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amount without making any special appropriation, it will be taken to have been paid in on the account, and will be applied in payment or reduction of the accommodation note.'

§ 764. In a banking account there is no room for any other appropriation, than that which arises from the order in which the receipts and payments take place, and are carried into the account. Accordingly, where the defendant accepted a bill of exchange drawn by C, who indorsed it to his bankers, and they entered it on the credit side of C's account, but the bill having been dishonored, entered it afterwards on the debit side; and a few days after this dishonor, the defendant paid to C the amount of the bill, but omitted to take it out of the banker's hands, and C having subsequently paid to the banker enough to cover the bill, including all previous items of his indebtedness, the defendant was held discharged." 564* *Though the accommodation maker of a note or acceptor of a bill stands in the relation of a surety towards the party for whose convenience the paper is made or accepted, they are nevertheless considered, in courts of law, as the principal debtors-as the parties primarily liable.' It follows that an accommodation maker or acceptor can only be discharged at law by payment or release, in the same manner

'Hammersley v. Knowlys, 2 Esp., 666.

2 Field and others v. Carr, 5 Bing. R., 13. The action was brought on two bills of exchange drawn by Thomas Crawshaw, on the defendant, at four months' date, and accepted by him. They were given for the price of certain wool purchased by the defendant of C., and indorsed by C. to plaintiffs; but the ground on which the defendant was held discharged was this, the plaintiffs had charged ten bills in account against C. and had treated them as paid; they had in fact been paid by defendant to C., though left in the hands of the plaintiff.

33 Barb., 634; Campb., 35; 13 East, 430; Farquhar and others v. Southey, Mood. & M., 14; Patty v. Milne, 16 Wend., 557. A person accepts a bill for the accommodation of another, and the latter passes it to his creditor to apply in payment of a note; the creditor gets the acceptance discounted and sends the proceeds to the acceptor directing him to pay the note; and it is held that the latter is bound to use the proceeds as directed. The party accommodated tacitly engages himself to take up the bill, or to furnish funds with which to take it up, or to indemnify the acceptor, or the accommodation maker of the note, as the case may be. Reynolds v. Doyle, 1 M. & G.; 2 Scott N. R., 45. But the accommodation maker and acceptor stand liable on the paper as principals. 5 Taunton, 192, 551; 10 B. & C., 578: 12 Serg. & Rawle, 382; 7 Wend., 227; 2 Sand., 115; 1 Hill, 513; 2 Comst., 469.

as they are discharged from their liability on ordinary business paper. But if the party for whose accommodation the bill was accepted or the note was made, pays it at maturity, this is in effect the same thing as payment by the maker or acceptor in the case of business paper; for the party paying, having no right of action thereon against the parties accepting or making the instrument, cannot transfer any better title after maturity than he himself possesses. The contrary has been asserted, and the decisions are not harmonious; but if the drawer, who is ultimately bound to pay it, actually pays and takes up the bill at its maturity, there does not seem to be any reason for permitting his indorsee of the bill overdue to recover on it. As purchaser, the indorsee takes the bill disgraced, and

is presumed to take it on the credit of the party indors- *565 ing it to him; and it is agreed that if he expressly stipulate to take up and cancel the bill when it becomes due, he cannot afterwards reissue it, and that a purchaser with notice cannot recover on it against the acceptor.

8765. Release of principal debtor.-The maker and acceptor being primarily and ultimately liable to pay the note or bill, are said to stand in the relation of principal debtors towards the other parties to the instrument, while the drawers and indorsers are spoken of as standing in the position of sureties. But this language is not strictly accurate; for the drawer of a bill and each of the successive indorsers, whether of a note or bill, being charged with notice of non-payment on a due demand made, is bound to pay the amount and take up the paper. He cannot, like a surety, require of the holder active diligence to collect the money of the party primarily liable to pay; nor does he ordinarily enter into the contract without a full and valuable consideration. The drawer delivers to the payee a draft on a third person in payment of a debt due or for money advanced, and undertakes that it shall

11 Campb., 35; 2 Stark., 203; post, 572–575.

Ante, 548; 3 Cowen R., 252; 3 Barb. Ch. R., 403, De Mott v. Starkey. Lazarus v. Cowic, 43 Com. Law R., 819; Jewell v. Parr, 76 id., 909; 81 id., 684; Mott v. Brown, 7 John. R., 361; Carruthers v. West, 63 Com. Law R., 143.

4 Byles on Bills, 190; Wallace v. McConnell, 13 Pet., 163; Blair v. Bank of Tennessee, 11 Humph., 84.

' Beardsley v. Warner, 6 Wend., 610; 8 id., 194; Trimble v. Thorne, 16 John. R., 152.

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be paid by the drawee; and his undertaking is that of a principal debtor. The payee indorses it over to another person for value, and is, in his turn, a principal debtor to his indorsee, and to the subsequent holder. So, in respect to the successive indorsers, in their relation towards the holder; the contract of each becomes an absolute engagement for the payment of the sum named on the happening or fulfillment of the conditions on which it is made.'

566*

8766.

There is in some respects a resemblance between an indorser and a surety. If the maker of a note or the acceptor of a bill pays, the indorser is discharged from his contract in the same manner as is a surety by the principal's paying; and if the holder does any act impairing the indorser's right to resort to the inaker or acceptor for indemnity for what he as an indorser has become liable to pay, he can show such act in exoneration of himself from his engagement to the holder. But as long as the holder is passive, all his remedies remain; for he owes to the parties that have been properly charged as drawers or indorsers, no active duty. And if he does nothing to deprive either of them of his immediate right of recourse, the relation of the parties will continue unchanged.*

8767. Any misrepresentation or fraudulent concealment of material facts which, if known to the surety, would have induced him to refuse to become a party, renders the contract void, as to all parties participating in such misrepresentation or concealment. But a surety cannot avoid himself of a fraud

1 "The moment the note is dishonored, and notice of that fact duly given to the indorser, the holder's right to suc him is perfect, and this right is not impaired as long as he remains passive." 9 Cowen R., 203; 3 Bos. & Pull., 62; 17 John. R., 393; 3 Wend., 216. In Trimble v. Thorne, supra, it is said, "An indorser, though in the nature of a surety, is answerable upon an independent contract, and it is his duty to take up the bill when dishonored."

2 Eastman v. Plumer, 32 N. H., 238; Suydam v. Westfall, 2 Denio, 205. See Payment.

36 Wend., 613; Wood v. Jefferson Co. Bank, 9 Cowen R., 194; Bank of Utica v. Ives, 17 Wend., 501; Sizer v. Heacock, 23 Wend., 81; Myers v. Welles, 5 Hill R., 463; Story's Eq., § 225, 226.

4 English v. Darby, 2 B. & P., 62; 2 John. Ch. R., 560.

5 Hamilton v. Watson, 12 C. & F., 109; Evans v. Kneeland, 9 Ala., 42; Solser v. Brock, 3 Ohio St., 302; Futman v. Schuyler, 4 Hun, 166; Graves v. Lebanon Nat. Bk., 10 Bush., 23; S. C., 19 Am. R., 50.

perpetrated upon him as against bona fide holders of a note or bill in no way connected with the fraud.'

§ 768. Mere indulgence at the will of the holder, extended to the maker of a note, though granted on the receipt of securities for the demand, does not at all impair the liability of an indorser, and does not discharge him. If, however, the principal be under any obligation to prosecute, his forbearance would discharge the surety. Nor does an agreement made by the holder with the maker of a note, to prosecnte the indorser, and in case the money is not collected of him to give the maker time on receiving security, discharge the indorser; it does not discharge the latter, because it does not deprive him of his remedy over against the maker. Nor will the taking of a new security, such as the note of a third person payable at a future day, on an agreement that the acceptance of such note as collateral security shall not prejudice the holder's claim against the maker and indorser of the principal note, nor prevent a suit thereon if ordered by the indorser, operate to discharge the latter."

$769. The mere omission of the principal to sue, as we have seen, will not discharge a surety, but when the surety requests the creditor to sue it becomes his duty to do so, and his failure to comply with the request will discharge the surety from his obligation. This doctrine, however, does not apply

1 Anderson v. Warne, 71 Ill., 20; S. C., 22 Am. R., 83; McWilliams v. Mason, 31 N. Y., 294.

* Bank of Utica v. Ives, 17 Wend., 501. The maker solicited of the plaintiff indulgence to arrange his affairs, and try to relieve his indorsers, and was given to understand that this would be extended to him; and at the same time delivered securities to the plaintiff. But there was no definite contract made for time, and it was not shown that the promise of indulgence was founded upon the new securities. McKecknie v. Ward, 58 N. Y., 541; Wright v. Watt, 52 Miss., 634; Clark v. Sickler, 64 N. Y., 231; Goodwin v. Simonson, 74 N. Y., 133; Buckalew v. Smith, 44 Ala., 638; Humphrys v. Crane, 5 Cal., 173; Allen v. Brown, 124 Mass., 77; Richards v. Commonwealth, 40 Pa. St., 146; Kirby v. Studebacker, 15 Ind., 45; Mutual Life Ins. Co. v. Davies, 12 J. & Sp., 172.

* Board of Supervisors v. Otis, 62 N. Y., 88.

4 Wood v. Jefferson Co. Bank, 9 Cowen R., 194.

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Remsen v. Beekman, 25 N. Y., 552; Clark v. Sickler, 64 N. Y., 231; Martin v. Skehan, 2 Col. T., 614; Colgrove v. Tallman, 67 N. Y., 95; Pain v. Packard, 13 Johns., 174; King v. Baldwin, 17 Johns., 384; Goodman v. 3 Tenn., 160; Gardiner v. Griffin, Ferree, 15 S. & R., 28.

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to the contract of indorsement;' and it is held in some states that a surety cannot at law procure his discharge by merely requesting the creditor to proceed against the principal; where the contrary doctrine is held, in order to discharge the surety it must also be shown that at the time of the request the principal was solvent and subsequently became insolvent; the notice given to proceed against the principal must be clear and unequivocal and understood as a request to collect by prosecution; if made to a corporation creditor it must be made the proper officers; and in all cases in order to discharge a surety on the ground of neglect to proceed against the principal it must appear that the surety has sustained some injury thereby. In many of the states the right of a surety to compel the creditor to commence an action against the principal is regulated by statute; it would be beyond the scope of this work to undertake to give these statutes, which are local regulations simply.

567* § 770. *The act of taking a new security from the maker of a note is beneficial to the indorser, unless it be accompanied by a valid agreement suspending or interfering with his right or remedy against prior parties. But if time be given to the maker of a note, though not in express words, so that the holder is precluded from suing the maker, it is a discharge of the indorser. Thus, where a note was indorsed for the accommodation of the maker, and the latter deposited it with a merchant as security for goods to be purchased from time to time, and on a settlement of the account between the maker and the vendor, the latter took from the purchaser his notes for the balance, payable at a future day, the accommodation indorsers were held discharged.' Accepting a note of

1 Wells v. Mann, 45 N. Y., 327, and cases cited.

Taylor v. Beck, 13 Ill., 376; Harris v. Newell, 42 Wis., 687; Pintard v. Davis, 1 N. J., 632; Carr v. Howard, 8 Blackf., 190.

3 Huffman v. Hurlburt, 13 Wend., 377; Herrick v. Borst, 4 Hill, 650; Colgrove v. Tallman, 67 N. Y., 95.

4 Goodwin v. Simonson, 74 N. Y., 133; Singer v. Troutman, 49 Barb., 182.

Mutual Life Ins. Co. v. Davies, 12 J. & Sp., 172.

Goodwin v. Simonson, 74 N. Y., 133; Tiernan v. Woodruff's Extrs., 5 McLean, 350.

Myers v. Welles, 5 Hill, 463; Fellows v. Prentiss, 3 Denio, 512; Pomeroy v. Tanner, 70 N. Y., 547; Couch v. Waring, 9 Conn., 264; Frois v. Mayfield, 33 Tex., 801.

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