Case Name: Russell Wheeler, Frank E. Wheeler and Francis Beman, Jr., agt. David M. Jones
Court: New York Supreme Court
Jurisdiction: New York
Decision Date: 1885-10
Citations: 1 How. Pr. (n.s.) 478
Docket Number: 
Parties: Russell Wheeler, Frank E. Wheeler and Francis Beman, Jr., agt. David M. Jones.
Judges: 
Reporter: Howard's Practice Reports
Volume: 1
Pages: 478–483

Head Matter:
SUPREME COURT.
Russell Wheeler, Frank E. Wheeler and Francis Beman, Jr., agt. David M. Jones.
Debt— Collateral security to — When does not extend time of payment of — Neglect of m-edilor to enforce does not release debtor.
The transfer of accounts against third parties, as security for an indebtedness of the assignor to the assignee, does not extend the time of payment of the original debt, unless it is so agreed.
To make the taking of collateral security extend the time of payment of the-indebtedness secured, there must be either a positive agreement to that effect or the circumstances must show that such was in fact the intention of the parties.
Mere neglect on the part of a creditor to collect securities held by him as. collateral security to a debt, will not release the debtor.
St. Lawrence Circuit,
October, 1885.
W. H. Sawyer, for plaintiffs.
L. P. Hale, for defendant

Opinion:
Tapp an, J.
Plaintiffs as copartners under the firm name of Russell Wheeler, Son & Co., doing mercantile business at Utica,. N. Y., on June 11, 1884, and on divers days until and on the-18th day of December, 1884, sold and delivered to defendant, a. merchant at Canton, N. Y., goods to the amount of $1,494.07, upon terms of credit that had expired upon the commencement., of this action, on April 27, 1885, upon which interest had accrued, down to the time of the trial, to the amount of $59.49, malting their claim then the sum of $1,553.56, upon which the-defendant had paid in cash, work, labor and material, at different-times since plaintiff's claim became due, the sum of $748.42; to which should be added interest, $26.84; making the sum to-, be deducted, $775.26; and leaving the sum of $778.30 unpaid; at the date of the trial, October 14, 1885.
The sum. unpaid at the time aboye stated was not the subject of controversy between the parties.
The contention upon the trial was as to the effect of a written instrument made by the defendant and delivered to the plaintiffs on November 27, 1884, which was as follows:
"Whereas, I, David M. Jones, of Canton, am justly indebted unto the firm of Russell Wheeler, Son & Co., of Utica, N. Y., in the sum of $1,860.64; now, therefore, for the purpose of securing said debt to said firm, I do hereby sell, assign and set over to them the following accounts and demands, to wit:
Caleb Pierce, of Madrid, account.....-............. $100 00
Nelson Watson, of Canton, account............... 125 00
Homer Newton, of Canton, account............... 150 00
John D. Grange, of Canton, account............... 150 00
George L. Stanton, of Canton, account............. 97 00
Supervisors town of Canton, account.............. 300 00
Trustees of First Presbyterian church of Potsdam, N. Y., account............................... 365 00
Charles Cox, of Potsdam, account................. 185 00
Adam Fisher, of Madrid, note.....'............... 76 00-
North Chamberlain, Canton, account, about........ 140 00
The said assignees are to collect said claims as they respectively fall due, and place the several amounts so received from them to my credit as payments upon my indebtedness, and after the same shall be paid in full to return such claims as are uncollected to me, if any there be; also, to account to me for any amount received by them over and above the amount of their • said claim and expenses of collection.
" Dated Canton, November 27, 1884.
"D. M. JONES."
The defendant's counsel contends that the effect of this instrument, when accepted by the plaintiffs, was to extend the time of payment of their claim against defendant until the same could be collected, from tbe accounts assigned, or until effort bad been made sufficient to gbow tbat tbe claim could not be made from sucb accounts.
Tbe assignment of tbe accounts was taken, not in payment, but as security for tbe plaintiffs claim.
It is well settled law tbat tbe transfer of accounts against third parties, as security for an indebtedness of tbe assignor to tbe assignee, does not extend tbe time of payment of tbe original debt, unless it is so agreed (Carey agt. White, 52 N. Y., 135; Kemmil agt. Wilson, 4 Wash. Circuit Ct. Rep., 308; United States agt. Hodge, 6 How. [U. S.], 279; Van Etten agt. Troudden, 67 Barb. [S. C.], 342; same case less fully reported, 1 Hun, 432; Elwood agt. Deifendorf 5 Barb. [S. C.], 398).
To make tbe taking of collateral security extend tbe time oí payment of tbe indebtedness secured, there must be either a positive agreement to tbat effect, or tbe circumstances must show tbat sucb was in fact tbe intention of tbe parties.
In Dunham agt. Countryman (66 Barb., 268), the time of payment was plainly extended by tbe terms of a written agreement.
In Dunker agt. National Bank of Fort Edward (36 Hun, 565), tbe mortgage taken in tbe name of tbe creditors as security recited tbe note, and then said: " tbe same to be paid in manner following, giving fifteen days for payment"
Tbe mortgage clearly fixed a later day for the'payment of tbe original note, than tbat stated in tbe note itself.
In Grocers Bank agt. Penfield (7 Hun, 279), tbe defendant, Truax, bad a note discounted with tbe plaintiff; when it became due be paid part of it, and gave two notes of Penfield & Stone, tbe other defendants-, for tbe balance. These notes were obtained at tbe request of tbe bank officers for a sum, which, with tbe amount on deposit in tbe bank by Truax, for which be gave bis check, made tbe amount of tbe note, which bad become due. Tbe bank refused to give up tbe original note, but, as far as tbe case shows, bad resisted suit upon it. Upon suit brought upon tbe two notes last received by tbe bank after due, it was properly held tbat tbe effect of tbe transaction was to extend the time of payment of the original note until the two notes taken by the bank, under the circumstances above related, became due, and that such extension was a good consideration for the other two notes, and rendered them valid in the hands of the bank, although given by the makers to Truax as accommodation paper.
That was the case of giving negotiable paper, payable in the future, to take the place of a debt past due, made especially for that purpose, endorsed by Truax, which, when once transferred to the bank, would be good in the hands of the holder, if received for value before due.
In Beard agt. Root (4 Hun, 356), the written agreement, in terms, extended the time of payment of the note for six months, until the mortgage assigned became due.
Wakefield Bank agt. Truesdale (55 Barb., 602), was a case where the maker of a note, just before the note fell due, paid interest for six months in advance, which was indorsed by the cashier of the bank, " In't paid to Feb. 26, 1886," and the note was not paid or sued until after that time, and this was held to extend the time of payment to that time and release sureties. The decision is put upon the ground that all the circumstances, taken together, showed an intent of the maker, and the cashier acting for the bank, to make the extension.
In Flushman agt. Strain (90 N. Y., 110), the note was sold to the creditor, and credited to the debtor on account — a different transaction from a transfer for security. By this, the time of payment of the original indebtedness was extended until the note taken in its place became due.
Hubbard agt. Gunny (64 N. Y., 457) was a case where the holder of a promissory note took a new note from the debtor, payable at a future day, and this was held, under the particular circumstances of that case, to operate to extend the time of payment of the original note until the note taken in its place became due. I think that there is no real conflict in the cases upon careful comparison.
The case of Kemmil agt. Wilson (4 Wash. Circuit Ct. Rep., 308) was nearly identical with, the case at bar in its facts. The action was upon a promissory note made by Kemmil. After it became due Wilson assigned to Kemmil two recognizances, as the case states, " to be held by the said Kemmil as collateral security for the debt due by the said Wilson to him, to be collected by Kemmil as he may think proper, and the balance due upon the recognizances, after discharging the said debt, to be paid by said Kemmil to the said Wilson"
The defendant's counsel contended before the jury, that the assignment ought to be so construed as to compel the plaintiff to use all the necessary means to coerce the payment of the recognizances, before he could sue for the original debt; that for ought that appeared, he might have collected some portion, or the whole amount of the recognizances, and, at all events, he then had the whole control over them as assignee.
Judge Washington charged the jury that these recognizances were assigned to plaintiff expressly as collateral security, and consequently they could not be considered as payment or satisfaction of the original debt, or as operating even to suspend .the plaintiff's remedy to enforce the payment of it.
In referring to the defendant's contention he uses this language : " If the plaintiff's right to sue for his original debt is suspended at all, it would be difficult to say at what time, or upon what contingency, the suspension could be removed; the contract points out none, nor has the defendant's counsel undertaken to suggest any."
" If the evidence of debt assigned to the creditor be negotiable, and have been parted with by him, he cannot recover upon the original debt, because the debtor might, in such case, be twice charged by payment of the original debt. The defendant becomes in equity, as he is in law, the owner of these recognizances, and entitled to collect their amount or enforce payment of them; " that if anything had been paid to plaintiff it would operate, pro tanto, as payment upon the original debt; that it was for defendant to make proof of such payment. The court in that case directed a verdict for plaintiff. In the case at bar the defendant could, at any time, have paid his indebtedness to tbe plaintiffs, and such payment would bave operated to reinvest him with the several claims assigned to them as security for the payment of their debt
Mere neglect on their part to collect these claims would not release defendant (Gilbert agt. Marsh, 12 Hun, 519).
The construction claimed by defendant would be unjust to plaintiffs, because it would operate to indefinitely postpone tbe time of the payment of their claim against defendant, when it has not been so stipulated in the agreement, deliberately formulated and reduced to writing.
Construed in tbe light of tbe authorities, it is not ambiguous or of doubtful construction
Judgment is directed for plaintiffs.