Williams v. National Bank

Yellott, J., delivered the opinion of the Court. The suit instituted in the Court below was on a promissory note signed by Eebecca A. Williams as maker. The declaration avers “that the defendant, on the 13th day of December, 1884, by her promissory note, now over-due, promised to pay, four months after date, to the order of I. Parker Yeazey, twelve thousand dollars, and the said I. Parker Yeazey, before its maturity, endorsed said note to the plaintiff, but the defendant did not pay the same.” It is shown by evidence in the cause, not disputed or contradicted, that this note was deposited with the appellee by I. Parker Veazey as collateral to a note of Graddess Bros, dated December 12th, 1884, for $12,000, at four months payable to the order of said Yeazey and endorsed by by him. Yeazey distinctly states in his testimony [348] that this note of Gaddess Bros, was paid by him on April 14th, 1885, by his check on the Bank of Baltimore to the order of the cashier; the check stating on its face that it was for note due April 12th, 1885. • Simultaneously with the giving of this check his account was credited with the proceeds of a new note of Gaddess Bros, which he says he also paid at maturity by his check on said Bank. Several other notes of Gaddess Bros, were endorsed by Yeazey and discounted by the Bank. The last note discounted is signed by Yeazey as maker, and dated 16th December, 1885. It reads as follows: “Pour months after date I promise to pay to the order of the National Bank of Baltimore $12,000, with a collateral note of Gaddess Bros, for $12,246.00, with legal interest from date.” This note was not paid at maturity and the firm of Gaddess Bros, having failed and made an assignment for the benefit of creditors, the appellee seeks to hold the ap2>ellant resjjonsible on the note dated December 13th, 1884. The question involved in controversy is whether the note sued on is to be considered and treated as collateral security only for the jjayment of the first note of Gaddess Bros, endorsed by Yeazey, or, as collateral security for all the notes given in the subsequent transactions between Yeazey and the Bank. This was a question of fact to be determined by the jury from the proof in the cause. It has been decided in a number of cases that it depends on the intention of the parties whether the giving of a new note extinguishes the existing debt and creates another obligation, or is to be considered as a mere renewal of the old note for which it is substituted. If the old debt is extinguished, the collateral security ceases to operate. If the old debt continues to exist there is no extinguishment of the collateral security. [349] This Court has said in Flanagin vs. Hambleton, 44, Md., 227, that “there can he no doubt, that ordinarily the effect of a renewal is to pay the note, even though the old note remains in the Bank untaken up and uncancelled in fact, as is often the case. * * * * It is the intent of the parties and their understanding of it which makes it a renewal. The word renewal has no legal or strictly technical signification. Whether a note is a renewal of another note, adjudged cases say depends entirely upon the intention of the parties.” And in Haines & Eppley vs. Pearce, 41 Md., 231, it has been decided that an agreement by the creditor to receive the note or bill absolutely as payment, need not be expressed in terms, hut “may he established by the facts and circumstances attending the transaction.” There can be no doubt that if Yeazey really paid the notes at maturity, by checks drawn on funds belonging to him and deposited in the bank these checks operated as an absolute payment and extinguishment of an existing indebtedness. Chambers vs. Miller, 13 C. B. N. S. 132. If the checks received by the Bank were received in absolute payment of a.note which had matured, the effect of this transaction was the extinguishment of an existing debt, and the giving of another note was the creation of another debt, and the holder of the note sued on can not maintain an action on said note, because of the non-payment of the subsequent indebtedness thus created. If, on the other hand, it was intended that the old note, endorsed by Veazey, which was unjjaid at maturity, was to be represented by a new note for the same debt, then the collateral security was not rendered inoperative, but still continued to exist in full force and effect. As the jury were to ascertain the intention of the parties, the Court, in granting instructions, should be careful not to mislead [350] the jurors into the belief, that it was only necessary to ascertain the intention of one of the parties to these transactions. The prayer offered hy the plaintiff, which is of extraordinary length, tends to mislead the jury in regard to the intention of Yeazey, in the transactions relating to the renewals already referred to.' The question of fact to he determined hy the jury was, whether the note of the defendant, which forms the foundation for this suit, was intended by Yeazey, as well as by the Bank, as collateal security for the jjayment 0f the notes signed by Gaddess Bros, and endorsed by Yeazey. The defendant’s note was given to the Bank as collateral security for the payment of the first note signed by Gaddess Bros., and endorsed by Yeazey. The jury should have been required, hy the instruction granted, to ascertain the intention of Yeazey as well as of the Bank. This question should have been presented in plain and explicit terms. This was not done. On the contrary, the phraseology of the instructions tended to confuse, mystify and mislead, and there was error in the Court in not rejecting the prayer as offered. There was no error in rejecting the three prayers offered by the defendant. The intention of the parties in regard to holding the note sued on, as collateral security for the subsequent notes given, after the nonpayment of the first note signed by Gaddess Bros., is not left to the finding of the jury, and these prayers obviously tend to mislead in other respects. They were, therefore, properly rejected. The first bill of exceptions is founded on the rejection by the Court below, of evidence offered hy the defendant, in relation to the existence of a custom among the Banks in Baltimore, to send notice of notes held by them to all persons whose names were on such notes, and that this was the custom when the notes [351] were held as collateral security. As it had been shown that no notice of the holding of this note, and of the non-payment of the ñote for which it was held as collateral security, had been sent to the defendant, it was supposed by her counsel, that such facts ought to be considered by the jury. There is evidence in the cause, not contradicted, that no such custom was ever observed by the plaintiff. It has been decided in a number of cases, that notice is not required when a note is held as collateral security. It does not represent the original debt, and to hold the defendant it is not necessary that the plaintiff should regularly proceed to have the note presented and protested. Westphal vs. Ludlow, 2 McCrary, 505; Allen vs. Rightmere. 20 Johns., 365. (Decided 20th. March, 1889.) No rule of law required the plaintiff to send notice, and as it had not adopted a custom observed by other Banks, which fact is presumed to have been known to the parties having dealings with the plaintiff, the Court below committed no error in rejecting this evidence. But as there was error in granting the plaintiff’s prayer, the judgment must be reversed. Judgment reversed, and new trial awarded.