applies with equal if not superior force to contracts giving time to the maker or acceptor before the drawer and indorsers have been charged with notice.

§ 773. In like manner, a contract made with the drawer of a bill or with the prior indorser of a note or bill, will have the effect to discharge all subsequent indorsers;' but will not operate as a release of the maker or acceptor. As between the first and subsequent indorsers, the former is regarded in the light of principal; he stands behind them upon the paper, and

is bound to take it up, in case of the default of the 570* maker. The *contracts of the several indorsers are like so many links in a chain, and if the holder consent to dissolve the first, the chain is no longer capable of binding either of the parties.'

§ 774. So long as the holder makes no valid and binding agreement for delay, he is at liberty to use every endeavor to secure the payment of the bill or note; he may receive part payment; he may take new securities; he may negotiate for delay; he may receive and transmit propositions to the indorsers for an extended credit; and he may voluntarily forbear to bring an action against any or all of the parties as long as he can do so without coming into contact with the bar raised by the statute of limitations.

In reference to taking new securities on an existing debt, the distinction between taking such securities simply as collateral to the debt and taking them in exchange therefor is that in the former case the surety will not be discharged, but in the

570.

1 Newcomb v. Rayner, 21 Wend., 108.

2 North American Coal Co. v. Dyett, 7 Paige Ch. R., 9; S. C., 20 Wend..

3 Smith v. Knox, 3 Esp. R., 46; English v. Darley, 2 B. & P., 61. 48 East, 576; James v. Badger, 1 John. C., 131; Kennedy v. Mott, 3 McCord, 13; Lynch v. Reynolds, 16 John. R., 41; Greenwalt v. McDowell, 65 Pa. St., 464; Halliday v. Hart, 30 N. Y., 474; Hill v. Bostick, 10 Yerg., 410; Bank of U. S. v. Hatch, 6 Pet., 250; Turnbull v. Black, 31 Ohio St., 649.

' Pring v. 5 Clarkson, 1 Barn. & Cres., 14; Elwood v. Diefendorf, 5 Barb., 398; Cary v. White, 52 N. Y., 138.

Hewitt v. Goodrich, 2 Car. & P., 468.

Foster v. Juridson, 16 East, 105.

* Beard v. Root, 4 Hun., 357; Brengle v. Bushey, 40 Md., 141; Andrews v. Mariett, 58 Me., 539; Cary v. White, 52 N. Y., 138; Lincoln v. Bassett, 23 Pick., 154.

latter the creditor's right of action is suspended and the surety discharged;' and an examination of the cases will show that in those cases where the receipt of collateral security has been held to extend the time of payment, there has been some express agreement to that effect, or a new agreement made and substituted for the original contract.

$775. The reason why the holder may not enter into an agreement giving one of the prior parties time to pay the note or bill is, that such an agreement works a prejudice to the subsequent parties; and hence if it be clearly shown that the holder, in giving a stipalation for delay, acted for the benefit of all the parties liable on the note, the stipulation will not discharge the indorser. Thus, if the holder in an action against the maker ofa note, takesfrom him a relicta and cognovit, with a proviso that no execution shall issue on the judgment which is entered thereon immediately, until a subsequent day; and it appear that judgment could not have been recovered any sooner, the indorser is not thereby discharged." But it has been held that an agreement to extend the time of payment of a judgment, even though the time be not extended beyond that to which the debtor might have legally delayed payment, will discharge the surety. Taking a confession of judgment in any form will not impair the rights of the holder, unless he gives a stipulation to withhold the execution for a greater length of time than would have been required to recover the judgment unincumbered by any agreement.' In England, it has been held no defense in an action against the *571 drawer of a bill that the plaintiff had, in a former suit against the acceptor, consented to a judge's order that upon the payment of the principal and interest, on a certain future day, all further proceedings should be stayed, otherwise judgmen to be entered; it not appearing that such future day was

1 Chickasaw Co. v. Ritcher, 36 Iowa, 594; Van Etten v. Troudden, 67 Barb., 342; Henderson v. Marvin, 31 Barb., 297.

* Merchants and Farmers' Bank v. Wixson, 42 N. Y., 438.

Cary v. White, 52 N. Y., 143.

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

16 Johns., 41.

5 Hallet v. Holmes, 18 John. R., 28.

Blazer v. Bundy, 15 Ohio St., 57.

Sizer v. Heacock, 23 Wend., 81; Mohawk Bank v. Van Horne, 7 Wend., 117.

posterior to that on which judgment could have been obtained against the acceptor.' But in New York it has been held that where a judgment taken by default had been opened and the creditor stipulated to stay proceedings for a definite time upon a good consideration, that such agreement operated as an agreement not to sue, and discharged the surety. The surety has a right to stand upon the very terms of his contract, and it cannot be extended by implication beyond its express terms; hence any variation or alteration of those terms without his consent will release him from all liability thereunder," and the courts in such case will not inquire whether the alteration be injurious to him or not, and though the alteration be made by order of the court it will have the same effect. The alteration that will discharge the surety must, however, be material," and made without the consent of the surety,' by one of the parties thereto with intent to change the terms of the contract," and with a knowledge on the part of the creditor of the existence of the relationship of principal and surety."

8776. It is scarcely necessary to say that an agreement made by the holder with the principal debtor, extending the time of payment, or even releasing him from his liability, will not discharge the drawer or indorser if he assents to the arrangement; and therefore if the holder and indorser of a note execute to the maker a general release, containing a proviso that nothing therein contained shall be construed to impair any collateral security held by either of the creditors, the indorser

1 Kennard and another v. Knott, 4 Man. & Gr., 474; Michael v. Myers, 6 Man. & Gr., 702. An agreement to give time, it seems is not enough to discharge an indorser, provided it be made on a condition, and time is not in fact given. Price v. Edmunds, 10 Barn. & C., 578.

Ducker v. Rapp, 67 N. Y., 464.

3 Grant v. Smith, 46 N. Y., 93; Calvo v. Davis, 73 id., 211; Wortham v. Brewster, 30 Ga., 112; Ide v. Churchill, 14 Ohio N. S., 372; Gardiner v. Harbeck, 21 Ill.. 129; Lemay v. Williams, 32 Ark., 166.

4 Paine v. Jones, 76 N. Y., 274; Grant v. Smith, 46 N. Y., 93. 5 Sage v. Strong, 30 Wis., 375.

"Brown v. Straw, 6 Neb., 536; Humphreys v. Crane, 5 Cal., 173; Blair v. Bank of Tennessee, 11 Hump., 84.

Gardiner v. Harbeck, 21 Ill., 129; Huntington v. Finch, 3 Ohio (N. S.), 445.

8 Boyd v. McConnell, 10 Hump., 68. 9 Nevins v. De Grand, 15 Mass., 436. 10 Burke v. Cruger, 8 Texas, 66.

is not thereby discharged.' So, if the holder receive from the acceptor of a bill an offer of new security, with a promise to pay by installments, and communicates the proposition to the drawer, who assents to it, the arrangement made accordingly will not impair the rights of the holder. So, also, if the holder give time to the maker or acceptor, and the drawer or indorser afterwards promises to pay, with knowledge of the fact, he is precluded from taking advantage of the indulgence so granted. If the drawer be consulted and his assent be given before any arrangement is made, he is a party to the contract extending the time of payment, and cannot complain of the delay.*

777. A release of a debt or liability given on a good consideration extinguishes the indebtedness; but a release without *consideration and not under seal, is void. *572 And hence an agreement made by a subsequent indorser, not under seal, that he will not look to the first indorser for payment, is without consideration and void.' And for the same reason a written release of the maker, given without consideration, will not discharge an indorser, whose liability has been fixed.*

The surety on paying the debt is entitled to be subrogated to all the rights of the creditor, and if the creditor has impaired that right of subrogation by releasing any security held

1 Seymour v. Minturn, 17 John. R., 170; Gloucester Bank v. Worcester, 10 Pick., 528; Parsons v. Gloucester Bank, 10 Pick., 533; 16 Ind.,, S 91. Clark v. Devlin, 3 Bos. & Pull., 363; Free v. Kierstead, 16 Ind.,

91.⚫

* Stevens v. Lynch, 12 East, 38.

4 Hill v. Johnson, 3 Car. & P., 456; Smith v. Hawkins, 6 Conn., 444; Bowling v. Flood, 1 Lea (Tenn.), 678; Remsen v. Graves, 41 N. Y., 471; Brown v. Prophet, 53 Miss., 649; Treat v. Smith, 21. Me., 112; Adams v. Way. 32 Conn., 160; Berry v. Pullen, 69 Me., 101; Ludwig v. Iglehart, 43 Md., 39; Gray v. Brown, 22 Ala., 262.

"Lewis v. Jones, 4 Barn. & Cres., 506, 515, note.

Jackson v. Stackhouse, 1 Cowen, 122; Strong v. Holmes, 7 Cowen, 224; 17 John., 175. A new consideration gives effect to a release not under seal. Kellogg v. Richards, 14 Wend., 116.

The payment of money before it is due, is a valid consideration for an agreement to extend the time of payment as to the balance. Newsam v. Finch, 25 Barb., 175; 21 Wend., 640. Not so where the money is due; Osgood v. Whittelsey, 20 How. Pr., 72; Reynolds v. Ward, 5 Wend., 501. Keeler v. Bartine, 12 Wend., 110.

Crawford v. Millspaugh, 13 John. R., 87.

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by him for the debt, he thereby releases the surety. The property so taken by the creditor is taken and held in trust not only for the creditor's security but for the surety's indemnity; and it matters not that the surety was ignorant that the creditors held such securities. Thus, where the principal debtor executed a chattel mortgage on certain property, and the creditor allowed him to sell and dispose of the property so that the security was lost, it was held that the surety was discharged; so if the holder of a note takes a confession of judgment, and afterward by agreement with the debtor, releases such judgment and execution, it will operate to discharge an indorser on such note. The release of securities however, does not discharge the surety absolutely from all liability, but only to the extent of the securities released."

§778. Where one of the makers of a promissory note adds to his signature the word surety, the holder is bound to treat him as such, and cannot vary the terms of the contract by extending the time of payment, or otherwise, so as to increase the risk of the surety without discharging him. But a naked promise to give the principal debtor further time will not have the effect to discharge the surety. The rule is the same as we have already stated it, in reference to drawers and indorsers. Where time is given to the principal debtor, by a valid agreement, which ties up the hands of the creditor, though it be but for a single day, it is quite clear that the surety is discharged. The principle is the same whether the time be long or short. The creditor must be in such a situation that when the surety comes to be substituted in his place by paying the debt, he may have an immediate right of action against the principal. An extension of credit to the debtor

1 Kirkpatrick v. Hawk, 80 Ill., 122; Hurd v. Spencer, 40 Vt., 581; Springer v. Toothaker, 43 Me., 381; Hubbell v. Carpenter, 5 ̊ Barb., 520; Clapton v. Spratt, 52 Miss., 251; Dillon v. Russell, 5 Neb., 484; Moore v. Gray, 26 Ohio, 525.

2 Freanor v. Yingling, 37 Md., 491.

3 Burr v. Bayer, 2 Neb., 265.

4 Germania Bank v. Frost, 11 J. & Sp., 117; see Smith v. Ervin, 19 Alb. L. J., 577.

'Barrow v. Shields, 13 La. Ann., 57; Everly v. Rice, 20 Pa. St., 297; Saline Co. v. Buel, 65 Mo., 63.

Reynolds v. Ward, 5 Wend., 501, and cases there cited.

Bangs v. Strong, 7 Hill R., 250; 10 Paige, 11; Bower v. Tiermann, 3