Granite National Bank v. Fitch

C. Allen, J. The guarantors made a partial payment upon the note in suit, but it is found by the court that the payment was made upon the agreement that the payee and holder of the note should hold it as security to the guarantors for the amount paid by them, as well as for the balance remaining due to the payee. This was equivalent to an agreement that the sum paid by the guarantors should not be deemed a payment for or on account of the parties primarily liable to pay the note, but that the note should be kept alive, in order to be put in suit for the benefit of the guarantors. If they had paid the whole amount of the note, there is no doubt that they might have taken an 569 indorsement to themselves, and brought suit upon it in their own names. It is not necessary to determine whether, in the absence of any express understanding, a payment in whole or in part by guarantors will have the effect to extinguish the note wholly or pro tanto ; though this result is often broadly denied. See Story Prom. Notes, § 400; Byles on Bills, (7th Am. ed.) 173, 224, 225. But clearly, where there is an agreement that the note shall be kept alive, such payment does not discharge the makers. Pinney v. McGregory, 102 Mass. 186. McGregory v. McGregory, 107 Mass. 543. Pacific Bank v. Mitchell, 9 Met. 297, 302. Williams v. James, 15 Q. B. 498. Jones v. Broadhurst, 9 C. B. 173. Thornton v. Maynard, L. R. 10 C. P. 695. As to the subsequent transaction, by which two of the makers sent to the holder of the note their new note for the balance remaining due beyond the amount paid by the guarantors, it is expressly found that the holder did not accept such new note in discharge of the original note; and under such circumstances, according to the well settled doctrine, the new note is not to be treated as payment. Cotton v. Atlas Bank, ante, 43, 45. Exceptions overruled.