91 however, where the release is given by the holder at the oral request, and with the consent of the party secondarily liable, notwithstanding the release is under seal and contains no reservation of any right against the party secondarily liable. Moreover, the provision that a person secondarily liable on an instrument is discharged "by the discharge of a prior party" is to be read in connection with the subsequent subdivision which provides for a discharge by a release of the principal debtor "unless the holder's right of recourse against the party secondarily liable is expressly reserved"; and hence where one of two joint makers is released, together with part of the security, but the holder's rights are expressly reserved against all other parties, an indorser is not released thereby except pro tanto, to the extent that payment was made by the maker released.92 And this is the rule at common law.93 [§ 857] (3) Release of Subsequent Parties. nett, 214 Mass. 352, 101 NE 982; Phenix Nat. Bank v. Hanlon, 183 Mo. | A. 243, 166 SW 830; Ziegfried v. Stein, 117 NYS 900. [a] Statute refers to the unconditional discharge of the maker. Arlington Nat. Bank v. Bennett, 214 Mass. 352, 101 NE 982. [b] Necessity for "express” reservation.-(1) "When the statute provides that a party secondarily liable is discharged by a release of the principal debtors, unless the holder's right of recourse against such party is expressly reserved, it must be taken to mean precisely what it says, and that a reservation of such right of recourse cannot be implied from the acts and conduct of the parties, in the face of an unconditional release of the principal debtor. Indeed the term, 'expressly reserved,' is evidently employed in the statute in order to leave no room for doubt as to this very matter, and to require, under the circumstances, an express, as distinguished from an implied, reservation of the holder's right of recourse against a party secondarily liable." Phenix Nat. Bank v. Hanlon, 183 Mo. A. 243, 248, 166 SW 830. (2) The facts that the indorser consented to the release of the maker by the holder on a part payment being made, and that the note was not surrendered and canceled but was retained by the holder, do not show that the holder "expressly reserved" its right of recourse against the indorser, within the provision of the Negotiable Instruments Law that a person secondarily liable is discharged by the release of the principal debtor unless the holder's right of recourse against the party secondarily liable is "expressly reserved." Phenix Nat. Bank v. Hanlon, 183 Mo. A. 243, 166 SW 830. [c] In Missouri it was held that under Rev. St. (1909) § 10,090, the indorser was released by discharge of the maker on receipt of part payment, although he indorsed on the note a consent to the maker's release. Phenix Nat. Bank V. Hanlon, 183 Mo. A. 243, 166 SW 830. 91. Arlington Nat. Bank v. Bennett, 214 Mass. 352, 356, 101 NE 982. "A negotiable instrument is discharged under § 136 by payment in due course by or in behalf of the principal debtor, or by the party accommodated when the instrument is made or accepted for accommodation, or 'by any other act which will discharge a simple contract for the payment of money.' It had long been decided before the law as to negotiable instruments was codified that a simple contract, consisting of a promissory note which is the debt itself, could be thus discharged and the maker or principal debtor relieved The maker of a note will not be discharged by a release of an indorser,94 and prior indorsers are not affected by the release of a subsequent indorser. So a covenant with an accommodation payee not to sue him is no discharge of the maker for whose accommodation the payee indorsed.96 [§ 858] e. Acceptance of, or Realizing upon, Collateral Security. Where the execution of a bill or a note is accompanied by an agreement that the maker is to transfer to the payee certain property as collateral which shall be accepted in full satisfaction in case of the maker's default, there is, in case of default, a payment of such paper.97 So where property or securities are accepted by the payee or holder in satisfaction of a bill or note, such acceptance will operate as a discharge of the indorser.98 A different rule prevails if the property is transferred simply as collateral security," but in all cases the rights and duties of the parties are his liability as indorser and thereby precluded a dismissal of a suit pending to enforce his liability as indorser, does not affect the liability of the maker and prior indorsers. especially where it was agreed that such acts should not affect the liability of other parties to the note. Tradesmen's Nat. Bank v. Looney, 99 Tenn. 278, 42 SW 149, 63 AmSR 830, 38 LRA 837. from all further liability to the holder. West Boylston Mfg. Co. v. Searle, 15 Pick. (Mass.) 225. But the effect of a release upon parties secondarily liable is found in § 137. It is obvious upon comparison, as well as under our decisions, that the words, 'release of the principal debtor,' and 'unless the holder's right of recourse against the party secondarily liable is expressly reserved,' refer to the unconditional discharge of the maker. They have reference only to the first class of cases, where the question whether the indorser is released depends not upon his consent, for he has not consented, but upon the true intent of the agreement. See Vanderford v. Farmers', etc., Nat. Bank, 105 Md. 164, 66 A 47, 10 LRANS 129. The statute speaks of an express reservation in the instrument. The language is entirely inappropriate to describe a consent on the part of the indorser, when the release is given at his request, under the second class of cases. The statute therefore should be construed as not intended to preclude the indorser and the holder from entering into an agreement by which the indorser's liability should continue unimpaired." Arlington Nat. Bank v. Bennett, supra. 92. Davis v. Gutheil, 87 Wash. 596, 152 P 14. 93. Davis v. Gutheil, 87 Wash. 596, 152 P 14. 94. Ala.-Cowan v. Campbell, 131 Ala. 211, 31 S 429. Ark.-Ruddell v. Walker, 7 Ark. 457. Cal.-Tomlinson v. Spencer, 5 Cal. 291. Iowa. Foster v. Russ, 14 Iowa 61. Me.-Auburn First Nat. Bank V. Marshall, 73 Me. 79. Mass.-Commercial Bank v. Cunningham, 24 Pick. 270, 35 AmD 322. Pa.-Love v. Brown, 38 Pa. 307. Tenn.-Tradesmen's Nat. Bank v. Looney, 99 Tenn. 278, 42 SW 149, 63 AmSR 830, 38 LRA 837. Eng. Harrison v. Courtauld, 3 B. & Ad. 36, 23 ECL 25, 110 Reprint 14; Carstairs v. Rolleston, 5 Taunt. 551, 1 ECL 283, 128 Reprint 805; Hayling v. Mullhall, W. Bl. 1235, 96 Reprint 728. [a] Illustrations.-(1) Where the payee of an attorney's fee note assigns it to her attorney who has collected everything due thereon except the attorney's fees, the fact that the payee is relieved by the attorney from further liability for such fees in consideration of the assignment is not a defense to an action on the note by the attorney to recover the attorney's fees. Cowan v. Campbell, 131 Ala. 211, 31 S 429. (2) An agreement between an indorser and the holder of a note, whereby the indorser substituted certain securities in place of [b] A discharge given by the holder of a note to one who signed on the back does not discharge one who had signed on the face of the note, when there is no evidence that the holder had any other knowledge of the relation between the signers than that obtained from an examination of the note. Auburn First Nat. Bank v. Marshall, 73 Me. 79. [c] Receiving part payment from the indorser and releasing him do not discharge the maker from the balance due. Commercial Bank v. Cunningham, 24 Pick. (Mass.) 270, 35 AmD 322. 95. Ala.-Kennon V. McRea, 7 Port. 175. Ark.-Ruddell v. Walker, 7 Ark. 457. Iowa.-Knight V. Dunsmore, 12 Iowa 35. Ky.-Commonwealth Bank V. Floyd, 4 Metc. 159. Oh.-Perry v. Carneal, Wright 197. [a] Payment by a later indorser will not discharge a prior one. Commonwealth Bank v. Floyd, 4 Metc. (Ky.) 159; State Bank v. Roberts, 4 La. 530. 96. Maltby v. Carstairs, 7 B. & C. 735, 14 ECL 330, 108 Reprint 898; Mallet v. Thompson, 5 Esp. 178. 97. Pauly v. Wilson, 57 Fed. 548; McGarvey v. Hall, 23 Cal. 140; First Nat. Bank v. Watkins, 154 Mass. 385, 28 NE 275; Gilliam v. Davis, 7 Wash. 332, 35 P 69. [a] But the facts that a trustee agreement provides that the proceeds of sale of collateral deposited to secure notes are to be applied to the payment of certain notes, and that provision is made for the payment of any surplus to the debtor, without express words preserving his liabil ity on the notes, in the event of a deficit, do not show that the proceeds of the sale were intended to be in full satisfaction of the maker's liability on the notes. Smith v. Ettenberg, 75 Misc. 458, 133 NYS 463. 98. Ark.-Airy v. Nelson, 39 Ark. La.-McGuire v. Wooldridge, 6 Rob. Mich.-Ives v. Lansingburgh Bank, 12 Mich. 361. 43. 47. Pa.-Stokes v. Brooks, 1 Phila. 35. Ont.-McLeod v. McKay, 20 U. C. Q. B. 258. 99. Md.-Brengle V. Bushey, 40 Md. 141, 17 AmR 586. 3 to be determined by their agreement.1 Where a note is secured by bonds, the maker is entitled to have the proceeds of substituted bonds, sold by a receiver of the payee, applied to the payment of the note. The mere acceptance of collateral security, or additional security, for a bill or note will not discharge indorsers or sureties, unless the time of payment is extended. Thus, the receipt of money from a third person, not as payment of the note but as security, does not affect the rights of the holder against an indorser.5 If, after suit is brought on a note, collateral security for more than enough to pay the balance due on the note is sold by plaintiff, this has been declared to be payment pendente lite, and to discharge the cause of action." So if the collateral is retaken by the maker, and a Mass.-Aldrich v. Blake, 134 Mass. 582. N. Y.-Lancaster v. Knight, 74 App. Div. 255, 77 NYS 488; Averill v. Loucks, 6 Barb. 470; Mohawk Bank v. Van Horne, 7 Wend. 117. Wis.-Marschuetz 50 Wis. 175, 6 NW 511. 1. U. S.-Pauly v. Wilson, 57 Fed. 548; In re Ford, 9 F. Cas. No. 4,932, 18 NatBankrReg 426. judgment in replevin rendered against him in the payee's favor is paid by him, it will satisfy the note secured; but if a judgment is rendered on the collateral and is transferred to the maker himself on a part payment by him, it will amount to a payment pro tanto only.8 Acceptance of higher security. The maker of a note will be discharged, where the holder takes another and higher security and makes an improper disposition of it by release and sale." The in [859] f. Refusal to Accept Security. dorser of a note is not discharged by a refusal of the holder to receive from the maker a conveyance of sufficient security, in consideration of an extension of the time of payment.10 [c] Acceptance, by the holder of an overdue note, of part payment and additional collateral from the maker without promise as to the future, did not discharge an indorser. Bacon v. Bacon, 94 Va. 686, 27 SE [860] g. Failure to Enforce Security. In the with the maker, purchased them it- discharge of the indorsers, although self, and filed claim in bankruptcy the goods are afterward taken and against the obligor, and the note was sold by the bank, but the sum restamped "paid" and payment credit-ceived is an extinguishment pro ed in the holder's books, and under tanto. Ford v. Decatur Branch State the agreement the maker and a third Bank, 6 Ala. 286. Pa. Sterling V. Marietta, etc., party were to pay any deficiency, Trading Co., 11 Serg. & R. 179. See such note was extinguished by the also Mechanics' Nat. Bank v. Kiel-new agreement and the cancellation kopf, 22 Pa. Super. 128 (holding that of the instrument, although it apit is not material from which of the peared that the bonds could not be parties to the original note the col- enforced against the bankrupt's lateral security is received; that mak- estate. Citizens' Nat. Bank v. Hile- 576. ers and indorsers are alike debtors to man, 233 Pa. 432, 82 A 770. (2) [d] New note. The payee of a the holder; and that as against him, Where a note indorsed before deliv-note who, on transferring it, agrees absolute payment by any debtor dis- ery by one other than the maker pro- to be liable on it as a joint maker charges all, while conditional pay- vided on its face that "we, signers, and not as an indorser, is not disment by any leaves the note in force indorsers, sureties, and all of us, in charged by the transferee thereafter against all on nonpayment of the solido, promise to pay," and the note taking a new note of the original collateral). also provided that collaterals at-maker, in the absence of an agreev. Wright, tached to secure its payment should ment that it shall discharge him. be applicable to the payment of any Bexar Bldg., etc., Assoc. v. Lockwood, indebtedness due or to become due (Tex. Civ. A.) 54 SW 253. by the "maker or makers," the collateral cannot be applied to debts of persons signing on the back of the note, whether they be considered indorsers or sureties. J. M. Dresser Co. v. Hibernia Bank, etc., Co., 136 La. 314, 67 S 15. (3) Where a note recites that collateral has been deposited as security for its payment or for payment of any other liability "to the holder hereof now due or to become due or that may be hereafter Bram-contracted," and authorizes a sale of the property pledged on nonpayment of any of such liabilities, and application of the proceeds to the payment of "either or all of said abovementioned liabilities as the holder hereof shall deem proper," a holder for value and before maturity by indorsement from the payee may apply the collateral to payment of other obligations owing by the maker to him, as well as to the payment of the note, and need not, on tender of the amount of the note at maturity, surrender the collateral, so long as other obligations owing to him by the maker remain unsatisfied. Oleon v. Rosenbloom, 247 Pa. 250, 93 A 473, LRA1915F 968 and note. Ala. Sampson v. Fox, 109 Ala. 662, 19 S 896, 55 AmSR 950. Cal.-McGarvey v. Hall, 23 Cal. 140. Ill-Esty v. Brooks, 54 Ill. 379; Mines v. Moore, 41 Ill. 273; Bodley v. Anderson, 2 Ill. A. 450. 13. Ind.-Lewis v. Wintrode, 76 Ind. Iowa. Findley v. Cowles, 93 Iowa 389, 61 NW 998. Ky.-Kentucky Nat. Bank v. 56. Mass.-First Nat. Bank v. Watkins, 154 Mass. 385, 28 NE 275; Springfield Five Cents Sav. Bank v. South Cong. Soc., 127 Mass. 516; Tucker v. Crowley, 127 Mass. 400; Brown v. Smith, 122 Mass. 589; Leland v. Loring, 10 Metc. 122; Mackay v. Holland, 4 Metc. 69. Mich.-Kent v. May, 13 Mich. 38. N. Y.-Cory v. Leonard, 56 N. Y. 494; Remington v. Staats, 1 Thomps. & C. 394; Stokes v. Stokes, 28 Misc. 58, 59 NYS 801. Pa. Oleon v. Rosenbloom, 247 Pa. 250, 93 A 473, LRA1915F 968 and note; Citizens' Nat. Bank v. Hileman, 233 Pa. 432, 82 A 770; Oliphant v. Church, 19 Pa. 318. S. C. Glenn v. Caldwell, 25 S. C. Eq. 168. Vt.-Austin v. Howe, 17 Vt. 654. Wash.-Gilliam v. Davis, 7 Wash. 332, 35 P 69. See Barron v. Robinson, 67 Wash. 656, 122 P 343 (where a mortgage was not accepted as cash payment on claims so as to discharge the note). Wis.-Matteson V. Matteson, 55 Wis. 450, 13 NW 463; Heath v. verthorn Lead Min., etc., Co., 39 Wis. 146. 2. Wagner v. Kohn, 225 Fed. 718, 140 CCA 592. 3. Ala. Ford v. Decatur Branch Del.-Sussex Nat. Bank v. Carew, N. Y.-National Park Bank V. Va.-Bacon v. Bacon, 94 Va. 686, [a] Thus a creditor may take as collateral to an old note new securSil-ity or other notes; and if time is not given to the debtor the indorser or surety will not be discharged. National Park Bank v. Koehler, 204 N. Y. 174, 97 NE 468. Eng-Ansell v. Baker, 15 Q. B. 20, 69 ECL 20, 117 Reprint 365. Can.-Yon v. Cassidy, 18 Can. S. C. 713. [a] Illustrations.-(1) Where the holder of a note sold bonds, held as collateral security under agreement [e] Guaranty.-Where the liability of an indorser has been fixed, as by bringing suit within the time prescribed by law, he is not discharged by a third party becoming guarantor. Tooke v. Taylor, 31 Tex. 1. [f] Assignment of mortgage. The act of the maker of a note who had delivered a mortgage to indemnify the accommodation indorsers, in procuring an assignment of the mortgage to the indorsee and lodging the assignment for record, is not of itself a delivery of the assignment so as to bind the indorsee to discharge the indorsers. Sussex Nat. Bank V. Carew, 27 Del. 444, 89 A 134. 4. See supra §§ 660-665. 5. Commercial Nat. Bank V. Clarke, 180 Mass. 249, 62 NE 370. [a] Thus the fact that, after the liability of both indorsers had been fixed by protest, plaintiff obtained as security for the note a personal demand note of the payee, indorsed by his father, who afterward replaced such note with cash to be held as security for the first note, does not affect plaintiff's rights against defendant. Commercial Nat. Bank v. Clarke, 180 Mass. 249, 62 NE 370. 6. Jefferson v. Century Sav. Bank, 143 Iowa 83, 120 NW 308; Lewis v. Jewett, 51 Vt. 378. [a] Collection from collateral of more than amount of note.The maker was entitled to cancellation of a note and return of collateral, where the payee had collected from collateral more than the amount of the note. Jefferson V. Century Sav. Bank, 143 Iowa 83, 120 NW 308. 7. Miles v. Walther, 5 Mo. A. 595. 8. Burnheimer v. Hart, 27 Iowa 19, 99 AmD 641, 1 AmR 209. 9. Hall v. Hopkins, 14 Mo. 450; Cuyler v. Cuyler, 2 Johns. (N. Y.) 186. [a] If the payee of a note executes a bond to the maker which is equivalent to a covenant not to sue [b] Illustration.-Where a bank the latter upon any demand then exaccepts a proposition from the draw-isting, such covenant will amount to er of a bill to take into its posses- an absolute release of the maker. sion a stock of goods to be applied Cuyler v. Cuyler, 2 Johns. (N. Y.) pro rata to all his debts it is not a 10. Lane v. Steward, 20 Me. 98; absence of special circumstances making prompt action a duty, mere failure to enforce collateral security or a mortgage does not discharge an indorser or surety on a note 11 or the maker,12 if there is no release or impairment of the security.13 [861] h. Surrender, Release, Impairment, or Substitution of Security. The surrender or release by the holder of a bill or a note of any security which he has received from the acceptor or maker, for the payment of the instrument, operates as a discharge of indorsers to the amount of the security so surrendered, provided the indorsers' liability has not become fixed,15 and they do not consent thereto;16 but the indorser is not discharged, where the security released was valueless nor where the 14 City Sav. Bank v. Kensington Land Granite Bank v. Richardson, 7 Metc. (Mass.) 407; Ryan v. McConnell, 18 Ont. 409. 13. See infra § 861. [a] Where an indorser of a note secured by deed of trust desires to avoid the consequence of depreciation of the mortgaged property, he must demand its sale; and, on failure to make such demand, he is not entitled to charge the holder with such depreciation between the maturity of the note and the institution of suit. Williams v. Planters', etc., Nat. Bank, (Tex. Civ. A.) 44 SW 617. 14. Ga.-Atlanta Nat. Bank V. Douglass, 51 Ga. 205, 21 AmR 234. Ill-Phares v. Barbour, 49 Ill. 370. Ind. T.-Franklin v. Browning, 3 Ind. T. 642, 64 SW 563. La.-Union Nat. Bank v. Cooley, 27 La. Ann. 202. Mass.-American Bank v. Baker, 4 Metc. 164. Mich.-Ives v. Lansingburgh Bank, 12 Mich. 361. Minn.-Bishop v. Buckeye Pub. Co., 57 Minn. 219, 58 NW 872. Miss.-Clopton v. Spratt, 52 Miss. 251. N. H.-City Bank v. Young, 43 N. H. 457. N. Y.-Spring v. George, 50 Hun 227, 3 NYS 43. Pa.-Wharton v. Duncan, 83 Pa. 40. S. C.-Ehrick v. Haslett, 10 S. C. L. 116. Tex.-Wylie v. Hightower, 74 Tex. 306, 11 SW 1118. Vt.-Hurd v. Spencer, 40 Vt. 581. Wis.-La Crosse State Bank V. Michel, 152 Wis. 88, 139 NW 748, 1131; Plankinton y. Gorman, 93 Wis. 560, 67 NW 1128. Ont.-Mellish v. Green, 5 Grant Ch. (U. C.) 655. See Canadian Bank of Commerce v. Northwood, 14 Ont. 207 (recognizing the rule, but not applying it in the particular case). See generally Principal and Surety [32 Cyc 216]. 17 security could not be enforced.18 One who signs a negotiable note on its face, although he attaches the word "surety" or the like to his name, is primarily liable under the Negotiable Instruments Law, and hence is not released by the act of the payee in returning collateral to the principal maker.1 19 144. Impairment of security. Indorsers are released if the security is impaired by the act or negligence of the holder to the injury of the surety or indorser,20 as where there is an improper sale of collateral or an improper appropriation of the proceeds by the holder.21 So it has been held that an indorser or surety on a note may be discharged by the holder's failure to record a mortgage given to in one day and three months from Douglass, 51 Ga. 205, 21 AmR 234. date, respectively, for "value re- Ind.-Cummings v. Pfouts, 13 Ind. ceived, for wintering cattle branded NS. Cattle wintered by G. W. Franklin to stand good for the payment of this note, and is to be paid out of the first shipment of said cattle." He indorsed the notes to plaintiff, "demand and notice waived." It was held that the promise in the notes was to pay out of the proceeds of the first cattle shipped and did not create an equitable lien on the cattle or proceeds; hence defendant was not released by plaintiff permitting the cattle to be removed after the notes matured and the subsequent insolvency of the maker of the notes. Franklin v. Browning, 3 Ind. T. 642, 64 SW 563. 15. Hurd v. Little, 12 Mass. 502. 16. Midland First Nat. Bank v. Powell, (Tex. Civ. A.) 165 SW 131; Tate v. New York State Bank, 96 Va. 765, 32 SE 476. [a] Illustrations.—(1) If the 17. Wade v. Livingstone, 13 Ont 18. [a] Under the Negotiable Instruments Law in Wisconsin, providing that a person secondarily liable on a negotiable instrument is discharged by giving up or applying to other purposes collateral security applicable to a debt, the surety is discharged only to an extent corresponding with the value of the security given up or misapplied, especially in view of the notes accompanying the Negotiable Instruments Law when presented to the legislature for adoption which showed no intention to change the previous law in this respect, and to which, under the express provision of §§ 1684-6, resort may be had in construing and interpreting the law. La Crosse State Bank v. Michel, 152 Wis. 88, 139 NW 748, 1131. [b] Where no lien.-Defendant owned two notes, payable to his order 20. Ga.-Atlanta Smith v. Marietta First Nat. Bank, 115 Ga. 608, 41 SE 983. See also Principal and Surety [32 Cyc 218 note 97]. [a] A bank not being able to en- 19. Lenoir v. Cannon, 4 Tenn. Civ. La.-McGuire v. Wooldridge, 6 Rob. 47; Hereford v. Chase, 1 Rob. 212 (loss of vendor's lien). Mo.-St. Louis State Bank V. Bartle, 114 Mo. 276, 21 SW 816. N. Y.-Nassau Bank v. Campbell, 63 Hun 229, 17 NYS 737, 74 Hun 616, 26 NYS 831 [rev on other grounds 147 N. Y. 694 mem, 41 NE 502]. Compare Buffalo First Nat. Bank v. Wood, 71 N. Y. 405, 27 AmR 66 (an accommodation indorser). Pa.-Sitgreaves v. Farmers', etc., Bank, 49 Pa. 359. Compare Fifth Ave. Bank v. Klauss, 193 Pa. 402, 44 A 450 (holding that B, indorsee of a note of L, by taking a second mortgage from L to secure this and other indebtedness, does not become a trustee for K, the indorser, so as to relieve K from liability, although B purchases the property at sale under the first mortgage which he also holds, for less than the amount thereof, when it is worth more than such amount). See generally Principal and Surety [32 Cyc 216–221]. But see Columbus State Bank v. Erb, 50 Mont. 442, 147 P 617 (holding that the indorsers impliedly assenting to the conduct of the maker as to property covered by a chattel mortgage to the payee were estopped from insisting that they were injured by loss through the maker's mismanagement of the proceeds). [a] Thus, if the holder of a note secured by a mortgage appears at a meeting of the maker's creditors and votes for the sale of the mortgaged property on terms of credit, an indorser of the note is discharged. McGuire v. Wooldridge, 6 Rob. (La.) 47. [b] If the holder voluntarily postpones to a later mortgage a mortgagė given to indemnify the indorser, the latter is discharged. Nassau Bank v. Campbell, 63 Hun 229, 17 NYS 737, 74 Hun 616, 26 NYS 831 [rev on other grounds 147 N. Y. 694 mem, 41 NE 502]. 21. Sitgreaves v. Farmers', etc., Bank, 49 Pa. 359. Compare Midland First Nat. Bank v. Powell, (Tex. Civ. A.) 165 SW 131 (holding that it would be immaterial on the rights of the indorser of a note received for cattle, and secured by a mortgage on the cattle, that the proceeds of a sale of the cattle which were sold with the consent of the indorser and the indorsee were reinvested before they finally came into the possession of the indorsee). [a] It is no defense, however, to the indorsers on a note that the holder sold mortgaged property privately, instead of under legal process, where the indorsement was not in consideration of the mortgage being executed by the maker. Montpelier Bank v. Montpelier Lumber Co., 16 Ida. 730, 102 P 685. 23 secure the note, whereby the benefit of the mortgage security is lost,22 except where the filing was, by agreement, not to be made until necessary. But the mere fact that the premises covered by a mortgage given to secure a note have depreciated in value since the time when the mortgage might have been enforced does not discharge an indorser from liability on the note.24 So an indorser is not discharged by the failure of the holder of a note, before maturity, to restrain the maker from wasting property mortgaged to secure the note.25 Substitution of securities. It has been held that the substitution of a new security discharges the indorsers,2 but this is true only where they have been injured thereby.27 So the indorser of a note is not discharged by the holder's releasing the property of the maker attached and taking a statutory bond, although done at the solicitation of the maker and for a valuable consideration.28 Where collateral is deposited by the surety on a note, the fact that the payee releases such collateral will not release the principal, although the latter may have been in fact only a surety as between him and the apparent surety.29 [862] i. Recovery and Satisfaction of Judgment. If judgment is recovered on a bill or a note, the instrument is thereby extinguished as between plaintiff and defendant, according to the doctrine of merger;30 but without satisfaction the instrument is not extinguished as between plaintiff and parties prior and subsequent to defendant,31 or between defendant and a party prior to plaintiff.3 32 Where a judgment is recovered against one of two promisors on a joint and several note, it will operate as a discharge of the other.33 Where the holder of 22. Atlanta Nat. Bank v. Doug- generally Principal lass, 51 Ga. 205, 21 AmR 234. See Cyc 220]. generally Principal and Surety [32 Cyc 2221. 23. Allentown Nat. Bank v. Trexler, 174 Pa. 497, 34 A 195 (holding that an indorser is not discharged from liability on a note because of the holder's failure to file a mortgage given as collateral security, whereby the mortgage has become valueless, where the mortgage was given on the express condition that it should not be filed until necessary, since the filing in such case is in the discretion of the holder). 24. Willson v. Binford, 81 Ind. 588. See also supra § 675. 25. Brown v. Nichols, 123 Ind. 492, 24 NE 339. 26. Smith v. Harper, 5 Cal. 329. 27. Smith v. Harper, 5 Cal. 329; Lock Haven State Bank v. Smith, 155 N. Y. 185, 149 NE 680; Keeler v. Hollweg, 23 Misc. 415, 51 NYS 259 [aff 36 App. Div. 490, 55 NYS 821]. See generally Principal and Surety [32 Cyc 221]. Compare however Atlanta Nat. Bank V. Douglass, 51 Ga. 205, 21 AmR 234 (where under the facts the rule was not applied). se [a] The mere exchange of curity (1) does not release the indorser where the two securities are of equal value and the indorser is not injured thereby. Lock Haven State Bank v. Smith, 155 N. Y. 185, 149 NE 680. (2) The mere exchange of collateral for a new instrument which is practically the same security is not a discharge of an indorser. Keeler v. Hollweg, 23 Misc. 415, 51 NYS 259 [aff 36 App. Div. 490, 55 NYS 821]. 28. Lane v. Steward, 20 Me. 98. Compare Page v. Webster, 15 Me. 249, 33 AmD 608 (holding that the dismissal of a suit and the discharge of an attachment against the maker will not release an indorser). See a note obtains a judgment thereon against the maker and sells such judgment, without reserving in the transfer any rights or claims against the indorser, he cannot afterward enforce payment from such indorser;34 but it has been held that the recovery of a judgment against the maker of a note does not discharge the indorsers.35 If an indorser has satisfied a judgment on the note and taken an assignment of it, his indorsee is entitled to have the judgment canceled as to him.36 An indorser of a note is not released by the act of the holder in attempting to enforce a judgment rendered against both the maker and the indorser, against the property of the indorser.37 A stay of judgment on a note does not operate as a payment thereof.38 [863] j. Discharge of Liability of Acceptor. At common law, if the acceptor of a bill is appointed as executor of the holder, it will release him from liability on the acceptance.39 A release of an acceptor may be implied where the holder accepts a new and different security.40 A release will not in' general discharge a subsequent acceptance; and where the acceptor of a bill is released by the drawer of the same before maturity, the liability of the former to a bona fide holder for value before maturity will not be discharged.42 Where the drawer is released by the holder for value of an accommodation bill, the accommodation acceptor will not thereby be discharged, although the holder may have known when the release was given that the acceptance was without consideration.43 Nor will an acceptor be discharged by reason of the indorsee's failure to retain collateral security received from his indorser.44 and Surety [32 29. Turner v. Farmers' Bank, 58 SW 695, 22 KyL 787. 30. See Judgments [23 Cyc 1110 note 90]. 31. Porter v. Ingraham, 10 Mass. 88; Norris v. Badger, 6 Cow. (N. Y.) 449; Witz v. Fite, 91 Va. 446, 22 SE 171; Tarleton v. Allhusen, 2 A. & E. 32, 29 ECL 37, 111 Reprint 13; Claxton v. Swift, 2 Show. 441, 494, 89 Reprint 1030, 1062. [a] An unsatisfied judgment may merge the bill or the note, (1) but is not of itself a payment (Norris v. Badger, 6 Cow. (N. Y.) 449; Witz v. Fite, 91 Va. 446, 22 SE 171; Tarleton v. Allhusen, 2 A. & E. 32, 29 ECL 37, 111 Reprint 13), (2) and cannot be pleaded as such (Claxton v. Swift, 2 Show. 441, 494, 89 Reprint 1030, 1062). [b] Issuing execution on the judgment obtained against one party does not extinguish the liability of the other parties. Porter v. Ingraham, 10 Mass. 88. 32. Tarleton v. Allhusen, 2 A. & E. 32, 29 ECL 37, 111 Reprint 13. 33. Coonley v. Wood. 36 Hun (N. Y.) 559; McDonald v. Gillis, 33 N. S. 244. 34. Spies v. National City Bank, 68 App. Div. 70, 74 NYS 64 [aff 174 N. Y. 222, 66 NE 736, 61 LRA 193]. 35. Brown v. Foster, 4 Ala. 282; Staples v. Hendrick, 89 Conn. 100, 93 A 5 [expl Couch v. Waring, 9 Conn. 261]; Historical Pub. Co. V. Hartranft, 3 Pa. Super. 59, 39 WklyNC 315. [a] In Connecticut, under Practice Act §§ 119, 124, it was held that the taking of judgment and the filing of a judgment lien against the maker of a note did not discharge the indorser. Staples v. Hendrick, 89 Conn. 100, 93 A 5 [expl Couch v. Waring, 9 Conn. 261]. [b] Judgment against collateral. -It is no defense to an action 38. Tenn. 626. Davis v. Home Ins. Co., 127 330, 155 SW 131, 44 LRANS 39. Bartrum v. Caddy, 9 A. & E. 275, 36 ECL 160, 112 Reprint 1216; Freakley v. Fox, 9 B. & C. 130, 17 ECL 66, 109 Reprint 49. To same effect Jenkins v. Mackenzie, 6 U. C. Q. B. 544. Contra Needham's Case, 8 Coke 135a, 77 Reprint 678. 40. Mason v. Hunt, 1 Dougl. 297, 99 Reprint 192; Evans v. Drummond, 4 Esp. 89. [a] The taking of a new security will not amount to a release (1) where the bill of exchange is still recognized as existing (Twopenny v. Young, 3 B. & C. 208, 10 ECL 103, 107 Reprint 711), (2) or where the giver of the same has knowledge that the security is void (Sweeting v. Halse, 9 B. & C. 365, 17 ECL 167, 109 Reprint 136). [b] To release two acceptors it is not necessary that the security should be given by both of them, but the separate bill of either may have that effect. Evans v. Drummond, 4 Esp. 89. 41. Drage v. Netter, 1 Ld. Raym. 65, 91 Reprint 939. 42. Dod v. Edwards, 2 C. & P. 602, 12 ECL 757; Scott v. Lifford, 9 East 347, 103 Reprint 605. 43. Howard Banking Co. v. Welchman, 19 N. Y. Super. 280. 44. Fowler v. Gate City Nat. Bank, 88 Ga. 29, 13 SE 831. . a By waiver. The liability of an acceptor on bill may be extinguished by waiver.45 A waiver, however, must be an unconditional renunciation as holder of the bill of all claims in respect thereto on the drawee as acceptor.46 XXIII. DISHONOR AND PROTEST The Negotiable Instruments Law expressly provides that the instrument is dishonored by nonpayment, when it is duly presented for payment and payment is refused or cannot be obtained, or when presentment is excused and the instrument is overdue and unpaid.51 It also expressly provides that, subject to the provisions thereof, when the instrument is dishonored by nonpayment an immediate 45. Fitch v. Sutton, 5 East 230, 102 Reprint 1058; Walpole v. Pulteney [cit Dingwall v. Dunster, 1 Dougl. 247, 248, 99 Reprint 161]. V. right of recourse to all parties secondarily liable thereon accrues to the holder.52 Like rules are found in the act as to when a bill is dishonored by nonacceptance.53 [§ 865] B. Protest.4-1. Definition and Scope of Term. The word "protest" signifies to "testify" before.55 Strictly speaking, and as the term is used in this subdivision, a protest is only a formal declaration executed by the notary 56 and does not include either the presentment of a bill or note or the notice of dishonor.57 In its popular sense, however, it means all the steps or acts accompanying the dishonor of a bill or note necessary to charge an indorser.58 The Negotiable Instruments Law expressly profused." Cook v. Litchfield, 7 N. Y. Super. 330, 341 [rev on another point 9 N. Y. 279]. of language or actions which are 47. Effect of dishonor on accrual [a] The return of a check pre- 53. 1440. [a] What constitutes waiver.(1) An agreement to consider an acceptance at an end (Walpole V. Pulteney [cit Dingwall v. Dunster, 1 Dougl. 247, 248, 99 Reprint 161]), (2) or a message to an accommodation acceptor from the holder that the business has been settled with the drawer and that the acceptor need not give himself any further trouble (Black V. Peele [cit Dingwall Dunster, 1 Dougl. supra]), is sufficient; (3) but mere negligence on the holder's part (Farquhar V. Southey, 2 C. & P. 497, 12 ECL 697, M. & M. 14, 22 ECL 460), (4) a statement to the accommodation acceptor that he shall not be troubled, coupled with a refusal to surrender the acceptance (Adams v. Gregg, 2 Stark, 531, 3 ECL 518), (5) a statement by the holder at a meeting of the acceptor's creditors that he will look to the drawer and not come on the acceptor (Whatley v. Tricker, 1 Campb. 35), (6) an agreement not to sue the acceptor, provided he will make an affidavit that the acceptance is a forgery (Stevens v. Thacker, 1 Peake N. P. 187; Lloyd v. Willan, 1 Esp. 178), (7) receiving from the acceptor a partial payment coupled with a promise to pay the balance at future time (Ellis v. Galindo, 1 Dougl. 250 note, 99 Reprint 163 note), (8) or receiving interest from the drawer and delaying for a long time to apply for payment to the acceptor (Farquhar v. Southey, supra) will not release. N. Y.-Coddington v. Davis, 1 N. Y. [b] A legal consideration is neces- 186, 3 Den. 16; Cook v. Litchfield, 7 sary, it has been held, to support a N. Y. Super. 330 [rev on another waiver of an acceptance after ma-point 9 N. Y. 279]. To same effect turity. Perfect v. Musgrave, 6 Price Sherman v. Ecker, 58 Misc. 456, 109 111, 146 Reprint 757; Badnall v. Samuel, 3 Price 521, 146 Reprint 340; Parker v. Leigh, 2 Stark. 228, 3 ECL 388. Compare Dobson v. Espie, 2 H. & N. 79, 83 (where in discussing this rule Bramwell, B., said: "The law is thus laid down in Byles on Bills, p. 168, 7th ed.: 'It is a general rule of law, that a simple contract may, before breach, be waived or discharged, without a deed and without consideration; but after breach there can be no discharge, except by deed or upon sufficient consideration' "'). a Liability of bank for not making pro- Mich.-Platt v. Drake, 1 Dougl. 296. NYS 678. Oh.-Townsend v. Lorain Bank, 2 [a] It has been defined as follows: (1) "A formal statement in writing, by a public notary, under seal, that a certain bill of exchange or promissory note (describing it) was on a certain day presented for payment, or acceptance, and that such payment or acceptance was refused." Burrill L. D. [quot Swayze v. Britton, 17 Kan. 625, 629]. (2) "A protest is a declaration in writing, made by a public officer, under his [a] Although a waiver may be by oath of office, that the bill or note parol (1) (Wintermute v. Post, 24 to which it relates, was, on the day N. J. L. 420), (2) yet it should be it became due, duly presented for either in express words, or by means payment, and that payment was re 46. Wintermute v. Post, 24 N. J. L. 420; Whatley v. Tricker, 1 Campb. 35; Dingwall v. Dunster, 1 Dougl. 247, 99 Reprint 161. 57. Platt v. Drake, 1 Dougl. (Mich.) 296; Walker v. Turner, 2 Gratt. (43 Va.) 534. 58. U. S.-Piedmont Carolina R. Co. v. Shaw, 223 Fed. 973, 138 CCA 227. Ala.-White v. Keith, 97 Ala. 668, 12 S 611. Ark.-Wards v. Sparks, 53 Ark. 519, 14 SW 898, 10 LRA 703. Cal.-McFarland V. Pico, 8 Cal. Conn.-City Sav. Bank v. Hopson, 53 Conn. 453, 5 A 601. 626. Ida.-Montpelier Bank V. Montpelier Lumber Co., 16 Ida. 730, 102 P 685. Ill. Blatchford v. Harris, 115 Ill. A. 160. La.-Commercial Nat., Bank V. Sanders, 136 La. 226, 66 S 854. Mass.-Demelman v. Brazier, 198 Mass. 458, 84 NE 856; Johnson v. Parsons, 140 Mass. 173, 4 NE 196. Mich.-Spies v. Newberry, 2 Dougl. 425. Minn.-Peabody v. Citizens' State Bank, 98 Minn. 302, 310, 108 NW 272 [cit Cyc]; Wolford v. Andrews, 29 Minn. 250, 13 NW 167, 43 AmR 201. Nebr.-Williams v. Parks, 63 Nebr. 747, 89 NW 395, 56 LRA 759; Wood River Bank V. Omaha First Nat. Bank, 36 Nebr. 744, 55 NW 239. N. Y.-Ayrault v. Pacific Bank, 47 N. Y. 570, 7 AmR 489 and note; Coddington v. Davis, 1 N. Y. 186, 3 Den. 16; Price v. McClave, 13 N. Y. Super. 544; Sherman v. Ecker, 58 Misc. 456, 109 NYS 678; Cook v. Litchfield, 10 NYLegObs 330. Oh.-Townsend v. Lorain Bank, 2 Oh. St. 345. Or.-Sprague v. Fletcher, 8 Or. Coldw. 52. V. Hughes, 2 Va.-Brown v. Hull, 33 Gratt. (74 Va.) 23. "It is true that technically speaking the word 'protest' only applies to and covers the formal writing and declaration made by the officer, who is ordinarily a notary, stating that the bill or note was duly and regularly presented in accordance with the laws governing commercial pa. per, and that payment was refused, and that he thereby formally protests the same for nonpayment. This, however, does not cover the meaning of the word as generally used in commercial transactions and as it is commonly understood in the business world. In its popular sense it includes all the steps necessary to |