after the paper has matured.606 And if goods are sold on an agreement that the purchaser shall give his note payable in one year, and "to be approved by the vendor," an agreement for a surety will be implied, and the vendor may have his action at once for the price of the goods, if the note is not given when requested. 607 So, if a debt is paid by an order on a third person, payable out of a particular fund to be created, it will not be presumed to be a payment, and will not suspend the creditor's right to sue on the debt.608 But if a stranger takes up another's note with an indorser by giving his own note, with the agreement that the original note shall remain in the holder's hands until the new note is paid, an agreement to extend the original note will be implied, and the indorser on it will be discharged.609

Collateral Security-Effect of Renewal.

610

§ 1571. Where a bill or note secured by collateral is renewed, the collateral will continue as security for the renewal.1 And this is true of a collateral mortgage given to secure the original

604 Byles, Bills, 388; Sayer v. Wagstaff, 5 Beav. 415; In re Harries, 13 Mees. & W. 3.

605 Jagger Iron Co. v. Walker, 76 N. Y. 521; Parrott v. Colby, 71 N. Y. 597 606 Byles, Bills, 391; Ex parte Barclay, 7 Ves. 597; Bishop v. Rowe, 3 Maule & S. 362; Dillon v. Rimmer, 1 Bing. 100, 7 Moore, 427.

607 Hale v. Jones, 48 Vt. 227.

608 Brill v. Hoile, 53 Wis. 537, 11 N. W. 42. But if a note is given payable out of the proceeds of certain sales, no action will lie on the original consideration without proof that there was no such fund or that the maker had not performed his agreement. Israel v. Redding, 40 Ill. 362.

609 Greene v. Bates, 74 N. Y. 333.

610 Flanagin v. Hambleton, 54 Md. 222; Dayton Nat. Bank v. Merchants' Nat. Bank, 37 Ohio St. 208; Ohio Life Ins. & Trust Co. v. Winn, 4 Md. Ch. 253; Holland Trust Co. v. Waddell, 75 Hun, 104, 26 N. Y. Supp. 980; Appeal of Kim

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