Case ID: ny_2/html/0352-01.html
Source: Caselaw Access Project
Author: {"author": "Gardiner, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Pitts et al., plaintiffs in error, vs. Congdon, defendant in error.
    Where a creditor receives from his principal debtor collateral security of sufficient value to pay the debt, the surety is discharged if the security be surrendered without his consent.
    But where the holder of a promissory note endorses and transfers it for value in the usual course of business, he is not a surety within the meaning of this rule, and therefore he will not be discharged, although the endorsee takes security from the maker, and afterwards- surrenders it without his consent.
    Where, however, the endorsee changes the contract of the maker, as hy extending the time or giving a new credit, so as to suspend the right of action on the note, this is a good defence to the endorser.
    Assumpsit brought in the court of common pleas of the city of New-York, against Charles Pitt and William Pitt, as the endorsers of certain promissory notes made by John S. Lawrence and payable to the defendants’ order. The suit was brought for the benefit of one Hillsburgh, between whom and the defendants there had been extensive dealings, and to whom thf* Licndants had transferred the notes for value in the usual course of business. After Hillsburgh became the holder of the notes, Lawrence, the maker, executed to him a bond and mortgage as collateral security for the payment thereof. The mortgage was never recorded, and subsequently, in January, 1846, was surrendered by Hillsburgh to Lawrence, and Lawrence sold the property on which it was a lien for more than enough to pay the notes. There was no understanding or agreement oí any sort between Lawrence or Hillsburgh and the defendants in reference to taking the mortgage, keeping it on foot, or its surrender. The defendants were told by Lawrence, after its execution, that he had given such a mortgage, but there was no communication between them and Hillsburgh. No evidence was offered as to the circumstances of Lawrence other tham that above mentioned. Nor was it claimed that Hillsburgh acted in bad faith in surrendering the securities. The plaintiff made the necessary proof to charge the defendants as endorsers.
    Upon proof of the matters above stated, the defendants *moved for a nonsuit, which was denied, and they excepted. They then requested the judge to charge the jury, that Hillsburgh took the bond and mortgage not only for his own, but for the benefit of the defendants; and, that having surrendered the same without payment, the defendants were thereby discharged from their liability. The judge refused so to charge, and they excepted. The jury rendered a verdict for the amount of the notes, and after judgment the defendants brought error to this court.
    
      N. Chase, for plaintiffs in error,
    cited Capel v. Butler, (2 Sim. & Stu. 457;) Hayes v. Ward, (4 John. Ch. 130;) Parsons v. Briddock, (2 Vernon, 608;) Mayhew v. Crickett, (2 Swanst. 185;) Eq. Cases Abr. 193; 2 Cox’s Rep. 86; Pitman on Pr. and Surety, 175; 9 Cowen, 194; Law v. The East India Co. (4 Vesey, 804.)
    
      A. C. Bradley, for defendant in error,
    cited Trimble v. Thorne, (16 John. 152;) Beardsley v. Warner, (6 Wend. 610, 613; Story on Prom. Notes, 411, 416, 419; Theobald on Sureties, 184.
   Gardiner, J.

If the endorser of negotiable paper for value, in the ordinary < ourse of business, is a surety for the maker, oi acceptor, the judgment of the common pleas is erroneous, and should be reversed. This is the sole question in the cause.

In a variety of cases, and in books of undoubted authority, we find it said that drawers and endorsers are in the “ light oi sureties, in the nature of sureties,” &c. (3 Kent’s Com. 112 marginal paging; 21 Wend. 504; 4 Hill, 216; 4 Bingham, 717; 9 Cowen, 264.) But we have been referred to no adjudication, nor have I been able to find one, in which it has been held, that they are sureties in fact. The case of Hurd v. Little, (12 Mass. R. 503,) is in principle directly in point, to show that tney do not sustain that relation. The plaintiff was the holder of a foreign bill of exchange, which was protested for nonacceptance. The plaintiff then took security of the drawer, (the party primarily liable,) which he subsequently gave up, *relying upon assurances, that the bill would be paid by the drawee. It was not paid, and this suit was brought against the endorser. The court said that as he had only taken further security, without giving new credit, the endorsee was not discharged. Pring v. Clarkson (1 B. & Cr. 14), is to the same effect. There a new bill was taken from the acceptors, discounted, and the proceeds were more than sufficient to discharge the first draft, which was afterwards endorsed to the plaintiff for val&e. Held to be collateral security ; and as there was no agreement to give time, the drawer was liable. C. J. Abbott said that in no case had it been held, that taking a collateral security from the acceptor, should have the effect to discharge, the other parties to the bill.

The authorities to which we have been referred, only deter mine that the holder of a bill, or note, cannot deal with the maker or acceptor, in such a way as to deprive the drawer or endorser of any remedy he may have upon the instrument. They cannot discharge the party primarily liable, and then sue the endorser, because the latter would in this way be deprived of his remedy over. They cannot extend the time, without the assent of the drawer, or endorser, for this would change their contract. (9 Cowen, sup. and cases there cited; Chit. on Bills, 410.) The same is true of sureties. But these rights, or restrictions, upon the power of the holder of the paper are by no means peculiar to them. The holder cannot release one of the joint makers of a note, without discharging all, (Chit. on Bills, 314,) and no man’s contract can be altered without his assent, be he maker or endorser.

When an individual becomes party to a note or bill, at the request and for the benefit of another, the relation of principal and surety exists, and must be regarded by all other parties or holders, affected with notice. (21 Wend. 504.) The adoption of this rule, has been regretted by judges in England and in this country, but it is established here, and can only be changed by legislation. (3 Camp. 362.) We are not inclined to extend the doctrine beyona the cases to which it has been restricted. In this case, the note was endorsed for a consideration received *by the endorser, and for his own benefit, exclusively, without reference to the wishes or convenience of the maker.

We think, therefore, that he was not surety for the maker, in any such sense as would entitle him to an account, from the holder of these notes, for the value of a collateral security, taken by him from the maker, on his own account, and subsequently surrendered in good faith, and without payment. The judgment must he affirmed.

Judgment affirmed. 
      
       To the same effect, see Schroeppel v. Shaw, S f ' . V*; s. a. 5 Barb. 580.