Law, by an extension of time,17 and such statute does not change the common-law rule in regard to guarantors.48 The provision of the Negotiable Instruments Law as to what constitutes a material alteration of an instrument relates to the physical alteration of the instrument itself and does not apply to a contract between the holder and the principal maker for an extension of time of payment of the instrument.49 courts, including the federal courts, have held that he is not discharged it his liability has become fixed by demand, protest, and notice of dishonor,52 but in the state courts generally the contrary is held.53 [662] 3. Conditional Agreement for Extension. If an agreement for extension is conditional, and the condition is not performed, so that the holder is at no time prevented from suing on the instrument, an indorser is not discharged.54 [ 663] 4. Reservation of Rights against Indorser. If the holder of a note, in agreeing with the maker to extend the time of payment, expressly stipulates as a part of the agreement that the delay shall not affect his rights against the indorsers, the agreement does not prejudice the indorsers and they are not discharged.55 It has been held that the ques sixty days other notes would be extended, the agreement did not release the other indorsers where the note was duly protested and notice thereof given). [ 661] 2. Extension after Indorser's Liability Is Fixed. It has been held that an extension of the time of payment of a bill or note, granted to the maker or acceptor by the holder, does not discharge an indorser, if his liability has already become fixed by a valid judgment against him.50 There are, however, several decisions to the contrary.51 Some ments Act. It is in the following language: "The person "primarily" liable on an instrument is the person who by the terms of the instrument is absolutely required to pay the same. All other parties are secondarily liable.' Section 3060a120 of the same act provides that a person 'secondarily liable' on a note is discharged by an extension of the time of payment without his consent, and the appellee argues that the provision of this section clearly designates the person entitled to the benefit of such defense, and the only person so entitled. If this were an action between holders in due course, within the meaning of the Negotiable Instruments Act, and the appellant Ann J. Snouffer, we are inclined to the view that the appellee's contention would be sound. But we do not, determine the point, because we are of the opinion that said act is not applicable to this case. Here the issue is between the parties to the instrument, and the rights of holders in due course are not involved. As we understand it, the entire scope and purpose of the act, so far at least, as it affects the question before us, is to fix the rights of holders in due course and to make it uniform in the several States." Fullerton Lumber Co. v. Snouffer, 139 Iowa 176, 178, 117 NW 50. 47. Grand Forks Northern State Bank v. Bellamy, 19 N. D. 509, 125 NW 888, 31 LRANS 149 and note (holding that one who indorses the note in the words "for value received, I hereby guarantee the payment of the within note and hereby waive presentment, demand, protest and notice of protest" is a guarantor of payment and hence is released by an extension of time for payment granted to the maker). 48. See Guaranty [20 Cyc 1472]. 49. Richards v. Market Exch. Bank Co., 81 Oh. St. 348, 90 NE 1000, 26 LRANS 99. 50. King v. Thompson, 14 F. Cas. No. 7,807, 3 Cranch C. C. 146; State Bank v. Haralson, 2 La. Ann. 456; Pole v. Ford, 2 Chit. 125, 18 ECL 545; Bray v. Manson, 8 M. & W. 668, 151 Reprint 1207. V. "The protesting of the note fixed the status of the parties and the liability of the indorsers. The bank could then proceed against the maker, or against the indorsers jointly. It was the right of each indorser to voluntarily pay the note after maturity and protest and then proceed against the maker for the amount due thereon, together with interest and proper costs, or against the other indorsers jointly liable with him for contribution. This was the legal situation after maturity of the note and notice of nonpayment. The holder could not, without the consent of the indorsers, enter into any agreement with the maker whereby the time of payment was extended, or any other thing permitted to be done, the effect of which would be to deprive them of any right which they had when their liability as indorsers attached by notice of nonpayment. The arrangement with Koller was that he pay as soon as possible and at most within sixty days. There is no reason why the bank should not say to him or to the other indorsers, your liability being now fixed, you must pay as soon as possible, and if you fail to pay within sixty days we will not refrain any longer from proceeding to collect. This, in legal effect, is what the bank agreed to do, and this agreement was with an indorser not the maker. It did not deprive the other indorsers of any of their legal rights, nor did it deny to them the privilege of paying at any time and then proceeding against the maker or the other indorsers. Therefore it did them no harm." York First Nat. Bank v. Diehl, 218 Pa. 588, 592, 67 A 897. 53. Veazie v. Carr, 3 Allen (Mass.) 14; Dorlon v. Christie, 39 Barb. (N. Y.) 610; Wood v. Jefferson County Bank, 9 Cow. (N. Y.) 194; Hubbly v. Brown, 16 Johns. (N. Y.) 70; State Bank v. Wilson, 12 N. C. 484; Union Bank v. McClung, 9 Humphr. (Tenn.) 98. 54. D. C.-Walker v. Washington Title Ins. Co., 19 App. 575. Iowa. Miller v. McCallen, 69 Iowa 681, 29 NW 942. Kan.-Costello v. Wilhelm, 13 Kan. 229. 81 51. McDowell v. Wilmington, etc., Bank, 1 Del. 369; Calliham v. Tanner, 3 Rob. (La.) 299; Shields Reynolds, 9 W. Va. 483; Vankoughnet v. Mills, 5 Grant Ch. (U. C.) 653. 52. U. S. Bank v. Abbott, 2 F. Cas. No. 906, 3 Cranch C. C. 94; U. S. Bank La.-Lamayer v. Uter, 22 La. Ann. v. MacDonald, 2 F. Cas. No. 925, 445. Cranch C. C. 624. Το same effect Md.-Gray v. Farmers' Nat. Bank, Lenox v. Prout, 3 Wheat. (U. S.) 520, 4 L. ed. 449; Priest v. Watson, 7 Mo. A. 579 [rev on other grounds 75 Mo. 310, 42 AmR 409]. Compare York First Nat. Bank v. Diehl, 218 Pa. 588, Va.-Winfree v. Lexington First 67 A 897 (holding that, where a Nat. Bank, 97 Va. 83, 33 SE 375. payee of a note of a corporation Eng. Badnall v. Samuel, 3 Price 521. agreed with one of the several in- Compare Fleming v. McLeod, 37 N. dorsers thereon that if he would pay B. 630 infra this note. the note as soon as possible within [a] Illustrations.-(1) An agree Md. 631, 32 A 518; Williams v. Hall, 9 Gill 347. N. J.-Herbert v. Servin, 41 N. J. L. 225. ment to renew a note by taking a new note, provided it shall be signed by the surety on the old note, does not extend the latter where the surety does not sign. This is true, although a discount may be paid in anticipation of the surety's signing. Miller v. McCallen, 69 Iowa 681, 29 NW 942. (2) An indorser is not discharged by an agreement to extend the time of payment of a note on receipt of a draft duly accepted, where the draft sent to the holder is not stamped as required by statute, and is returned by him for that reason. Williams v. Hall, 9 Gill (Md.) 347. (3) A holder of a note, agreeing to an extension of the time of payment on condition that the indorser consents, does not thereby release the indorser. Winfree V. Lexington First Nat. Bank, 97 Va. 83, 33 SE 375. (4) Where an agreement by the holder of a note with a prospective purchaser to extend the time of payment is expressly conditioned on the prompt payment of the semiannual installments of interest when due, and the purchase is made, but the first installment of interest is not paid when it falls due, and the holder of the note thereupon, and before its maturity, attaches thereto a memoran dum declaring that, as the interest was not paid, the provisional extension, is void, the indorsers are not discharged if, on the failure of the maker of the note to pay it on maturity, they are given proper notice of its dishonor. Walker v. Washington Title Ins. Co., 19 App. (D. C.) 575. [b] Consent of other creditors.— (1) An indorser on a note is not discharged by an agreement on the part of the holder with the maker to give the latter an extension, if all his creditors will do likewise, where such condition is not fulfilled. LSmayer v. Uter, 22 La. Ann. 45. (2) But a condition in an agreement by the maker of a note and certain of his creditors for an extension of the time of payment, that a certain other creditor shall execute the agreement, is performed where the agreement is executed by the other creditor's as signee for the benefit of creditors, the assignment having been made prior to the agreement. Gifford v. Allen, 3 Metc. (Mass.) 255. [c] Conditional reservation.-But an agreement by the holder of pastdue notes made with the maker, without the knowledge or consent of the indorser, to extend the time for payment to a fixed date, and to accept in full satisfaction a compromise if paid at the date fixed, will discharge the indorser, although the compromise was not paid, and it was expressly agreed that in that event the holders' rights against all parties should be preserved. Fleming v. McLeod, 37 N. B. 630. 55. U. S.-Eldrege v. Chacon, $ F. Cas. No. 4,329, Crabbe 296. La. Hine v. Bailey, 16 La. 213, 35 tion whether an extension of time for payment reserved rights against the indorser is largely a question of intention of the parties;56 but it seems that the agreement must distinctly reserve the right,57 especially under the Negotiable Instruments Law which uses the phrase "unless the right of recourse against such party is expressly reserved.'' 58 Thus an agreement on extending time to the maker for payment of a note that the acceptance of the new note shall not discharge "the parties hereto" cannot be construed as a reservation of rights against the indorser, since he is not one of the parties to the agreement.59 ![[blocks in formation]](https://books.google.co.kr/books/content?id=8308AAAAIAAJ&hl=ko&output=html_text&pg=PA449&img=1&zoom=3&q=%22or+both,+according+to+its+tenor,+and+that+if+it+be+dishonored+and+the+necessary+proceedings+on+dishonor+be+duly%22&cds=1&sig=ACfU3U1V0dm0B-q_cAZ8_YYQSgsa5GqKlA&edge=0&edge=stretch&ci=451,80,498,148) [§ 665] 6. Waiver of Discharge. An indorser on a note, who has been discharged from liability by an extension of time granted to the maker, may waive his discharge, as where he makes a new promise after the discharge and with full knowledge of the facts, but there is no effective waiver where his Siebeneck v. Anchor Sav. Bank, 111 Pa. 187, 2 A 485. 64 [§ 664] 5. Consent of Indorser. In order that AmD 214. Compare however Gustine | liable on the original note. Hill v. v. Union Bank, 10 Rob. 412. Bostick, 10 Yerg. (Tenn.) 410. Mass.-Faneuil Hall Nat. Bank v. Meloon, 183 Mass. 66, 66 NE 410, 97 AmSR 416; Hutchins v. Nichols, 10 Cush. 299 (holding that an agreement by the holder of a note never to sue the maker thereon, and not to call on the indorser for a period of nine months, suspends, but does not destroy, the claim against such indorser); Sohier v. Loring, 6 Cush. 537. Mich.-Big Rapids Nat. Bank v. Peters, 120 Mich. 518, 79 NW 891. Mo.-Miners', etc., Bank v. Rogers, 123 Mo. A. 569, 100 SW 534. N. Y.-Newburgh Nat. Bank v. Bigler, 83 N. Y. 51; Calvo v. Davies, 73 N. Y. 211, 29 AmR 130; Morgan v. Smith, 70 N. Y. 537; Bailey v. Baldwin, 7 Wend. 289. N. C.-Charlotte First Nat. Bank v. Lineberger, 83 N. C. 454, 35 AmR 582. Okl.-Adams v. Ferguson, 44 Okl. 544, 147 P 772. Pa.-Hagey v. Hill, 75 Pa. 108, 15 AmR 583. Vt.-Morse v. Huntington, 40 Vt. 488. Eng. Oriental Financial Corp. v. Overend, L. R. 7 Ch. 142; Nichols v. Norris, 3 B. & Ad. 41, 23 ECL 28, 113 Reprint 15; Boaler v. Mayor, 19 C. B. N. S. 76, 115 ECL 76, 144 Reprint 714, 17 ERC 367; Pooley v. Harradine, 7 E. & B. 431, 90 ECL 431, 119 Reprint 1307; Price v. Barker, 4 E. & B. 760, 82 ECL 760, 119 Reprint 281; Kearsley v. Cole, 16 M. & W. 128, 153 Reprint 1128. 56. National Park Bank v. Kochler, 137 App. Div. 785, 122 NYS 490 [aff 65 Misc. 390, 121 NYS 640, and rev on other grounds 204 N. Y. 174, 97 NE 468]. 57. National Park Bank v. Koehler, 204 N. Y. 174, 97 NE 468 [rev 137 App. Div. 785, 122 NYS 490] (holding, however, that in the particular case the right to recourse was not reserved, and reversing the decision of the appellate division, which held that, where new notes are given for an old note, the payee agreeing to hold the old note as collateral until the new notes are paid, the protest of the old note and the giving of notice thereof to the indorser show an intention on the part of the payee to reserve its rights against the indorser). 58. See Dies v. Wilson County Bank, 129 Tenn. 89, 105 SW 248, Ann Cas1915A 1090 (where the original note was retained by the payee so as to reserve a right of action against the surety); Meredith V. Dibrell, 127 Tenn. 387, 155 SW 163, 46 LRANS 92, Ann Cas1914B 1079. 59. Greenberg V. Ginsberg, 82 Misc. 415, 143 NYS 1017. 60. U. S.-Eldrege v. Chacon, 8 F. Cas. No. 4,329, Crabbe 296. Ark-Griffin v. Long, 96 Ark. 268, 131 SW 672, 35 LRANS 855, AnnCas 1912B 622. La.-Gordon v. Dreux, 6 Rob. 399; Frazier v. Dick, 5 Rob. 249; Hule v. Bailey, 16 La. 213, 35 AmD 214. Ont.-Canadian Bank of Commerce Mo.-Milan First Nat. Bank v. v. Northwood, 14 Ont. 207; Bell v. Wells, 98 Mo. A. 573, 73 SW 293. Manning, 11 Grant Ch. (U. C.) 142; N. H.-Merchants' Nat. Bank v. Wood v. Brett, 9 Grant Ch. (U. C.) Worster, 75 N. H. 495, 496, 77 A 11 452; Upper Canada Bank v. Jardine,[cit Cyc]; Pine River Bank v. Swa9 U. C. C. P. 332. And see Pirie v. Wyld, 11 Ont. 422. [a] Reason for rule.-"The ground upon which an agreement to give time to the maker, made by the holder without the consent of the endorsers, upon a valid consideration, is held to be a discharge of the endorsers, is solely this, that the holder thereby impliedly stipulates not to pursue the endorsers, or to seek satisfaction from them in the intermediate period. It can never apply to any case where a contrary stipulation exists between the parties. Hence, if the agreement for delay expressly saves and reserves the rights of the holder in the intermediate time against the endorsers, it will not discharge the latter. In such case the very ground of the objection is removed, for their rights are not postponed against the maker, if they should take up the note." Hogey v. Hill, 75 Pa. 108, 111, 15 AmR 583. [b] Reservation will not be implied. Stein v. Steindler, 1 Misc. 414, 20 NYS 839. [c] Agreement between maker and subsequent indorser.-It has been held that the renewal of a note discharges the indorser on the original note, although the maker and an indorser on the renewal agreed that the former indorser who knew nothing of the agreement should still be [8 C. J.-29] zey, 47 N. H. 154; Crosby v. Wyatt, 10 N. H. 318. N. J.-Solomon v. Gregory, 19 N. J. L. 112 N. Y.-Buffalo Third Nat. Bank v. Blake, 73 N. Y. 260; East River Bank v. Kennedy, 22 N. Y. Super. 543; Moyv. Urtel, 9 NYSt 667; Chenango Bank v. Curtiss, 19 Johns. 326. er Okl.-Adams v. Ferguson, 44 Okl. 544, 147 P 772. Tenn. Meredith V. Dibrell, 127 Tenn. 387, 155 SW 163, 46 LRANS 92 and note, AnnCas1914B 1079 and note (under Negotiable Instruments Law); Cherry v. Miller, 7 Lea 305; East Tennessee Bank v. Hooke, 1 Coldw. 156. Va.-Winfree V. Lexington First Nat. Bank, 97 Pa. 83, 33 SE 375. Wash.-Guarantee L. & T. Co. v. Galliher, 12 Wash. 507, 41 P 887. Wis. Black River Falls First Nat. Bank v. Jones, 92 Wis. 36, 65 NW 861 (holding that an extension of the time for the payment of a renewal note without the knowledge or consent of one of the makers does not discharge him, although he was merely an accommodation maker of the original note, where the renewal note was accepted at his sole request and for his accommodation and benefit alone). [a] The holder has the burden of proving that an indorser assented to an extension of the time of payment. 61. See supra § 223. 62. Crosby v. Wyatt, 10 N. H. 318 (holding that if a note is made payable to a bank, where a regular usage exists to receive payment by installments, at regular intervals, with the interest on the balance in advance, there is presumptive evidence of the assent of a surety that payment may be delayed and received by installments, according to such usage, until the contrary is shown. But this principle cannot be held to apply to any delay beyond such regular usage, and no assent to any other course can be presumed). 63. Matchett V. Anderson Fdy., etc., Works, 29 Ind. A. 207, 64 NE 229, 94 AmSR 272 (holding that an indefinite extension of the time of payment, or more than one extension, is not justified by a provision in a note waiving all defenses of the extension of the time of payment given the drawers or indorsers); Le Jeune v. Sparrow, 1 Terr. L. 384. [a] Construction of consent.-(1) A joint and several note providing, "We, the makers, sureties, guarantors, and indorsers hereon, agree to extensions of this note without notice, hereby ratifying such extensions, and binding ourselves for payment hereof as if no extension of time for or forbearance of payment has been granted or made," contemplates an actual extension of the time of payment and an actual forbearance to sue, resting on a positive agreement therefor, and not merely delay or indulgence without any binding extension. Wellington Nat. Bank v. Thomson, 9 Kan. A. 667, 59 P 178. (2) Further illustration. School Trustees v. King, 85 Ill. A. 220. [b] Consent of joint makers necessary.-An agreement by an accommodation indorser of a note that the payment thereof may be extended, means an extension with the consent of the makers; and where an extension is made with the consent of only one of two makers of the note, so as to discharge the other and thereby increase the liabilities of the indorser without his consent, the indorser is discharged. Uniontown Bank v. Mackey, 140 U. S. 220, 11 SCt 844, 35 L. ed. 485. [c] Consent conditioned on reduction of debt.-Where the indorser of a note protested for nonpayment signed an agreement reciting that the drawer was about to make an arrangement with the holder for the renewal of the note, "which is to be reduced from five to ten per cent. every sixty days," and consenting that the protested note be held as collateral security, and stipulating to take no advantage of any delay given, it was held that the holder, having accepted the renewal without always exacting the reduction, had given time to the drawer without consent of the indorser and could not recover on the original indorsement. Dundas v. Sterling. 4 Pa. 73. 64. Hazard v. White, 26 Ark. 155; Black River Falls First Nat. Bank v. acts are without knowledge of his release by an extension of time.65 A judgment foreclosing a mortgage given to secure a note on extension of the time 71 XIX. DISCHARGE OF PARTIES BY [§ 666] A. Failure to Sue-1. General Rule. In the absence of a statute 68 or a special agreement,69 an ordinary indorser of a negotiable bill or note is not discharged from liability by mere delay or refusal on the part of the holder to commence or to prosecute a suit against the maker or acceptor for any period short of that fixed by the statute of limitations, where the indorser's liability has been duly fixed by demand, protest, and notice,70 although the maker or acceptor may become insolvent during such delay, if there is no agreement extending the time of payment and postponing the remedy, as already explained.72 In such a case the remedy of the indorser is to pay the debt himself and then to enJones, 92 Wis. 36, 65 NW 861 (holding that, if after learning of an extension of the time for payment of a note a surety recognizes his liability thereon by giving a collateral note for the debt, or in any other way amounting to a promise to pay the same, he remains liable notwithstanding such extension). But see Walters v. Swallow, 6 Whart. (Pa.) 446 (holding promise not binding where no new consideration). 65. Dey v. Martin, 78 Va. 1; Fay v. Tower, 58 Wis. 286, 16 NW 558. 66. Kane v. Cortesy, 100 N. Y. 132, 2 NE 874. See infra § 669. 67. Delay in presentment for payment, notice of dishonor, etc. see infra §§ 736-786, 890-957. 68. See infra § 668. 69. 70. U. S.-Ross v. Jones, 22 Wall. 576, 22 L. ed. 730; Lenox v. Prout, 3 Wheat. 520, 4 L. ed. 449; Franklin v. Browning, 117 Fed. 226, 54 CCA 258. Ala.-Abercrombie v. Knox, 3 Ala. 728, 37 AmD 721; Inge v. Mobile Branch Bank, 8 Port. 108. Ark. Ashley v. Gunton, 15 Ark. 415; Jones v. Robinson, 8 Árk. 484. Cal.-Carver v. Steele, 116 Cal. 116, 47 P 1007, 58 AmSR 156. Conn.-Glazier V. Douglass, Conn. 32 393; Lockwood v. Crawford, 18 Conn. 361. Ind. State v. Hughes, 19 Ind. A. 266, 49 NE 393 (notes governed by law merchant). Iowa.-Darling v. Blazek, 142 Iqwa 355, 120 NW 961. La.-Morgan City Bank v. Herwig, 121 La. 513, 46 S 611; Moore v. Britton, 22 La. Ann. 64; Fortineau v. Boissiere, 18 La. 470; Huie v. Bailey, 16 La. 213, 35 AmD 214. Me.-Mariners' Bank v. Abbott, 28 Me. 280; Bagley v. Buzzell, 19 Me. 88; Page v. Webster, 15 Me. 249, 33 AmD 608; Freeman's Bank v. Rollins, 13 Me. 202. Mass.-Way v. Dunham, 166 Mass. 263, 44 NE 220. Mich.-Rogers v. Detroit Sav. Bank, 146 Mich. 639, 341, 110 NW 74, 18 LRANS 530 and note [quot Cyc]. Miss.-Bullit v. Thatcher, 6 Miss. 689, 37 AmD 175. ![[blocks in formation]](https://books.google.co.kr/books/content?id=8308AAAAIAAJ&hl=ko&output=html_text&pg=PA450&img=1&zoom=3&q=%22or+both,+according+to+its+tenor,+and+that+if+it+be+dishonored+and+the+necessary+proceedings+on+dishonor+be+duly%22&cds=1&sig=ACfU3U0W-JFM-pWIkAfBsDFSMA6Ie_lZZg&edge=0&edge=stretch&ci=496,74,452,231) tuted by the holder against the real Nebr.-Gibson v. Parlin, 13 Nebr. The liability of a guarantor of a note is generally dependent on the exercise of due diligence to collect the amount due from the maker.76 Thus, prior to the enactment of the Negotiable Instruments Law, in those states where the liability of an indorser before delivery was considered that of guarantor, to allege that plaintiff had exhausted his remedies against the maker. Gardner v. Pitcher, 109 App. Div. 106. 95 NYS 678, 17 NYAnnČas 259 [aff 185 N. Y. 534 mem, 77 NE 1187 mem]. [b] In Kentucky, (1) under Neg. Instr. Law (L. [1904] c 102) § 66, making an indorser of a negotiable note liable for its payment on the taking of necessary proceedings on dishonor, the maker need not be prosecuted to insolvency in order to hold an indorser. Williams v. Paintsville Nat. Bank, 143 Ky. 781, 137 SW 535, AnnCas1912D 350. (2) Prior to such statute, however, and perhaps even now, assignors-it is not clear whether this term as used includes indorsers-were not liable unless the maker was first prosecuted to insolvency. Williams v. Obst, 12 Bush 266; Stafford v. Bruce, 10 KyL 187; Potter v. Manion, 6 KyL 653; Clarke v. Wilkerson, 4 KyL 630; Rawlins v. Gaines, 4 KyL 535. See also Whaley v. Vanhook, 4 B. Mon. 271. N. Y.-Smith v. Erwin, 77 N. Y. N. C.-State Bank v. Wilson, 12 N. Pa. In re Alldred, 229 Pa. 627, 79 Tenn.-Cherry v. Miller, 7 Lea 305; Tex.-Midland First Nat. Bank v. Wyo.-Bliler v. Boswell, 9 Wyo. But see Broun v. Hull, 33 Gratt. "It is a thoroughly well-settled doctrine that, when the liability of the indorser is once fixed by due demand and notice of nonpayment, mere delay of the holder in bringing suit on the instrument will not affect such liability. 2 Randolph's Com. Paper, section 761. This is especially true when the delay has been suffered at the indorser's request, and there is evidence in the record from which the trial court could have found such request by appellant." Darling V. Blazek, 142 Iowa 355, 358, 120 NW 961. Mo.-Faulkner v. Faulkner, 73 Mo. 327; Miller v. Mellier, 59 Mo. 388; [a] "The liability of an indorser Schlatter v. Rector, 1 Mo. 286; Block (1) is by virtue of his contract and is V. O'Hara, 1 Mo. 145; Hunter v. fixed by protest or suit within the Hempstead, 1 Mo. 67, 13 AmD 468; time prescribed by statute, and is in Coalter v. Price, 1 Mo. 54; Hunter v. no wise dependent upon any other Price, 1 Mo. 53; Herrick v. Edwards, diligence to collect from the princi106 Mo. A. 633, 81 SW 466 (holding pal obligor." Midland First Nat. that where a third person signed a Bank v. Powell, (Tex. Civ. A.) 149 note on the face thereof and placed SW 1096, 1104. (2) The maker and after his name the word "indorser," the indorser of a note being jointly whether his liability was that of and severally liable, and not joint maker or guarantor, he might be sued obligors, a complaint in an action on directly on the maturity of the note, a note against the indorser's adminwithout an action having been insti- istrator was not defective for failure as [c] Occupies same position surety. An indorser of commercial paper will ordinarily be released by the same acts that will release a surety. Midland First Nat. Bank v. Powell, (Tex. Civ. A.) 149 SW 1096. [d] Failure to file claim against estate of deceased maker. It is no defense for indorsers of a bill of exchange, who have had notice of demand and nonpayment, that the indorsee failed after notice to file a claim against the insolvent estate of the deceased maker. Lawson v. Watson, 8 Baxt. (Tenn.) 72. [e] An agreement between a payee and one of several indorsers, that, if the latter would pay the note as soon as possible within sixty days, other notes would be extended, does not release the other indorsers where the note was duly protested and notice thereof given, since in such a case mere delay in enforcing the collection of the note after maturity, when the liability of the indorsers has become fixed by law, will not discharge the other indorsers. York First Nat Bank v. Diehl, 218 Pa. 588, 67 A 897. Laches in demand for payment or notice of nonpayment see infra §§ 736-786, 890-957. Liabilities of collecting bank for failure to use diligence see Banks and Banking § 286 et seq. 71. See cases supra note 70. See supra §§ 660-665. 72. 73. Rogers v. Detroit Sav. Bank, 146 Mich. 639, 641, 110 NW 74, 18 LRANS 530 [quot Cyc]; East River Bank v. Kennedy, 22 N. Y. Super. 543. 74. Motte v. Kennedy, 14 S. C. L. 13. 75. Edmonston V. Ascough. 43 Colo. 55, 95 P 313. 76. See Guaranty [20 Cyc 1448 et seq]. ![[blocks in formation]](https://books.google.co.kr/books/content?id=8308AAAAIAAJ&hl=ko&output=html_text&pg=PA451&img=1&zoom=3&q=%22or+both,+according+to+its+tenor,+and+that+if+it+be+dishonored+and+the+necessary+proceedings+on+dishonor+be+duly%22&cds=1&sig=ACfU3U1D4nwjJHcpZ5gdPYcDSTJ068k-WA&edge=0&edge=stretch&ci=32,80,454,40){kind=small} The liability of a surety on a note does not depend on a prior action against the principal, according to the general rules relating to suretyship.78 [§ 667] 2. Nonnegotiable Notes. A different rule applies, however, in case of nonnegotiable paper, where the indorser of such paper is considered a guarantor. In such a case, diligence against the maker is necessary to charge the indorser or assignor of a nonnegotiable note.79 [ 668] 3. Statutory Provisions. In a number of states statutes have been enacted for the protection of indorsers and assignors of commercial paper, or generally of indorsers, sureties, and guarantors, by requiring the holder of paper to use diligence to collect the debt from the maker or acceptor as a condition precedent to liability on the part of the indorser, assignor, surety, or guarantor. These statutes vary in the different states.80 1182 hundred dollars, in order to charge the indorser or In Alabama the statute 81 provides that, in the absence of a waiver or of facts constituting an excuse, as provided in the statute, on all contracts assigned by writing which are not governed by the commercial law, when the amount due exceeds one 77. Clayton v. Coburn, 42 Conn. | Bates, 4 Ala. 342; Hall v. Chilton, 3 348; Holbrook v. Camp, 38 Conn. 23; Ala. 633; Pearson v. Mitchell, 2 Ala. Rhodes V. Seymour, 36 Conn. 1; 736; Reese v. White. 2 Ala. 306; RidWithers V. Berry, 25 Kan. 373; dle v. Rourke, 1 Ala. 394; Rathbone Kearnes v. Montgomery, 4 W. Va. 29. v. Bradford, 1 Ala. 312; Bristow v. Contra San Diego First Nat. Bank v. Jones, 1 Ala. 159; Woodward v. HarBabcock, 94 Cal. 96, 29 P 415, 28 bin, 1 Ala. 104; Ivey v. Sanderson, 6 AmSR 94; Parkhurst v. Vail, 73 Ill. Port. (Ala.) 420; Cavanaugh v. Ta343. tum, 4 Stew. & P. (Ala.) 204; Chapman v. Arrington, 3 Stew. (Ala.) 78. See Principal and Surety [32 Cyc 91 et seq]. 79. Matchett V. Anderson Fdy., etc., Works, 29 Ind. A. 207, 64 NE 229, 94 AmSR 272; Adams, etc., Co. v. Robinson, 76 SW 510, 25 KyL 853; Edgewood Distilling Co. v. Nowland, 44 SW 364, 19 KyL 1740; Merchants' Nat. Bank v. Williams, 41 W. Va. 37, 23 SE 685. See also supra § 76. 80. See statutory provisions. [a] In Arkansas the statute requiring prosecution of a suit against the principal debtor, on the written request of a person bound as surety, does not apply to indorsers of commercial paper. Ross v. Jones, 22 Wall. (U. S.) 576, 22 L. ed. 730. [b] In Colorado the assignor of a bill or note was formerly liable to an action by the assignee, if the latter used due diligence, by the institution and prosecution of a suit against the maker, but not otherwise, unless such suit would have been unavailing or the maker had absconded or left the state when the paper became due. Lowe v. Farnham, 22 Colo. 307, 44 P 507; Castagno v. Carpenter, 14 Colo. 524, 24 P 392; Watson v. Hahn, 1 Colo. 385; Chicago Inv. Co. v. Harrison, 1 Colo. A. 466, 29 P 462. 81. Ala. Civ. Code (1907) §§ 5153 5155. 480. [a] Thus (1) the fact that an indorser of a note was previously liable to the one to whom he indorsed it does not entitle the latter to recover against the indorser without showing that he brought suit against the maker in the first court to which suit could be brought, which was necessary to charge an indorser. Bradford v. Haggerthy, 11 Ala. 698. (2) In an action to recover from an indorser on a note, where it is admitted that no action was brought against the maker within thirty days after maturity, as required by statute, and plaintiff's testimony leaves it in doubt as to whether or not such action was waived by defendant, while defendant's testimony denies a waiver, a judgment for plaintiff will be reversed. Cole v. Tuck, 108 Ala. 227, 19 S 377. [b] Where the judge of the coun- [c] Record as proof of suit 82. Luverne Bank v. Sharp, 152 Ala. 589, 44 S 871, 126 AmSR 58 (no excuse that maker was not liable because of failure of consideration); Marshall v. Bishop, 140 Ala. 206, 37 S 324; Cole v. Tuck, 108 Ala. 227, 19 S 377; Mobile Sav. Bank v. McDonnell, 83 Ala. 595, 4 S 346; Thomason v. Cooper, 57 Ala. 560; Cook v. Mutual Ins. Co., 53 Ala. 37; Sugg v. Winston, Bloodgood v. Cammack, 5 Stew. 49 Ala. 586; McDaniel v. Dougherty, & P. (Ala.) 276. Το same effect 42 Ala. 506; McDougald v. Ruther- Woodcock v. Campbell, 2 Port. (Ala.) ford, 30 Ala. 253; Fulford v. Johnson, 456. 15 Ala. 385; Schaefer v. Adler, 14 Ala. 723; Bradford v. Bishop, 14 Ala. 517: Weed v. Brown, 13 Ala. 449; Bradford v. Haggerthy, 11 Ala. 698; Miller v. McIntyre, 9 Ala. 638; Hagerthy v. Bradford, 9, Ala. 567; Murphy v. Gee, 9 Ala. 276; Litchfield v. Allen, 7 Ala. 779; Bates v. Ryland, 6 Ala, 668; Howze v. Perkins, 5 Ala. 286; Hammett v. Smith, 5 Ala. 156; Ryland v. [a] Paper indorsed before passage of statute. Such a statute affects the nature of the contract, and not merely the remedy on it, and therefore does not apply to a note indorsed prior to its passage. Bloodgood v. Cammack, 5 Stew. & P. (Ala.) 276. [b] A note payable "at call" is not embraced in the statutory exceptions in Ala. Code (1876) § 2112, providing [c] A guaranty in these words, "I bind myself to pay this note, if T. M. Likens [the maker] does not," made upon the back of the note by one who is not a party to it, was not within the statute. Nesbit v. Bradford, 6 Ala. 746. [d] An irregular indorsement on paper, not negotiable was not embraced by the act of 1828, and the liability thereby created was that the indorser would pay it if by the use of proper diligence the money could not be collected from the maker. Fulford v. Johnson, 15 Ala. 385; Jordan v. Garnett, 3 Ala. 610. 84. Mobile Sav. Bank v. McDonnell, 83 Ala. 595, 4 S 346. 85. Hays v. Myrick, 47 Ala. 335. [a] Effect of continuance.-After suit begun by the holder against the maker to the first term of court after the note falls due, the continuance of the cause by consent or other legal delay of the trial is not such an improper suspension of the remedy against the maker as will discharge the indorser. Hays v. Myrick, 47 Ala. 335. 86. Pearson v. Mitchell, 2 Ala. 736. [a] Thus where the action was brought to the county court, being the first court held, the writ was returned not found, and plaintiff then dismissed his suit and commenced anew to the next circuit court, the second suit was regularly instituted, as it would stand for judgment sooner than if an alias writ had been issued from the county court. Pearson v. Mitchell, 2 Ala. 736. ![[blocks in formation]](https://books.google.co.kr/books/content?id=8308AAAAIAAJ&hl=ko&output=html_text&pg=PA451&img=1&zoom=3&q=%22or+both,+according+to+its+tenor,+and+that+if+it+be+dishonored+and+the+necessary+proceedings+on+dishonor+be+duly%22&cds=1&sig=ACfU3U1D4nwjJHcpZ5gdPYcDSTJ068k-WA&edge=0&edge=stretch&ci=617,1198,328,164) The such an action is conclusive against the indorser, where he is notified of the pendency of the action,88 provided the judgment was on the merits.89 judgment must be followed by an execution returned "no property'' 90 before the commencement of the suit against the indorser;91 but when such return is made it is conclusive of the liability of the indorser where the other requirements of the statute have been complied with.92 sequent indorsers and all cosureties are discharged.23 The notice must state the county of the principal's residence.94 In Illinois the statute declares that the rights of the holders of notes payable in money and the liability of all parties to or on the same shall be the same as that of like parties to inland bills of exchange according to the custom of merchants. But the assignor of other notes, bonds, bills, or other inIn Georgia any surety, guarantor, or indorser, at struments in writing, whereby a person agrees to pay any time after the debt on which he is liable be- any sum of money in personal property or articles comes due, may give notice in writing to the cred- of personal property, etc., is liable to an action by itor, his agent, or any person having possession or the assignee or holder, if the latter shall have used control of the obligation, to proceed to collect the due diligence by the institution and prosecution of same out of the principal, and, if the creditor or a suit against the maker for the recovery of the holder refuses or fails to commence an action for money or property due thereon, or for damages in three months after such notice, the principal being lieu thereof, but not otherwise, unless the instituwithin the jurisdiction of the state, the indorser, tion of such suit would have been unavailing or the guarantor, or surety giving the notice and all sub- maker had absconded, etc.95 Due diligence includes 88. Hagerthy v. Bradford, 9 Ala. | sufficient to protect the indorser hav- cution of a suit against the maker, 567. ing notice of the facts. Carhart v. etc. See Wills v. Claflin, 92 U. S. 135, [a] Effect of judgment.-Where Wynn, 22 Ga. 24. (2) Where a bank 23 L. ed. 490; Springer v. Puttkamer, an indorsee sues the maker of an in- is the holder of a note, notice to sue 159 Ill. 567, 42 NE 876 [aff 58 Ill. A. dorsed note and notifies the indorser given to the cashier is sufficient. St. 675]; Telford v. Garrels, 132 III. 550, of the pendency of the suit or ad- Marys Bank v. Mumford, 6 Ga. 44. 24 NE 573 [aff 31 Ill. A. 441]; Finley vises him of any defense interposed, v. Green, 85 Ill. 535; Kayser v. Hall, this will make the judgment con85 Ill. 511, 28 AmR 624; Clayes v. clusive against the indorser, if the White, 83 Ill. 540; Kelly v. Graves, maker is discharged, and it cannot 74 Ill. 423; Shufeldt v. Sutphen, 52 be controverted when the indorser is Ill. 255; Corgan v. Frew, 39 I. 31, sued. Hagerthy v. Bradford, 9 Ala. 89 AmD 286; Judson v. Gookwin, 37 567. III. 286; White v. Clayes, 32 Ill. 325; Rives v. Kumler, 27 Ill. 291; Robinson v. Olcott, 27 Ill. 181; Hamlin v. Reynolds, 22 Ill. 207; Nixon v. Weyhrich, 20 Ill. 600; Roberts v. Haskell, 20 Ill. 59; Curtis v. Gorman, 19 Ill. 141; Crouch v. Hall, 15 111. 263; Brown v. Pease, 8 Ill. 191; Bledsoe v. Graves, 5 Ill. 382; Hilborn v. Artus. 4 Ill. 344; Raplee v. Morgan, 3 IL 561; Saunders v. O'Briant, 3 111. 369; Mason v. Wash, 1 Ill. 39, 12 AmD 138; Delamater v. Kearns, 35 III. A. 634; Temple v. Peo., 6 111. A. 378; Windheim v. Ohlendorf, 3 111. A. 436. (2) If the indorsee of a note desired to hold the indorser liable, it was his duty to proceed to judgment against the maker at the earliest opportunity, Robinson v. Olcott, 27 Ill. 181. (3) Action must have been brought against the maker at the first fol 89. Murphy v. Gee, 9 Ala. 276. To same effect Hagerthy v. Bradford, 9 Ala. 567. 90. Bradford v. Bishop, 14 Ala. 517; Hammett v. Smith, 5 Ala. 156; Reese v. White, 2 Ala. 306; Woodward v. Harbin, 1 Ala. 104. [a] Sufficiency of return.-(1) Although the statute makes the return of "no property found" conclusive evidence of the insolvency of the maker, a return that "there are no goods or chattels, lands or tenements of defendant, to be found in his county," is equivalent and sufficient. Hammett v. Smith, 5 Ala. 156. (2) But a return "nulla bona" is not sufficient, as these words import a want of "goods" only. Woodward v. Harbin, 1 Ala. 104. [b] Failure to issue alias execution. The omission by an indorsee for nearly two years to sue out an alias execution upon a judgment obtained by him against the maker, the sheriff having failed to return the original execution, in the absence of any excuse for such neglect, discharges the indorser from liability. Bradford v. Bishop, 14 Ala. 517. [c] Death of principal debtorIt is no defense to an action on a note brought against an indorser subsequently to the death of the principal debtor that after the note became due the indorser notified plaintiffs that they must proceed by suit against the estate of the principal debtor and that plaintiffs agreed so to do. Brown v. Flanders, 80 Ga. 209, 5 SE 92. [d] Effect of receivership in federal court.-Where the maker and indorser of a note are sued thereon in a state court and thereafter the property of the maker passes into the hands of a receiver appointed by the United States circuit court, the payee of the note is under no obligation, on the demand of the indorser, to file an intervention in the United States court, although by so doing he may recover the amount of his note from the assets of the maker, and a failure so to do will not relieve the indorser from liability. James V. Southern Electrical Works, 108 Ga. 746, 34 SE 140. [el Delay in entering final judg-lowing term of any court having jument.-An accommodation indorser, risdiction, although there might not sued jointly with the maker, was not discharged merely because plaintiff, after an entry of "default" had been made upon the judge's docket, permitted one or more terms to elapse before entering up a final judgment in the case. Hall v. Pratt, 103 Ga. 255. 29 SE 764. 94. Ware v. Macon City Bank, 59 Ga. 840. Ware v. 91. Riddle v. Rourke, 1 Ala. 394. 92. Reese v. White, 2 Ala. 306. 93. Ga. Civ. Code (1911) § 3546. See Ware v. Macon City Bank, 59 Ga. [a] Thus notice to sue, given by 840; Denson v. Miller, 33 Ga. 275; an indorser to the holder as provided Vanzant v. Arnold, 81 Ga. 210 (hold- in the statute, describing the parties ing that the statute applies to an in- to be sued as "of Macon, Georgia," dorsement containing a guaranty and is insufficient, there being both a waiver of demand and notice); Car-county and city of Macon. hart v. Wynn, 22 Ga. 24; Prior v. Gentry, 11 Ga. 300; St. Marys Bank v. Mumford, 6 Ga. 44; Howard v. Brown, 3 Ga. 523 (holding that the holder of a note has the whole of the three months after notice in which to sue the maker); Holt v. Salmon, 24 S. C. L. 91 (construing the Georgia statute). [a] Dormant partner of maker.Under the statute, the holder of a note is bound to sue a dormant partner of the makers, when notified so to do by the indorser. Howard v. Brown, 3 Ga. 523. [b] To whom notice should be given.—(1) Under the statute of 1831, notice to sue given by an indorser to an agent holding a note merely for collection, with authority only to receive the amount due, was held in Macon City Bank, 59 Ga. 840. [a] In order to render an indorser be ten days between the time the note falls due and the commencement of the term. Chalmers v. Moore, 22 III. 359. (4) Suing the maker in the circuit court, where he could'not obtain a judgment for a year or more, instead of suing in a justice's court, was not prosecuting with due diligence. Allison v. Smith, 20 Ill. 104. (5) Suit by an indorsee against the maker of a note, in order to hold the indorser, must be instituted in the county in which the maker resides if known to him; but, if not known, it may be brought in the county in which the note was made if the mak er can be found there so as to make service on him at the first term of the court after the maturity of the note. Bestor v. Walker, 9 Ill. 3. [d] Not applicable to makerThe statutory requirement that the indorsee must exercise diligence to collect the note from the maker be fore he can compel the indorser to pay it has no application to the rights or liabilities of the maker. Oxman v. Garwood, 80 Ill. A. 658. [e] Obtaining judgment.-The indorsee of a note, in order to hold the [c] Formerly in Illinois (1) the indorser, must not only institute suit statute provided that every assignor thereon against the maker at the first of every promissory note, bond, bill, term after it becomes due, but if he or other instrument in writing, should can he must obtain judgment at that be liable to an action by the assignee, term and use ordinary diligence in if the assignee should use due dili-enforcing execution. But, if a failure gence, by the institution and prose- to obtain judgment at the first termi [b] Excuses for not suing maker. -Barlow v. Cooper, 109 Ill. A. 375. |