Case ID: tenn_18/html/0410-01.html
Source: Caselaw Access Project
Author: {"author": "Green, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Hill vs. Bostick.
    Nashville,
    December, 1837.
    A note due to a bank, which is taken up by the proceeds of a note discounted to renew it, is in general extinguished.
    A endorsed a note for B, which was about to fall due. B applied to-A to endorse another note for the purpose of renewing the first, which A refused to da, C however agreed with B to endorse it, provided A should be held responsible as endorser on the first note. The first note was protested, and A duly notified; B, thereupon executed a note which was endorsed by C, with the express understanding between him and B, that A was to remain responsible. This note was discounted, and the proceeds of it applied to take up the first note. C then sued A as endorser on the first note: Held, that the first note was extinguished and A was not liable
    If the holder of a note take a further security, and agree to give time, he thereby discharges the endorser or surety.
    If no express agreement by the holder, to give time to the principal debtor is proved, yet if he take a collateral security payable at a future time, in the absence of proof to the contrary, an engagement to wait until the security becomes due will be implied;
    This was- an action brought by Hill, as surviving partner of the firm of F. Porterfield & Co., as the holder of a note of Joseph Litton, for 0787 56, dated 4th April, 1832, and payable at the office of deposite of the Bank of United States, at Nashville, four months after date, against Bostick, the first endorser. The declaration is in the usual form in assumpsit, and the pleas are non-assumpsit, payment, accord and satisfaction, &c. On- the trial in the circuit court, it was proved that the note on which suit was brought was discounted in bank, and the proceeds, credited to F. Porter-field, the last endorser thereon. That at the proper time for discounting a note to renew said note, there was a new note executed by said Joseph Litton, for precisely the same amount, at four months, endorsed by H. R. W. Hill and F. Porterfield, discounted at the same bank, and that F. Porterfield was credited with the proceeds of this latter note, and that Litton at no other time had a note of about that amount discounted.
    It was also proved by Joseph Litton, that the second note above mentioned was given on account of the first note, and to renew it, and that the proceeds of the second note was applied to the payment of the first note. He also proved that in the account which F. Porterfield had against him, he was credited with the proceeds of the discount of the first note, and charged with the payment of it, and was credited with the proceeds of the discount of the second note, upon • which Hill was an endorsor. Litton also proved that the second note was made and endorsed by Hill before the first was protested, and that in fact said second note had been discounted before the first was protested. That an arrangement between himself and Hill was made in the absence and without the consent or knowledge of Bostick, and that it was a part of this arrangement, between Litton and Hill, that the first note at the proper time should be protested, and that Hill should hold Bostick responsible thereon, which protest was accordingly afterwards made. Litton also proved, that Bostick was his accommodation endorser on the first note, and that although he had not much credit, he had unincum-bered property sufficient to pay the note for six months after it was protested, and that Bostick refused to endorse the second note. Upon these facts the jury, under the charge of the circuit court, returned a verdict for the defendant Bos-tick. A new trial was asked by Hill, which was denied. The charge of the court is stated in the opinion of the court.
    
      J. Campbell, for plaintiff in error.
    1st. If the proceeds of the second note were intended to pay the debt due the bank, but we?fe not intended to discharge the liability of the drawer or endorser of the first note, they still remain liable.
    
      2d. If the proceeds of the second note legally belonged to, and was under the control of Porterfield, as most assuredly they were by agreement with Litton, in consideration of which, and of which oply, Hill and Porterfield endorsed the second note, and he, Porterfield, took those proceeds and paid them in discharge of his own liability upon the first, and took up the first note as owner, then he, Porterfield, had his recourse upon the first note, and the court should so have instructed the jury.
    
      3d. If Porterfield had paid his own money in discharge of the debt due the bank, the presumption would be, that he paid it in discharge of his own liability upon his endorsement, and not in discharge of the liability of Bostick or Litton. If Porterfield stipulated with Litton before he endorsed the second' note, that upon its being discounted he must have the proceeds as his own, to pay over to the bank, and he would not pay .it over but in discharge of his own liability, in other words, that he would reserve his recourse - upon the note and previous indorsement, then such payment by Por-terfield, out of the proceeds of the note, is precisely the same thing in effect as though he had paid his own money raised from other sources.
    4. By looking into the cases where renewals of notes are held to discharge the previous endorsers, it will be seen they all go upon the principal, that time has been given to the drawer of the note or acceptor of the bill. This is the rule that governs the cases and no other. See Chitty on Bills, 5 London edition, 371 d seq., where all the authorities are collected.
    To make the renewal in this case exonerate Bostick, it must be shown that the taking of the second note from Litton was giving time to Litton upon the first note. Now so. far from this being done, so far from time having been given to Litton, the drawer of the note, Porterfield expressly reserves his recourse upon the first note; so far then from giving time, he expressly refuses to give time. Bull N. P. 271: Gould and others vs. Robson Keymer, 8 East Rep. 576: Wal-wyn vs. St. Quintín, 1 B. and P. 656: Reese vs. Remington, 2 Ves. Jr. 540.
    Taking an additional security will not discharge the debtor, Sthrubrich’s exer. vs. Russell, 1 Dessaus. Ch. Rep. 315: Green1 s ex r. vs. Warrington, S Dessaus. Rep. 430: yet the judge in effect told the jury this would discharge the endorser. He says, if the second note was a new security given by Litton for the first debt, this would release Bostick. See also Lynch vs. Reynolds, 16 J. R. 41: Hubly vs. Brown, 16th J. R. 70: English vs. Darley, 2 B. and P. 61: 2 J. C. R. 560.
    
      
      J. Marshall, for defendant in error.
    1st. If the proceeds . of the second note were applied by Porterfield or Hill to payment of the first note, Bostick, the endorser is discharged thereby.
    2d. If the second note was given by Litton to renew the first note, or if it was taken as new security given by Litton for the original debt, Bostick is discharged, though Hill reserved the right to hold Bostick responsible, provided Bos-tick did not concur in the arrangement. The renewal of the note by the debtor, or the giving of a new security by him for the debt, discharges the endorser. 12 Wheaton, 554, Mc-Lemore vs. Powell: Chitty on Bills, (edition of 1836,) 441, 442, and the cases cited in the notes: Chitty on Bills, 444: 1 Yer. 145: Theobald on Principal and Surety, 203-4: 16 Johnson, 73, 42: 4 Wendel, 367: 9 Conn. Rep. 264: 2 Campbell, 179. Will the reservation of the right to hold Bostick responsible alter the rule? It is insisted, that it will not; the case of Gould vs. Robson, 8 East. 576: and English vs. Darley, 2 Bos. & Pul. 61, in note g: Chitty on Bills, 440, 441, are in point.
    One of the reasons, that giving time to the acceptor of a bill or the maker of a note discharges the endorsers is, that the effect of such an arrangement between the holder and the maker or the acceptor, is that the maker becomes less active in endeavoring to satisfy the note than he otherwise would be, without such an arrangement, which inactivity operates to the prejudice of the endorser, should he remain bound. Chitty on Bills, 442.
    If the reservation of recourse on the endorser, without his concurrence, has the effect of continuing his responsibility, as it is contended, then the endorser would sufferthe prejudice of, without having the protection against such arrangement, and yet be equally as innocent, and need the protection, equally as much as if no such recourse had been reserved'. Theobald on Principal and Surety, 203, 204: Russel vs. Berrington, 2 Ves. Jr. 540.
    3. An accord and satisfaction of the first note, discharges the endorser on it, that is, as between holder and maker. The renewal of the first note by Litton, or the giving the second note as a new security by Litton for the original debt, . . J J ° ’ rs an accord and satisfaction of the first note. 1 Yer. Rep. 145.
    4. The acceptance of the second note by Hill, for the debt specified in the first note, is a suspension of Hill’s right to sue on the first note, until the second note reaches maturity. Chi tty on Bills, 195: 2 Gill and Johnson, 403: 2 Br. C. C. 579: 6 Dow. Rep. 233: 2 Yes. 540: 3 Meri-vale, 272: Theobald, 132, 286, 287: and consequently discharges Bostick.
   Green, J.

delivered the opinion of the court.

This is an action of assumpsit by Hill, surviving partner of F. Porterfield & Co., as the last endorser of a note drawn by Joseph Litton, for $787 56, dated 4th day of April, 1832, payable four months after date, at the office of discount and deposite of the bank of the United States at Nashville to the defendant John Bostick, who was the first en-derser. This note fell due 4-7th of August, and was renewed by a note for the same amount, dated the 4th of August, and endorsed by Hill and Porterfield. When the first note fell due, Litton applied to Bostick to endorse another note to renew it, which he refused to do. Porterfield also refused to endorse, unless Bostick would become the first endorsor. Hill afterwards agreed to endorse, provided Bos-tick should be held responsible on the first note. This was agreed to between Hill and Litton, and the first note was protested, and the necessary steps were taken to fix Bostick’s liability. The second note was given to meet the first note, and Hill endorsed the second note upon condition, that he would hold Bostick liable on the first note. Bostick was absent and knew nothing about this agreement. The first note was paid by Porterfield, when it fell due, and was delivered to him by the bank, and he charged Litton with the payment, and afterwards credited him with the proceeds of the second note. The court, among other things, charged the jury that, 1st. If they found from the evidence that the second note drawn by Litton was discounted in bank, and the proceeds applied by Hill or Porterfield to the payment of the note endorsed by Bostick, the endorser is discharged. 2. If they found from the evidence that the note endorsed Bostick was not paid, but that the second note was given by r . , „ , . Litton to renew the first, or that it was a new security given for the original debt by Litton, though the renewal was made or note given with a reservation to Hill or Porterfield, that Bostick, the endorser, was still to be responsible to Porter-field or Hill upon his endorsement on,the first note; still, if the renewal was made, or the note given, without the concurrence of Bostick, he is discharged. 3. Or if, from the evidence you find that the holder of the first note contracted with Litton, the drawer, to give time and not to sue, and that contract was made upon a good and valid consideration in law, then the endorser would be discharged. To the first part of the charge, exception is taken, but we think without reason. The second note was drawn by Litton; Hill and Porterfield were his accommodation endorsers, and the note was negotioted for the benefit of Litton, and the proceeds applied to Porterfield, who bad paid the first note. Then the judge was right in saying, that “if the proceeds of the second note were applied to the. payment of the first, Bostick was discharged.

The chief objection, however, is urged against that part of the charge contained under the second head. It is insisted, 1st. That the taking a new security does not discharge an endorser, unless time be given. 2d. That if such were the law in ordinary cases, where no stipulation was made, still that such would not be the effect in this case, because of the express stipulation that Bostick was to remain liable.

It is certainly true, that if the holder of a note take a fresh security and agree to give time, he thereby discharges the endorsers. If there be no express agreement for time, but a further security, payable at a future time is received, that would in general imply an engagement to wait till it becomes due. Chitty on Bills, 441-2, (8th edit.) The plaintiff’s counsel attempt to show, and argue very ingeniously, that the second note was negotiated in discharge of Porterfield’s liabilities only, and that both Litton and Bostick continued to be liable to him on the first note, and that be was under no obligation to wait with either the drawer or first endorser, hav- ° . ...... expressly stipulated that they should still remain liable on the first note. The facts of the case, however, don'otjus-tify this position. It is true there was a stipulation that Bos-tick was to remain liable, but there is no proof that such was the understanding as to Litton. He had drawn the second note, and when the money was received, he was credited on the books of Porterfield with the proceeds. So far from their being any intention to proceed against Litton, the very object of the second note was to give him time. Porterfield had paid the first note, the second note was negotiated for Litton’s benefit, and the money that was raised on it, belonged to him. Porterfield so treated it, by giving credit for it on his books, thus applying it to the payment of the sum he had advanced on the first note. What claim, after this, could he have against Litton, upon the first note? We think none at all; at any rate, he could not have sued Litton until the second note fell due. It is true, if Porterfield had advanced his own money in payment of the first note, or if he had made any other arrangement, so that the liability of Litton should not be discharged or suspended, he might have preserved his remedy against Bostick. But according to the facts of this case, Porterfield had no right to proceed against Litton, until after the second note fell due, because the second note was executed by Litton to renew the first, and no such right was reserved in the contract with Hill, its stipulation having relation to Bostick alone. In this view of the case, Bostick the endorser is discharged, for although the the execution of the second note by Litton might not extinguish the debt against him, yet it suspended Porterfield’s remedy against him, until the second note was dishonored. Chitty on Bills, 195; (8th edit.) Theo. on Sur. 287-8.

The plaintiff’s urge their claim to a recovery, principally upon the ground of the contract, that Bostick should still be held liable. The argument proceeds, however upon the supposition, that the legal effect of the whole arrangement was, that Litton and Bostick should both continue to be liable to be sued, at any time, upon the first note. This it Isas been shown is a mistaken view of the facts and of the legal consequences from them.

The question, therefore, is reduced to the consideration of the legal effect of the reservation of the liability of Bos-tick, the endorser, in the contract between Litton and Hill. We think this reservation could not effect the rights of the endorser. He was not present, nor assenting to it, and to say that he should be bound by it, would be to hold him to an obligation different from that to which he had assented, and would be inconsistent with the obligation of the surely. Theo. on Surety, 203-4. Upon the whole we think there is no error in this record, and that the judgment be affirmed.

Judgment affirmed.