Petefish, Skiles & Co. v. Watkins

Citations

• 124 Ill. 384

Syllabus

<p>1. Payment—misapplication of proceeds of new loan to other indebtedness them as directed. A party having a note in bank, executed another note with security, payable to a third party, who was willing to loan money on the same, and left the new note with the cashier of the bank, upon which the bank received the amount called for on its face: Held, that if the debtor, at the time he delivered the second note to the bank, directed its application upon the other note, or if it was agreed that the proceeds of the last note should be received and receipted on the note first given, the bank was bound to so receive it and apply it, and could not apply the same on other indebtedness of such debtor.</p> <p>2. If, at the time of the execution and delivery of a note to a bank, 'there is an agreement between the bank and the principal maker and his surety, that the note is given temporarily until the money can be borrowed elsewhere, and that, when so borrowed, it shall be applied on the note, it will not be in the power of the bank and the principal maker lawfully to divert the proceeds of the loan, and apply it on other indebtedness of the principal to the bank.</p> <p>3. A executed a note, with B as surety, to a bank, under an agreement that as soon as the bank should procure a loan for the amount, A and B were to execute another note to the party loaning, and the proceeds should be applied in payment of the note first given. The new note was signed by A and B, the latter telling A to take it to the bank, but not to give it up until he obtained the first note. In a suit on the note in bank, B was allowed to prove his direction to A. The court, in an instruction, stated that this testimony could have no force unless the directions were communicated to the bank: Held, that the admission of the evidence was not reversible error.</p> <p>4. Surety—discharge of principal. If the liability of the principal in a note is discharged by payment, the liability of the surety will be ext