Court Opinion

ID: 3680274
Source: CourtListenerOpinion
Date Created: 2016-07-06 06:25:53.073935+00
Date Added: 2024-06-11T15:28:04.607023
License: Public Domain

This case may properly be said to be thoroughly enveloped in a mist of codification. The questions involved would not be at all difficult of solution if the statutory law were all placed to one side. The defendant Stary, having undertaken as maker of the note to pay, and the defendant Sutherland likewise having undertaken as indorser to pay and having broken his promise would, of course, be liable without qualification aside from statutes. It would not be a sufficient defense for him to assert that his efforts to persuade the creditor to pursue its remedies against Stary had been unavailing and that his rights had been impaired by reason of the delay. The answer to such a defense would be that he had it in his own power to protect his rights by simply paying the obligation according to his own agreement and pursuing whatever remedies he or the creditor had against the principal debtor. Any loss he might have sustained would not be directly chargeable to the delay or non-action of the creditor. Such would be the solution in the absence of statute, according to the overwhelming weight of authority. 21 R.C.L. 1035; 1 Brandt, Suretyship  Guaranty, 3d ed. § 116.
However, a solicitous regard for the welfare of the surety has caused another view of the surety's rights in the premises to gain some foothold in the law. In Pain v. Packard, 13 Johns. 174, 7 Am. Dec. 369, and King v. Baldwin, 17 Johns. 384, 8 Am. Dec. 415, the doctrine was announced that the failure of the creditor to pursue the principal debtor when requested so to do by the surety, followed by the subsequent insolvency or absconding of the principal, would operate to discharge the surety. This rule has become expressed in some form or another in the statute law of a number of American states, including Alabama, Arkansas, California, Georgia, Illinois, Indiana, Iowa, Kentucky, Mississippi, Montana, North Carolina, North Dakota, Oklahoma, South Dakota, Tennessee, Texas, Virginia, West Virginia, and perhaps other states. The North Dakota statute reads (Comp. Laws, 1913, § 6675): *Page 431 
"A surety is one who at the request of another and for the purpose of securing to him a benefit becomes responsible for the performance by the latter of some act in favor of a third person or hypothecates property as security therefor."
And § 6683 provides:
"A surety may require his creditors to proceed against the principal or to pursue any other remedy in his power, which the surety can not himself pursue and which would lighten his burden; and if in such case the creditor neglects to do so, the surety is exonerated to the extent to which he is thereby prejudiced."
It would seem to be quite plain, aside from the Negotiable Instruments Act, that one who is not otherwise a party to a negotiable instrument and who indorses it before delivery at the request of another for the purpose of securing to the latter a benefit, thereby becomes responsible for the performance by the latter of his obligation to pay the face of the note to a third person and is a surety within the definition contained in § 6675, supra. It would seem equally plain that one in that position would have a right to accelerate the movements of the creditor under § 6683, supra, at the peril of the latter losing rights against the surety to the extent of the resulting prejudice. (It is not intended to intimate here that one, who is not an accommodation indorser and who indorses, not for the benefit of another, but to subserve some purpose of his own, would be entitled to the rights of a surety under this statute even though he might have a right of recourse against prior parties).
In fact, prior to the passage of the Negotiable Instruments Act and concurrently with the codification of the law of suretyship appearing in our code, the irregular indorser was presumptively a co-maker in many jurisdictions and clearly entitled to avail himself of his rights as a surety if he were such in fact. As was said in Story on Promissory Notes, § 58, the maker and an irregular indorser are both deemed original promisors, and the note a joint and several promissory note to the payee, although as between the maker and the other party they stand in the relation of principal and surety. See Good v. Martin, 95 U.S. 90, 24 L. ed. 341; Good v. Martin, 1 Colo. 165, 91 Am. Dec. 706; Tabor v. Miles, 5 Colo. App. 127, 38 P. 64; McCallum v. Driggs,35 Fla. 277, 17 So. 407; Bradford v. Prescott, 85 Me. 482, *Page 432
27 A. 461; Schroeder v. Turner, 68 Md. 506, 13 A. 331; Gumz v. Giegling, 108 Mich. 295, 66 N.W. 48; Peninsular Sav. Bank v. Hosie, 112 Mich. 351, 70 N.W. 890; Dennis v. Jackson, 57 Minn. 286, 47 Am. St. Rep. 603, 59 N.W. 198; Schultz v. Howard,63 Minn. 196, 56 Am. St. Rep. 470, 65 N.W. 363; Richardson v. Foster, 73 Miss. 12, 55 Am. St. Rep. 481, 18 So. 573; Mastin Bank v. Hammerslough, 72 Mo. 274 (cf. First Nat. Bank v. Payne, 111 Mo. 291, 33 Am. St. Rep. 520, 20 S.W. 41); Salisbury v. First Nat. Bank, 37 Neb. 872, 40 Am. St. Rep. 527, 56 N.W. 727; Sargent v. Robbins, 19 N.H. 572; McFetrich v. Woodrow, 67 N.H. 174,38 A. 18; Hoffman v. Moore, 82 N.C. 313; Ewan v. Brooks-Waterfield Co. 55 Ohio St. 596, 35 L.R.A. 786, 60 Am. St. Rep. 719, 45 N.E. 1094; Jackson Bank v. Irons, 18 R.I. 718, 30 A. 420; Sylvester Bleckley Co. v. Alewine, 48 S.C. 308, 37 L.R.A. 86, 26 S.E. 609; Provident Sav. Life Soc. v. Edmonds, 95 Tenn. 53, 31 S.W. 168; Barton v. American Nat. Bank, 8 Tex. Civ. App. 223, 29 S.W. 210; National Bank v. Dorset Marble Co. 61 Vt. 106, 2 L.R.A. 428, 17 A. 42; Donohoe-Kelly Bkg. Co. v. Puget Sound Sav. Bank,13 Wash. 407, 52 Am. St. Rep. 57, 43 P. 359, 942.
Before entering upon an inquiry to determine whether or not an irregular indorser, who is in fact a surety, may, since the adoption of the Negotiable Instruments Act, still assert his rights as surety, it is essential to determine the extent of the waiver on the note in suit; for if the defendant Sutherland has waived whatever rights he might have as a surety, as held in the majority opinion, it is manifestly unnecessary to consider the character and extent of the rights waived. The waiver on the note in suit is in these words: "The makers and indorsers each guarantee the payment of this note and waive demand, protest and notice of non-payment, and consent to any extension of time of payment or renewal thereof without notice." In the majority opinion it is said that this language is broad enough to include a waiver of the statutory right of a surety to accelerate the movements of the creditor by notice as provided in § 6683, Comp. Laws, 1913, and the cases of Owensboro Sav. Bank  T. Co. v. Haynes, 143 Ky. 534, 136 S.W. 1004, and Archenhold Co. v. Smith, ___ Tex. Civ. App. ___, 218 S.W. 808, are cited in support of such holding. In my opinion the waiver is not properly construed by the majority and the cases cited *Page 433 
are not in point. The defendant Sutherland does not claim to have been prejudiced by reason of the failure of the creditor to collect from Stary during any period covered by an extension of time or renewal contracted between the bank and Stary. He claims to have been injured through indulgence of the principal debtor after notice to the creditor to collect. The manifest purpose of a waiver such as that contained in this note is to obviate the technical defenses that sureties or indorsers may assert, where there has been a contractual extension of time without consent or a failure to make demand and give notice, even though no actual damage ensues. In the Kentucky case the stipulation waived"diligence in bringing suit against any party hereto, either maker or indorser," and the court, in construing it, said: "Diligence in bringing suit, being the thing waived, it is immaterial whether there is an absence of diligence under the common law, or an absence of diligence after notice given pursuant to the statute." And this is manifestly correct. In the note involved here, however, there is no waiver of diligence inbringing suit. Likewise, in the Texas case the stipulation embodied an express waiver of "diligence in bringing suit against any party hereto." It would seem that the waiver in the case at bar is more analogous to that involved in the case of Trustees of Schools v. Southard, 31 Ill. App. 359, which was in these words: "and no extension of time of payment with or without our knowledge, by the receipt of interest or otherwise, shall release us, or either of us, of the obligation of payment." And it was there said (page 363) "that agreement cannot be held to be aperpetual waiver of a right given by the statute to thedefendants, to demand an effort at collection by the payee forthe protection of the surety." In my opinion, such is the correct construction of the stipulation in question here.
Since, then, the right of the surety to accelerate the movements of the creditor, if such right exists, has not been waived, there remain for consideration the character and extent of the right claimed, the question of whether or not an accommodation, anomalous, indorser has such right under § 6683, Comp. Laws, 1913, and whether or not the right is affected by any provision of the Negotiable Instruments Law.
In the majority opinion it is stated:
"The fundamental question, therefore, is whether an *Page 434 
accommodation indorser, who indorses before delivery, a promissory note containing the waivers and consent to extensions of time, incorporated in the note in suit, may relieve himself from liability thereon by notifying the creditor payee to proceed against the principal debtor under the provisions of § 6683, Compiled Laws of 1913."
It is submitted that this statement of the question is not accurate. The statute upon which the defendant relies does not purport to relieve him from liability upon the service of notice to proceed against the principal debtor. The full effect of the statute is merely to exonerate the surety to the extent to which he may be prejudiced by the failure of the creditor to attempt collection from the principal debtor. The defendant's contention here, as I understand it, is not that he is relieved of liability by serving the notice, but that he is exonerated to the extent of the prejudice sustained by the failure of the plaintiff to proceed against the principal debtor when requested so to do. Again, in discussing certain Oklahoma cases, the principal opinion, by implication at least, erroneously states the defendant's contention as I understand it. It is said that it is held in Oklahoma, under facts very similar to and scarcely distinguishable from the facts in the case at bar, that the surety cannot, by demand, compel the creditor to sue the principal maker before the former may require the surety to paythe note. I do not understand it to be contended by the defendant that, by service of notice on the creditor to proceed against the principal debtor, he compels the creditor to sue the principal debtor before he (the surety) may be required or compelled to pay the note or that he (the surety), through the notice, in any way postpones or qualifies his obligation. Certainly, the statute upon which the defendant relies does not purport to suspend any remedy which the creditor has against him. The most it does is to impose a duty on the creditor to proceed promptly against the principal and to exonerate the surety only to the extent of any prejudice he may sustain by reason of the failure to thus proceed. The statute, for instance, would not prevent an immediate action by the creditor against both the principal debtor and the surety and the obtaining of a judgment against both in the same action. It suspends no remedy; it merely imposes upon the creditor a duty of prompt action against the principal debtor. Bingham v. Mears, 4 N.D. 437, 27 L.R.A. 257, 61 N.W. 808. *Page 435 
It is said that the rule prevailing before the Negotiable Instruments Law was adopted was that an accommodation indorser did not stand in the relation of a surety to the maker so as to be within the provisions of statutes giving the surety the right to enforce remedies against the principal debtor or to require the creditor to proceed against the principal debtor. Authorities are cited for this statement which appear to support it. However, the statement, in my opinion, is of no value in determining the meaning of a statute like ours, and the authorities are only in point to the extent that they arose in a similar or analogous situation. A statute may be so framed as to leave no room whatever to doubt its application to sureties who occupy that relationship by virtue of having signed an instrument on the back as well as to sureties who have signed it on the face. For instance, in the revised statutes of Texas for 1893, it was provided in article 3819 that "the remedy provided for sureties in this title extends to indorsers, guarantors, drawers of bills which have been accepted, and every other suretyship, whether created by express contract or operation of law." See Williams v. J. Ogg  K. Lumber Co. 42 Tex. Civ. App. 558, 94 S.W. 420. To like effect are the statutes of Virginia and West Virginia, Virginia Code, 1904, § 2890 (Edmondson v. Potts, 111 Va. 79, 68 S.E. 254, 21 Ann. Cas. 1365); Barnes's Code (W. Va.) 1916, chap. 101, p. 1040. Or the statute may be so drawn as to be somewhat ambiguous in its application and hence open to construction, in which event it may be so construed as not to give to one who is an accommodation indorser a right as a surety when the right claimed is in derogation of the common law. The extent to which considerations of this sort may have contributed to the decisions supporting the general statement in the majority opinion, will more amply appear upon examination of the cases, and it will also appear that in none of them was the situation completelyanalogous to the case at bar, with the exception of the Oklahoma cases. The chief difference to be noted is this: In this state the legislature has attempted to codify the law of suretyship in its entirety as well as the law of negotiable instruments, and in so far as there is any presumed intention that the codification shall be a complete expression of the rules of law governing the particular branch, it is as applicable to the suretyship code as to the Negotiable Instruments Act. The rigid rules against repeals by implication *Page 436 
are applicable with all their force as between these two attempts at codification, and it is only by virtue of the fact that the Negotiable Instruments Law was enacted later in point of time that the principle of repeal, or partial repeal, by implication can be invoked. Hence, the statutes governing the suretyship relation must stand with all their force unless clearly repugnant to the Negotiable Instruments Act.
The chapter of the Civil Code expressing the law of suretyship starts with the definition that a surety is one who at the request of another and for the purpose of securing to him a benefit becomes responsible for the performance by the latter of some act in favor of a third person or hypothecates property as security therefor. There can be no question whatsoever, in my judgment, that a person who signs a negotiable instrument as a comaker and who is in fact a surety for one or more of the makers or for other parties and known by the payee or creditor to be such, is a surety within this definition, and it would seem to be obvious that an accommodation indorser is just as clearly a surety as is an accommodation maker. As heretofore pointed out, the liability of both was presumptively the same in many jurisdictions when our suretyship statutes were passed. The suretyship under our code definition does not depend upon the form of the contract (See Fowler v. Alexander, 1 Heisk. 425) that is, upon whether it be the contract of a maker or the contract of an indorser, it depends wholly on the purpose and the relationship. Was the purpose of the liability assumed that of securing to another a benefit and does the one signing become responsible for the performance by the person benefited of some act in favor of a third person? If so, he is a surety. This definition, it will be noted, excludes an ordinary indorser from the position of surety because the ordinary indorser does not indorse in order to secure to another a benefit, but he indorses for the purpose of transferring his own title and securing to himself a benefit. Not so, however, with an accommodation indorser. It would seem, therefore, that before it can be said that an accommodation indorser does not stand in the relation of a surety to the maker of the note, within a suretyship statute like ours, it must be demonstrated that the accommodation indorser does not come within the definition of a surety laid down in the first section of the suretyship code. *Page 437 
In the authorities cited in the majority opinion, the courts were not called upon to apply a definition of suretyship such as that contained in our statute. It seems they were concerned only with an isolated statute purporting to give a surety the right to enforce diligence on the part of the creditor and they were free to and did define the term surety within such a statute so as to exclude an accommodation indorser. In view of our statute, this cannot be done in this state without modifying the statutory definition of a surety. Hence, the authorities cited are not, in my opinion, persuasive, much less conclusive.
As to the Oklahoma cases, Palmer v. Noe, 48 Okla. 450, 150 P. 462, and National Bank v. Lowrey, 57 Okla. 304, 157 P. 103, they do hold, in accordance with the weight of authority prevailing where no statute imposes diligence upon the creditor, that the surety has not the right to compel the creditor to proceed against the principal debtor and that his remedy is to pay the debt in accordance with his undertaking as surety and himself proceed against the principal debtor. It can not be disputed that such a measure of protection is ordinarily adequate and within the power of the surety and that he may not claim exoneration where the creditor fails to comply with his demand. But such is not the rule of our statute, nor is it the rule in those states where statutes have been enacted giving to the surety the right to require the creditor to proceed against the principal debtor and specifically exonerating him if he is prejudiced by the failure to comply with the demand. The Oklahoma statute to that effect is in all substantial particulars the same as ours, and, in my opinion, where such a rule exists, it is not competent for the court to ignore it and follow the decisions adhering to the common law rule. The Oklahoma cases do this. They do not seem to construe the statute; they set it aside.
However, in this state there was never any doubt, prior to the adoption of the Negotiable Instruments Act, that an accommodation indorser was entitled to all of the rights of a surety under the suretyship statute. For it was expressly provided in the original Negotiable Instruments Act (Rev. Codes 1899, § 4882, Levisee's Code of 1883, § 1850, Rev. Codes (Dak.) for 1877, § 1850, Commissioners' Draft of Civil Code for the state of New York, 1862), that one who indorses for the accommodation of another has all the rights of a surety *Page 438 
as defined by the chapter on suretyship and is exonerated in like manner with respect to everyone having notice of the facts. See also 2 Dan. Neg. Inst. 6th ed. §§ 1304, 1305. So, obviously, it could not be doubted that prior to 1899 in this state an accommodation indorser was exonerated to the extent of any damage occasioned by the failure of the creditor, upon notice, to pursue remedies against the principal debtor. When the Negotiable Instruments Law was adopted in 1899 it was not accompanied by any express repeal of existing statutes. Hence, all discussion as to whether or not an accommodation indorser was, prior to 1899, within the suretyship statute is clearly beside the question. The question is narrowed down to this: Does the Negotiable Instruments Law repeal the pre-existing law on that subject? If it does so, it is by implication merely, and I can find no provisions of the act from which any such implication arises. The act is wholly silent on questions of the suretyship relation and exoneration.
It would seem to be elementary that the relation of suretyship is dependent wholly upon the arrangements between the parties to an obligation and that there is nothing in the contract of a maker, drawer, acceptor or indorser of a negotiable instrument, as such, that militates against the existence of the relation between the various parties; except, however, that an indorser who negotiates for purposes of his own is not in a position to assert the full rights of a surety, since he has assumed the burdens of an independent contract based upon an independent consideration beneficial to himself; whereas, on the other hand, an accommodation indorser, like an accommodation maker, is ordinarily a surety for some other party. See Hereford v. Chase, 1 Rob. (La.) 212; Dunn v. Parsons, 40 Hun, 77.
Neither, in my opinion, does the fact that the Negotiable Instruments Law provides that the irregular indorser is liable as indorser preclude his occupying a position of suretyship. The purpose of the adoption of this section (64 Negotiable Instruments Act, § 6949, Comp. Laws, 1913) is clear. It was to fix definitely the status of one who had placed his name upon the back of an instrument before delivery so that there could be no question as to whether he should be treated as primarily or secondarily liable. The diversity of decision was such that, in the absence of a definite, uniform rule, it could not be *Page 439 
determined by the holder whether demand and notice were necessary to fix the liability of one so indorsing.
Since it must be admitted that Sutherland is one who at the request of Stary, and to secure to him a benefit, became responsible for the payment of Stary's note to the bank, he is a surety for Stary with the liability of an indorser instead of a maker. Being such surety, he is exonerated by virtue of § 6683 to the extent to which he was prejudiced by the failure of the bank to proceed against Stary when required so to do, unless the Negotiable Instruments Act provides to the contrary.
Starting with the assumption that Sutherland became liable to the bank as indorser, that he made every engagement to the bank that an indorser makes, which concessions are required by various provisions of the Negotiable Instruments Law, the question narrows down to this: May he show that he was in fact a surety and known by the payee to be a surety and then further show that the payee has exonerated him by the failure to take the steps required by § 6683? In my opinion, this question should be answered in the affirmative.
The argument that a surety may not be thus exonerated is generally supported by §§ 119 and 120 of the Negotiable Instruments Law, Comp. Laws, 1913, §§ 7004 and 7005 and runs as follows: It is said that § 119 provides the circumstances in which a negotiable instrument is discharged and that a primary party may be discharged only by an act which discharges the instrument. First Nat. Bank v. Meyer, 30 N.D. 388, 152 N.W. 657; and that § 120 states the conditions in which a person secondarily liable on the instrument is discharged and that these are exclusive. As the acts which exonerate a surety from liability pro tanto are not included within either of these sections and as they are regarded as stating the sole grounds upon which parties to a negotiable instrument may be discharged, it is said that a surety cannot show acts of exoneration. German American State Bank v. Watson, 99 Kan. 686, 163 P. 637.
In the case of First Nat. Bank v. Meyer, supra, this court was called upon to determine the effect upon the liability of an accommodation maker of a compromise settlement with a solvent garnishee for a less amount than the judgment against the garnishee, and it adopted the view that the accommodation maker might not show the prejudice *Page 440 
to his rights resulting from the satisfaction of the judgment because he had assumed a primary obligation which could not be discharged except in one of the ways indicated in § 119, Comp. Laws, 1913, § 7004. In so holding, the court followed the theory developed in the argument of counsel, who apparently considered that the decision should turn upon whether or not circumstances not included in Section 119, could be shown, which if proved would result in the absolute discharge of a surety at common law. In a later case, however (Scandinavian American Bank v. Westby,41 N.D. 276, 172 N.W. 665), this court held that a maker might show that he had sustained damages by reason of the surrender of collateral security which had been pledged by one on whose behalf the note had been given and that these damages might be offset against the amount due on the note. Had the maker in this instance been a surety for a co-maker instead of an accommodation maker for one whose name did not appear, the decision surely would have been no different. If a surety may show that he is exonerated from liability to the extent of a prejudice suffered by the surrender of collateral, upon what principle can it be held that he is precluded from asserting exoneration to the extent of a prejudice suffered by the failure or refusal of the creditor to proceed against the principal debtor when requested so to do? One set of circumstances claimed as an exoneration is declared to have this effect in § 6681, of the Compiled Laws of 1913, of the suretyship codification, and the other in § 6683 of the same codification.
In view of the decision in this case and in the Westby Case, supra, it may be pertinent to inquire whether in this jurisdiction one who is in fact a surety upon commercial paper within chapter 85 of the Civil Code, the suretyship codification, may show such fact by parol for the purposes of establishing exoneration under § 6681 but not for the purpose of establishing exoneration under § 6683. If such be the condition of the law, it certainly may be said to be technical to the point of bewilderment. Note the two sections: Section 6681 says that "A surety is exonerated:
"(2) To the extent to which he is prejudiced by any act of the creditor which would naturally prove injurious to the remedies of the surety or inconsistent with his rights or which lessens his security; or, *Page 441 
"(3) To the extent to which he is prejudiced by an omission of the creditor to do anything when required by the surety which it is his duty to do."
And § 6683, heretofore quoted, provides:
"A surety may require his creditors to proceed against the principal or to pursue any other remedy in his power, which a surety can not himself pursue and which would lighten his burden; and if in such case the creditor neglects to do so, the surety is exonerated to the extent to which he is thereby prejudiced."
Is not the failure of the creditor to proceed against the principal debtor after notice an omission of duty within ¶ 3 of § 6681? Or are both ¶ 3 of § 6681 and § 6683 utterly devoid of meaning as applied to parties to commercial paper? No principle was better established in the law of negotiable instruments prior to the adoption of the Negotiable Instruments Act than the rule that the surrender or release by the holder of a bill or note of security for the payment of the instrument operated as a discharge of indorsers or known sureties to the extent of the value of the securities surrendered. See 8 C.J. 620; 2 Dan. Neg. Inst. 6th ed. §§ 1303 and 1311. It has been said on excellent judicial authority: "The purpose of the law (Negotiable Instruments Law) was, not to make radical changes in long established and fundamental principles, but to wipe out the many differences in minor details existing between the laws of the various states by adopting in each case of difference that uniform rule which was best adapted to the needs of the business world. The idea was to secure uniformity by wiping out small differences, not to change the general principles of commercial law." State Bank v. Michel, 152 Wis. 88, 139 N.W. 748, 1131. Is it consistent with such purpose to ascribe to the legislatures of the various states a purpose to wipe out a wholesome and just principle of universal operation on no stronger evidence than that afforded by the failure to incorporate in the Negotiable Instruments Law an express provision governing exoneration or discharge pro tanto of the liability of a party on account of the failure or refusal of the creditor to respect the rights ordinarily attaching to his position? To me it seems more reasonable to construe sections 119 and 120 as providing for exactly what they purport to provide for, namely, the discharge
of an instrument and the discharge of secondary parties, meaningthe full discharge, *Page 442 
and that the failure to provide for discharges pro tanto or exoneration of various parties, leaves such matters to be determined, as formerly, according to consistent principles of universal application and dependent upon the relationship of the parties as between themselves. And such is, in effect, the decision in Scandinavian American Bank v. Westby, supra.
Notwithstanding the apparent weight of judicial authority supporting a rigid and literal construction of §§ 119 and 120 of the Negotiable Instruments Act, §§ 7004 and 7005, Comp. Laws, 1913, which tends to defeat the well established rights of sureties, (See Brannan, Neg. Inst. Law, 3d ed. pp. 311-331) there is a very evident trend in the opposite direction. Milner v. Eskridge, 62 Colo. 430, 163 P. 1115; Southern Nat. Life Realty Corp. v. People's Bank, 178 Ky. 80, 198 S.W. 543; Kopf v. Yordy,200 Ill. App. 409; Id. 208 Ill. App. 580; Fullerton Lumber Co. v. Snouffer, 139 Iowa, 176, 117 N.W. 50; Auto Brokerage Co. v. Morris  S. Auto Co. 106 Misc. 147, 174 N.Y. Supp. 188; Frazier v. First Nat. Bank, 34 Ohio C.C. 508.
In the Ohio case supra it is interesting to note that the defendant was an accommodation indorser; that he claimed he should be protected in his right to have collateral securities applied toward the payment of the debt; and that there was pressed upon the court of appeals, in answer to his contentions, the decision of the Supreme Court of Ohio in the case of Richards v. Market Exch. Bank Co. 81 Ohio St. 348, 26 L.R.A.(N.S.) 99, 90 N.E. 1000. (It was upon this case that this court rested its decision in the case of First Nat. Bank v. Meyer, supra). The court of appeals in answering the argument supported by the Richards Case, said: (page 511).
"Richards v. Market Exch. Bank Co. supra, was a case involving the discharge of the instrument itself, while the case at bar is one in which the defendant sought protection of his rights as surety by insisting upon the fulfillment of the contract whereby collateral security had been deposited for his benefit and we think that case is not inconsistent with his claim.
"If the argument of counsel for the bank is sound, then it would be possible in every case for a payee of negotiable paper holding collateral security to release the same at will and thereby deprive the *Page 443 
surety of all protection. We can not believe, nor hold, that a surety, under such circumstances, is without remedy.
"The subject of collateral security now under consideration does not appear to be embraced within the negotiable instrument statute, and it is provided in said statute, in Section 8300 G.C. that any case not provided for, should be governed by the rules of the law merchant. By those rules, Frazier (the accommodation indorser) would be entitled to the relief sought by him, if the allegations of his pleading are sustained by the evidence."
In the New York case (Auto Brokerage Co. v. Morris  S. Auto Co. 106 Misc. 147, 174 N.Y. Supp. 188), an indorser was held exonerated to the extent of a lien lost by virtue of the failure of the creditor to record a chattel mortgage, the maker of the note being bankrupt. And in the Illinois case (Kopf v. Yordy, 200 Ill. App.? 409, id. 208 Ill. App. 580), the same principle was applied in an action against an irregular, accommodation indorser. It was there held that where the creditor, by his laches, had deprived an accommodation indorser of the benefit of securities, whereby he had been injured, the latter might assert in defense, when sued on the note, his exoneration to the extent of the injuries suffered. It was further held that parol evidence might be properly admitted which would show the circumstances in which the indorsement was made, notwithstanding the provisions of the Negotiable Instruments Act which fix the nature of the contract and the liability of the irregular indorser.
In the case of Haddock, B.  Co. v. Haddock, 192 N.Y. 499, 19 L.R.A.(N.S.) 136, 85 N.E. 682, it is held that an irregular accommodation indorser, whose liability is fixed by § 64 of the Negotiable Instruments Act, § 6949, Comp. Laws, 1913, as that of an indorser, may introduce parol evidence for the purpose of determining the primary liability as between the parties whose names appear upon the instrument or as between parties secondarily liable. It is further held that the declaration in the Negotiable Instruments Act, to the effect that an irregular indorser is liable as indorser to certain parties, does not alter the pre-existing law according to which parties to an instrument were permitted to establish by parol evidence the true relationship between them.
These holdings and others, which might be cited, are consistent with *Page 444 
various provisions of the act under which parol evidence must be resorted to to give them effect. It is expressly provided, for instance, in § 68 (Comp. Laws, 1913, § 6953) that evidence is admissible as between indorsers to establish the order in which they have agreed to be liable. Under §§ 80 and 115, §§ 6965 and 7000, Comp. Laws, 1913, parol evidence may be resorted to to establish that one appearing to be secondarily liable is an accommodated party and hence not entitled to presentment and notice of dishonor.
If such a degree of liberality prevails under the act with respect to matters of liability that parol evidence may be resorted to to give effect to arrangements made between parties, why should there be a strict regard for purely negative implications where matters of liability are not concerned, and where it is sought only to show that a relationship exists, to the knowledge of the creditor, which carries with it certain obligations, presumably based on equitable considerations?
In my opinion, the right of a surety to exoneration based upon the failure of a creditor to proceed against the principal debtor after notice given is, under our statutes, on an exact par with the right of exoneration which rests upon other circumstances stated in the statute and which exonerate a surety pro tanto. And if the right of exoneration to the extent of prejudice suffered through the lessening of security, for instance, continues to exist after the adoption of the Negotiable Instruments Act, as is clearly indicated by the weight of authority (notwithstanding the tendency to construe as exclusive §§ 119 and 120 of the act, §§ 7004 and 7005, Comp. Laws, 1913), I fail to perceive any valid reason why the similar right, where clearly given by statute, based on neglect to proceed against the principal debtor after notice given, should not likewise continue to exist. It will not do to say that a distinction exists because the basic equity is stronger in the one case than in the other. The legislature has determined that matter and it is not competent for the courts to construe all the meaning out of a statute, because it may not agree with the legislature as to the policy expressed. It should require something more than a mere negative implication or omission from sections dealing with the discharge of an instrument and of secondary parties to accomplish a virtual repeal of express statutory provisions enacted for the purpose of *Page 445 
fixing the rights of parties sustaining certain relationships to one another. Full effect can be given to the codified principles of suretyship as contained in chapter 85 of the Civil Code without conflicting with any express provision of the Negotiable Instruments Act and vice versa. In my opinion chapter 85 of the Civil Code still governs the relations of parties to negotiable instruments as between themselves if they are in fact sureties, and in doing so, it does not qualify in the slightest degree their liability as parties to commercial paper. Any ultimate effect upon liability is due to the subsequent failure of the creditor to respect fundamental statutory rights attaching to a generally recognized relationship; not to any original qualification whatsoever of a liability which the Negotiable Instruments Act renders certain and unambiguous.
In the instant case as Sutherland had not waived his right to require the bank to proceed against Stary, he should have been permitted to show the damage, if any, sustained by him, through whatever indulgence was granted not based upon any extension contracted prior to the service of the notice by him.