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§ 1330. When the bill, note, check, or other security which is taken by the holder, is payable immediately, or what is the same thing, on demand, there can arise no presumption for delay on the part of the holder, and consequently it will operate in itself as a discharge of the drawer or indorser.23 Yet the holder, by neglecting to collect the amount of the bill, note, or check with due dili gence, may discharge the maker or acceptor who passed it to him; and thus by discharging the principal discharge the drawer or indorser. It is his duty to present a check on the same day if it be on a bank in the place where received, and to forward it by mail of the next day if in another;24 and he must exercise diligence in presenting a bill or note payable on demand. What due diligence is, is elsewhere considered.

§ 1331. Composition with principal. Any composition with the maker or acceptor, whereby a certain per cent. is agreed to be taken in discharge of the whole amount, upon receiving collateral security from a third person for the composition money, and it were given accordingly, would discharge the drawer or indorser, whether he were an accommodation party or not; for it would amount to an extinguishment and satisfaction of the instrument as to all the parties thereto.25

23. Crafts v. Beale, 11 C. B. 172, 2 Am. Lead. Cas. 273. See, on this point, Board of Education v. Fonda, 77 N. Y. 362, Folger, J.: "Taking of the draft (which was payable on demand) as a means of getting payment of the debt, and the unavailing use of it for that purpose, without laches, worked no suspension of remedy against Wolcott, the principal, that will discharge defendants if they are his sureties." Merriman v. Barker, 121 Ind. 74.

24. Smith v. Miller, 43 N. Y. 171 (1870), 52 N. Y. 546 (1873). See vol. II, § 1590.

25. Lewis v. Jones, 4 B. & C. 506; Steinman v. Magnus, 11 East, 390; Story on Notes, § 426, 427. In Story on Bills, § 430, it is said: "Perhaps it is questionable, even if the holder has the consent of the other parties, that he may accept the composition, and hold them liable, without resorting to the compounding creditor, whether he will not still be deprived of his remedy against them, if the composition operates as a release of the debt, inasmuch as it will be a fraud upon the other creditors, if they have supposed that they had contracted with each other on equal terms. On the other hand, the holder's compounding with, or releasing, the drawer, will not discharge the acceptor of a bill, although he has accepted it for the accommodation of the drawer, unless it is expressly so stipulated." See Kiam v. Cummings, 13 Tex. Civ. App. 198, 36 S. W. 770.

This doctrine was first introduced in courts of equity,26 but it is now universally applied by courts of law. A discharge of the maker in bankruptcy does not release an indorser.27

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SECTION IV.

LATENT SURETIES; ACCOMMODATION, AND JOINT PARTIES AS SURETIES.

§ 1332. There is no doubt that if the party add the word "surety" to his name upon the face of the paper, it is a distinct indication of the character in which he signs, and that he will be treated as a surety as against all parties.28 And it is equally well settled that if the party signing add the word "principal" to his name, or expressly describe himself as principal on the face of the paper, all parties may so regard and treat him.29 But there are other cases in which the parties signing do not expressly describe in what character they are to be bound, which claim especial attention.

What we have heretofore said in respect to the discharge of those parties to bills and notes who are regarded as occupying the rela

26. Melvill v. Glendinning, 7 Taunt. 126.

27. Pratt v. Chase, 122 Mass. 265.

28. Hunt v. Adams, 5 Mass. 358; Robison v. Lyle, 10 Barb. 512; Edwards on Bills, 572. See § 1338a; Bank v. Good, 21 W. Va. 467, citing the text; Stovall v. Border Grange Bank, 78 Va. 194, citing the text; Peoria Mfg. Co. v. Huff, 45 Nebr. 7, 63 N. W. 121; Arbuckle v. Templeton, 65 Vt. 207, 25 Atl. 1095; People's Bank v. Pearsons, 30 Vt. 711.

29. In Sprigg v. Bank of Mount Pleasant, 10 Pet. 265, Thompson, J., said: "In ordinary cases, when sureties sign an instrument without any designation of the character in which they become bound, it may be reasonable to conclude that they understood that their liability was conditional, and attached only in default of payment by the principal. And hence the reasonableness of the rule of law, which requires of the creditor that his conduct with respect to his debtor should be such as not to enlarge the liability of the surety, and make him responsible beyond what he understood he had bound himself. But when one who is in reality only surety is willing to place himself in the situation of a principal by expressly declaring upon his contract that he binds himself as such, there cannot be any hardship in holding him to the character in which he assumes to place himself. As to that particular contract, he undertakes as a partner with the debtor, and has no more right to disclaim the character of principal than the debtor would have to treat him as principal if he had set out in the obligation that he was only surety." See also 14 Pet. 201; Harris v. Brooks, 21 Pick. 195; Menagh v. Chandler, 89 Ind. 94; Arbuckle v. Templeton, 65 Vt. 207, 25 Atl. 1095; Claremont Bank v. Wood, 10 Vt. 582; Benedict v. Cox, 52 Vt. 247.

tion of sureties, by indulgence to or discharge of their principals, was said under the assumption that the bill or note, as the case might be, was executed upon a valuable consideration, and that all parties were bound in all respects to the holder in like manner as they appeared to be.

§ 1332a. Parties signing as principals for accommodation. Where the parties ostensibly principal were in reality mere parties for the accommodation of others, it has been held, by authorities of high consideration, that different and peculiar principles apply, and that in such cases, if the holder grant time to or release the party for whose accommodation another became acceptor or maker, the acceptor or maker was thereby discharged.30

§ 1333. English decisions. Thus it was held at nisi prius, by Lord Ellenborough, that where the indorsee of a bill, who received it knowing that it was accepted for accommodation of the drawer, gave time to the drawer when it became due upon his paying a part, the acceptor was thereby discharged.31 And subsequently, by the same judge, that giving time to an accommodation acceptor would not discharge the accommodated drawer, on the ground that the latter had no remedy over against the acceptor which could be materially affected;32 in both cases regarding the acceptor as a surety, and the drawer as the principal debtor. The doctrine of Lord Ellenborough was soon doubted, and held not to apply where the acceptor promised to pay the bill when demand was made at maturity;33 and Lord Mansfield declared in the ensuing year that

30. Hoffman v. Butler, 105 Ind. 372, citing the text; Fisher v. Denver Nat. Bank, 22 Colo. 379, 45 Pac. 440, supporting the text, "but the mere taking of collateral security, whether it be by note or mortgage, or both, or payable or enforceable after the maturity of the original debt, is not prima facie evidence of an extension of payment of original debt." See Fisher v. Denver Nat. Bank, supra; Flour City Nat. Bank v. McKay, 86 Hun, 15, 33 N. Y. Supp. 365. See Gist v. Feitz, 43 Nebr. 238, 61 N. W. 621.

31. In Laxton v. Peat, 2 Campb. 185 (1809), Lord Ellenborough said: "This being an accommodation bill within the knowledge of all the parties, the acceptor can only be considered a surety for the drawer, and in the case of simple contracts the surety is discharged by time being given, without his concurrence, to the principal. The defendant's remedy over is materially affected by the new agreement into which the plaintiff entered with the drawer after the bill was due. The case is exactly the same as if the bill had been drawn by the defendant (the acceptor), and accepted by Hunt (the drawer), in consideration of a debt due." See Edwards on Bills, 573.

32. Collett v. Haigh, 3 Campb. 281 (1812).

33. Kerrison v. Cooke, 3 Campb. 362 (1813), Gibbs, J.

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except in the case cited from Campbell (Laxton v. Peat), it never was known that anything passing between other parties could discharge an acceptor." 34 Lord Ellenborough himself, it appears, had applied a different doctrine from that held by him in the cases above referred to, in an earlier case, where a similar question was presented between the indorsee and the maker of a note for accommodation of the payee. 35 Upon the question arising in the Court of Common Pleas, in a case where it appeared that the indorsee of a bill accepted for the accommodation of the drawer took a cognovit from the drawer payable by instalments, it was unanimously held that the acceptor was not discharged, and the circumstance that the holder did not know it was an accommodation acceptance when he took it, was considered by Lord Mansfield entirely immaterial.36

§ 1334. The doctrine of the Court of Common Pleas, enforced by the great name and cogent reasoning of Lord Mansfield, may be regarded as the settled doctrine of the courts of common law in England, in cases where the holder did not know that the note or acceptance was for accommodation at the time when he took the instrument, although he may have afterward acquired information of its true character.37 And even where the holder

34. Raggett v. Axmore, 4 Taunt. 730 (1813).

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35. Mallet v. Thompson, 5 Esp. 178 (1804). The indorsee of the payee, for whose accommodation the note was made, knowing that it was an accommodation note, covenanted in a composition deed not to sue or molest the payee on account of the debt for ninety-nine years, and received a dividend of the payee's estate. Lord Ellenborough held that the maker was not discharged, in a suit against him by the indorsee, and said: "It is true that the plaintiff, recovering on the defendant (the maker) in this case, he (the maker) may have his action over against Twigg (the payee), but it will be for money paid to his use at the defendant's suit; the payment creates a new debt, but the old debt is satisfied as between Twigg and the plaintiff." 36. Fentum v. Pocock, 5 Taunt. 192, 1 Marsh. 14 (1813).

37. Carstairs v. Rolleston, 5 Taunt. 551, 1 Marsh. 257 (1814). The holder released the payee who had indorsed to him an accommodation note. He did not know when he received it that it was accommodation paper. Held, the maker was not discharged. In Nichols v. Norris, 3 B. & Ad. 41, Parke, J., said: "I am of opinion that Fentum v. Pocock is sound law." In Price v. Edmunds, 10 B. & C. 578 (1830), Parke, J., said: "I think that the decision in Fentum v. Pocock, where it was held that the acceptor of an accommodation bill was not discharged by giving time to the drawer, was good sense and good law." Rolfe v. Wyatt, 5 Car. & P. 181 (1831). Held, giving time to drawer, on receiving part payment of bill accepted for his accommodation, did not discharge acceptor. The holder did not know it was an accommodation

knew that the apparent principal party was really signing for the accommodation of another, at the time when he received the instrument, the better opinion is that that circumstance does not alter his rights or duties, as such party has held himself out and obligated himself in a certain character, and has no just ground to demand or expect greater consideration than that legally incident to that character which he has assumed.38 If he intended to insist on the privileges of a surety, he should have refused to bind himself save in a recognized form of suretyship. Furthermore, it may be observed, that while the indulgence or release of an acceptor (or other principal) materially affects the remedies of the drawer (or other surety) who is thereby delayed or entirely deprived of recourse against the acceptor upon the bill itself, to which he would be entitled, and upon which he might sue the acceptor on making payment, no such injury can possibly be inflicted on the acceptor for accommodation by indulgence to or release of the drawer. The acceptor may, at any time at or after maturity of the bill, pay it, and no matter what may be the arrangements between the holder and the drawer, sue the latter, not upon the bill, but for money paid to his use. 39 But now in courts of equity in England, and in courts of law where equitable pleas are admissible, the opposite doctrine prevails, and was enforced a few years since in a well-considered case."

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bill. Harrison v. Courtauld, 3 B. & Ad. 37 (1832). Held, that holder who knew at the time of the agreement, but not when he took the bill, that it was accepted for accommodation, by releasing drawer did not discharge acceptor. Story on Bills, §§ 253, 268.

38. Fentum v. Pocock, 5 Taunt. 192, 1 Marsh, 14 (1813), Lord Mansfield; Webster v. Mitchell, 22 Fed. 870, citing the text. See Gist v. Feitz, 43 Nebr. 238, 61 N. W. 621.

39. See Mallet v. Thompson, supra; § 1333, note 35; Thompson on Bills, 237; Story on Bills, § 268.

40. Edwin v. Lancaster, 6 Best & S. Q. B. 572 (118 Eng. C. L.) (1865). Bill accepted for drawer's accommodation, and agreement of compensation entered into between holder and drawer, the holder knowing then that the acceptance was for accommodation. Crompton, J.: "Originally, the cases at law were extremely strong that the position of parties to a bill of exchange or promissory note could not be reversed by making the party who appeared on the face of the instrument to be the principal debtor surety for the other. They proceeded on the principle that parol evidence is not allowed to alter a written contract. That principle is a sound one, and has governed many cases in courts of law. But cases in equity establish, that when one or both of two parties to an instrument are primarily liable, as in the instance of a common bond where several join as obligors, and the creditor may sue any one of

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